The imbalance between buyers and sellers in the Twin Cities is becoming more extreme, causing sharp price increases just in time for the summer homebuying season.
At the end of April, there were only about 9,200 houses for sale in the 13-county metro market — the first April in decades when house listings dipped below 10,000, the Minneapolis Area Association of Realtors (MAAR) said Tuesday.
“It’s out of control,” said Becky Quinby, who co-owns an independent real estate brokerage in south Minneapolis. “We’re seeing every single property we list get at least three offers.”
Quinby said that so far this year, her office has already done more business than they did during all of last year. In one month they sold eight properties before they were ever publicly listed.
Still, a shortage of listings is stifling sales, which fell 5.2 percent last month compared to April 2017. That shortage is creating stiff competition and putting upward pressure on house prices, which increased nearly 8 percent. The shortage of listings is particularly acute among entry-level houses, pitting buyers against one another.
For fear of not finding a house to replace the one they own, sellers are staying put and new houses aren’t being built quickly enough. During April there were 7.2 percent fewer new listings — the sixth consecutive month of annual declines. That was about half as many listings as six years ago and 25 percent fewer than last year at the same time.
The average price per square foot was $152, a 7.7 percent increase from last year. The median price of all closings during the month was $266,000, an 8.6 percent increase and a record high for April.
Buyers aren’t the only ones who are desperate. Some agents are door-knocking, others are writing “I have a buyer for your house” letters.
Quinby and her business partner, Nora Webb, are taking a different approach. They’re targeting the deep well of homeowners who don’t have the time or experience to get their house ready to list by offering a top-to-bottom cosmetic makeover. Their approach, which they call “designed to sell,” is meant to appeal to buyers with HGTV expectations.
They’ll make just about any improvement that doesn’t require a building permit, and they’ll do the work themselves if they can’t find someone to hire. They recently ripped out carpet and refinished the hardwood floors, painted the honey oak cabinets and replaced laminate kitchen counters and dated fixtures in one client’s house.
Without any improvements, the house would have hit the market at $250,000, but after investing about $2,500 in updates, they listed it at $275,000 and accepted an offer for $300,000. The sale closed in May.
At a rental house that had been put on the market for $180,000 in south Minneapolis, Quinby and Webb stepped in after the seller went through five showings with no offers. The home had dirty, smelly carpet that they ripped out. They persuaded the seller to spend about $7,000 on improvements, including new paint and flooring, and then sold it for $235,000.
“Buyers have to have an iron stomach,” Quinby said. “It feels like we’re in a mini San Francisco.”
Inventory figures are the lowest since the MAAR changed its record-keeping methods in the early 2000s, but are likely the lowest since the 1980s when the metro area had a much smaller geographical definition.
Though there’s deep demand for housing in the metro, builders haven’t kept pace, especially when it comes to entry-level houses. During April, builders were issued 434 permits to build 842 units, according to data compiled by the Keystone Report for Housing First Minnesota. That was an 8 percent decline in single-family houses, and a 43 percent decline in attached housing compared with last year.
Slightly more than half of the planned units were rentals, mostly upscale suburban apartments. The bulk of the houses that are getting built are priced at more than $300,000; last month the median price of all new home sales was $395,000, about $150,000 more than existing houses.
While some builders and developers say that a shortage of inexpensive land and skilled labor has curbed construction, Tom Wiener, president of Housing First Minnesota, attributed the declines to a long winter that’s created less than ideal conditions.
“This does not help the housing supply issue we have in the Twin Cities,” he said in a statement.