House prices have been rising in the Twin Cities – but a study finds that it is still one of the most affordable metro areas to live in the country.
The latest data from the University of St. Thomas's Residential Real Estate Index finds the median price of single family homes in the Twin Cities was up 2.7 percent in August compared to the same time last year.
Each month in 2015 has seen a rise in prices of between 2.5 and 3.5 percent compared to the corresponding 2014.
This is higher than the 1.9 percent growth in household income in the Twin Cities last year and the 2-2.5 percent predicted for this year, the report notes. But the fact that house price increases and wage growth are still reasonably close means the metro area is staying affordable.
"In terms of real dollars, home prices are keeping up with inflation," it says. "This is not the case in many major metro areas around the country."
The report put the average price of a single family home in the 13-county metro area at $224,900, and with the Twin Cities having an average household income higher than many other cities (though not everyone experiences this), a monthly mortgage payment should cost homeowners just over 25 percent of their income.
This is lower than Denver, San Francisco and Chicago (which the report uses for comparison), but higher than Atlanta.
Minneapolis-St. Paul's reputation for being an affordable place to live is borne out further by figures released by the S&P Dow Jones Indices on Tuesday.
The figures look at house price changes over the last year in 20 U.S. cities, and found that San Francisco, Denver and Dallas had gains of 10.4, 10.3 and 8.7 percent respectively in the 12 months between July 2014 and the end of June 2015.
At a 3.6 percent rise over that time, Minneapolis-St. Paul had the fifth lowest growth in house prices in those 12 months, with only Chicago, Cleveland, New York and Washington D.C. having lower rises.
Supply of single family homes dwindling
Prices could continue to rise in the future, particularly if more efforts aren't made to increase the supply of single family homes in the metro area.
The St. Thomas study found that the Twin Cities is on pace to have approved 5,000 new-build single family home permits by the end of the year, which is the same as 2014 and 2013 levels.
But according to the report, this is well down from the 8,000 to 10,000 per year granted in the early 2000s, before the housing crash.
This lack of construction is contributing to a "historically low" inventory of homes for sale, with the research finding that last month there were 2.8 homes available for sale for every home sold in the metro area. This compares to August 2006, when there were 6.3 homes for sale for every home sold.