University of St. Thomas Minneapolis St. Paul Residential Index December 2016 Welcome to the latest edition of the UST Minneapolis St. Paul Residential Real Estate Index.

The University of St Thomas Residential Real Estate Index has been developed by the Shenehon Center for Real Estate at the University Of St. Thomas Opus College Of to correct the overstatement of housing price decline reported by the S&P Case-Shiller Price Index for the Min•neapolis–St. Paul metropolitan area. Rather than a single index or price representative of all homes, the UST Residential Real Estate Index includes the price of homes in three sub-markets: traditional sales, short sales and sales as well as a nine variable composite index for measuring market health for each category based on a three- month moving average 2017 – What to Expect in the Twin Cities Housing Market Median Sale Price

Increase in 2016 – 4.1% Expected increase in 2017 – 5% Persistent low availability of homes for sale and strong demand will push the increase slightly higher than 2016. The amount of the increase will be tempered by an increase in the number of new homes built as home builders see the number of new housing starts return to more normal levels.

Number of Closed Sales Sold in 2016 – 60,033 Expected in 2017 – 60,000 2016 was a good year in terms of the number of sold. We expect that due to the constrained availability of existing homes the number of closed sales will be about the same as 2016. Inventory of Homes for Sale Range of the number of homes for sale in 2016 11,000 – 15,000 Expected in 2017 12,000 – 16,000 The low number of homes for sale will continue through 2017. We expect that the inventory situation will improve somewhat in 2017 due to the increased number of new home completions and that increasing home values will cause more homes to be listed for sale. These numbers are still historically low. Before the crash there were typically in excess of 20,000 homes for sale at any given time. As can be seen on the table below the shortages are most pronounced in the lower to moderate priced homes.

Where is the Shortage of Homes for Sale the Greatest? Price Range % of Homes % of Homes Sold Months Available For Sale in December Supply in December

Less than $200,000 23.6% 38.2% 1.1 $200,000 - $399,999 39.5% 46.8% 1.4 $400,000 - $599,999 18.6% 10.8% 3.0 More than $600,000 18.3% 4.2% 6.5 Dec 2015 - Median Sale Price $219,500 Dec 2016 - Median +4.1% Sale Price $228,500

Affordability – How do we compare with the rest of the country? The Twin Cities housing market continues to be one of the most affordable major metro housing markets in the nation as can be seen in the table below. In 2016 the median sale price of an existing single family home increased by 4.1%%. In 2017 we expect to median home sale prices increase by about 5%. This higher rate due to continued shortages of existing homes for sale and relatively low interest rates. Housing Affordability Index (Composite) Measures the degree to which a typical family can afford the monthly mortgage payments on a typical home.

A value of 100 means that a family with the median income has exactly enough income to qualify for a mortgage on a median-priced home. An index above 100 signifies that family earning the median income has more than enough income to qualify for a on a median-priced home, assuming a 20 percent down payment. For example, a composite housing affordability index (COMPHAI) of 120.0 means a family earning the median family income has 120% of the income necessary to qualify for a conventional loan covering 80 percent of a median-priced existing single-family home. An increase in the COMPHAI then shows that this family is more able to afford the median priced home. This index is calculated as composite of the fixed and adjustable rate mortgages. Least Affordable Markets Most Affordable Markets San Jose 63.9 Twin Cities 217.1 Denver 128.7 San Francisco 72.6 Chicago 192.1 Los Angeles 73.6 Indianapolis 243.8 New York 84.4 Cleveland 245.1 Naples FL 89.5 Des Moines 248.0 Source: National Association of Realtors, Housing Affordability Index (Composite)© [COMPHAI], retrieved from FRED, Federal Reserve Bank of St. Louis; Data is from 2015. https://fred.stlouisfed.org/series/COMPHAI, January 16, 2017.

University of St Thomas Real Estate Indices At a level of 1114 the December UST Residential Real Estate Traditional Sale Composite index is down slightly, registering a .8% decrease compared to the level of 1122 that was recorded in November. It has increased 4.6% since December 2015. Our index is based on a rolling 3 month average of the last three months and the December index is based on October 2016 - December 2016 data. The UST Residential Real Estate Short Sale Composite Market Health Index was 1058 in December, up 1.3% from the 1044 recorded in November. The index has increased 10.5% compared to one year ago. There were only 67 short sales in December representing 1.6% of the total metro sales. The UST Residential Real Estate Foreclosure Composite Index was observed in December at 834. The number of at 225 represented 5.4% of the total sales recorded in July.

Real Estate at the Opus College of Business

Shenehon Center for Real Estate www.StThomas.edu/Shenehon The Shenehon Center for Real Estate serves as a resource to the commercial, industrial, residential and corporate segments of the real estate and the community to advance the public interest in real estate issues. For more than 15 years, the center has supported improvement in real estate leader- ship and management by creating and developing real estate leadership and management programs for undergraduate and graduate degree programs and professional development, providing a neutral forum to convene real estate professionals to share best practices, supporting and working with local real estate industry organizations, conducting real estate research, and developing mechanisms to transfer leading edge business practices to the real estate industry.

Graduate Certificate in Real Estate www.StThomas.edu/RealEstate The Graduate Certificate in Real Estates one of six graduate business degree programs offered through the Opus College of Business. Certificate students will gain fundamental skills in market analysis, valuation, investment analysis, financial modeling and the development process. The program is designed for students who have earned a bachelor's degree and who wish to obtain a foundation for a career in real estate, as well as for those who hold a graduate degree but seek in a new career area or specialization within the industry. The certificate program consists of six graduate-level courses (16.5 credit hours). Students take the same graduate-level concentration courses as MBA or master’s degree students.

Real Estate MBA www.StThomas.edu/RealEstate

The “University of St. Thomas MBA in Real Estate” is a course of study for students in the new UST Evening “Flex” MBA program who wish to earn a MBA with a real estate concentration. As a part of the new St. Thomas Evening “Flex” MBA program students would take the normal MBA required classes (22 1/2 credits) and take most of their electives (16 ½ or 18 credits) as real estate classes. The real estate classes are the same classes that are required for the Graduate Certificate in Real Estate. The only other difference is that students would take Real Estate Law as a substitute for Business Law. Upon graduation a student would receive a diploma that would be a Master of Business Administration from St. Thomas along with a Graduate Certificate in Real Estate. Bachelor of Science Degree in Real Estate www.StThomas.edu/business/BSRealEstate The Bachelor of Science Degree in Real Estate is one of 13 undergraduate concentration areas in the Opus College of Business. This four-year degree pro- gram provides students with a background in general business and real estate theory and practice. Students study the many factors involved in property assessment and sales, how they change and how these changes affect real estate and individuals. Recent graduates hold positions in the government, nonprofit, construction and private business sectors, including leadership positions in real estate brokerage, investment management, , appraisal, construction management, land-use planning and land development.