Twin Cities home buyers were out in force last month, paying top dollar for homes despite a recent spike in mortgage interest rates.
"It's stressful, it's harried and it's just very busy," said Mike Weiland, a sales agent with Keller Williams Realty, noting that many of his first-time buyers are in a race against higher rates.
During June there were 5,448 sales, a nearly 6 percent increase over this time last year, according to the Minneapolis Area Association of Realtors. Pending sales, an indication of future closings, were up 14.2 percent to 5,421 purchase agreements, the highest level since 2006.
The median price of sales also reached $210,000, a 17.5 percent increase over a year ago.
"Home prices have been enjoying quite the rally," said Andy Fazendin, president of the Minneapolis Area Association of Realtors and broker at Roger Fazendin Realtors in Wayzata.
Rising home values are the result of steep declines in home repossessions and short sales, which represented about a fifth of all closings last month. On Thursday, RealtyTrac said foreclosure filings in Minnesota during June fell to their lowest level since the end of 2006, suggesting that fewer homeowners are having trouble staying current on their house payments.
Just two years ago, distressed sales accounted for more than 60 percent of all transactions in the Twin Cities metro. With fewer heavily discounted houses on the market, sellers are in a much better position to increase prices.
John Benzick said he's been watching prices in his south Minneapolis neighborhood rise, and is seriously exploring whether it makes sense to sell the 1.5-story starter home he bought in 1994 and trade up to a more expensive one.
"There's more pressure to move now before prices start getting too high," he said.
Benzick recently started a website for entrepreneurs, and so far business is going well. That's giving Benzick more confidence about the economy and his own financial situation.
"I'm not deliberately thinking about the macro economy, but when you start to read about positive economic signals, it certainly loosens you up a little to consider a change, or an upgrade."
Indeed, the June housing report offers more evidence that the housing recovery is strong and determined despite recent increases in mortgage rates. On Thursday, Freddie Mac said the average 30-year, fixed-rate mortgage averaged 4.51 percent, up more than a full percentage point over last year.
Mortgage interest rates have crept up in the past several weeks, rising to their highest level in nearly two years. Agents say the threat of higher rates coupled with unabated price increases are creating fierce competition among buyers for a dwindling number of listings.
For now, buyers continue to outpace sellers. There was a 17 percent decline in the number of houses for sale last month despite a 20 percent increase in new listings.
Demand could soften if rates continue to rise, said Weiland, the Keller Williams agent. He's getting clear signals from his buyers, mostly first-timers, that higher rates are having an impact on their willingness to spend.
"Buyers are very sensitive to rates," he said. "They're really sharpening their pencils, maybe that's a carry-over from the bad market — people are just a little more conservative."