A shortage of house listings in the Twin Cities metro continues to force buyers to make quick decisions and strong offers.
At the end of October, there were only 11,221 properties on the market, 18 percent fewer than last year, according to a monthly sales report from the Minneapolis Area Association of Realtors. Tight supply is driving up prices, with the average price per square foot of sales that closed during the month up 7.1 percent to $144.
There were 4,991 house closings in October, just a couple dozen more than a year earlier.
“At this point in the year, we begin to look toward annual numbers that are less susceptible to weather and other variables,” said Cotty Lowry, president of the Minneapolis Area Association of Realtors (MAAR) and a broker at Keller Williams Integrity. “We’re still very much on track with last year’s sales levels.”
There’s plenty of evidence in Wednesday’s report that sales are being stifled by a shortage of options. By every measure, buyers are paying more than they did last year, especially in the entry-level market.
The median price of all closings was $244,000, a 6.1 percent increase from last October. House prices have risen for 68 consecutive months, and houses have sold in 52 days on average compared with 61 last year at this time.
Sellers received on average 97.7 percent of their original list price, 0.8 percent higher than in October 2016. And at the current sales pace, there are only enough listings to last 2.2 months. The market is considered balanced when there’s a five- to six-month supply of listings.
First-time and entry-level buyers are facing the fewest options, which is why listings priced at less than $250,000 were the only price category to see a decline of closings. Sales were up in every other price range.
The tight market helped drive up prices in several affordable inner-ring suburbs where closings were down but prices increased by double digits. In Roseville, for example, closings in October were down 10 percent, but the average price per square foot was up 19 percent. And in Fridley, closings fell 30 percent, but the price per square foot increased 14 percent.
In Golden Valley, a coveted first-ring suburb with an abundance of move-up houses, sales increased 38 percent with a corresponding 18 percent increase in the price per square foot.
Sales all year have been driven by unexpectedly low mortgage interest rates, which remain several percentage points below historical averages. Michelle Fitzpatrick, a real estate broker who specializes in new construction in Woodbury and the eastern suburbs, said low rates are enabling buyers to qualify for more house than they might have expected.
Fitzpatrick said that while open-house traffic last month was slower than it was in the spring, people who are planning to sell their house in the spring are out shopping now for a new house. Already this week, she has had three closings for houses that were ordered in the spring.
Favorable mortgage options are even enabling some buyers to build new homes without first selling their existing house. “I haven’t had anybody not be able to sell their existing house before they close on their new home,” she said. “People are definitely wanting to take advantage of low rates.”
Fitzpatrick said that she’s also seeing an increase in the number of first-time buyers who are skipping entry-level houses and ordering what would normally be considered a move-up house in the $500,000-plus range. “It’s shocking,” she said. “There’s no place to park in the street because there’s so much construction happening out here.”
Similar trends are playing out beyond the Twin Cities metro. Throughout the state, there was a 7½-month supply of properties on the market during October, a slight decline compared with last year, according to a report released by the Minnesota Association of Realtors (MAR) earlier this week.
Among the 13 regional development areas that MAR tracks, the biggest inventory shift has been in the north-central region, where there was a 5.5-month supply of listings, a 26.7 percent decline.
The median price of all closings across the state was $220,000, a 6.8 percent increase over last year. The west-central region was the only where the median sales price declined; it fell 1.5 percent to $176,200.
“We remain in a unique housing situation — it is a buyer’s and seller’s market,” said Chris Galler, MAR’s CEO. “For buyers, lack of inventory hinders their efforts to purchase, but interest rates remain low, making money more affordable when borrowing. For sellers, multiple-offer situations remain a common occurrence and push more buyers closer to the property’s list price. We expect this trend to continue in the short-term.”
Jim Buchta • 612-673-7376