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Higher mortgage rates and a shortage of listings have yet to stifle home sales in the Twin Cities metro area. In fact, prices and closings are rising noticeably year over year.

Last month, there were 3,806 house closings across the region, a 13.8% increase from 2023, according to a monthly sales report from Minneapolis Area Realtors. The median price of those sales was $385,250, a 4.1% increase from a year ago. At the same time, buyers signed 4,334 purchase agreements, 8.5% more than this time last year.

"People are realizing that interest rates are what they are," said Brady Holland, a Twin Cities real estate agent. "They're saying, 'We're not going to sit for another year.' If they need to move, they're going to move."

Mortgage rates, which have inflated house payments and chipped away at buying power, posted a series of very small but steady increases last month. The latest data shows after a five-week climb, rates have been hovering around 7% but ticked down a bit during the first week of April. The 30-year fixed-rate mortgage averaged 7.09% during the week ending May 9, according to a Freddie Mac survey.

The trends were similar outside the metro. Statewide, new listings increased 20%, pending sales rose 7.7% and the median price of all closings was $350,000, a 4.5% increase from last year, according to Minnesota Realtors.

Despite waning affordability, new listings have posted an annual increase for seven consecutive months, and pending sales have been up five consecutive months.

"Even as inventory levels rise, sellers are still finding they have the upper hand in most areas and price points," Geri Theis, president of Minnesota Realtors, said in a statement. "Buyers should understand that while they have more options, there is still competition. That'll be even more true if rates fall."

According to that statewide report, the most-balanced markets between buyers and sellers were Detroit Lakes and Bemidji, while the tightest markets included St. Cloud, Rochester and the Twin Cities. Pending sales posted the biggest gains in the Alexandria, Grand Rapids and Bemidji regions.

Holland said homebuyers aren't deterred, and many are finding workarounds, including rate discounts that many Twin Cities homebuilders are offering. Lennar, for example, has a "limited time" FHA fixed-rate mortgage as low as 4.99% on select properties through Lennar Mortgage.

Construction crews work at the Lennar at Lynwood housing development in Ramsey on Tuesday. Finished units are in the background.
Construction crews work at the Lennar at Lynwood housing development in Ramsey on Tuesday. Finished units are in the background.

Anthony Souffle, Star Tribune

Those incentives seem to be working. Through March, new home sales were up nearly 25% in the Twin Cities metro area, according to a rolling 12-month average from Minneapolis Area Realtors.

Holland said despite an increase in new listings, houses are still selling quickly and bidding wars are happening on about three of every four listings he shows.

Last month, more than 6,300 houses, condominiums and townhouses went up for sale, nearly 21% more than last year. While that caused a 14.1% increase in total inventory at the end of the month, there's still a deep imbalance between listings and sales, extending what's been a years-long seller's market.

At the current sales pace, there are enough houses on the market to last two months. A balanced market exists when there's a four- to six-month supply.

"Houses were selling very fast," said Denise Personette, who is moving from Fruita, Colo., to the Twin Cities.

Last year, she made several buying trips to the Twin Cites, but was left frustrated by the lack of options. After looking at single-family houses in the northern suburbs, she felt intimidated by the big yards needing lots of tending, as well as the prospect of dealing with deferred maintenance and redecorating. So she decided to buy a new townhouse that offered a more maintenance-free life for herself and her 20-year-old son.

Even with a budget cap of $500,000, many of the new and to-be-built townhouses were selling quickly. So when she saw one under construction in Ramsey, she made an offer and is readying to move later this year.

The developer sweetened the deal by offering to pay some of her closing costs.

"I was lucky," she said. "There are quite a few incentives out there."

Units like these at the Lennar at Lynwood housing development in Ramsey are selling fast.
Units like these at the Lennar at Lynwood housing development in Ramsey are selling fast.

Anthony Souffle, Star Tribune