It might not look like spring, but Twin Cities home sales are heating up.
Last month, buyers outnumbered sellers, triggering double-digit price increases and bidding wars in the metro’s most popular neighborhoods.
“This has certainly been a breath of fresh air,” said Kate Beckman, president of the St. Paul Area Association of Realtors.
The latest report provides more evidence that the housing market is continuing its recovery despite less-than-ideal shopping conditions.
During March there were 3,632 closings with a median price of $176,000 — a 17.4 percent increase over last year and the 13th-consecutive monthly increase in sale prices, according to the Minneapolis Area Association of Realtors (MAAR).
The spring thaw normally draws buyers out of hibernation, yet the recent cool temps didn’t seem to hamper shoppers. Closing sales were flat compared with last year, but pending sales — an indication of future closings — increased more than 6 percent despite a 31 percent decline in inventory that’s stifling an even more pronounced recovery.
“Low inventory is what’s holding back sales right now,” said Herb Tousley, director of the real estate program at the University of St. Thomas.
Last month there were only 6,147 new listings, a 5 percent decline from last year, causing the supply of houses for sale to fall to the lowest level in more than a decade.
“Sellers are starting to dip their toes into the water, but we could use some divers,” said Emily Green, MAAR president-elect.
Would-be sellers are reluctant for several reasons. Some owe more than the house is worth, while others are worried that their buying options are too limited. Many are simply waiting for even higher prices in hopes of recouping some of the equity that was lost through the downturn.
Indeed, prices have been on the rise. Last month’s double-digit increase was one of the biggest on record, and it happened because of bidding wars that result in sale prices that exceed the list price. Last month sellers received on average 95 percent of their asking price, up from 92 percent last year.
Higher median prices are being driven in part by an increase in upper-bracket houses and a decline in heavily discounted foreclosure sales, causing a statistical increase in the median.
Beckman, who is branch vice president of Coldwell Banker Burnet’s Crocus Hill office, said sales of $1-million-plus houses last month was 10 percent higher than last year, while distressed listings fell to the lowest level since May 2008.
MAAR’s 10K housing value index, which controls for such variables, showed that prices actually increased about 10 percent to $182,378.
‘Selling in multiples’
Fueled by historically low mortgage rates, inventory declines and growing confidence, the data point to a seller’s market in some areas. That’s true in Edina, southwest Minneapolis and neighborhoods along the west edge of St. Paul where there’s access to amenities and little room to build more houses.
“Pretty much everything is selling in multiples,” said Chris Willette, a sales agent with Edina Realty who specializes in negotiating difficult short sales.
Willette said many would-be sellers are surprised to find that they no longer have a mortgage that exceeds the value of their house, but the backlog of homeowners in that situation is still deep.
That doesn’t mean a guaranteed sale for every listing. Buyers have high expectations and little appetite for fixer-uppers and houses that aren’t in move-in condition.
“It’s not totally a seller’s market,” Tousley said. “But it’s certainly turning that way.”