Home buyers in the Twin Cities are running out of options.

By the end of last month there were 46% fewer houses for sale in the metro compared with last year, but no shortage of buyers, according to a monthly report from the Minneapolis Area Realtors (MAR) and the St. Paul Area Association of Realtors that tracks the housing market throughout the 16-county Twin Cities metro.

The imbalance between buyers and sellers has been triggering bidding wars and jacking up prices for the past several months, and now it's stifling sales. Pending sales, a reflection of how many deals were signed last month, was flat compared with the same time last year, but the most in 16 years. With houses selling in near-record time, the median price of all closings last month increased more than 11% to $314,000.

"It's just insane," said Dan Frank, a Minnetonka-based real estate agent. "If it's going to take 11 offers, I'm telling my buyers to stay confident and persistent."

Frank said multiple-bid situations were routine last month. He recently listed a $400,000 house in Minnetonka and received 12 offers, including one for about $70,000 more than the asking price. On that listing every offer was accompanied by a letter from the buyer that made the case for why their offer should be accepted. And many waived the inspection and financing contingency.

"Delivering the news to 11 people who didn't get it isn't easy," he said.

In early February he showed his buyers a house in Eden Prairie that received 38 offers, and another in Prior Lake that drew 27 offers. He even showed clients a $1.9 million house on Lake Minnetonka that sold within hours of hitting the market.

Buyers are taking advantage of rock-bottom mortgage rates and the pandemic, which has caused homeowners and renters alike to reconsider where and how they live. Many renters are making the leap to homeownership, and there's been a surge in homeowners who hope to upsize, downsize or move to a new community now that many employers are committing to more flexible remote work policies.

Demand is up in urban areas, the suburbs and in outstate Minnesota communities that once catered primarily to second-home buyers.

Though pending sales were on par with last year across the metro, they were up 23% in Minneapolis and more than 8% in St. Paul. Condo sales had lagged in recent months, but last month saw the strongest demand growth in both pending and closed sales. New homes are selling briskly, and so are luxury homes. New construction was up nearly 33% compared with last year, and houses priced at more than $1 million posted a 53% increase over 2020.

"We're seeing lots of factors at play right now," said Todd Walker, the MAR president said in a statement. "Buyers are running up against the inventory shortage even as they're inspired by 50-year low mortgage rates. We're seeing shifting attitudes around urban living and condos. People are also very encouraged by the progress on the vaccination front."

Closings, an indication of how many purchase agreements were signed two to three months ago, rose 4.8% from last February to the highest total since at least 2003.

The number of homes on the market is now at a 20-year low. During February there were 12.6% fewer new listings than the year before. At the current sales pace there are only enough houses for sale to last a few weeks; the market is considered balanced when there's a four- to six-month supply of listings. Homes sold in record time last month, with half of them selling in fewer than 20 days.

That's forcing many buyers to pay more than the asking price. On average, sellers last month received more than 100% of their list price.

"With so many buyers vying over a shrinking pool of listings, well-priced and well-staged homes don't spend much time on the market," said Tracy Baglio, president of the St. Paul Area Association of Realtors. "That means buyers have to come out swinging right out of the gate with their best offer in order to be successful."

Jim Buchta • 612-673-7376