The Twin Cities posted the second-highest increase in home prices among 20 major U.S. cities in July, as the local housing market continues to strengthen.
The Standard & Poor's/Case Shiller index showed home prices in the metro area jumped 6 percent in July compared to a year ago, far outpacing the 20-city composite that showed a 1.2 percent gain. The Twin Cities trailed only Phoenix, which saw prices soar 16.6 percent for the month.
Among the metro areas S&P follows, the Twin Cities has been a standout for much of the year with six months of year-over-year gains. July's increase gives Realtors, buyers and sellers even greater confidence that the market is finally gaining stability after crashing five years ago.
"July was absolutely crazy," said Jane Oelfke, a sales agent with Edina Realty. "Last year in July, I only closed a couple, then it just dropped." But these days "I'm still crazy busy."
On Tuesday, Oelfke pre-listed a house on Beard Avenue in south Minneapolis and had two serious inquiries even before it officially hit the market. She expects the $265,000 house will sell immediately.
Jonathan Smoke, executive director of research for Hanley Wood Market Intelligence, said he expects to see prices continue to rise in the coming months. In particular, tight inventory result in costlier homes.
"The positive price changes are real," he said. "Minneapolis-St. Paul, like several markets in the country, are showing that we are into the first stages of recovery."
While the latest figures show promise, Twin Cities home prices are outperforming the nation mostly because they're being compared with unusually low prices last year, a trend absent in many markets.
In fact, the Twin Cities area was one of several regions around the country where prices continued falling even after the broader market began to stabilize. Local prices hit bottom in March 2011 while most of the country hit a low around 2009.
The delay was largely the result of the foreclosure crisis. Home repossessions in the Twin Cities were consistently high through the middle of last year even though they'd begun to fall in other markets. Foreclosures are now starting to ease up in the Twin Cities.
CoreLogic said Tuesday the local foreclosure rate had fallen 0.42 percent to 1.62 percent in July. That's below the national average of 3.25 percent.
And the Minneapolis Area Association of Realtors (MAAR) has been reporting a steady decline in the share of all sales that were foreclosures, meaning that more deals have been between traditional buyers and sellers. That ultimately boosts home prices.
"We're moving back to true supply and demand," said Maureen Maitland, vice president at S&P Dow Jones Indices. "We're getting back to a more normal, healthy mix."
That shift has been accompanied by a steady decline in listing inventory at a time when sales have been on the rise.
As of Sept. 15, pending sales in the Twin Cities were up 20 percent, while new listings were up only marginally, causing overall inventory levels to fall to near-record lows, according to the MAAR.
At this sales pace, the current inventory would last only 4.2 months.
A shortage of listings means serious competition for buyers, but only modest gains for sellers even though multiple offers have become increasingly common.
Jim Buchta • 612-673-7376