The pickings have never been slimmer for home buyers this spring in parts of the Twin Cities, and that’s putting a lid on home sales.
Buyers across the metro signed only 5,103 purchase agreements in March, a 12.2 percent drop from a year ago. But sellers received nearly 100 percent of their asking price, an indication that there’s no shortage of demand.
The number of properties available in the Twin Cities was 26 percent lower than a year ago, and sellers remain slow to enter the market with 17.5 percent fewer new listings in March than a year ago.
The shortage is most acute for entry-level houses, or anything priced less than $250,000, in large part because there’s a swell of first-time buyers and baby boomers looking to downsize from the big house in the suburbs into smaller, more-affordable homes.
That means that in several Twin Cities neighborhoods and inner-ring suburbs where houses are the most affordable, sellers got far more than their asking price as desperate house shoppers duke it out.
For buyers, the Cleveland neighborhood in north Minneapolis was the most competitive in the Twin Cities last month. On average sellers there received 106.4 percent of their asking price, according to a Star Tribune analysis of sales data from the Minneapolis Area Association of Realtors.
First-time buyer Marni Zimlin said that after being outbid on the first two houses she wanted to buy, the third time was the charm. She leapt at the chance to tour a three-bedroom Arts-and-Crafts-style house in the McKinley neighborhood in north Minneapolis, where sellers received 104.9 percent of their asking price last month.
The house had just gone on the market for $130,000, and even before she set foot in the house she knew it was “the one.” Because it was move-in ready she knew it was going to go quickly, so she offered $24,000 more than the sellers were asking. She’s glad she did; turns out that there were 10 other offers.
“It was so exciting, but I was nervous,” Zimlin said.
In March, there were only 175 properties priced at less than $120,000, 60 percent fewer than last year. It’s a segment of the market that’s being driven by many former renters who are finding that, with interest rates still hovering near record lows and rents on the rise, it’s cheaper to own a house or condo.
For Zimlin, a California transplant, her house payment is about $400 less expensive than her rent, making homeownership a no-brainer.
That deepening imbalance between entry-level buyers and sellers is putting upward pressure on prices across the metro. The average price-per-square-foot of closings during March was $150, a 9.9 percent increase over last year.
The competition was no less fierce in the suburbs. Sellers were the least active in West St. Paul, where new listings during the month fell 47 percent — the most in the metro.
Buyers were most aggressive in Crystal, where sellers received on average 103.39 percent of their original ask price. New listings in that city were down 44 percent compared with last year, causing the average price per square foot to increase 26 percent, the third highest increase in the metro.
The imbalance between buyers and sellers was most pronounced in Richfield, where total inventory by the end of the month was 65 percent lower than it was last year. That first-ring suburb has been the hottest home market in the metro for two years.
In Inver Grove Heights, Sheila Lange, a sales agent with Coldwell Banker Burnet, said that when she listed a 1,042 square-foot condo for $80,000 in mid-March, she had more than 35 offers even though the unit needed some work. The sale closed for $115,000 and that wasn’t even the highest offer.
But Amy Ruzick, a sales agent with RE/Max Results, said the sky isn’t the limit for sellers. Buyers have access to comparable sales data and aren’t willing to overpay when they don’t think it’s warranted. Plus, she said that for agents and buyers, the memory of the housing crash a decade ago still lingers.
“I think there’s a lot more attention being paid to not going all out on pricing,” Ruzick said. “Having lived through that before, I don’t want to be a part of that again. It was horrible.”
Data editor MaryJo Webster contributed to this story.