Worried about rising rates and prices, Twin Cities homebuyers are still on the hunt

Home buying in the Twin Cities during November was on par with last year, while a persistent shortage of property listings caused a nearly double-digit percentage increase in prices.

Last month, there were 4,749 pending sales across the metro area, 36 more than a year ago, according to a monthly sales report from the Minneapolis Area Association of Realtors. The median price of all closings, a reflection of deals made a couple months earlier, increased 9.4% to $339,000.

That price gain, although much higher than average, was much more tempered than earlier this year, when prices increased as much as 17 %. That's a sign, in part, that demand isn't quite as strong. Total closings in November were down 3%.

"We've gone from a white hot market to a hot market," said Todd Urbanski, an agent with Fazendin Homes in Wayzata and a former MAR president. "We're just seeing that normal seasonality creep back in, which we haven't seen for a while."

The annual decline in closings during the month is more a sign of strong demand during the last half of 2020 rather than weakness this year. The COVID-19 pandemic created an unusual surge in home buying at a time when it typically slows. This fall, however, buying and selling patterns have largely returned to normal.

For the first time since July, there was an increase in housing listings, although a modest one. During November there were 4,123 new listings, a 1.2 % increase over last year. Still, for the 10th year in a row, the Twin Cities is a seller's market.

At the end of the month there were 6,110 properties on the market, a nearly 20% decline compared with last year, according to the report, which was released in conjunction with the St. Paul Area Association of Realtors (SPAAR).

"While the housing shortage is still very real, there are signs that the ultra-competitive landscape is easing a bit," said Tracy Baglio, SPAAR president.

On average, homes sold in just 30 days last month, a notable decline compared with last year. At the current pace, there were enough houses for sale to last about a month, a more than 20% decline compared with last year. The market is considered balanced between buyers and sellers when there's a four- to six-month supply of listings.

Demand for luxury homes was especially strong. For houses priced at more than $1 million, pending sales were up nearly 45%. And the number of homes for sale in that price range fell by nearly half.

There was also a steep decline in options for people who wanted to spend less than $350,000, with inventory levels in those price ranges falling nearly 25% compared with last year.

Dwindling options for buyers in just about every price range caused bidding wars that forced many buyers to pay more than the seller's asking price. The strongest bids were for houses priced between $190,000 and $350,000: Those properties fetched more than 102% of list price.

Though interest rates have remained near historic lows, helping offset those rising prices, rates have ticked up recently. Freddie Mac said the 30-year fixed-rate mortgage averaged 3.12% as of Thursday. That's up from 3.1% last week and 2.67% a year ago.

Urbanski said that although there are signs of moderation and that winter is typically one of the slowest times for home buying in the Twin Cities, there are still plenty of buyers on the sidelines who are concerned about rising mortgage rates and want to take advantage of the winter slow-down.

"Due to seasonality and less listings coming on the market right now, we are again seeing buyers racing to new listings as they go live," he said. "With the Fed announcing an increase in interest rates next year, this should continue into our spring market."