The 2013 housing market is off to a promising start, with area home sales up 11 percent over last year.
“It’s as if we skipped the traditional winter slowdown,” said Emily Green, Minneapolis Area Association of Realtors (MAAR) president-elect. “We expect to see buyer activity continue into the spring market.”
During January, there were 2,797 home sales in the 13-county metro. Buyers were out in force during the month hoping to take advantage of near record-low mortgage rates and prices that are still 20 to 30 percent below peak. Sales of heavily discounted foreclosures fell slightly during the month while sales of upper-bracket houses rose, causing the median price of all closings during the month to increase 14 percent to $160,000.
January’s gains extended a lengthy series of monthly year-over-year increases in sales and prices that started early in 2012, bolstering confidence in what is expected to be a slow, but steady recovery in the Twin Cities and beyond.
While January is typically one of the sleepiest months of the year, unseasonably strong buyer activity suggests that the spring market — typically the busiest of the year — will be robust.
“We’re still seeing decent progress,” said Herb Tousley, chairman of the department of real estate at the University of St. Thomas.
Pending sales — an indication of future closings — were up even stronger than closings, rising 13 percent during January, suggesting that March and April sales will remain strong.
While there were plenty of house hunters, the same can’t be said of sellers. During January there were 4,798 new listings, a 6 percent decline from last year.
Total listings in January stood at 12,000, a 32 percent decline from last year. At the current sales pace those listings would last less than three months.
“There are tons of frustrated buyers out there,” said Andy Fazendin, MAAR’s current president.
With inventory falling, there is an expectation that it’s become a seller’s market, but that’s far from the case. Sellers still offered hefty discounts in January, getting only 93 percent of their original list price. They’re doing slightly better than they did last year, but buyers are still driving a hard bargain.
At the same time, home prices are still being suppressed by high levels of foreclosures and short sales. During January those distressed sales represented 43 percent of all deals, a decline from last year, but still a high rate.
Demand for traditional listings has been strong and buyers in some areas are finding themselves bidding against other buyers for the same house. That’s especially true for houses in prime locations, priced right and in impeccable condition, especially in Edina, Plymouth and Woodbury.
Fazendin and other agents say that an increase in listings can’t happen soon enough.
“There’s a lack of options for buyers, and that’s keeping a lid on growth in sales,” he said. He said that he recently showed a buyer a house that had just come on the market in Plymouth. It went on the market at 6 a.m. and by 8 p.m. it had received multiple offers.
“It’s astounding to me how much demand is outpacing supply,” he said.
Many would-be sellers are holding back because they’re waiting for higher prices. Others owe more than their house is worth, so can’t sell unless they’re willing to bring cash to the closing table. Higher home prices are already reducing the number of underwater homeowners, suggesting that listing inventory could soon increase.
With positive fundamentals in place, Fazendin and other agents are optimistic that the January market is a positive harbinger of what’s to come in 2013 as housing catches up with the broader economic recovery. Early indications suggest another year of low inventory, rising demand and stabilizing prices. Estimates range for year-over-year sales increases of anywhere from 5 to 15 percent, but that depends largely on whether the unemployment rate continues to fall.
“It won’t go gangbusters,” Tousley said. “[But] we’ll see a steady recovery through the year.”