May warmed up the Twin Cities-area housing market, as sales climbed 21 percent and building permits rose by half.
Strong demand and a shortage of listings helped boost home prices in May to their highest level since October 2010.
The median sales price increased 11 percent last month, the third consecutive month of year-over-year price gains, according to the Minneapolis Area Association of Realtors, which released its latest numbers Tuesday. Home sales climbed 21 percent in May, as the number of listings continues to decline.
"May looks great on paper and on the street," said Andy Fazendin, broker at Fazendin Realty and president-elect of the Realtors association. "Buyers are active, sellers are starting to see some brightness on their end and the market is rediscovering a nice balance."
Home construction got a healthy boost in May as well. Twin Cities-area builders were issued 389 permits to build 638 units, a 50 percent increase in permits over last year.
Overall, the housing numbers suggest a market that is slowly bouncing back from the Great Recession, but feeling the effects of a low number of listings.
While record low mortgage rates have been attracting home buyers, many are discovering a shortage of homes on the market. The number of houses on the market dropped 31 percent from May 2011 to 17,262 active listings, the lowest level since early 2004.
As a result, competition is stiffening among home buyers, generating multiple offers in some parts of the Twin Cities, especially for properties that are easy to buy and are in move-in condition. In fact, sales of bank-owned listings and short sales represented only 39 percent of all closed sales last month, down from more than half of all sales during the past couple years.
"It's been a positive change for our local housing market and it's been a long time coming," according to Cari Linn, president of the Realtors association and a sales agent with Coldwell Banker Burnet.
Distressed sales tend to sell for far less than traditional listings, which means home prices will climb if fewer deals involve foreclosures or short sales. In fact, traditional home sales had a median price of $205,000; foreclosures, in turn, had a median price of $116,350.
The trend is likely to continue as foreclosure rates fall, and banks clear out their inventories of unsold homes. Last month, foreclosures and short sales represented only 31 percent of all new listings, the smallest share since June 2008.
More new construction
Builders are feeling more confident, as well, as tight inventories of existing homes are enticing more buyers to consider new construction. So far this year, builders have been issued 1,371 permits to build 2,615 units (a single permit can be issued to build more than unit), a nearly 70 percent increase in units, according to the Builders Association of the Twin Cities (BATC).
The increase was driven by a large increase in the number of single-family houses during what has been a market dominated by new rental housing, especially in Minneapolis. By its own calculations, the city has issued permits to build more single-home units than any other city in the metro for the past six years, according to Tom Streitz, the city's housing policy director. Last month, there were 127 planned units for the city, and 764 so far this year, according to BATC. St. Louis Park was second with 120 permits to build 316 units.
The dominance of Minneapolis and St. Louis Park represents a general preference among home seekers to be close to their jobs and shopping, leaving much of the excess housing inventory in exurban communities that were targeted by developers seeking cheap land during the housing boom.
"The growth in single-family construction permits is another positive indicator for our industry," said Curt Christensen, BATC's president and owner of Lee Lyn Construction.
Jim Buchta • 612-673-7376