The housing recovery hit another milestone last month, with pending sales in the Twin Cities rising to their highest level in eight years.
Such a jump offers more evidence that the market is tilting in favor of sellers, who are commanding a higher percentage of their asking prices and selling their homes more quickly than last year. Increasing prices are also encouraging more sellers to test the market — new listings jumped 26 percent last month.
"These favorable market conditions for sellers will invite more new listings as summer rolls on," said Kate Beckman, president of the St. Paul Area Association of Realtors and branch vice president for Coldwell Banker Burnet.
In May, sales jumped almost 13 percent to 5,363 while pending deals rose 19 percent to 5,872, according to a report Wednesday from the Minneapolis Area Association of Realtors. Prices also posted a healthy gain, rising 15 percent to $194,450, the highest level in five years.
Higher home values are also offering hope to sellers like Jim Wavra. After refinancing, he ended up being underwater on his five-bedroom house in Richfield. Now that prices are increasing, Wavra expects that he'll be able to sell for far more than he owes, which will enable him to downsize to a condominium or townhouse in St. Paul.
"You hear about price wars and people overbidding, so this seems like the best time to sell," said Wavra, who has owned his home for 23 years. "For five years, I thought, 'I can't sell this home,' " he said.
As prices rise, fewer homeowners nationwide are underwater on their mortgage, putting more of them in a position to sell without having to bring cash to closing.
New data released Wednesday by CoreLogic show there are 100,245 Twin Cities homeowners — or 18.4 percent of all residential properties with a mortgage — who had negative equity during the first three months of this year. That's down from the first quarter of last year, but slightly more than the fourth quarter 2012.
"We are still far below peak home price levels, but tight supplies in many areas coupled with continued demand for single-family homes should help us close the gap," said Anand Nallathambi, CoreLogic's president and CEO.
Foreclosure rates in the Twin Cities metro are also far lower than they were last year at this time, and that means a larger percentage of house listings are being sold by traditional homeowners rather than lenders who have acquired them through the foreclosure process. Last month, there was a 50 percent increase in the number of "traditional" sellers, while foreclosure listings fell 15.4 percent. Short-sale listings were also down, falling 43.4 percent.
"With the recent disparity between massive buyer demand and sluggish seller supply, it is encouraging to see a substantial increase in traditional listings," said Andy Fazendin, president of the Minneapolis Area Association of Realtors and broker at Fazendin Realty.
With prices on the rise and options dwindling, a sense of urgency is returning to prospective buyers They're facing more pressure from rising mortgage rates, which remain near historic lows, but have increased slightly over the past several weeks.
Rick Aneshansel, incoming president of U.S. Bank Home Mortgage, expects rates to remain relatively low — and favorable for buyers — over the remainder of the year, but he warns that the recent double-digit price growth isn't sustainable.
"We see continuing property appreciation," he said. "But a lot of it will be tagged to the economy, and the pace of growth — that's what will drive future appreciation."