The biggest home price gains since the Great Recession are drawing thousands of would-be sellers — underwater and otherwise — back into the housing market at a time when buyers are struggling to find available homes.
Case-Shiller reported this week that Twin Cities home prices posted the sixth-largest gain among the 20 metro areas it tracks. Those rising values drove a recent 20 percent gain in new home listings, giving the area market a potent and much-needed boost.
“The phones are ringing again,” said Dan Arrigoni, president of U.S. Bank Home Mortgage, noting that homeowners are regaining a sense of confidence they haven’t felt in years.“We all know someone with a home that’s sold in a day with three or four offers.”
The median home sale price for the Twin Cities metro area in April rose 12.2 percent to $182,312 — the highest since September 2008, according to the Minneapolis Area Association of Realtors. Home prices have been on the rise for much of the past two years, but have accelerated in recent months as the dwindling supply of available homes is causing buyers to pay top dollar for move-in ready properties.
The shift is spurring many homeowners — even those who once owed more than their house was worth — to test the market. Todd and Laura Bjorgo doubted that they’d ever sell their two-bedroom townhouse in Cottage Grove for the amount they still owed on the property.
But with an agent telling them the house is worth $30,000 more than last year, they are painting, cleaning and sprucing up the yard in hopes of hitting the market next week.
“I’m just scrambling to get everything ready,” said Todd Bjorgo, 42, who wants to upgrade to a house with a yard and more space for his two toddlers. “With prices rising, everyone else is going to be doing the same thing.”
Higher home values have helped those underwater, in particular, because they’re now able to command prices that will satisfy what they owe on their mortgages, said John Schuster, a top listing agent with Coldwell Banker Burnet. During much of the downturn, 80 percent of his business consisted of short sales that helped underwater owners sell their homes. But such distressed sales now account for a smaller share of his business.
“Sellers are demanding higher prices and are getting” them, Schuster said. “Prices are up across the board.”
This week, Zillow said the number of Twin Cities homeowners upside down on their mortgage fell to 30 percent from 35 percent, enabling an increasing number of potential sellers to list their homes.
Marc Lietzau is feeling the optimism. The 47-year-old plumber may finally be able to sell the super-efficient five-bedroom home he built in Chisago City in 2009. At one point, the one-level house situated between two lakes was worth $50,000 to $70,000 less than what he paid to have it built. “There was no way I could sell it,” he said.
But with the housing market looking up — and his two daughters leaving the state — he wants to buy a condo. His agent said prices have bounced back to the point where he should at least break even, so he just signed a listing agreement to sell the house and is eager to see how the market responds. “I’ve just been waiting for the right time, and I’m hoping that with the market recovering, I’ll get most of it back,” he said.
Experts attribute the strength of the market to a lower-than-average unemployment rate, a diverse economy and a lack of overbuilding during the boom.
In fact, pending sales during April were up 14 percent — the highest since May 2006. This includes many homeowners who haven’t been underwater and just want to take advantage of higher prices to upgrade to a bigger house.
After waiting years for the just the right moment to sell their townhouse, the Bjorgos recognize the delicate balance they now face as sellers. With overall inventory levels still down nearly 30 percent compared with last year, they know that they might face limited options once their place sells. That’s why they are prepared to rent until next spring, when they expect higher prices to draw out even more home sellers.
“I’d rather hurry and up and sell because with prices rising, everyone else is going to do the same thing,” Todd Bjorgo.