The imbalance between home buyers and sellers in the Twin Cities last month was a little less out of whack than it's been in years, but sellers still rule when it comes to the entry-level market.
House listings across the metro increased significantly last month, and buyers took notice — pending sales increased slightly, suggesting a modest rebalancing between supply and demand.
In July, buyers signed 5,894 purchase agreements, 0.4 percent more than last year at the same time and the first monthly gain this year, according to the Minneapolis Area Association of Realtors (MAAR).
Though buyers had a few more options, stiff competition for entry-level houses pushed the median sale price of all closings during the month to $268,000, a nearly 7 percent year-over-year increase and a July record.
"Buyers out there should know that their persistence is beginning to pay off," said Kath Hammerseng, president of MAAR and a sales agent with Edina Realty. "Sellers appear to be preparing to bring additional options to the market."
Higher prices and lightning-fast sales helped draw more sellers into the market. During the month there were 7,671 new listings, a 4.1 percent annual increase and the biggest monthly gain in more than a year. On average, houses sold in just 38 days, a 17.4 percent decline compared with last year.
Though the market appears to rebalancing slightly, there's still a deep disconnect between supply and demand in certain submarkets and price ranges.
Sales of houses priced at less than $249,999 fell 9.1 percent during the month, while demand for move-up houses increased the most. For example, sales of houses priced from $250,000 to $499,999 increased 14.4 percent and sales of $1 million houses increased 7 percent.
"It's slowly starting to shift, but it's still a sellers' market," said Susan Meyers, a sales agent with Kris Lindahl Real Estate.
During early July, Meyers listed a house in Inver Grove Heights for $550,000 that was designed by a protégé of Frank Lloyd Wright. The house was being sold by the original owners, and it was in perfect condition, she said.
A buyer submitted an offer just a few days after the house hit the market.
"I knew it'd have a lot of interest, given the character, architecture and location," she said. "It was a really well-loved home."
She said that if she had tried to sell the same house a year or two ago it would have taken longer to sell. Houses in that price range are selling 10 percent faster than they did last year at this time.
Several underlying forces are driving move-up sales, Meyers said. Many move-up buyers are feeling some pressure to buy because they're concerned that mortgage interest rates are poised to increase, and some agents are reporting a decline in showing activity, causing some upper-bracket sellers to offer buyers more price flexibility.
During July, houses that sold for $500,000 to $1 million fetched only 96.7 percent of their home's original asking price compared with 99.7 percent for houses priced from $150,000 to $190,000.
"Sellers had this mind-set that they could just wait to list their house and the market would just grow and get stronger and stronger," she said. "But sellers are becoming more fearful of the market changing, and they're becoming more negotiable."