Along with the temperature, the housing market in the Twin Cities is beginning to cool.
For the second month in a row, the number of home sales fell in August in the 13-county metro area, the Minneapolis Area Association of Realtors (MAAR) said Monday.
There were 6,513 closings during the month, 1.4 percent fewer than a year ago. And buyers signed 5,740 contracts, 2.6 percent fewer than last year, the association said.
The market always slows at the end of summer, but there are some complications this year.
The most important is the ongoing shortage of entry-level priced houses to satisfy demand. At the same time, there's an overabundance of upper-bracket houses on the market, enabling buyers to shop longer and forcing sellers to accept lower offers than they might expect.
Still, home prices rose to a new high for August and, on average, houses sold twice as fast as normal.
"The well-priced and staged homes may sell in days while homes that are not may languish on the market for 100-plus days," said Kath Hammerseng, a sales agent with Edina Realty in Plymouth and president-elect of MAAR. She said that, despite some indications that sellers are in the driver's seat, the market feels more balanced than the numbers suggest. "Neither buyers nor sellers are getting everything they want," she said.
For example, the median price of all closings during the month was $252,800, 6.8 percent higher than last year. The bulk of those gains are coming from sales of the least expensive houses, which are in short supply and are often selling for more than the asking price. But there was also a significant increase in sales of upper-bracket houses, causing a statistical increase in the monthly median.
There was just a 1.4-month supply of houses priced between $150,000 and $190,000 on the market last month. For homes priced from $500,000 to $1 million, there was a six-month supply while there was more than a 12-month supply of listings priced at more than $1 million.
Across all price ranges, the market is considered balanced when there's a five- to six-month supply of listings.
Last month, 7,264 new listings hit the market, about the same number as last year. But with more buyers than sellers in some areas, by the end of the month there were only 12,602 properties on the market, 16.7 percent fewer than last year.
"The shortage of homes for sale is still driving this market," said MAAR President Cotty Lowry.
On average, houses in the metro sold within just 48 days, 14.3 percent faster than last year. Because of that, at the current sales pace there would be only enough houses on the market to last 2.5 months, 16.7 percent lower than last year.
"This should not be misconstrued to say that sellers can overprice or avoid having to properly stage their homes for showing," Hammerseng said.
The shortage of house listings has been exacerbated by the fact that builders haven't kept pace with demand for inexpensive houses. That's beginning to change. In August, there was a 17 percent increase in permits issued to build single-family houses in the Twin Cities, according to data compiled by the Keystone Report for Housing First Minnesota. That followed a slight decline in July.
Though rising house prices are worrisome because prices are increasing faster than incomes, many house shoppers are being motivated by unexpectedly low mortgage rates.
According to a weekly mortgage rate survey from Freddie Mac, average mortgage rates have fallen slightly in recent weeks and remain largely unchanged from the previous week's year-to-date low, giving buyers an extra incentive to make a deal this fall. At the end of last week, the 30-year fixed-rate mortgage averaged 3.78 percent with an average 0.5 point for the week. A year ago at this time, the 30-year rate averaged 3.50 percent.
Rates were expected to rise through the end of 2017, but instead have been hovering within a percentage point of all-time lows.
Sean Becketti, chief economist for Freddie Mac, said that, following a sharp decline last week, the 10-year Treasury yield rose 11 basis points this week, but the 30-year mortgage rate remained unchanged. "If Treasury yields continue to rise, mortgage rates could see an increase in next week's survey," Becketti said.