Twin Cities area house sales — and listings — during November posted steep double-digit declines, but with houses selling relatively quickly, prices are still rising.
During November there were 2,841 pending sales, 40.5% fewer than last year at this time and the lowest November figure in more than a decade, according to a monthly sales report from the Minneapolis Area Realtors.
Sellers were also scarce. There were only 3,453 new listings during the month, 17% fewer than a year ago.
"Buyers have gotten an idea that it's a buyer's market right now, but I don't think it is," said Andy Harwood at Keller Williams Integrity Realty. "There's still very limited inventory compared to the number of buyers."
Even so, the Twin Cities area housing market shifted dramatically in recent months.
This summer, sellers expected and usually received more than one offer. Today, that's not necessarily the case. Rather than battling other buyers and waiving home inspections, buyers are now more likely asking sellers to help pay closing costs.
Closings, a reflection of deals that were signed two to three months ago, were also down double digits. Still, the median price all sales during the month was $354,000, 4.1% higher than last year.
"One factor that's kept home prices rising modestly is that seller activity has come down in tandem with sales," Mark Mason, president of the St. Paul Area Association of Realtors, said in a statement. "Moderating price growth should be seen as a sign of a more sustainable market in line with longer-term trends."
During November half of all sellers sold homes for no more than 98.4% of their original list price, compared with 99.8% last year, and they accepted those offers after an average of 40 days after the house hit the market.
After more than a year of record sales — and prices — higher mortgage rates and the prospect of a recession have put a chill on sales. For the past several months, sales have posted double-digit declines. The normal seasonal cycle, with less activity in fall and winter, has also returned.
This year, mortgage rates doubled to just over 7% for the average 30-year fixed-rate mortgage, according to Freddie Mac. Over the past month, however, rates have fallen more than three quarters of a point. On Thursday, Freddie Mac said the average 30-year fixed-rate mortgage declined again to 6.31%.
"Sellers are hesitant to put their home on the market because their payments would be very different," Denise Mazone, president of Minneapolis Area Realtors, said in reference to the rate volatility.
She added, "In most cases, sellers are also then buyers, and many have chosen to stay put for now until things settle down, instead of trading up to a higher payment on a more expensive home."
In other parts of Minnesota, the situation was more challenging. Statewide, including the metro, sales were down 35% in November, with the median price of all sales increasing only 1.7% compared with last year, according to a report from Minnesota Realtors.
Several regions of the state saw prices decline compared to last year. Those declines were likely driven by weakening demand for recreational land and second homes that are most abundant in those areas.
Harwood said the change in the market has caused many buyers to become "emboldened and quite aggressive." However, steep price discounts are still the exception rather than the rule, so he's counseling his buyers to be reasonable about their expectations.
When he and his wife and business partner, Cheryllyne Vaz, started working this summer with first-time buyer Nick Michaelson, they warned him that the market was still extremely competitive. After a few months of house hunting, that was no longer the case.
But with a $250,000 budget, buying a house was still less expensive than renting, Michaelson said.
"There were options out there," he said. "There wasn't an abundance of them."
He bid on a stucco two-bedroom, one-bathroom bungalow in the high-demand Standish neighborhood in south Minneapolis. The house had initially been listed for $285,000 at the end of October, but the seller reduced the price twice to $247,5000.
The most recent price reduction caught the attention of Michaelson and at least a couple of others who also submitted an offer. But the sellers accepted his $240,000 offer, and he moved in last week.
"I was shaking my head in disbelief that we got such a great deal, but we had the leverage right now, so he was able to get the house at under asking price and seller concessions," Harwood said. "If we had been looking a few months ago, I would have told you this was impossible."