All year, starter homes have been selling nearly as fast they hit the market, but a late-season rally among move-up buyers — and sellers — is making it a record fall for home prices.
Last month, a double-digit increase in sales of houses priced at more $300,000 pushed the median price of all closings to $280,000, a record for October, according to a monthly sales report from the Minneapolis Area Realtors.
“Interest rates are boosting buyer confidence,” said Todd Urbanski, president of Minneapolis Area Realtors, in a statement. “Consumers may also be realizing that some of their fears around the market and economy could be overstated.”
The lowest mortgage rates in a generation aren’t the only thing motivating move-up buyers. Bidding wars among first-time buyers and downsizing baby boomers are putting extra cash in the hands of many sellers, enabling them to spend more on their next home. And this fall, those move-up buyers have plenty of options, especially those who bought during the economic downturn.
“Back in 2009 and 2010 you could find homes for $100,000 scattered throughout the Twin Cities, and now some of them are worth $225,000 to $250,000,” said Urbanski. “And now they’re taking that $100,000 to $150,000 in equity and using that for the down payment on the house they really want to live in.”
While a shortage of houses priced at less than $300,000 is stifling sales of those properties, a bumper crop of more expensive listings is giving move-up buyers plenty of options at a time when they normally dwindle. During the month there was about a 16% increase in listings — and sales — of houses priced from $300,000 to $500,000, and a nearly 20% increase in closings on properties priced from $500,000 to $1 million.
Steve Schmitz, a sales agent with Coldwell Banker Burnet, said that within a day of listing a four-bedroom stucco Tudor-style house in south Minneapolis for $399,900, he received more than a half dozen offers all for more than the asking price.
“I expected it to sell quickly and probably with more than one offer, but I didn’t expect seven,” he said.
Interest in that property, which had been spruced up from top to bottom with finishes that appeal to many of today’s buyers, was an indication that there is pent-up demand for Instagram-ready houses.
“Had it been ordinary, I think it would have been well received, but it wouldn’t have had the frenzy it had,” he said.
Schmitz added that while it is still considered a seller’s market in all price ranges, buyers are still finicky.
“Sellers usually have to do quite a bit to get a home ready for sale,” he said. “Many people, if not most, want it done and don’t want to take on the project unless they’re getting some kind of deal.”
Brooke Bundy, the seller of that Tudor in south Minneapolis and a professional designer, said that while she and her husband weren’t planning to sell as quickly as they did — a job transfer drove the decision sooner than she expected — she nonetheless considered a future sale when planning the remodel.
“We chose finishes that we like, but that also have a mass appeal,” she said. “We were really thoughtful in our decisions and made sure that all the finishes complemented the style of the house while also being current.”
At the current sales pace there were enough houses throughout all price ranges to last 2.3 months, an 8% decrease compared with last year at the same time. The market is considered balanced when there’s a five-month supply of houses on the market.
Despite the dearth of starter homes, total sales in the Twin Cities this year are on track to outpace 2018. And buyers aren’t wasting any time. During October it took on average 46 days to sell a house, 4.2% fewer than last year.
Though house prices in the Twin Cities are now hovering at seasonal records, price increases have remained relatively moderate compared with many coastal markets and tech hot spots, including Denver and San Jose, where prices have been increasing double-digits for several years. Those markets are now seeing signs of cooling with prices and sales retreating, a trend that is unlikely to take hold anytime soon in the Twin Cities.
“The latest figures show our key metrics returning to growth,” said Linda Rogers, president-elect of Minneapolis Area Realtors, in a statement. “We expect Minnesota and the Midwest to fare well should that change.”