Profile picture for dlinet

Why is zillow now predicting prices to drop next year in minneapolis?

Why is zillow now predicting prices to drop next year? A few months ago housing prices were expecting to rise in minneapolis.
  • November 26 2013 - Corcoran
  • 0
    0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Be a Good Neighbor. Be respectful and on-topic. No spam or self-promotion! See our Good Neighbor Policy.

Answers (3)

Profile picture for Blue Nile
"Where do you see Zillow predicting price drops" -

On each of the home details pages in that area.  (All home details pages have such "predictions" now).

Just from one random property:

"Zillow predicts 55374 home values will fall 0.3% next year, compared to a 1.3% rise for Minneapolis-St Paul Metro as a whole. Among 55374 homes, this home is valued 31.2% more than the midpoint (median) home, but is valued 35.4% less per square foot.

Foreclosures will be a factor impacting home values in the next several years. In the 55374 market, the number of foreclosures waiting to be sold shrank 87.8% in the last year. The number of unsold foreclosures is 243% higher than in Corcoran, and 276.6% higher than the national average. This higher local number may prevent 55374 home values from rising as quickly as other regions in Corcoran.

Learn more about forecast calculations or 55374 home values. …
"


Although not mentioned in Zillow's synopsis, the rise in interest rates this past August also had and is continuing to have an impact on home prices dropping.  And in March, we can expect the interest rates to swing both directions again, as we again face the U.S. Government budget issue, and the U.S. debt ceiling, and as the FED hints at tapering and delaying tapering of Quantitative Easing again.
  • November 27 2013
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

I would also like to see the report stating that prices are predicted to drop next year. That is the only way I could answer the questions Zillow has voiced.

I agree with Lenny the general consensus is that prices will continue to rise in 2014, but that we will move away from "hyper-appreciation" of double digit price gains to a more modest 4-6% gain. This is because:

1) Inventory is still at a 10-year low- as long as there are more buyers than sellers you have a inventory problem, and this creates appreciation through stiff competition of move-in ready homes for buyers. Multiple offers pursue, and sellers are getting closer to list price. Until inventory gets fixed the balance is going to be in the seller's favor.

2) Rental rates are still staying elevated- The rental market is also expected to breathe a little bit next year which is a great thing, however you are still paying almost $1200/month for a 2 bed TH right now. There are plenty of examples all over Minneapolis, but bottom line home prices are still attractive relative to rental rates.

3) New Construction continues to rise- I just got an email this morning stating permits for October were the highest since 2008 for the same month. That is a great sign as new construction tends to only happen when new house-hold formations are being created (we need more houses for the population). Without demand new construction waivers. 

4) Foreclosures/Short Sales have plummeted this year- I would have to go back and check my latest market report, but I believe these have dropped by almost a quarter in the twin cities. More traditional homes are on the market, and as prices increase more homeowners are not underwater on their mortgage. This creates a more stable market, and releases the pent up demand created for all those people who wanted to sell but could not due to owing more on their home then what it was worth. 

There are many variables that go into the supply versus demand equation (and you can analyze them all day until you are blue in the face), but at the end of the day it all sums up to "months supply of inventory". Essentially we take current buyer demand (pendings), and then we look at the total inventory (about 15,000 homes for sale right now). We determine how long at the current rate of purchases it would take to clear all the inventory, and that gives you a number. It is a snapshot of the market at any given time, and we monitor it monthly.

Right now we are around 3.4 months of supply for inventory. Typically anything under 5 is considered a sellers market, 5-6 is usually a "transition period" or "neutral" period, and once you go above 6 the market shifts to buyers heavily. 

I hope this helps! If you have any other questions feel free to let me know.

~Chris

  • November 27 2013
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Where do you see Zillow predicting price drops? I think the general consensus is that prices will still tend to rise but maybe not to the same extent it did during 2013.
  • November 26 2013
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.