Despite a global pandemic and steep recession, the housing market in the Twin Cities broke a bevy of records last year.
Home sales rose by 8% in 2020 compared with the previous year, sending the median sale price to a record $305,000, more than double the level of eight years ago and nearly 9% higher than the previous high.
"Despite several challenges, the Twin Cities housing market exceeded all expectations," said Todd Walker, Minneapolis Area Realtors president, in a statement.
Record low mortgage rates largely drove the surge in home buying, fueling demand in virtually every corner of the region and in every price range, even at the top of the market. Sales of $1 million homes last year posted the biggest annual gain for any price range, rising 25% over the previous year.
The global pandemic also reshaped the market. After a brief spring pause following the onset of the pandemic, an increase in the number of remote workers created a surge of interest in larger houses with home offices and big yards in outlying suburbs.
"People were looking for a 'COVID home,' " said Sharry Schmid, president of Twin Cities-based Edina Realty. "They wanted bigger backyards and two or three extra spaces for distance learning and home offices."
Across the metro area, sellers weren't nearly as active as buyers. While sales jumped, listings remained largely flat compared with 2019.
And with sales outpacing listings in parts of the metro, the total number of properties for sale at the end 2020 was down nearly 40% compared with the previous year.
In Minneapolis and St. Paul, where social unrest and rising crime raised concerns, a double-digit increase in listings prompted questions about an urban exodus. But sales also jumped: In Minneapolis annual closings increased 10% while sales increased 16% in St. Paul.
A lack of listings in the metro area sparked fierce competition, forcing buyers to make strong offers quickly. On average, sellers across the metro got 99.8% of their asking price, with prime properties drawing multiple bids.
"Predictably, the result of record sales combined with ultralow inventory meant rising prices and sellers accepting stronger offers in less time," according to Tracy Baglio, president of the St. Paul Area Association of Realtors.
Homes sold in record time. On average, houses sold in just 43 days last year, 12% faster than 2019. Half the houses had accepted offers in under 18 days, but that varied by location, price and property type. Condos and $1 million houses tended to take the longest to sell, but entry-level houses sold swiftly and often for far more than the asking price.
"Inventory remained a hurdle," said Walker. "But homeowners have never had so much equity in their homes, and buyers haven't seen rates this low in 50 years, offsetting rising prices."
Schmid said that while 2020 started off with a bang, all bets were off when COVID struck. Amid what she and others thought would be a strong spring market, stay-at-home orders and the first whiff of recession upended all expectations about the rest of the year as showings ground to a halt.
With mortgage rates on the decline, buyers and sellers quickly adapted to new virtual and touchless listing and selling protocols, and sales — and prices — rebounded.
While the brief 2020 downturn brought to mind the housing crash of the Great Recession, Schmid doubts another price bubble is in the offing. During the Great Recession, home buying was fueled by risky mortgage lending that doesn't exist today.
"What's driving that median price up today," she said, "has been a lack of supply."
Jim Buchta • 612-673-7376