The frenzy in the Twin Cities housing market has intensified to the point that, for the first time in a decade, most sellers are getting more than they ask.
An unbalanced market in which house hunters outnumber listings is forcing buyers to bid aggressively, or lose out. New data show that in April at least half of all buyers paid more than asking price, with the trend most evident on houses priced under $300,000.
As a result, prices are rising. Preliminary data for May show the median sale price of all closings in the metro was $237,000, which was the highest of any month since June 2006 and $1,000 shy of the all-time high.
“Demand is unrelenting and sellers are not restocking the bin,” said David Arbit, research and economics director for the Minneapolis Area Association of Realtors.
At the current sales pace, there are now enough houses priced from $120,000 to $190,000 range to last just 1.6 months compared with 7.1 months for houses in the $500,000 to $1 million-plus range. In a normal market, a six-month supply of listings is considered balanced.
“It’s nerve-racking,” said Kathy Borys, an agent with Coldwell Banker Burnet who estimates that 90 to 95 percent of her transactions in recent months have involved offers for more than the list price, including some she thought weren’t even worth an offer at all.
“I’ve seen some houses that I’ve shown to clients where we walked through and said ‘not in a million years would this work,’ then you hear that the seller got 20 offers,” she said. “It’s just crazy.”
Borys, who tends to have a lot of listings in northeast Minneapolis, said that buyers are not just offering more money but are writing letters to sellers and are using the most straightforward financing to smooth deals.
Andrew Price, a sales agent with Edina Realty, said that many buyers now offer 3 percent above the asking price in part because so many want sellers to help pay their closing costs without feeling like they’ll net less than the house is worth.
He recently listed a 24-year-old split-level house in Lakeville for $250,000 and, in just a few hours, got an offer that was $8,000 more than the asking price. The buyer had been shopping for several months, was outbid on several other houses and wanted to ace out prospective competitors.
“They’re saying ‘Let’s just buy it right now,’ ” Price said. “And the seller isn’t going to turn that down.
Price had advised seller Jennifer Becker to make the house next to perfect, so she painted, decluttered and fixing everything that wasn’t working. “I think most people want to believe their home is worth more than asking price, but no I wasn’t expecting to receive an offer that was more than the asking price,” Becker said. “Really, I was just hoping to receive an offer at asking price!”
David Wells of Coldwell Banker Burnet recently listed a classic 1925 stucco bungalow in southwest Minneapolis for $625,000. It had been remodeled top to bottom with the very latest finishes and is within walking distance to the 50th and France and Linden Hills shopping areas.
Wells said that he was nervous about the price, which he thought was somewhat aggressive, but by the end of the day in late April the 2,500-square-foot house went on the market, he received three offers, including one for $25,000 more than his clients were asking.
“We did intentionally wait until the spring market to list, thinking that buyer activity would be up from the crazy spring last year,” said Wells. “But we did not expect the feeding frenzy that ensued.”
That frenzy can look very different when a seller becomes a buyer.
After closing on the sale of their house in the Kenwood neighborhood of Minneapolis, Sonia and Patrick Toomey struggled to buy a new one. While they were trying to sell, the Toomeys made an offer on a house that was contingent upon the sale of their house, but they got outbid even though they offered $5,000 more than the successful, but non-contingent offer.
“That was the point at which I felt like the gloves are off now, this is going to be a tough market,” said Sonia Toomey.
The Toomeys and their three young children moved into a small southwest Minneapolis rental for four months — and kept looking. After months of not finding anything that suited their needs, they took a second look at a two-bedroom brick Colonial in the Tangletown neighborhood that had been marked down to $600,000.
Though they’d seen it several months earlier, months of looking left them with a fresh perspective on the market and a sense of desperation. The four-bedroom house they once thought needed too much TLC now seemed like the perfect fit. On the same day of their showing, they wrote an offer for $10,000 less than the asking price. Incredibly, the seller received two additional offers on the same day. One of those buyers quickly withdrew, and the seller picked the other bidder. “It was just horrendous, it really was,” Toomey said.
But a few days later, the people who outbid them also backed out. This time, the Toomeys took no chances: even though, as far as they knew, they were the only buyers on deck, they offered the sellers $25,000 over asking price.
They got the house and in retrospect are glad they did because they’ve watched prices rise in just the few months since they bought. “We are so thrilled, it was worth every penny,” Toomey said.