As Twin Cities home market tips into shortage, May sales fall and buyers waste no time

Home sales in the Twin Cities metro fell slightly last month, but not for a lack of buyers.

House listings during May fell to a 14-year low as buyers struggled to find anything worth an offer.

During May there were 8,744 new listings — about the same as last year, but buyers burned through those listings and by the end of the month there were 17 percent fewer properties on sale than at the same time last year, monthly data from the Minneapolis Area Association of Realtors showed Thursday.

For home sellers, it's the best spring market in at least a decade. For many buyers, it's been one of the most frustrating.

With mortgage interest rates much lower than expected and rents on the rise, the buyer pool is swelling led by first-time buyers. Sellers, however, have been scarce.

Many homeowners are staying put because they are afraid they won't find a house to replace the one they've sold. And there are still plenty of baby boomers with the kinds of houses that are much coveted who have decided to age in place rather than downsize.

Homebuilders aren't helping much, either. Though construction is on the rise, it's not happening quickly enough to satisfy demand, especially when it comes to entry-level houses in the Twin Cities and inner-ring suburbs.

In Golden Valley, for example, the market is on fire. Houses sold on average in 50 days (twice as fast as last year), listing inventory was down more than 20 percent and the median price of all sales increased 20 percent.

On Westchester Circle, a quiet side street in Golden Valley, Edina Realty agent Tony Videen had two side-by-side listings. His company, STR8 Modern, redesigned and renovated one of them. The house next door was beautifully maintained, but virtually untouched since it was built in the 1970s and "literally is a time capsule and has some fun midcentury modern details to it," Videen said.

Both houses went on the market, both had multiple buyers who wanted to offer and both went under contract almost immediately.

"Buyers continue to buy on emotion vs. trying to truly establish a market value for the home," Videen said. "I've had several of my clients offer above my recommendation as they are nervous they won't find a home or are just tired of riding out the lack of inventory."

With such situations happening across the metro, many buyers are on the sidelines and that's hobbling sales volume. Last month, there were 6,246 closings, a 1.1 percent decline compared with last year. Pending sales, an indication of future closings, were down 3.1 percent.

With listings scarce, buyers wasted no time. On average, houses sold in just 51 days, 10 days faster than last year. At the current sales pace there are now enough listings on the market to last only 2.3 months, 20 percent faster than last year. A five- to six-month supply is considered balanced.

As a result, prices rose to a near all-time high. The median price for all closings last month increased 5.5 percent to $250,000.

In a statement, Tina Angell, president of the St. Paul Area Association of Realtors, said prospective home buyers should prepare to be nimble.

"This fast market also doesn't mean sellers should sit back and relax," she said. "To be competitive, they have some work to do, too. Their best results are achieved by pricing at market, having great curb appeal, and showing in great condition."

Jim Buchta • 612-673-7376