WSJ: Twin Cities Real Estate Market Looks Weak

by Alex Stenback on May 3, 2006

Wsj_re_outlook_2
The most excellent WSJ RealEstateJournal runs a piece analyzing the prospects for 18 major real estate markets, and the Twin Cities, as you can see in the graphic at right, is one of them.  Let’s just say they are not calling us the next "hot market."

<<click on graphic for a larger image>>

The graphic, which is fairly self explanatory, uses recent inventory changes, price trends, and job growth outlook to gauge the the health of our real estate market, and the results are not all that promising for the Twin Cities.  Particularly troubling are the job growth prospects – we’ve long maintained that a healthy housing market is about jobs more than anything else – and if the figures in the chart are accurate, we might be in for a bit of a choppy ride for the next couple of years.

On the upside, the Minneapolis Federal Reserve’s data disagrees with that used in the chart (from Moody’s), predicting both a job growth rate and unemployment rate better than the national average.  From the Fed’s 2006 Forecast:

The forecasting models predict continued employment growth in 2006, but
at slightly slower rates than in 2005. In addition, unemployment rates should remain at low levels relative to historical averages. According to the  business outlook poll, 33 percent of respondents plan to increase employment at their place of
business in 2006; 14 percent expect decreases. Respondents also noted
increased difficulty finding available workers compared with the
preceding year’s poll.

Does this mean that a crash is coming, and property values are set to
fall?  We hardly think so – these are just educated guesses after all -  but if
you are watching the housing market, watch the job growth, which is the
real "fuel" for a healthy market.
· As the Boom Cools, New Markets Heat Up [REJ]
· Minneapolis Fed Forecast, 2006 [minneapolisfed.org]

Leave a Comment

 

Previous post:

Next post: