The number of foreclosure and short sales dropped, raising hopes of a local housing market recovery along with sale prices.
Robust home sales helped lift Twin Cities-area prices in March for the first time in nearly two years.
The year-over-year price jump is evidence the real estate market is undergoing a fundamental shift. Buying activity veered away from distressed transactions and toward higher-priced traditional sales.
"We'll accept that as progress and build upon it," said Cari Linn, president of the Minneapolis Area Association of Realtors.
The association said the median price of closed sales in March rose 6.4 percent to $149,000. Meanwhile, the number of closed sales last month rose 8.4 percent to 3,525. And pending sales, an indication of future closings, were up 20 percent to 4,524.
Sales of foreclosures and short sales in March fell 13 percent, while sales of traditional listings jumped 33 percent. Those traditional listings tend to sell at much higher prices than distressed sales, causing the overall median to rise.
The median price increase comes after several months of declines. Despite gains in monthly sales over the past few months and a steady decline in the number of homes available, prices weren't rising because more than half of those transactions were foreclosures and short sales.
But the dominance of distressed sales fell sharply last month, with foreclosures and short sales representing 35 percent of all new listings and 44 percent all pending sales. Those were the smallest percentages since July 2008.
Warmer temperatures have given the market a boost. And because shopping conditions have been favorable, house hunters who might have waited until April to start their search came out in March, giving demand a lift.
Nevertheless, there is growing confidence a recovery is on the way. That has manifested itself this spring with more cases of multiple offers and shorter market times. Last month, the average home took 144 days to sell, down from 160 days last March, and it was the sixth consecutive month of declines in the average market time.
Jonathan Smoke, executive director of research for Hanley Wood Housing Intelligence, a research firm, said the persistent price declines in the Twin Cities have defied economic and market fundamentals that would suggest gains. In fact, he called the Twin Cities one of the five strongest markets in the country, along with Boston, Washington, Dallas and Seattle.
"Your market is strong on all cylinders," he said, referring to strength in the rental housing, single-family construction and remodeling activity.
Based on public records that include all home sales, not just those sold through a Realtor, the median price of a traditional sale was $180,000, up 7 percent from last year, Smoke said.
Smoke said it's too soon to tell whether higher prices in March signify a sustained recovery, only consistent increases over the next few months -- the heart of the selling season -- will be proof.
Herb Tousley, director of the real estate program at the University of St. Thomas, agrees. He also said that whether the March increase is purely statistical, or a sign of real price growth, it will help boost consumer confidence, which until recently has been a drag on sales.
Tousley said prospective buyers, and even some sellers, are already becoming more optimistic that the worst is over.
"One month doesn't make a market, but it sure is nice to see it going in the right direction," said "People are feeling a little better."
Jim Buchta • 612-673-7376