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Twin Cities house prices almost hit a record high in May

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House prices in the Twin Cities are now almost at the record high set 10 years ago during the housing bubble – but now they could be affected by the turmoil in Europe.

Monthly analysis by the University of St. Thomas found that the median house sale price in the metro area reached $237,000 – just below the highest price ever record of $238,000 in June 2006.

Summer is usually one of the most popular times to buy a house and this has combined with a situation of high demand and a historically low supply that has persisted in the market for more than three years.

This is one huge difference between the current house price levels and those during the bubble of 10 years ago.

In 2006 there was a 6.7-month supply of homes for sale – last month there was just a 2.8 month supply, meaning all homes listed for sale in the metro area would be sold in 2.8 months if no new ones came on the market.

Herb Tousley, the university's director of real estate programs, said possibly reasons for the limited supply could include difficulty finding and buying a replacement home for a reasonable price, higher standards to get a mortgage, lackluster wage growth and homebuilders not building as many single family units.

Demand is high meanwhile because interest rates are still low, the economy improving and the rental market is tight. The university says average rent in the Twin Cities rose 5 percent in 2015, and large increases tends to prompt renters to look to buy.

Could the Brexit send prices even higher?

The tumultuous happenings in Europe, following Britain's exit from the European Union, could have further consequences for the U.S. housing market.

Uncertainty over the vote already impacted the mortgage market, with the Federal Reserve deciding against increasing interest rates this month – and may well delay future rises following the "Leave" vote.

And the Detroit Free Press reports the U.S. housing market could be indirectly boosted by the decision to leave because the U.K. is a haven for wealthy people with property – generally in the booming market of London.

The National Association of Realtors' chief economist told the newspaper they could now consider selling their properties as it becomes a less attractive place to do business, and demand for U.S. real estate could rise as a result.

That said, Forbes points out that the U.K.'s exit has created global economic uncertainty, which might dissuade people from making their next housing purchase and in turn could cause some markets to dip.

That said, interest rates are low and could now get lower as Treasury rates fell in the wake of the Brexit vote, so people could be encouraged to take advantage of cheap mortgages before they go up again.

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