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February 2021 Market Report

Homes for sale down. Pending sales flat for first time since May 2020

MINNEAPOLIS (March 10, 2021) — Demand remained high in the Minnesota housing market in February as homebuyers competed with multiple offers for diminishing housing stock. Closed sales were up +5.8% over last year, but new listings sank -14.8%.  Since last May, pending sales fell flat for the first time and were down -0.8% from February 2020. Adding to the pressure, homes for sale fell 51.6%, the largest decrease in a year. Shrinking inventory defined this seller’s market, pushing the median sales price up +10.6% to $282,000. Days on the market retracted by -25.47% over last year, down to just 47 days. Correspondingly, homes received 99.0% of the original price received, a +2.3% increase over last year.

“In a heated market where there isn’t even a month of supply available, many sellers are in the enviable position of sometimes getting offers that exceed the list price,” said Chris Galler, CEO of Minnesota Realtors. “As we come into the spring selling season, more inventory will come online. But as long as interest rates remain favorable, buyers will come out in even greater numbers. A year into the pandemic, changes in work and lifestyle continue to fuel the desire for more space. The dropping rate of COVID infections in Minnesota and the increasing number of vaccinated individuals also will likely impact consumer behavior. So, although we’re anticipating another record-breaking sales season, it is likely that supply will run short of the overwhelming demand.”

Across the state, there were only 7,460 homes available for sale compared to 15,417 in February 2020.

February year-over-year summary:

  • Closed sales: +5.8% to 4,424
  • Median sales price: +10.6% to $282,00
  • Average sales price: +10.5% to $319,813
  • New listings: -14.8% to 6,184
  • Pending sales: -0.8% to 5,762
  • Days on the market: -25.4% to 47 days
  • Homes for sale: -51.6% to 7,460

Closed Home Sales Across Minnesota by Region

Closed sales were up by double digits in eight of the 13 Minnesota regions, with the Upper MN Valley hitting a 100% increase over February 2020. South Central and the seven-County Twin Cities saw more modest gains, while the Arrowhead was flat to last year. Southwest Central and Southeast both marked single-digit declines. See the chart below for more details comparing February 2021 to February 2020.

graph of regional stats

The seven-county Twin Cities region comprises Anoka, Carver, Dakota, Hennepin, Ramsey, Scott and Washington counties. The official Minneapolis-St. Paul-Bloomington metropolitan statistical area recognized by the Census Bureau consists of 16 counties, on which MAR & SPAAR local associations report.

Source: MNR news

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Mortgage Insurance

What Is Mortgage Insurance and How Does It Work?

What Is Mortgage Insurance and How Does It Work?

Mortgage insurance protects the lender in the event you default on the loan. In return, the lender agrees to provide a higher mortgage amount to cover the additional down payment needed. Mortgage insurance can be included in your new monthly payment, paid by the lender in return for a higher interest rate, or paid upfront. The rates used to calculate mortgage insurance are based upon debt-to-income ratio, credit, and how much down payment you will need to meet the 80% loan-to-value requirement, or 20% down.

Below describes common types of mortgage insurance:

  • PMI (Private Mortgage Insurance): This insurance can be paid upfront or financed into your mortgage. Once you reach 78% loan-to-value, refinance, or reach the mid-point of your mortgage, this insurance will go away. If you own a multi-family home or investment property, these rules differ, and you may want to talk with your loan officer about those options.
  • LPMI (Lender-Paid Mortgage Insurance): This option is when the lender pays for your mortgage insurance and in return, you agree to pay a higher interest rate where the premiums are built in.
  • MIP (Mortgage Insurance Premium):  If you’re applying for an FHA mortgage, you pay part upfront and the remainder is financed into your mortgage payment. If you are not able to pay any part upfront, it too can be financed into your mortgage payment. It’s important to note, for FHA loans, MIP would last for the term of the loan if you purchased or refinanced your home on or after June 3, 2013 and you had a down payment of less than 10%.

Bottom line: Remember, in addition to mortgage insurance, there are several ways to purchase a home without a 20% down payment. If you are interested in exploring mortgage insurance as an option, talk with your loan officer to see which types work best for you.

Source: Mortgage Market Guide