Dearth of homes for sale in Twin Cities sends median sale price to $327,500 in March

Home buyers outnumbered sellers in much of the Twin Cities — and in nearly every price range — last month. By a long shot.

At the end of March there were just shy of 5,000 houses for sale across the metro, about half as many as last year and the lowest figure in nearly two decades, according to a monthly sales report from the Minneapolis Area Realtors.

And with a double-digit percentage increase in signed purchase agreements, but a nearly equal decline in newly listed properties, March was a battlefield for buyers. On average across the metro, sellers received 2% more than their asking price, causing a nearly $30,000 annual increase in the median price, which rose to a record $327,500.

"For everyone who is selling, regardless of why they're selling, there's at least 30 people who want to buy their house," said Leah Drury, a Twin Cities sales agent.

Her business partner, Jill Numrich, said she recently listed a house in New Brighton that had 126 showings in two days and 27 offers. She said all of the 27 home sales the team was involved with during the first quarter involved multiple offers.

"It was just crazy, it's everywhere," she said.

At the current sales pace, there are now only enough houses on the market to last less than a month. The market is considered balanced when there's a four- to six-month supply. On average, houses sold in 38 days, a nearly 40% decline compared with last year.

Annual sales gains varied by location, price and property type. Sales were up nearly 32% in Minneapolis and nearly 10% in St. Paul. And condo sales increased nearly 32%, outpacing gains for single-family and townhouses. Builders are in high demand, as well. New construction sales rose by a quarter and home sales above $1 million increased more than 70%.

"Demand is still growing faster than supply," said Tracy Baglio, president of the St. Paul Area Association of Realtors, in a statement. "With less than one month of supply, buyers must be patient and understand they may lose out on a few bids before an offer is accepted. Be ready to act fast."

Low mortgage rates have helped offset rising home prices, but they have also increased the sense of urgency for buyers who worry that waiting for more listings could mean a higher interest rate — and higher home prices — down the road.

Though mortgage interest rates ticked up slightly earlier this year, they have dipped a bit in recent weeks. On Thursday, the 30-year fixed-rate mortgage (FRM) averaged 3.04% with an average 0.7 point for the week ending April 15, according to Freddie Mac's Primary Mortgage Market Survey. That's down from the previous week when the FRM averaged 3.13%, and 3.31% a year ago.

Sam Khater, Freddie Mac's chief economist, predicts that while mortgage rates have been steady, he expects them to increase modestly for the remainder of this year.

The latest figures come a year after the initial government shutdown began as COVID-19 began to spread, so they may reflect unseasonable changes in the market. Though real estate was considered an essential service, many buyers and sellers put their plans on hold. And demand for multifamily living slowed.

Redfin, a tech-powered real estate brokerage, said that nationwide, March was the hottest month in housing history: The number of homes for sale fell to a record low, with a record year-over-year drop of 29%; the typical home sold in just 25 days; 42% of homes sold above their list price and the average sale-to-list ratio, a measure of how close homes are selling to their asking prices, surpassed 100% for the first time.

Across the state, home sales were similar to the metro, especially in areas where second-home buyers are also taking advantage of low rates. Agents also attribute strong sales in greater Minnesota to the pandemic, which is causing remote workers and rural wannabes to pursue homes in more isolated areas.

"Factors that were in play even before the pandemic continue to shape the housing environment, including historically low interest rates and a stubbornly persistent shortage of homes." said Chris Galler, CEO of the statewide trade group Minnesota Realtors. "Supply is further depressed by homeowners who are reluctant to sell their properties for fear of being unable to purchase an affordable home in the area where they are relocating."

Jim Buchta • 612-673-7376