A shortage of listings hobbled home sales in the Twin Cities last month but did nothing to slow the pace of the market or home price increases.
That’s according to a monthly sales report from the Minneapolis Area Association of Realtors (MAAR), which showed that during April new listings in the Twin Cities declined 8.3 percent, while buyers signed 8.5 percent fewer purchase agreements.
Closings fell, as well. During April there were just 4,709 closed sales, 10.3 percent fewer than last year.
Agents say a lack of supply — not buyers — is putting a lid on sales.
“Any agent or house hunter can confirm that buyers are in no way disappearing,” said Cotty Lowry, president of the Minneapolis Area Association of Realtors. “But we are seeing signs that the shortage of listings is starting to hold back our demand indicators such as pending [sales] and closed sales.”
Lowry said that though there were fewer listings, sellers and their agents are reporting an increase in the number of showings per listing. That means stiff competition for houses that are in prime condition in the most coveted neighborhoods.
During the month there were just 7,749 new listings, leaving shoppers with just 10,916 properties to choose from by the end of the month, the lowest April reading since 2003. That means houses got higher offers and sold more quickly during the month.
In fact, the median percent of original list price received at time of sale was 100 percent, meaning that half the sales closed for less than full list price while the other half closed for over list price. That helped boost the median sales price to $245,500, 6.3 percent higher than last April.
Multiple offers continued aplenty, helping accelerate the velocity of the market. On average it took 58 days to sell a house last month, 20.5 percent faster than last year.
At the current sales pace, there were only enough houses on the market to last 2.2 months, the lowest April reading since 2003. Generally, a five- to six-month supply is considered equally balanced between buyers and sellers.
With prices on the rise and mortgage rates expected to increase by the end of the year, house price gains are expected to moderate slightly in the coming months. For now, though, the market is being fueled by unusually strong buying conditions.
Mortgage interest rates continue to hover near all-time lows and well below long-term averages in the 8 percent range. For the week ending May 4, the average 30-year fixed mortgage rate held steady at 4.02 percent with an average 0.5 point, according to Freddie Mac’s weekly mortgage rate survey.
At the same time, rents have been on the rise in the Twin Cities, creating a situation in which many renters are finding that it’s cheaper to own than to rent. That’s been particularly true among millennials who have been late to homeownership but are helping drive home sales now that the oldest are turning 30, getting married and having kids.
“The shortage of supply in our market is showing up in several ways beyond price gains, quick market times and multiple offers,” Kath Hammerseng, MAAR’s president-elect, said in a statement. “Additional inventory is key to sustaining our housing recovery and is critical to maintaining a healthy and accessible marketplace.”