Rising prices and a shortage of starter homes hobbled home sales in the Twin Cities last month.
During April there was a 7% decline in closings, but the median price of those sales rose to a record $281,000, according to a monthly report from the Minneapolis Area Realtors (MAR).
“Things still seem to be rebalancing a bit,” said Todd Urbanski, MAR president. “Low and stable rates have definitely helped, and so has the ongoing economic expansion.”
Throughout the metro, demand for inexpensive houses that are affordable to first-time buyers and downsizing baby boomers exceeds supply, putting many would-be buyers on the sidelines.
The imbalance is slowly changing.
Though there were fewer properties on the market at the end of April than there were last year, there was a 4.5% increase in new listings during the month.
With an annual increase in new listings for seven of the last eight months, buyers have more options. Pending sales — a measure of future closings — were down just 1.1% compared with last year.
Despite the decline in sales, houses are still selling quickly, but not as briskly as last year. On average houses sold in just 56 days, but that was slightly slower than last year at this time.
When it comes to the pace of the market, there’s no relief in sight for those shopping for the least-expensive houses. Houses priced at $150,000 to $250,000 are selling twice as fast as those priced from $350,000 to $500,000, which took about two months to sell.
Julia Israel, a sales agent and productivity coach with Keller Williams Integrity Lakes, said many of her entry level listings are selling even before they hit the market. Recently, she was about to list a 1,850-square-foot house in the Folwell neighborhood in Minneapolis for $225,000. Some acquaintances saw the house in a “coming soon” e-mail and immediately wrote an offer. Those buyers have been shopping for about four months and had already been outbid on a half-dozen houses, so they wasted no time.
“Those [entry-level] buyers are really struggling to compete,” said Israel.
At the current sales pace, there were enough listings on the market to last two months, far below what’s considered healthy.
Spring buyers are getting a boost from the lowest mortgage rates in a generation. The average 30-year fixed-rate mortgage has hovered around 4.1% in recent weeks.
“We’re doing better here than many other parts of the country,” Linda Rogers, MAR’s president-elect, said in a statement. “It’s important for buyers and sellers to understand local dynamics, not national headlines.”
On Tuesday, the National Association of Realtors said existing home sales during April were down 4.4% compared with last year. From March to April, sales were down 0.4%.
NAR said existing homes sold at a seasonally adjusted annual rate of 5.19 million during April, down from 5.21 million the previous month.
NAR attributed those declines to affordability challenges and a limited supply of options for would-be home buyers, especially those looking for their first house.
Nationwide, homes sold on average in a record 24 days. The median sales price of those sales was $267,300, a 3.6% increase from last year.
Matthew Speakman, an economic analyst for Zillow, said in a statement that despite encouraging buying conditions there are signs of more fundamental changes underway nationwide.
“The economy in April enjoyed a robust labor market, strong consumer sentiment and low mortgage rates — and was untouched by subsequent trade tensions with China,” he said. “Yet an inventory shortage persists, with a greater share of listings reporting price cuts and, in some months, sitting on the market longer, indications that the pace of existing home sales may continue to suffer or possibly recover slowly going forward.”