The peak selling season for the housing market Twin Cities is waning, but buyers aren’t retreating.
Last month houses sold in near-record time, and sellers got a record percentage of their asking price.
During August, buyers signed 5,728 purchase agreements in the 13-county metro, a 7.9 percent increase over last year, according to the Minneapolis Area Association of Realtors (MAAR). The median price of all sales during the month was $237,750, a 5.7 percent increase over last year.
Though by nearly every measure it’s still a seller’s market in the region, August is the beginning of a seasonal slowdown as would-be buyers focus on getting the kids to school and taking last-minute summer vacations. Pending sales, an indication of future closings, were flat compared with the previous month.
“The market is more balanced right now,” said Mary Beattie, sales agent with the downtown Minneapolis office of Engel & Voelkers. “Buyers do not feel that sense of urgency that was prevalent throughout the spring and summer market.”
Though the prime summer selling season is over, there’s still an imbalance between buyers and sellers causing houses to sell in near-record time. During August, 7,072 new listings hit the market, but the total number of properties on the market at the end of the month fell 18.8 percent. On average, houses sold in 55 days, 14.1 percent faster than last year and the second fastest market time for any month since the beginning of 2007.
At the current sale pace there are now enough listings on the market to last 2.8 months, a 24.3 percent decline from last year and the lowest August figure on record since 2003. The market is typically considered in balance when there’s a five to six months of supply of listings.
“Absorption rates under three months suggests things are still pretty tight out there as we transition to autumn,” said Judy Shields, MAAR president. “But there are still peculiarities across locations and segments. Blaine is not Linden Hills and downtown condos are not suburban single family new construction. It’s important to have all the facts before making a move.”
The market is stratified both in terms of price and location. The least expensive houses are the most coveted and in the shortest supply, especially in the Twin Cities and first-ring suburbs that are close to jobs, transportation, parks and shopping. Move-up houses in the outer-ring suburbs aren’t selling as quickly. Many of them were built a couple decades ago and are in need of updating, and some have floor plans that aren’t well-suited to today’s buyers.
Houses priced from $200,000 to $299,900, for example, sold in 28 days on average, a 28 percent decline compared with last year. In contrast, houses priced at more than $500,000 took nearly three times longer to sell and that figure is on the rise.
At the top of the market, sellers are also competing with homebuilders, especially in Edina and other suburbs where small construction companies are replacing dated houses with new ones that appeal to buyers who are trying to avoid long commutes and remote suburbs.
That’s one of the reasons people selling the least expensive houses are getting the highest percentage of their asking price. Last month people who sold houses with less than 2,000 square feet got 100 percent of their last list price while those who sold houses with more than 2,500 square feet got 97.8 percent of their ask price.
People who are selling $450,000 to $750,000 houses are also competing with homebuilders who are building houses to compete with the existing home market, especially in small, infill developments.
“Builders feel more confident and are more inclined to take the risk with spec homes and new construction,” Beattie said.
Buyers in the $450,000 to $750,000 range have been more scare than in previous years, she said, in part because people who have the financial strength to purchase their first home in a move-up price range are instead deciding to spend less.
“The mind set has shifted,” she said. “The empty nester demographic often chooses to purchase at lower price point than what their financial profile will allow. This decision is often driven by the fact that they will be owning two to three homes.”
Aside from the prospect of higher prices, late-season buyers are being motivated by the best mortgage rates in a generation. The 30-year fixed mortgage rate has been hovering around 3.5 percent compared to a long-term average of about 8 percent.
“Over the long term, favorable interest rates, rising rents and a strong labor market should be conducive to housing,” said Cotty Lowry, MAAR’s president-elect. “But we’ll need some additional inventory — particularly in the affordable brackets — in order to keep up with consumer demand.”