House prices across Minnesota continued to climb last month, despite a slight decline in closings.
Throughout the state there were 4,708 closings during February, a 6.6 percent decline from last year, the Minnesota Association of Realtors reported Thursday. Inventory dropped 13.8 percent, causing the median price of those sales to increase 14 percent to $142,754.
The report was released on the same day that the National Association of Realtors said that existing home sales during the month increased 0.8 percent to a seasonally adjusted rate of 4.98 million sales. That was a 10.2 percent increase over last year and the 20th consecutive month of year-over-year increases.
“Job growth in the improving economy and pent-up demand are causing both home sales and rental leasing to rise,” said Lawrence Yun, the NAR’s chief economist. “The only headwinds are limited housing inventory, which varies greatly around the country, and credit conditions that remain too restrictive.”
Throughout the country, buyers have outpaced sellers, with listing inventory falling to near-record lows in some areas. In Minnesota, new listings during the month fell 15.2 percent, causing the number of homes for sale to fall nearly 14 percent. Nationwide, listing inventory at the end of February was 19.2 percent lower than last year, but up slightly from January.
The Minnesota report, which tracks activity in 13 economic development regions, shows that the recovery is lagging in some regions of the state, especially in markets dominated by second homes and recreational properties, as well as in communities where the economy hasn’t improved. That was particularly true in the North Central region where closings were down 57 percent. The region also saw a nearly 60 percent decline in new listings. The trend was similar in the Headwaters region, where closings were off 42 percent and listings were down 34 percent. Across the state, at the current sales pace, inventory would last just 5 months — down 19 percent from last year.
Chris Galler, the Minnesota Association of Realtors’ chief executive, downplayed the significance of February’s sales decline. He said that while inventory constraints have played a minor role in stifling home sales because prospective buyers have so few choices, last month’s sales are being compared with a particularly robust month last year. February 2012 was a month when the weather was unseasonably mild and conducive to home buying. Galler also attributed the declines to politics. He said that many of last month’s closings were the result of deals signed in October and November when the uncertainty of the presidential election caused many buyers to delay their decision.
“There are a lot of things that can affect real estate sales,” Galler said.
Despite the decline in sales, there were several indications last month that the market is improving for sellers. Days on market fell nearly 11 percent to 101 days, and sellers got 92 percent of their original asking price, a 3 percent increase from last year.
Inventory across the country has been limited because hundreds of thousands of homeowners have mortgages that exceed the value of their houses, restricting their ability to sell without asking their lender to take a loss or bringing cash to closing. Experts are optimistic that as house prices rise, inventory will increase, especially during the critical spring selling season.
Already, the number of homeowners who are underwater is falling. This week, CoreLogic said the number of homeowners with an underwater mortgage had fallen to 21.5 percent nationwide, moving about 200,000 homeowners into a positive equity position. At 16.4 percent, Minnesota had one of the lowest negative-equity ratios in the country, CoreLogic said.