Limited home listings and a particularly harsh winter clipped home sales last month, but with fewer foreclosures and a dearth of options for buyers, prices continued to rise.
During March there were 3,133 closings, a 16.7 percent decline from last year and the fifth month of lower year-over-year sales, according to the Minneapolis Area Association of Realtors. The average median prices of those closings was $190,000, a 7.6 percent increase.
"There's a lot of excitement and positive energy out there, especially among sellers," said Emily Green, president of the Minneapolis Area Association of Realtors. "Some would-be sellers have been lifted out from underwater by rising prices and less competition from foreclosures, while other move-up buyers are also eager to buy."
A contraction in sales in the Twin Cities and beyond has raised concerns about the durability of the housing recovery, but experts say that unusually brutal winter put the brakes on home sales. Most of the closings recorded last month were for purchase agreements signed in January, the worst of the deep-freeze in the Midwest.
A shortage of options for willing and able buyers is also being blamed for the slowdown. Despite recent increases in new listings, the pool of homes for sale has been falling. Last month there were 13,086 houses on the market, 4.1 percent fewer than last year and the lowest in a decade.
"While low inventory has been a concern, new listings are up," said Michael Hunstad, president of the St. Paul Area Association of Realtors. "I would anticipate an increase in new listing activity as the spring market and weather continue to warm up."
Since last year, Amy Kelly had been debating whether to sell or rent out her spacious early 1900s house in northeast Minneapolis, but with spring appearing and houses in her neighborhood selling quickly, she decided to test the market.
"I kept hearing stories about how the market was suddenly tipping potentially in my favor," she said. "So I thought it might be time to get my money back out of it."
At the end of March, the three-bedroom, two-bath house hit the market for $214,900. At an open house nearly 30 people showed up, and the house sold with multiple offers.
"I was hoping for that 'cause that's what I heard was happening, but I certainly didn't expect it," she said.
Her agent, Jennifer Olstad of Keller Williams Classic Realty Northwest in Maple Grove, said there's a particular shortage of move-in ready houses for less than $250,000, but that houses in all price ranges are selling quickly. She said that three of the five listings she put on the market during the past two months have sold within the first five days on the market.
"It's all about buyers' needs now," she said. "There's a little more of a selection out there so it's going to be a little easier for buyers."
By a variety of measures, there is evidence of pent-up demand. Houses are selling faster than they did last year; the average market time fell 12 percent to 95 days. And at the current sales pace, the existing inventory would be sold out in just 3.1 months, a 6 percent decline from last year.
In contrast to last year, this spring market is being driven by traditional buyers rather than investors who were snapping up foreclosures for resales or for use as rentals. New foreclosure listings last month fell nearly 40 percent compared with last year, and those foreclosure sales now represent a minority of all sales, boosting home prices, but reducing the kind of buyer pool that existed last year.
Despite a robust recovery last year, the market is expected to show more moderate growth this year, according to a recent report by Fitch Ratings. The group said that higher house prices and an expected increase in mortgage rates would make houses less affordable, decreasing the buyer pool. Fitch said new-home prices would rise only 2.5 to 3 percent.
Though mortgage interest rates this spring are higher than last year when they dipped to record lows, they've slipped in recent weeks. Freddie Mac said Thursday that the 30-year fixed-rate mortgage averaged 4.34 percent with an average 0.7 point for the week ended Thursday, down slightly from the previous week. A year ago at this time, the 30-year averaged 3.43 percent.