Home buyers in the Twin Cities picked up the pace last month.
During January, buyers signed 3,302 purchase agreements, slightly more than the previous month and January 2019. The uptick in buying activity came as new listings fell nearly 15%, boosting prices and putting buyers on track for another competitive spring market, according to a monthly sales report from the Minneapolis Area Realtors and St. Paul Association of Realtors.
“Buyers were again spoiled by rates that no one expected would be this low,” said Linda Rogers, president of Minneapolis Area Realtors, in a statement. “That’s fueled more sales activity but we’re still missing the inventory piece.”
The housing market in the Twin Cities has been dogged by a shortage of houses that are affordable to first-time buyers, downsizing empty nesters and working-class families. Last month the supply of houses priced at less than $250,000 fell more than 20% compared with last year. Options for those willing to pay $250,000 to $500,000 were down only half as much.
A deepening imbalance between entry level buyers and sellers is creating stiff competition, and multiple offers for more than list price aren’t unusual. On average, houses priced at less than $350,000 were commanding nearly 100% of the seller’s asking price. Last month the median price of all closings rose 4.2% to a January record $270,000.
The lowest mortgage rates in at least a generation are fueling sales and helping offset higher prices. This week, a 30-year fixed-rate mortgage averaged 3.49%, nearly a full percentage point lower than last year at this time, according to Freddie Mac. Mortgage applications to purchase a home were up 15% from a year ago.
In the Twin Cities, sellers listed 4,330 properties in January, 1.8% fewer than last year. That caused the total number of listings to decline 14.9%. At the current sales pace there were only enough houses on the market to last 1.5 months, a 16.7% decline compared with last year. The market is considered balanced when there’s a five- to six-month supply of houses on the market.
On average, houses sold in 66 days, slightly more than last year.
The housing market in the Twin Cities is affected by the weather far more than in other parts of the country, with the spring market typically starting just after the Super Bowl. Based on a recent ShowingTime index that tracks regional home showings for individual properties, early indications suggest a busier spring market than usual in the Midwest.
Across the metro, closings increased slightly compared with December and were up 5.4% over last year. Nationwide, home sales during January increased nearly 10% compared with last year but fell 1.3% from December to January, according to a report released Friday by the National Association of Realtors.
“The year is off to a solid start, and metro area communities each have a unique story to tell when it comes to housing availability and price,” said Patrick Ruble, president of St. Paul Area Association of Realtors.