The boom in the Twin Cities housing market continued into November, a time when real estate deals usually slow dramatically, helped by better-than-usual weather.
Buyers signed 3,497 purchase agreements in the metro area, an 18 percent increase over last year, the Minneapolis Area Association of Realtors announced Friday.
New listings rose 11.5 percent over November 2014. But the surge in buying activity left the total number of properties on sale at month’s end 18.5 percent below the year-ago level.
“It was hot,” said Judy Shields, the president-elect for the Minneapolis Area Association of Realtors.
Shields, an agent in the Minneapolis Lakes office of Coldwell Banker Burnet, said the market feels remarkably similar to the sales trends last year, when buyers took a breather in August, September and October but hit the pavement in November.
This year, home sales rose 3.3 percent in October, 12 percent in September and 7.8 percent in August.
Shields and other agents attribute the late-season surge to several factors. Warm weather made for better-than-average shopping conditions. Buyers are becoming increasingly concerned that mortgage rates are poised to rise. And there’s been an unusually high number of clients relocating to the Twin Cities for work.
Shields said she is working with three relocation buyers right now. “I think that’s another indicator of how strong our economy is here in the Twin Cities,” she said. “But there’s also a little fear and uncertainty about what’s going to happen with interest rates.”
The Federal Reserve’s policy-setting committee meets next week and is expected by many economists, investors and real estate professionals to begin to raise interest rates from the near 0 percent level at which they’ve been since the 2008 global downturn. Although rates are likely to rise slowly in small steps, any increase will flow through to mortgage rates.
For the week ending Thursday, Freddie Mac said the average 30-year fixed mortgage rate was 3.95 percent, up marginally from 3.93 percent at the same time last year.
Low inventory remains the biggest barrier to even greater home sales in the Twin Cities.
Shields estimated there is only one listing for every three buyers in the market right now. At the current sales pace, there are only enough properties to last slightly more than three months. That’s far below the five-month equilibrium point.
“We had an unbelievable October followed by a very strong November,” said Andy Fazendin, broker/owner at Fazendin.
Building activity up
Twin Cities homebuilders also experienced a late-season boost.
During November, they were issued 450 permits to build 1,555 housing units, according to data compiled by the Keystone Report for the Builders Association of the Twin Cities (BATC). That was an 11 percent increase in permits and a nearly 80 percent increase in new units compared with the same month a year ago. So far this year, 4,513 permits were issued to build 9,167 units — a pace neck-and-neck with 2014.
Last month, multifamily units — mostly rental apartments — accounted for 73 percent of all construction, causing a slight uptick in the total number of year-to-date units. Construction of single-family homes also was up slightly, rising 6 percent over the same period last year.
“We started the year expecting to see large gains in residential construction, but continued to be disappointed,” said BATC President Chris Contreras. “We are hopeful that this positive trend will continue into the new year.”
The scarcity of new and existing home listings has put sellers in the driver’s seat in many parts of the metro area, fetching them top dollar for their properties and often commanding multiple offers. On average, sellers got 95.89 percent of their asking price in 73 days — six days faster than last year at this time. The median price of those sales increased 7.3 percent to $219,900.
“It’s very unusual to have a strong fall like this,” Fazendin said. “Sales activity has been off the charts for all of the fall market.”