Many home sellers in the Twin Cities are feeling a fall chill.
After a robust summer, home sales across the 13-county metro are slipping, and so are price gains. That is not necessarily the case for some entry-level sellers with move-in-ready houses, which are still fetching their asking price — or more.
During September, home buyers in the Twin Cities signed 4,957 purchase agreements, 1,000 fewer than the previous month, according to Minneapolis Area Realtors. The median sales price increased 6.6%, to $279,250.
“Attractive interest rates have unleashed some of the pent-up demand from earlier this year,” said Todd Urbanski, president of Minneapolis Area Realtors. “But each price point, product type and area is unique.”
On average, sellers who closed in September got $160 per square foot — 4.8% more than last year. That price gain is about half the annual increases that were posted last year at this time.
The seasonal slowdown comes in the midst of prime buying conditions. Mortgage interest rates remain near historic lows, and the supply of listings for move-up buyers has remained steady and well balanced.
Entry-level buyers, however, are struggling despite the overall decline in signed contracts. First-time buyers and downsizing baby boomers are battling for a dwindling number of listings. During September. listings priced at less than $300,000 declined 9% vs. last year. That shortage is stifling sales in that price range, which saw a 6% decline in closings.
In contrast, sales of houses priced at more than $300,000 increased by the double digits, but not without seller discounts. Across the metro, sellers drew 98.5% of their asking price during September, slightly less than the previous month despite bidding wars on some of the most affordable houses and those in move-in ready condition.
The situation is somewhat confounding to Ian Harrison, who has already discounted the price of his four-bedroom, 2.5-bathroom house at least four times during the two months he has been trying to sell it. Still, he has yet to receive a single offer on the house, which is just seven blocks from Lake Harriet in the typically high-demand Fulton neighborhood in southwest Minneapolis. He is now planning another price reduction on the house, which is currently priced at $589,900.
“We’re kind of an inbetweener on the price point,” he said, noting that several less-expensive houses in the neighborhood have sold quickly.
For the market as a whole, Harrison’s situation is no outlier. On average, houses sold within 43 days.
The house is in move-in-ready condition and has all the features most buyers want today, he said, but he blames the situation on a weak pricing strategy and bad timing. He acknowledges pricing the house higher than he expected to sell for with the expectation that a buyer would negotiate a lower price, and he is worried that’s he has missed the biggest wave of buyers.
“August is not a great month [to list a house],” he said. “Everyone has already purchased a home or they’re out on vacation before school starts.”
Harrison, who has already moved and is eager to sell the property, is simultaneously offering the house for rent.
“Whoever signs first wins,” he said.
The housing-market situation in the Twin Cities is part of a broader national trend. On Thursday, Zillow reported that across the country during September there were 6.4% fewer houses on the market compared with last year, with a double-digit decline in houses in the bottom third of the price range.
“That’s not great news for those frustrated by the housing market and looking to buy their first home,” said Cheryl Young, a senior economist at Zillow.
Young said that buyers and sellers in the Twin Cities shouldn’t fret. Price growth in the metro has been far more moderate than the national average, especially compared with coastal markets, and that’s good news for those who are worried about getting priced out.
“That doesn’t mean prices are going down,” said Young. “But there have been challenges in the market as prices have escalated and people are more wary of jumping into the housing market.”