The Twin Cities housing market enjoyed a robust start in March but stumbled under the weight of a pandemic economy and a government stay-at-home order that stopped showings in their tracks.
In the middle of the market, houses priced between $250,000 and $500,000 saw a 30% increase in signed purchase agreements in March. Sales of the least- and most-expensive houses in the Twin Cities were clobbered, according to a monthly sales report from the Minneapolis Area Realtors (MAR).
The increase for midpriced homes helped boost the overall total pending home sales, an indication of future closings, by 11% in March compared with last year, but gains came early.
“The first half of March was nothing like the second half,” said David Arbit, director of Research and Economics for MAR.
At its outset, March was on pace to be one of the best in more than a decade for home sales in the metro area, but by the end of the month open houses were banned and showings went virtual.
During the first week of March, pending sales were up 23% over the same period the previous year, but by the last week of the month pending sales reversed course, posting an annual decline of more than 5%.
That shift is a reflection of growing uncertainties about the economy and the future of the housing market in the metro. Though agents generally expect the housing market to rebound once showings can begin again, there’s growing concern that certain segments of the market won’t regain their earlier momentum.
“The strength of the market preceding this crisis bodes well for a relatively quick recovery once this crisis is over,” said Patrick Ruble, president of the St. Paul Area Association of Realtors, in a statement. “We even saw a double-digit gain in new listings, providing more options for buyers facing limited choices.”
For now at least, the pandemic is having the most profound effect on buyers who have the least — and most — amount of money to spend. Pending sales of houses priced at less than $190,000 were down by double-digit percentages while sales of houses priced at more than $1 million fell by nearly 40%.
Those declines illustrate the effect of the two parallel economic impacts of the pandemic: soaring unemployment rates and turbulence in the stock market.
“Buyers in the luxury segments are far more susceptible to large swings in the stock market. Just think of someone who had a net worth of $3 million at the end of February could’ve been worth $2 million by late March,” Ruble said. “Job losses in the leisure, hospitality and retail sectors have disproportionately affected buyers who would’ve purchased homes under $200,000.”
In addition to economic uncertainties, entry-level buyers faced a challenge upper-bracket buyers didn’t: a scarcity of options.
For properties priced at less than $190,000, new listings were down by double-digit percentages during the month, while seven-figure listings increased 6%.
While sellers were active in the Twin Cities, they were far less active than usual.
Zillow said listings typically increase 103% from the beginning of March to early April, but this year they increased listings only 14 % during that period.
Skylar Olsen, senior principal economist at Zillow, said that because the market in the Twin Cities was strong when the virus began, she expects it to be a more resilient market than many.
Housing markets in outstate Minnesota may not fare as well as those within the metro through the pandemic. According to data released this week by the Minnesota Association of Realtors, closings in most of the 10 non-metro regions tracked by the association posted annual declines during March, reflecting fewer pending sales in January and February.
In the Twin Cities, house prices have yet to be affected. The median price of all sales during the month was $297,000, 8% higher than last year.
Agents said despite the onset of an economic recession that’s expected to last into 2021, buyers are motivated by mortgage rates that are hovering at record lows and the expectation that there will be fewer buyers and less competition.
Still, buyers were getting close to their asking price last month, and multiple offers were still happening.
Elizabeth Mayer said that she and her fiancé, Damon Madzey, are planning to get married in June and were eager to lock in a low mortgage rate on their first house.
On Thursday, Freddie Mac said the average 30-year fixed-rate mortgage averaged 3.31%, down slightly from the previous week and near an all-time low.
Though concerns about the virus were already spreading, Mayer and Madzey weren’t alone in their quest. They were outbid on the first house they wanted, so when they saw a two-bedroom twinhome in Mounds View come on the market in early March for $185,000, they bid quickly.
“I do feel it was somewhat competitive despite the virus situation,” she said.
They bid more than the list price to ensure the seller would take their offer. And the seller did. They closed on the deal Friday afternoon.
The listing agent on that property, Chris Willette of Coldwell Banker Realty, said such properties are still a hot commodity even though some buyers are taking a break from the market. That shift was especially noticeable after the March 25 stay-at-home order.
“No one really knew what to expect,” said Willette. “I did see cancellations across the board in all price ranges as people were either losing their jobs, and/or scared of how long the stay-at-home order would be in place and were scared to perform on one’s existing purchase agreement.”