Home buyers in the Twin Cities are facing a vexing situation: There are thousands of more listings compared with a year ago, but the number of options is shrinking.
“We are in desperate need of homes to sell,” said Chris Prescott, of Redfin Realty, who recently listed a townhouse near the University of Minnesota for $199,899 and got nine offers before selling it for more than the asking price.
Though the supply of properties for sale ebbs and flows with the weather, the imbalance between buyers and sellers is acute this spring.
Buyers came early and in droves, signing more purchase agreements last month than any month in a decade, data released last week showed.
A deeper look showed that sellers were no less bashful. So far this year, new listings have increased by nearly 3,000 compared with a year ago.
But that wasn’t enough. The number of properties on the market at the end of the month was down 2 percent.
Buyers are racing to beat higher home prices and to lock in near-record low rates, creating an unseasonably early increase in sales and a tremendous amount of competition.
“It was stressful,” said Meghan Faricy of Minneapolis. She said she felt pressure to buy a house with her fiancé, Danny Jandro, while mortgage rates were still within a percentage point of all-time lows.
The couple had been renting a condo in an upscale high-rise near the Mississippi River, but wanted a bigger two-story house in a first-ring suburb with a big yard for their dog.
They quickly realized their choices were going to be limited. Many of the houses that met their needs had an accepted offer by the time they had a chance to see it. “There just weren’t a lot of options,” Faricy said. “I felt like there were few and far between.”
Faricy and Jandro fell in love with a house in Richfield that had a big yard and a patio. Knowing that several others had already toured the property, they quickly made an offer for $10,000 more than the list price. The sellers got five other offers, including one that beat theirs.
“I knew going into this that I might not get our first house, but it was the first one I could see us living in,” Faricy said. “It was so depressing.”
Several weeks and dozens of showings later, the couple found another house in Richfield they liked even better. They immediately made an offer, outbidding another buyer, and will close on the property next month.
Pat Paulson, an agent with Exit Realty and a past president with the Minneapolis Area Association of Realtors, said that for the first time in 50 years, the ratio of pending sales to new listings during April exceeded 80 percent.
“There’s a shortage relative to demand,” he said “Sales are so strong, they’re eating up those gains in new listings.”
Inventory this spring is being constrained by a unique convergence of circumstances. There’s been a steep decline in the number of deeply discounted foreclosures and bank-owned listings, limiting options for investors and first-time buyers.
Sarah and Jordan Wein began shopping in December for their first house. It took several months and 50 to 60 showings before finding anything worth an offer and that didn’t already have a buyer. They made offers on two homes before reaching a deal.
The first house they bid on sold for nearly $30,000 more than the list price. The second time around they found a house in the Como Park neighborhood that was priced in the mid $200,000s. They didn’t waste a minute before making an offer.
“We had to make a decision really quickly,” said Sarah Wein. “This was a very intense process.”
There also are still thousands of homeowners who have a house with a mortgage that exceeds the value of the property. In Minnesota, 5.9 percent of all properties with a mortgage were underwater in the first quarter, compared with 9.3 percent last year, RealtyTrac said last week.
And higher home prices have made many would-be sellers hit the pause button in hopes that prices will rise even more, creating the kind of price-speculation that led to inventory shortages shortly before the latest housing crash.
David Arbit, research manager for the Minneapolis Area Association of Realtors, said that at the current sales pace, there are only enough homes on the market to last 3 ½ months. In a more normal and balanced market, he said, there should be a five-month supply.
The situation, he said, is being compounded by a lack of housing construction in the Twin Cities, limiting options for move-up buyers.
“If absorption trends continue at this fast clip,” Arbit said. “Homebuilders are going to smell opportunity.”