A shortage of listings and a decline in foreclosures are dampening home sales in the Twin Cities.
The number of transactions increased just 1.9 percent to 4,495 sales last month from a year earlier, according to a report released Tuesday by the Minneapolis Area Association of Realtors. Meanwhile, pending sales posted one of the few annual declines since the housing recovery began.
“Buyers are just waiting and watching for something new to come online,” said Krista Wolter, a sales agent with Coldwell Banker Burnet, who has several frustrated buyers who can’t find what they want. “With inventory going down in the fall, that doesn’t help our housing market.”
Some agents say the biggest impediment to a stronger recovery is the shortage of options for would-be buyers. Closings outpaced new home listings last month, causing the pool of houses on the market to fall 3.7 percent. There was also a notable decline in foreclosures and short sales listings, reducing the drag these heavily discounted properties have had on home prices.
The median sale price of all closings last month jumped 11.4 percent to $195,000, with distressed sales representing only 22 percent of all sales, compared with nearly 50 percent last year. “The slight decrease in pending sales activity is entirely attributable to declines in the number of contracts signed on foreclosure and short-sale properties,” said Andy Fazendin, president of the Minneapolis Area Association of Realtors.
It’s also typical for the housing market in the Twin Cities to slow down as winter approaches. It’s the time of year when buyers and sellers take a break to prepare for the holidays. Also, there’s an expectation of less-than-ideal shopping conditions.
Home sales in the Twin Cities and beyond have also been buffeted by fluctuations in mortgage interest rates and by the recent government shutdown, which created a sense of uncertainty that derailed many house hunters.
“The government shutdown really slowed the pace of showings,” said Stephanie Gruver, a sales agent with RE/MAX Results. “And yes, it’s usually slow this time of year. But honestly, buyers should be out in droves right now.”
According to a Freddie Mac weekly survey, mortgage rates rose slightly last week after three weeks of steady declines. The average 30-year fixed-rate mortgage stood at 4.16 percent for the week ending Nov. 7, and there’s an expectation that the average rate will break 5 percent next year.
Lawrence Yun, chief economist for the National Association of Realtors, said that even though rates are within a percentage point of record lows, buyers are sensitive to any increase. After rising to the highest level in nearly four years, sales of existing homes across the country declined 1.9 percent in September. And last week, Yun predicted higher rates would cause home sales next year to remain flat compared with 2013, but that prices would rise 6 percent because of inventory constraints.
Despite the hiccup in sales last month, the shortage of listings is affecting the market in the Twin Cities metro in several ways. Properties are selling faster than they did last year, and the average days on the market fell 27.2 percent to 75 days, the lowest level since 2006. Sellers also got a higher share of their asking prices last month, with the average home fetching 95.8 percent of list price.
Wolter, the Coldwell Banker agent, said being a seller at a time when there’s so much contradictory information floating around about the market isn’t easy. She’s encouraging prospective sellers to take advantage of the seasonal slowdown.
“If you’re not on the market, and not in the game, then there’s no chance of selling,” she said.