Minneapolis home buyers roared back last month, outpacing many suburban sales gains as mortgage rates dipped to new lows, making it the busiest October for home buyers in nearly two decades.
Last month there were 6,249 pending sales across the 16-county metro area, a nearly 22% increase over last year, according to a monthly sale report from the Minneapolis Area Realtors. In Minneapolis alone, pending sales were up 47% and in St. Paul sales increased almost 30%.
Most suburbs were popular with buyers, as well, but sales gains were generally more tempered than in the core cities.
“Despite some earlier challenges, Minneapolis and St. Paul are still seeing strong sales growth,” said Linda Rogers, president of Minneapolis Area Realtors and a Twin Cities agent. “They’re still quite competitive.”
Sellers were also active in the core cities, with new listings up 35.5% in Minneapolis and nearly 23% in St. Paul. Both were far above the metro as a whole, which saw new listings increase 8.3%. At the end of the month there were only 8,080 active listings, a 34.5% decline compared with last year.
The October sales surge put to rest, at least for now, concerns about an urban exodus. Though many Twin Cities did decamp to the suburbs and to more rural areas to escape rising crime and high-density living in the suburbs, there were plenty of buyers to take their place. That was especially true for first-time buyers who might have been renting or living with their parents, but decided it was time to take advantage of falling mortgage rates.
On Thursday, Freddie Mac said the average 30-year fixed-rate mortgage slipped to 2.72%, the 13th time this year rates fell to a new low.
Low rates are helping drive sales, but the battle for a dwindling number of for-sale homes is also boosting prices. The median price of all sales last month was $315,000, a 12.5% increase over last year. That median price has been increasing double-digits all summer, eroding some of the additional buying power that’s come with low mortgage rates, and there’s growing concern that many would-be buyers are getting priced out of the market.
David Arbit, Minneapolis Area Realtors’ director of research, said after the civil unrest this summer seller activity increased faster than buyer activity, but the reverse is now happening as home shoppers consider properties that were listed this summer.
“It’s exactly what they’ve been awaiting for years: more listings,” he said. “We still hear that demand is quite strong in the cities, with multiple offers and bidding wars still commonplace.”
Housing has been one of the bright spots in the economy, despite turmoil in many other sectors and a high unemployment rate.
On Thursday, the National Association of Realtors said existing home sales during October increased 4.3% from the previous month to a 6.85-million unit pace, the fastest pace since 2006. Listings are down nearly 20% compared with a year ago and the lowest on record.
First-time buyers have been the driving force in the Twin Cities for much of the year, but move-up buyers are taking advantage of rising equity and low rates to build houses and trade up to more expensive ones. New construction sales last month were up by nearly half, and sales of $1 million-plus houses doubled compared with last year at the same time.
The exception to last month’s gain was the downtown condo market in both Minneapolis and St. Paul, where listing gains exceed sales and prices have been flat. That buyer pool has been winnowed by a lack of corporate relocations and a more cautious contingent of baby boomers who are putting their plans to move downtown on hold in the midst of rising COVID-19 cases and higher crime.
“Buyers are still out in force, which is fairly unusual for this time of year when things typically quiet down,” said Patrick Ruble, president of the St. Paul Area Association of Realtors and a Twin Cities agent, in a statement. “But the shortage of inventory and fast pace of the market are still keeping some waiting in the wings.”