The heat is on for Twin Cities home buyers.
Sales outpaced listings in May and bidding wars rose, the Minneapolis Area Association of Realtors said Thursday in its latest monthly release of data.
"It's wild," said Adam Fonda of Lakes Sotheby's International Realty. "Anything that's move-in ready and priced right is selling."
There was a nearly 20 percent increase in pending sales last month, the most since 2005. The median price of those sales climbed 6.7 percent to $224,000, just shy of an all-time high.
Sellers are clearly in charge. They got an average of 97.5 percent of their original list price last month, the highest in nearly a decade.
And while new listings are hitting the market at a healthy clip, they're not keeping pace with sales in some parts of the metro area.
There were 8,590 new listings, about the same as last May. But the number of properties on the market by the end of last month was 6.8 percent lower than a year ago.
"Inventory is still chronically low," said Herb Tousley, director of the real estate programs at the University of St. Thomas. "So if you're a buyer, you have to be ready to move if you see something that looks good."
A shortage of listings is ratcheting up the competition for many buyers. There was more than one offer on at least a quarter of the deals last month.
While that's not yet a record, the situation is more challenging for buyers than it was a couple of years ago when investors dominated the market. Today, most buyers are first-timers or trying to move up and their need for a house to live in, as opposed to using as an investment, means there's more at stake when a bid fails.
Some buyers, like Jason and Kelli Biederwolf, are trying to time their move. The couple have two young boys and planned to build a house to replace their four-bedroom house in Maple Grove. They found an existing one with the three-car garage, master bath and extra space they needed.
"It was time for mom to have another bathroom, and dad to have another stall on the garage," Kelli Biederwolf said. "Immediately after seeing this house, we knew we would make an offer. It had everything we were looking for."
Within the three days of listing their 2,200-square-foot house for $274,900, they had nine showings and an offer.
"We had a feeling our house would sell pretty fast when looking at the comps in the area, but also didn't want to be overconfident," said Jason Biederwolf. "As the buyer, it is all about making the right move at the right time."
Their agent, Nevin Raghuveer of Re/Max Results, said that demand — and the shortage of listings — is most pronounced among properties priced below $425,000.
"It gets exponentially brisk as you go lower on the price range," he said. "Above $425,000, it gets choppy."
After a dismal 2014, the housing recovery has regained most of its momentum in part because mortgage interest rates have remained unexpectedly low. Last year, economists predicted that by the end of 2015 rates would have risen to at least 5 percent. The 30-year rate is now just under 4.2 percent.
For the Biederwolfs, the decision to buy their "forever house" was motivated by the expectation that rates will eventually rise. Kelli Biederwolf said that when she and her husband calculated the long-term effect of a quarter-point rise in rates, it made sense to move.
"The money that we could have saved in the next year of saving every dime, doesn't even compare to the thousands that we will save over the life of the mortgage," she said.
Jim Buchta • 612-673-7376
