Home sellers outpaced buyers in the Twin Cities metro last month, but not enough to right the market back into balance, according to a January sales report from the Minneapolis Area Association of Realtors (MAAR).
The trade group’s monthly market update showed 4,304 new property listings in the Twin Cities metro, 3.1 percent more than last year. At the same time, buyers signed 3,130 purchase agreements, a 4.3 percent increase. Still, there’s not enough options for buyers, mostly first-timers, and that’s putting upward pressure on prices, dampening sales. During January, 8,212 properties were on the market, 25.4 percent fewer than the same period a year ago and the fewest in 14 years.
Noting that the uptick in new listings during January was the second biggest monthly gain in nearly a year, MAAR President Cotty Lowry said that 2017 is off to a strong start.
“If that is sustained,” he said. “We should be able to achieve the balancing act of steady price gains while maintaining our affordability.”
With a swelling number of first-time buyers driving the market, the vast majority of buyers are hunting for houses priced from $190,000 to $250,000. As those entry-level properties find buyers, the number of move-up buyers is rising. During January, the largest percent gain in sales was in the $350,000 to $500,000 range.
Move-up buyers have been scarce in some parts of the metro largely because so many owners of entry-level houses still haven’t recovered enough equity to justify selling. The situation is changing rapidly as rising prices reduce the number of people who have a mortgage that exceeds the value of their house.
In a new report, Attom Data Solutions said that at the end of 2016, only 4.7 percent of all homeowners with a mortgage were in a negative-equity situation. That’s down slightly from the previous year and half of the national average.
With demand for the least expensive houses outstripping supply and upper-bracket houses taking much longer to sell, the most affordable houses are posting the biggest price gains, leading to worries that prices are outpacing wage growth.
The median price of all closings during the month was $225,000, 4.7-percent higher than last year, though changes in value varied by price range.
And when it came to pricing, sellers were clearly in the driver’s seat. On average, those sellers got 95.9 percent of the original list price, an increase of 0.9 percentage points compared with last year.
Because of a steep end-of-the-year decline in listings, closings — a reflection of deals signed in November and December — were down 3.2 percent.
Still, properties tended to sell faster than they did last year. The average days on market until sale fell by six days compared to a year ago, or 7.1 percent, to 79 days.
At the current sales pace, there are enough listings on the market to last 1.6 months — a nearly 15-year low. Generally, five to six months of supply is considered a balanced market.
Though single-family houses dominated the market last month, condos and townhouses posted the largest year-over-year increase in total sales. For buyers of both housing styles, the options are extremely limited.
Only a handful of condo buildings have been built in the metro since the Great Recession; at the end of the year there were only enough condos on the market to last a bit more than a month. In downtown Minneapolis, for example, only three condo buildings have been built postrecession. That includes Portland Tower, which was completed in August. More than half of the 112 units in that building have sold, according to sales agent Luke Kleckner. And at the Legacy in the Mill District near the Mississippi River, more than 70 of the 400-plus units in that building have been sold or reserved, he said. “Reservations are picking up, and the best units are going quickly,” said Kleckner.
Buyers have been motivated by rising prices and the prospect of higher mortgage interest rates, which have increased marginally over the past several months. “The trick will be increasing supply enough to keep price growth at a moderate pace,” said Kath Hammerseng, MAAR’s president-elect. “That will allow households to better absorb rising borrowing costs. Overall 2017 is expected to be another good year for housing.”