Twin Cities home sales hit virus wall; median price tops $300,000
With the economy in a coma and most open houses closed, home buying in the Twin Cities slumped last month. During April home buyers signed 20% fewer purchase agreements compared with last year, according to the Minneapolis Area Realtors, as sellers fretted about letting strangers into their homes and buyers worried about paying too much.
"Emotions are all over the place," said Pat Paulson, manager of Exit Realty Metro.
Before COVID-19, home sales in the Twin Cities were on track to outpace last year. During April, home closings — a reflection of deals signed mostly during February and early March increased 4% over last year and the median price of those sales increased nearly 9% to a record $305,000. That was the biggest annual gain in more than a year and the first time the median price exceeded $300,000 in the metro.
But with unemployment rates soaring and the prospect of a recession looming, buyers and sellers are now struggling to make decisions. During the last half of the March home showings in the Twin Cities slowed dramatically, bottomed out in early April, but have accelerated steadily through the remainder of the month.
"Showings are a leading indicator for purchase activity and they've reached new highs for the year," said Linda Rogers, president of the Minneapolis Area Realtors, in a statement.
Despite economic uncertainty, low mortgage rates have also been a powerful incentive for many buyers. Rates fell to a record low of 3.23% at the end of April. And on Thursday, Freddie Mac said the 30-year fixed-rate mortgage averaged 3.24%.
Low rates have helped drive demand, especially for first-time and move-up buyers in the market for move-in ready houses priced at less than $500,000. With those listings in short supply, multiple offers haven't been uncommon.
In early April, Ben Ganje of Lakes Sotheby's International Realty, listed a house in the Desnoyer Park neighborhood in St. Paul for $480,000. Immediately, he got several above-list offers from people who had yet to view the house in person. By the first day the house was available for in-person tours, he had seven offers and 24 showings. The deal closed on May 10 for $29,000 more than the asking price.
Still, buyers are facing a more challenging lending environment as banks assess the impact of mortgage forbearance programs and the ability of borrowers to make their payments. Wells Fargo and JPMorgan Chase, two of the nation's largest mortgage lenders, both said recently there were temporarily limiting the types of mortgages they offer and are requiring bigger down payments and higher FICO credit scores.
Though mortgage applications across the country declined during much of April, they've increased in recent weeks. During the second week of May, purchase applications increased 6 % from the previous week, according to the Mortgage Bankers Association's seasonally adjusted index.
Joel Kan, an MBA economist, said in a statement that it's unclear whether the increase represents growing confidence — and demand — or a short-term recovery that's simply satisfying pent-up demand during the recent lull.
The National Association of Realtors said Thursday that home sales across the country were down nearly 18 % compared with last year. That was the lowest number of sales and the biggest month-to-month decline since 2010.
In the Twin Cities, home buyers are also being dogged by a shortage of options as would-be sellers wait on the sidelines. Last month new listings fell 20% compared with last year in large part because people most likely to be impacted by a job loss — those with houses priced at less than $250,000 — are putting their plans to move on hold.
The top end of the market has also been deeply impacted, forcing many upper-bracket buyers to decide between offering a steep discount or hitting the pause button. For houses priced at more than $1 million, listings were down nearly 45% last month.
"You're kind of in limbo," said Dick Bottorff. He and his wife, Nancy, listed their Queen Anne-style house on a shady street in the Linden Hills neighborhood in Minneapolis for $1.349 million in early March when the pandemic was just starting to spread in the United States.
At first they had many showings and packed open houses, but as the month wore on and the virus spread, interest in the 4,340 square-foot house waned. Not long after listing the house they got an offer, but it "didn't meet our expectations," said Bottorff.
Sensing a lull in the market and weary of keeping the house is tiptop showing condition, the Bottorffs recently decided to take a break from showings, so they changed the status of the listing to "not available."
Given its price, and the fact that's it's a historic style on a double lot, they expected the house to take at least six months to sell. So they're being patient.
"We have time, when things stabilize we can come back in," he said. "The market is in a cautious phase right now. There are a lot more important things happening in the world than selling our house."