Real estate agent David Olson was fluffing pillows and lighting candles in preparation for a recent open house in Minnetonka. Even on a frigid weeknight, he expected a full house.

"It's insane," said Olson, noting that he just hired two assistants to keep pace with a growing number of interested homebuyers. "And I'm still working evenings and weekends."

Five years after the housing bubble burst, the Twin Cities housing market is bouncing back in ways that once seemed unimaginable to Olson, who started selling real estate after he and his wife lost their jobs during the recession.

Across the metro area, houses are selling faster than they're being listed, leaving agents, loan officers and others struggling to keep pace with demand. And with housing construction doubling over the past year, builders, contractors and suppliers -- including some that were once on the verge of bankruptcy -- are scrambling to fill jobs.

Even companies that operate on the periphery of the housing market -- lumber yards, insurance companies and petroleum sellers -- are beginning to feel the momentum.

"They're all benefiting," said Toby Madden, regional economist with the Federal Reserve Bank of Minneapolis. "This will have a spillover effect into manufacturing and other industries and that will help the overall economic expansion even more."

Fueled by record-low mortgage rates, declines in unemployment and growing confidence in the market, home sales in the Twin Cities metro area posted an unprecedented 17 percent increase from 2011 to 2012, outpacing national sales, according to the Minneapolis Area Association of Realtors.

For many homeowners, the prospect of higher prices and the fear that mortgage rates might soon rise are drawing them back into the market.

Jen Weigle, for example, paid $316,900 at the peak of the market for her tidy rambler in west Bloomington. Looking to downsize, she tried to sell it in 2009 for $289,000. After nearly four months on the market, nary a showing and no offers, she took it off the market.

Today, Weigle is feeling far more confident that she will be able to sell and downsize into a townhouse or condo. There's little competition in her neighborhood, but she's heard that bidding wars are breaking out in some parts of the metro.

"It's at the point where I think I can get what I owe, or maybe a bit more," she said. A house in her neighborhood recently sold for more than $200,000, so she's hoping hers will fetch about $250,000. "I've noticed that things are slowly creeping back up," she said.

Such optimism is fueling higher prices and prompting some buyers to pay more than the asking price. Last year, the median price for all sales was $167,900, up almost 12 percent.

Ron Peltier, chairman of the parent company of Edina Realty, noted that 2012 "marked a year of strong evidence that we're in the early stages of recovery. In 2013, we will continue to see that."

Peltier said he expects metrowide sales to increase nearly 15 percent this year.

Builders see momentum

Last year, about 14,000 housing units, including rentals, were planned across the metro area. That was a nearly 100 percent increase in new units, but still short of a historical average of about 30,000 units.

Indeed, gains in home sales and construction aren't playing out evenly from community to community.

Closings last year increased more than 40 percent in Shoreview, New Brighton and Medina, but fell by double digits in places like St. Francis, Chisago and Greenfield.

Regardless, the consensus within the housing industry is that the momentum is positive. Bill Burgess, president of Lennar, the state's largest homebuilder, said that sales are so strong, he has been able to raise prices on both lots and finished homes, and that he expects to add several new developments over the next year. Land scouts are scouring the metro area in search of developable land to replace the lots that are quickly being sold.

"People feel a lot better about the economy and they're coming out and saying 'Now is the perfect time to buy,'" Burgess said. "We're starting to see inflation creep into the marketplace."

The trend is also putting Twin Cities subcontractors like Todd Polifka, president of Brush Masters Painting & Drywall, in an unexpected bind. At the peak of the market, the company employed about 250 people, but he had to trim the staff to about 100 employees. Just a few years later, he is having trouble finding workers to help him handle new business from area homebuilders. "It's organized chaos at times," he said.

That's why he and representatives of nearly 20 Twin Cities companies recently gathered at a community center in Roseville to recruit workers. More than 400 prospective workers showed up to vie for about 200 construction jobs.

Polifka said he's eager to fill several positions, his crews are working overtime and weekends, and he recently leased an additional 5,500 square feet in a warehouse, where crews are painting cabinets, millwork and other hard goods.

"Finding skilled, qualified people has become a challenge," he said.

A ripple effect

The shift is being felt well beyond the job sites and open houses at companies that operate on the fringe of the housing industry, ranging from those that sell home furnishings to those that make oil filters for the tractors that dig foundations.

Forsythe Appraisals, a St. Paul firm with offices across the country, started training new appraisers about nine months ago to keep pace with double-digit increases in the demand for appraisals. The company's senior vice president, Alan Hummel, said that a year ago it would take two or three days to get an appraiser on a job after a request. Now, it can take twice as long.

And at Lyman Lumber, the company is hiring sales representatives, forklift drivers and desk workers to keep up with steady increases in sales of dimensional lumber and sheet goods that are used to build everything from load-bearing walls to concrete forms. Just a few years ago, the 100-plus-year-old company had filed for Chapter 11 bankruptcy protection.

"It's nice because the stress today is growth stress, not contraction stress," said Lyman's branch manager, John Zirbes.

Olson, a ReMax Results sales agent, knows the feeling. Just five years after wondering how he would pay the mortgage, he's wondering how he'll keep up with the market.

"Buyers are coming out of the woodwork and getting off the fence and are ready to take action," he said. "It's a good problem to have."

Jim Buchta • 612-673-7376