Twin Cities home sales last year surged to the highest level since 2006, marking what is widely considered the first sustained recovery since the Great Recession.
Throughout the 11-county metro area, there were 48,622 sales in 2012, a 17 percent increase over the previous year, the Minneapolis Area Association of Realtors said Friday. The median price of those sales also rose 11.9 percent to more than $168,000.
Barring an economic relapse, these positive trends will continue as buyers and sellers regain confidence and the market begins to stabilize. "History is going to look back at 2012 as the year the housing market bottomed and the turnaround started," said Herb Tousley, director of real estate programs at the University of St. Thomas.
Sales increased in nearly every corner of the metro, though prices weren't up evenly. Sales and price gains were strongest in Minneapolis, St. Paul and several inner-ring suburbs where supplies are limited and options for new construction are few. In Minneapolis, sales were strongest in the University neighborhood, where transactions were up nearly 40 percent, and in St. Paul sales were robust in the Summit Hill neighborhood, where closings were up 64 percent.
"The situation varies from neighborhood to neighborhood, but homeowners should take comfort in those ongoing improvements," said Kate Beckman, president of the St. Paul Area Association of Realtors.
After falling more than 40 percent from peak to bottom, prices still have a long way to go to recover what was lost.
Jonathan Smoke, director of research at Hanley Wood Market Intelligence, said that based on public records, including recently filed deeds, prices were up 19 percent for both new homes that closed and the median price of bank-owned homes.
"Like we are seeing in most markets, investors and regular consumers [in the Twin Cities] are bidding up the price of distressed homes as the inventories decline," Smoke said.
By the end of the last year, there was only a 2.9-month supply of houses on the market in the Twin Cities, a fact that's no surprise to first-time-buyer Jake Meidl.
Early in the year, the recent college graduate said that he'd done his homework and decided the market had turned a corner, so he started shopping for a house priced at less than $200,000. He'd looked at dozens of houses, but "if it was a good house and priced right there were always multiple offers," he said.
Eventually he found a foreclosure in Burnsville that was priced at $174,900. When the price dropped $15,000, Meidl and several buyers made an offer. He got outbid, but the sale didn't close and the house came back on the market. When it came back on the market he decided to bid $175,000 -- more than the asking price. This time he got it.
"I said, 'let's finish this fight,'" he said. "It was very crazy."
Such deals helped put upward pressure on prices last year, but the increase was also the result of a statistical shift caused by a robust increase in more expensive move-up houses. During the course of the year, as entry-level buyers were able to sell their houses and upgrade to more expensive houses, demand worked its way into the upper-bracket market. By the end of the year, gains in the sale of $1 million-plus properties exceeded the broader market.
There were also far fewer distressed sales, including foreclosures and bank-owned listings. Distressed sales represented 40 percent of all sales, down from 50 percent in 2011.
Despite improving fundamentals, the market still faces challenges. While mortgage rates are expected to remain at or below 4 percent for much of the coming year, home sales are more dependent on people having jobs, so the continuation of the economic recovery will be important. And distressed sales are still at historically high levels, creating financing problems for many in the way of appraisals that are coming back too low to justify the higher prices that many buyers today are willing to pay.
Still, the Realtor groups expect closings to increase 4 to 8 percent in the coming year and that prices will rise 8 to 12 percent.
Meidl is also optimistic that improvements to his new house, including a new roof, updated plumbing and a variety of other repairs, will pay off.
"I'm seeing so many multiple offers and so much bidding that I'm very happy that I have something right now," he said. "I'm completely confident that I'd be able to sell it and make a little money."
Jim Buchta • 612-673-7376