May was not the month for first-time buyers in the Twin Cities. Scarce listings kept competition fierce and prices high.
Move-up buyers, however, were in their element.
A burst of upper-bracket house listings helped drive double-digit increases in sales of houses priced from $250,000 to $500,000, according to monthly data from the Minneapolis Area Realtors.
That increase, however, was offset by a decline in sales of the least-expensive houses. Across all price ranges, pending sales were flat compared with the same time last year. Closings, which reflect deals signed two to three months ago, broke a several-month losing streak by increasing 3% over year ago levels.
Despite the dearth of sales, prices reached a new high. Competition for the least-expensive listings forced buyers to pay list price or more. Those gains, and a significant increase in more expensive sales, caused the median price of all closings through the metro to increase 5.2% to $285,000. Even the average price per square foot increased significantly, rising 6% to $162 per square foot.
“We’re still seeing some rebalancing, but it just isn’t as dire as some want us to believe,” Todd Urbanski, President of Minneapolis Area Realtors, said in a statement.
That one-month snapshot has been the continuation of a long-term trend in the Twin Cities and beyond. For many, rising rents and falling mortgage rates have made homeownership more affordable than renting.
Trouble is, there’s a dwindling supply of houses that working-class buyers and baby boomers aiming to downsize can afford.
During May, sellers listed only 9,402 properties, 2% more than last year. The bulk of those listings were affordable only to move-up buyers. By the end of May, only 554 houses priced from $150,000 to $190,000 were on the market, down 34% from May 2018. At the same time, there were nearly 3,000 houses for sale priced from $350,000 to $500,000, about 10% more than last year.
The imbalance between buyers and sellers for houses priced at less than $250,000 has stifled sales — so far this year closings are down nearly 2% compared with last year. Despite that decline, buyers aren’t wasting time. On average, houses are selling in just 45 days, two days faster than last year at this time and a week faster than two years ago.
Price gains across the state have remained at, or slightly above, the national average. CoreLogic’s latest survey shows that during April, price gains in Minnesota increased 4% over last year. Nationwide, the gain was 3.6%.
All year, mortgage rates have been at the lowest level in a generation, but in recent weeks rates have fallen to their lowest level in more than a year.
“Rates under 4% is a significant motivator for buyers,” Urbanski said.
On Monday, Freddie Mac’s June forecast said that low mortgage rates along with a strong labor market will help housing markets post modest growth over the next year and a half.
Sam Khater, Freddie Mac’s chief economist, said in a news release that concerns about global growth and ongoing trade disputes have pushed long-term interest rates lower, causing mortgage rates to fall to the lowest level since fall 2017.
That forecast calls for the 30-year fixed-rate mortgage rate to average 4.1% this year and 4.2% in 2020.
“These low mortgage rates, combined with strengthening homebuilder confidence and an increase in the level of housing permits,” he wrote, “are expected to translate into stronger housing starts and increased home sales for the remainder of the year.”