After months of shopping and an unsuccessful bid, Kate and Matt Shalbrack finally prevailed with their offer on a tidy stucco house in Roseville late last year.
“It was an incredible moment,” said Kate Shalbrack, recalling the night their above list-price offer had been accepted.
For the Shalbracks and other first-time buyers, former renters and downsizing baby boomers in the Twin Cities metro area, 2018 was one of the worst on record. They battled over a paltry number of houses last year, driving the median sale price to a record $265,000, according to year-end data from the Minneapolis Area Realtors (MAR).
Even a late-season swell of fresh listings wasn’t enough to relieve the pressure. The least-expensive houses in the Twin Cities sold on average in about 30 days, about four times faster than move-up homes, pushing an untold number of would-be buyers to the sidelines.
Higher prices and a shortage of listings affordable to entry-level buyers stifled sales. Throughout 2018 there were about 2,000 fewer closings than the year before.
“The market is changing,” said Nick George, the Keller Williams agent who helped the Shalbracks find their Roseville house. “It’s just the natural fluctuation in the market, it’s more of a leveling. Instead of getting seven offers you might get two, or maybe one.”
Even though there was a 5 percent increase in listings during the year, there were far more entry-level buyers than sellers. On average, those who sold last year received nearly their full asking price, especially in urban neighborhoods where demand has been the most intense.
Price pressure and a shortage of listings pushed buyers to the inner-ring suburbs and a handful of exurbs, making them the hottest housing markets in the metro last year, according to the Star Tribune’s third annual Hot Housing Index, which ranks communities based on where houses sold more quickly than the year before, where prices posted the biggest gains and where sellers received closest to their asking price. A handful of exurbs, including Otsego, soared to the top of the list because of a spike in housing construction last year. But working-class suburbs like Crystal, St. Anthony and Richfield, where houses are modest and close to the central cities, dominated.
Owen and Bailey Kinsky were willing to spend more than $400,000 on an older house with charm in a Minneapolis or St. Paul neighborhood, but there just weren’t that many options and the competition was fierce. So they shifted their focus to the eastern suburbs where they fell for a Victorian-style house in Stillwater that had been on the market several months for about $450,000. After a hefty price reduction, the Kinskys couldn’t resist, so they quickly made an offer.
“We knew that the market may speed up come spring and that interest rates were likely to keep going up, so we did want to get ahead of that curve,” said Owen Kinsky. “It felt a little less stressful looking for a home in the offseason.”
Though listings had increased during 2018, by the end of the year only 13,083 houses were on the market — 37 fewer than the year before — putting a lid on what many worried was the start of another boom-and-bust cycle.
Todd Urbanski, the new president of the Minneapolis Area Realtors, said that a price bubble akin to the one that popped in the mid-2000s is unlikely today because there are only about a third as many houses on the market today, and that a true bubble results from an oversupply of listings.
“And we’re far, far from that right now,” he said.
The Shalbracks know all too well how tight the market was. They had their hearts set on a starter house in northeast Minneapolis or St. Anthony, the third-hottest market last year on the Star Tribune housing index. When friends warned them about how few houses were on the market and how quickly they were selling, they realized they needed to expand their search area to Roseville. “It’s still close to Northeast if we want to go to breweries, visit friends or go out to dinner, and it’s not too far from downtown,” said Matt Shalbrack. “It’s a perfect location for us.”