A shortage of listings is stifling home sales in the Twin Cities, causing the first year-over-year decline in nearly two years.
During February, sales fell 4.7 percent from last year to 2,736 closings, according to a monthly report released Tuesday by the Minneapolis and St. Paul Realtors’ associations. But pending sales — an indication of future closings — increased 2 percent, suggesting it’s going to be a competitive spring selling season.
“Lack of inventory is becoming acute in some areas,” said Andy Fazendin, president of Roger Fazendin Realtors.
The decline in sales didn’t put a dent in prices, nor will it jeopardize the recovery. The median price of those deals was $160,000, a 15 percent increase compared with last year, largely because of an increase in upper-bracket listings and a decline in foreclosure sales. Traditional sales rose more than 20 percent, while foreclosure sales fell more than 23 percent, reducing the drag that distressed sales are having on prices.
There were other signs of strength in the market last month. On average, homes sold in 113 days, 22 percent faster than last year, and sellers received nearly 94 percent of their list price, up from 91 percent last year.
“Judging by the number of inquiries agents are receiving, buyers seem prepared and motivated this spring,” said Emily Green, president-elect of the Minneapolis Area Association of Realtors. “We anticipate an uptick in new listings, and we hope it is enough to meet the strength of buyer demand.”
Sellers have been timid throughout the recovery, boosting prices while frustrating buyers. During February, for example, there were only 4,855 new listings, compared with 5,370 last year. Scant listings, coupled with a string of double-digit monthly increases in sales, caused overall inventory last month to fall 32 percent to a 10-year low.
Listings aren’t keeping pace with sales largely because post-bubble prices have made it impossible, or unpalatable, for homeowners who either owe more than their house is worth or are awaiting higher prices. With prices on the rise, the number of people who are underwater on their mortgage is declining, but there is also a growing number of people who want to sell but are staying put because they’re worried they won’t find a suitable replacement for the property they’ve sold.
At the current sales pace, the number of active listings would last only 2.9 months, making it a seller’s market in some areas. The market is considered at equilibrium when there’s a four-month supply of listings.
“I would expect to see an inventory uptick in the spring and early summer months,” said Kate Beckman, president of the St. Paul Area Association of Realtors. “Anyone who has been holding their home off the market waiting for improvement may wish to contact a Realtor for a market analysis. The results just might pleasantly surprise the would-be seller.”