Home sales sank in November as buyers faced a shortage of housing options and higher mortgage rates.
In Minnesota, there were 5,561 closings, a 9 percent decline from 2012 and the biggest drop in more than a year. Meanwhile, the median price of those sales increased a robust 9.7 percent to $170,000, according to a report released Thursday by the Minnesota Association of Realtors.
The same trends played out across the country last month. Sales of single-family homes, townhouses, condominiums and co-ops fell 4.3 percent to a seasonally adjusted annual rate of 4.9 million, which is 1.2 percent below last year, according to the National Association of Realtors. The median sale price of those closings was $196,300, a 9.4 percent increase from last year.
While it was the third consecutive month of decline and the first time in 29 months that U.S. home sales fell below year-ago levels, experts were hardly fazed. The market typically slows when it gets cold, but there's a general belief that a shortage of desirable and fresh listings is holding back sales.
"That's mostly what is driving volume declines, and that's not a bad thing," said Jonathan Smoke, executive director of research for Hanley Wood Market Intelligence.
NAR officials hailed higher sale prices and very narrow gaps between list and sale prices as evidence that market fundamentals are strong. While demand has been strong and the competition is stiff for move-in-ready properties in plum locations, the median price is on the rise because there's been an increase in the number of upper-bracket sales and a persistent decline in foreclosures and short sales. These distressed sales accounted for 14 percent of all sales last month compared with 22 percent last year.
In Minnesota, only 5,666 properties came on the market last month, nearly 10 percent fewer than last year, leaving prospective buyers with about the same number of options they had last year.
"There is a pent-up demand for both rental and owner-occupied housing as household formation will inevitably burst out, but the bottleneck is in limited housing supply, due to the slow recovery in new home construction," said Lawrence Yun, the national group's chief economist.
Despite the November chill in home sales, closings are on pace to exceed last year. Closings so far this year in Minnesota are 4.9 percent head of 2012, but that's not true in all parts of the state. Of the 13 economic development regions tracked by the association, only five performed better than last year and there were wide variations.
In the Headwaters region, for example, sales were off 70 percent, but increased 8.2 percent in the nearby Arrowhead. Such differences from region to region are common because the number of transactions in these monthly reports is relatively small.
Jeff Schulz, an agent who specializes in communities beyond the fringe of the west metro area, said there's a clear difference between the recovery in the urban and rural markets where he sells. He attributes the declines in sales to a shortage of options for his buyers, but he expects that to change in the new year.