Home buyers in the Twin Cities are showing no signs of slacking. The same can't be said for sellers.
House shoppers signed 4,404 purchase agreements last month, a 1.6 percent increase in pending sales compared to last year and the best October since 2004, according to the Minneapolis Area Association of Realtors.
Sellers, however, aren't keeping pace. Just 5,249 properties came to market, a nearly 10 percent decline compared with last year. At the current sales pace, there are now only enough listings to last about 10 weeks, making it the tightest market since 2003.
"Demand is still soaring while listing activity has weakened," said Judy Shields, president of the association.
The imbalance between sellers and buyers is most dire in the entry-level market. Sales of houses priced from $190,000 to $250,000 outpaced listings in many areas, and there was a 19 percent decline in the total number of listings on the market at the end of the month.
Though there have been big gains in condo and townhouse sales, the strongest gains in sales activity over the past 12 months were in the $190,000 to $250,000 range, followed by houses priced from $250,000 to $350,000, a segment of the market that is driven by people selling their starter houses and trading up.
Kathryn Kennedy, a sales agent with Coldwell Banker Burnet, said the unusually warm weather and anticipation of the election made for a "unique October market." She attributes the shortage of listings to a concern among sellers that if they sell their house they won't find another to replace it.
"With inventory being down, sellers are nervous that they have nowhere to go," she said "And no one wants to move twice."
Kennedy, who works out of the Crocus Hill office, said that first-time buyers aren't the only ones who are facing a shortage of listings. In St. Paul, for example, new listings are up 2.9 percent so far this year, but the pace is slowing. In October, there were 360 new listings in the city, down from 517 during the previous month. Even in the Highland Park neighborhood, there were 26 new listings in October, compared with 45 the month before.
In such neighborhoods, even upper-bracket houses are in high demand. Just three weeks after listing a 2,042 square-foot house in the St. Paul's Highland Park neighborhood, Kennedy received multiple offers on the property, which was recently renovated and listed at $450,000. "We figured we'd have a lot of showings," she said.
With sellers in charge and buyers competing for a shrinking number of listings, multiple bids are still common and buyers have little room to negotiate. The median price of all closings last month was $230,000, up 6.5 percent from a year ago. Sellers on average last month received 99.6 percent of their most recent list price.
"Partly because of that, we expect prices to remain firm through the winter months barring any unforeseen events," Shields said.
The report comes in the midst of rising mortgage interest rates, which are now at their highest level since the beginning of the year and expected to keep climbing after the election outcome triggered a sell-off in the bond market.
There's also been a steady increase in housing construction in the Twin Cities region, a trend that's expected to help ease supply constraints, though mostly for homes in the $250,000 to $350,000 range.