Minnesota is generally a very consistent performer in the economy when compared to the United States Economy as a whole. The peaks are never too high and the valleys are never too low. On Friday Wells Fargo released its July 2014 economic outlook reinforcing that the state economy is greatly improved but housing still lags behind.
The state’s real GDP rose a full percentage faster than the nation in 2013. The unemployment rate is one of the lowest in the country at 4.5 percent with the labor force participation rate also clocking in at an impressive 70.3 percent.
However, like the rest of the nation, Minnesota’s housing market leaves much to be desired. Demand for single family homes is weak.
The sluggish pace of single-family homebuilding also reflects still weak demand for single-family homes. The first half of 2014 saw 7.6 percent fewer home sales than over the same period in 2013. Existing and new home sales both appear to be weaker this year.
Nationwide, some of the weakness in the housing market can be attributed to falling investor demand along with a smaller distressed inventory. Likewise, distressed homes are scarce in Minnesota. The foreclosure rate in the state is only a third of the national average. Delinquency for 90 or more days overdue is also 2.1 percentage points lower than the national average.
Home prices have risen 8.7 percent over the past year and have trailed behind the national pace. Wells Fargo speculates that the small share of distressed homes and the slower-than-average pace of price increases have probably caused investors to look to other states.
According to the report, “the housing recovery has had a hard time reaching the key tipping point level, where homeowners feel confident that they can sell their current home at a good enough price to make it worthwhile to move. Given that year-to-date sales are the lowest in at least two years, it does not seem like traditional homebuyers are rushing back into the housing market just yet, however.”