House listings in the Twin Cities metro rose 1.5 percent last month from their year-ago level, the biggest such increase in more than three years and a welcome sign for buyers frustrated by a lack of choices.
"What is happening now is hopefully a slow and steady rise to 'normal' levels," said Emily Green, president of the Minneapolis Area Association of Realtors (MAAR).
April is typically the height of the spring buying season, but with new listings in short supply, closings have failed to keep pace with last year.
Last month, there were 3,806 closings, 11.9 percent fewer than in April 2013, according to a monthly sales report from MAAR.
Despite tepid sales, house prices are budding across the metro. In communities where listings are the most scarce, buyers are outbidding one another, sometimes offering more than what buyers are asking. And steep declines in heavily discounted distressed sales are reducing the drag that the foreclosure crisis had on prices.
Foreclosure sales fell 42 percent last month. And the median sales price for all closings rose 8 percent to $197,000, the 26th consecutive month of year-over-year price gains.
"We are settling into this idea of market recovery with the hope conditions will continue to improve throughout the coming warmer month," said Michael Hunstad, president of the St. Paul Area Association of Realtors.
Karen and Mark Swoverland put their 1½-story house in south Minneapolis on the market in April and within 48 hours had several offers for more than the list price. While they were thrilled to sell it for more than they expected, they were frustrated by the lack of other houses for sale. So they put their belongings, including a piano, in storage and moved into 7West, a new upscale apartment development in Minneapolis that allowed them to sign a three-month lease.
"The whole point of moving was to find our dream home. We were moving because we were looking for something that's different from what we have," Karen Swoverland said. "We joked about going door to door and, while it sounds insane, there was nothing out there that we liked."
After finding a near-perfect house and making an offer, they were outbid. Eleven showings later, plus drive-bys of at least another 24 houses and daily online searches, they found a house in the Longfellow neighborhood in Minneapolis that fit most of their criteria.
"We pounced," she said. "We tried to negotiate a deal before anyone else could throw their hat in the ring."
Such stories aren't unusual. Sellers in the Twin Cities received 96 percent of their asking price last month, and on average, homes spent 89 days on the market, an 8.2 percent decline from last April.
What's happening in the Twin Cities isn't unique. On Monday the National Association of Realtors (NAR) said the median price of single-family houses (not including new homes) increased at a more moderate pace than last year, posting an annual price increase in 74 percent of the 170 metropolitan statistical areas that it tracks during the first quarter.
Thirty-seven areas, or 22 percent of the areas tracked, had double-digit increases, and 45 areas reported lower median prices than last year.
Lawrence Yun, NAR's chief economist, called it a favorable trend. "The cooling rate of price growth is needed to preserve favorable housing affordability conditions in the future, but we still need more new-home construction to fully alleviate the inventory shortages in much of the country," he said. "Limited inventory is creating unsustainable and unhealthy price growth in some large markets, notably on the West Coast."
The national median existing single-family home price was $191,600 in the first quarter, up 8.6 percent from $176,400 in the first quarter of 2013.
Nationwide, buyers are in a better position than in the Twin Cities.
At the end of the first quarter there were 1.99 million houses for sale, 3.1 percent more than last year. At the current sales pace, that inventory would last five months, a level that favors sellers. A supply of six to seven months represents a rough balance between buyers and sellers.
Mortgage interest rates down
Despite the imbalance, buyers have one thing in their favor: Mortgage interest rates are trending down, falling recently to their lowest level this year, according to several national surveys. HSH.com's Weekly Mortgage Rates Radar showed the average rate for conforming 30-year fixed-rate mortgages fell by seven basis points (0.07 percent) to 4.31 percent.
"The investor rush into stocks has cooled for the moment, and there are plenty of other concerns to keep markets on the defensive," said Keith Gumbinger, vice president of HSH.com, a publisher of mortgage information. "Although the U.S. economy seems to be picking up some momentum, the effects of slower growth in China and the unstable situation in Ukraine are all contributing to the ongoing bid for Treasury debt, driving yields down and pulling mortgage rates down too."