House listings in the Twin Cities are on the rise, but first-time buyers are snapping them up as quickly as they hit the market, setting the stage for another competitive spring market.
At the current sales pace, there were only enough houses on the market last month to last 1.6 months, the lowest in a year, according to a January report from the Minneapolis Area Realtors (MAR).
“We’re still very much undersupplied locally and nationally,” said MAR President Todd Urbanski. “We’re expecting 2019 to be a good year for both buyers and sellers.”
During January, home sellers listed 4,359 properties, 8 percent more than last year and the fourth month in a row when listings increased. Though there were fewer closings than last year, buyers were out in force. Pending sales, an indication of future closings, increased a little more than 3 percent.
With limited options for first-time buyers, sellers are still fetching nearly their entire asking price. The median price of all sales during the month was $258,900, a 6 percent increase and an all-time high for January.
The hottest houses last month were those priced at less than $250,000, which on average sold in about a month — nearly 20 percent faster than last year. Houses priced from $350,000 to $500,000 took twice as long to sell as those priced below $250,000, and those priced at $500,000 to $1 million took three times longer to sell.
High demand for those inexpensive listings is why aging and developing suburbs were the hottest markets this year, according to the Star Tribune’s annual Hot Housing Index. Otsego, an exurb along Interstate 94 where there’s been a burst of construction aimed at first-time buyers, was the hottest market last year, but several inner-ring suburbs where the median sale price is below average ranked high.
Demand for that entry-level housing is being fueled by strong job growth that’s increasing the buyer pool, especially young professionals who are finding that rising rents often mean homeownership is less expensive than renting.
That phenomenon is why Zillow said the Twin Cities is expected to be the fifth-hottest housing market in the nation this year, behind San Jose, Calif., Orlando, Denver and Atlanta. Zillow’s ranking is based on where home values and rents are expected to outpace the nation this year, and where income growth, job opportunities and a growing population are driving demand.
Zillow senior economist Aaron Terrazas also attributed the relative affordability of the housing in the Twin Cities to its high ranking this year.
Although a shortage of listings in some areas and rising prices are stifling sales, spring buyers are getting a break on mortgage rates.
Though rates were expected to top 5 percent by the end of 2018, rates have fallen in recent weeks to about 4.4 percent for the 30-year mortgage, the lowest level in a year.
Linda Rogers, MAR’s president-elect, was optimistic about the spring market. “Our data shows slightly more inventory, and rates are down from where they were at the end of last year,” she said in a statement. “Buyers should know that they’re going to find more options out there this spring and summer.”