The Twin Cities home market continued to percolate in January, though it remained below full boil because of constrained supply.
Buyers in the Twin Cities metro signed 3,033 purchase agreements for homes last month, 3.5 percent more than a year ago, the Minneapolis Area Association of Realtors said Friday.
“This year’s spring market started earlier and stronger than in past years,” said Cotty Lowry, a sales agent with Keller Williams and president-elect of the association.
Closings on deals that were signed late last year rose 17.8 percent, with the median price of those closings rising 10.3 percent to $215,000. Prices reached new highs in several markets, including Edina, St. Louis Park, Plymouth, Hopkins, Uptown and southwest Minneapolis.
And despite the Federal Reserve’s increase in December of the main borrowing rate for the nation’s banks, mortgage rates have slipped for six weeks, putting the average 30-year fixed rate mortgage at 3.69 percent as of Thursday, according to Freddie Mac. That’s barely above the 2015 low of 3.59 percent and within shouting distance of all-time lows.
Many shoppers, however, have been unable to take advantage of falling rates, and house sales in parts of the metro are being constrained because of a shortage of listings.
The number of properties to hit the market during January was down 7.2 percent, causing overall inventory levels to fall 22.2 percent to the lowest level since 2003.
And at the current sales pace, there are only house listings to last 2.1 months — the lowest on record and a full month lower than last year. Generally, five to six months of supply is considered a balanced market.
“We’re starting the year in the same low inventory environment in which we ended last year,” said current MAAR President Judy Shields.
The dearth of listings is having an impact on every aspect of the market, from pricing to how long it takes to sell. On average, buyers received 95 percent of their asking price last month and sold their home within 85 days, compared with 101 days last year.
“Buyers are ready to pull the trigger when a “good one” hits the market,” said Cassie Frick, an Edina Realty agent who works in the west suburbs. Both of the houses Frick listed in January — a seasonally slow time — sold quickly. Frick said she expects her listings and pool of buyers to double this month and in March, the traditional beginning of the spring market.
Even so, Frick said that there are plenty of listings that have lingered for several months. “In this market, some buyers see that a house has been on the market for more than a few weeks and automatically assume something is wrong with it,” she said.
The situation is particularly challenging for first-time and entry-level buyers, who are facing an acute shortage of options. Homebuilders have built very few entry-level houses, and inexpensive foreclosures and short sales have essentially evaporated. Those distressed sales represented just 13.9 percent of all closings last month, causing sales of houses priced at less than $150,000 to decline nearly 18 percent.
Brett and Kellie Treichel, who have a 10-month-old baby, are aiming to move up from a two-bedroom townhouse to a house with at least three bedrooms that’s centrally located since they work on opposite ends of the metro area. While they’ve made a couple of offers, they haven’t been able to snare a deal. “There’s not a lot of inventory, so your options are limited which can be frustrating at times,” Brett Treichel said.
Like many shoppers, the couple say they are mindful that interest rates won’t stay low forever. “That’s always in the back of your mind,” Treichel said.
And with rates on jumbo mortgages, those with loan balances greater than $417,000, falling to the lowest level since April 2013, even upper-bracket buyers are feeling a little more motivated.
Chad Larsen of the Berg Larsen Group of Coldwell Banker Burnet, said there’s been an equal number of $1 million-plus house sales compared with last year, and that 20 homes in that price range went pending or sold during the month. In the $500,000 to $999,999 range, sales were up 21 percent compared with last year.
“With little fresh inventory on the market, it was a good time to pick up great properties at good values,” Larsen said.
Though the market is brisk and the pickings are slim, Larsen and other agents say that sellers need to have their houses in tiptop condition and can’t be too aggressive about pricing, especially at the top end of the market.
Larsen’s advice to Kate Helms, who is selling a $1.5 million house in Edina, was to be “somewhat stoical,” Helms said.
“That being said, we also recognize that we have to be poised with a plan to leave … pretty promptly if the right buyer surfaces,” she said.
By the end of last week, mortgage applications were up nearly 10 percent, according to the latest survey by the Mortgage Bankers Association, with refinancings representing more than 60 percent of those applications and rising.
“We have noticed a significant flurry of refinance activity in the last few weeks,” said Brian Call, founder of Rubicon Mortgage Advisors and president of the Mortgage Association of Minnesota.