A shortage of starter houses is choking home sales in the Twin Cities, making it a less-than-stellar spring for first-time home buyers in the Twin Cities.
By the end of March, the number of property listings for buyers wanting to spend less than $250,000 had fallen nearly 25% compared with last year, according to a monthly report from the Minneapolis Area Realtors. That decline in entry-level listings led to a 14% decline in pending sales in that price range, according to a 12-month rolling average.
There was a much better balance between the supply and demand for move-up houses. The inventory of houses priced from $250,000 to $1 million increased 5% during March, enabling pending sales in that price range to increase 9% over last year.
Wild weather hasn’t helped.
“The extremes of February and March are still noticeable,” said Todd Urbanski, president of Minneapolis Area Realtors and a sales agent with Fazendin Realtors in Wayzata. “It’s difficult to disentangle weather-induced market shifts with organic market shifts.”
Across the board, there was a 9% decline in year-over-year closings. Pending sales, an indication of future closings, were also down significantly.
The lack of options is making it one of the most competitive markets for entry-level buyers in more than a decade.
On average it took people with houses priced from $150,000 to $250,000 just 34 days to sell their houses. Sellers with houses priced at more than $1 million waited six months to sell.
That means there’s still considerable froth in the market. Houses priced at less than $250,000 fetched their full asking price, and in some cases buyers paid far more than the asking price. Sellers with upper-bracket houses weren’t as fortunate; many were forced to offer modest discounts. During March the median price of all closings throughout the metro was a record $275,000, nearly 7% higher than last year.
What’s happening in the Twin Cities mirrors a national trend. In most major metro areas sales have been down slightly compared with last year, with some once-hot coastal markets seeing double-digit declines.
A Trulia study released Thursday shows that while most metro areas across the country still favor sellers, a growing number of submarkets are seeing a change in fundamentals that’s putting more buyers in the drivers seat. That’s especially true along the West Coast, where home prices have increased the most and affordability has been waning dramatically.
Based on sales data through January, Trulia said that 50 major metro areas have shifted in favor of home buyers compared with five a year ago. In the Twin Cities metro area, 48% of the postal codes have shifted in favor of buyers via longer market times, more price cuts and an increase in for-sale listings. That’s up from 13% of all postal codes a year ago. The largest shifts are generally in the most expensive neighborhoods.
Though many buyers have now been priced out of the market, mortgage rates have remained relatively low in recent weeks. After significant declines toward the end of March, rates have increased slightly over the past couple of weeks. During the week ending April 18 the 30-year fixed-rate mortgage averaged 4.17% with an average 0.5% discount point, according to a survey by Freddie Mac. That’s up slightly from the previous week, but nearly a half percentage point lower than last year at this time.
“There’s plenty of buyers and sellers out there looking to get deals done,” said Linda Rogers, president-elect of Minneapolis Area Realtors. “If rates and inventory cooperate, we’re still anticipating a solid year.”