The Minneapolis housing market seems to be barreling through the adversity of rising interest rates seemingly unscathed. Increased sales activity is fueling housing demand alongside rising home prices, while buyers wait patiently for more homes to become available on the market.
In fact, pending home sales in August rose 10.9% to 5,244, data from the Minneapolis Areas Association of Realtors reported.
Making it the fifth consecutive year-over-year increase in seller activity, new listings also jumped 16.5% in August to 6,951.
The current Minneapolis available inventory holds 15,773 properties, 9.9% lower than in August 2012, but 21.2% higher than in January of this year.
The Twin Cities saw an overall median sales price increase of 16.9% year-over-year, reaching $208,000. The reason behind this bump is likely due to a shift in sales type.
Last August, foreclosures and short sales totaled 35.8% of all sales activity. However, last month these two distressed segments only made up 20.7% of all sales. The percentage of all new listings that were distressed in August fell to 17.8%, down from 32.7% in 2012 on the seller side.
"Foreclosure activity and home prices are inversely related," said Andy Fazendin, president of MAAR. "As distressed activity has subsided, prices have rallied. Sparse inventory has exacerbated this dynamic."
Up 34.7%, traditional buyer activity substantially outpaced closed sales, which were up 8.9%. Foreclosures and short sales both fell dramatically, down 34.5% and 43.5%, respectively.
Conversely, new listings were up 16.5% overall, but traditional seller activity soared 42.1% higher. Foreclosure new listings saw a 31.4% fall, while short-sale new listings dropped 46%.
Not many foresaw such a significant pendulum swing for the Twin Cities, which have seen 18 months of year-over-year median price gains, multiple-offer situations and a 3.6-months supply of inventory.
Minneapolis area homes are flying off the market, spending an average of 70 days on the market — the quickest pace in six and a half years. Even more shocking, sellers are receiving an average of 97.0% of their original list price, marking the highest ratio in approximately seven years.
"August was another good month on the road to recovery," said MAAR President-Elect Emily Green. "We're anticipating stronger-than-average sales activity this fall."
Realtor Lisa Stevens, with Vibrant Realty, has been working the Minneapolis housing market since 2004, when she started doing short sales. Back in 2004, the short sales would trickle in, said Stevens. "Then in 2007, it really got bad." Stevens noted that back in 2007, "you were either an REO agent or a short sale agent."
However, now, Stevens believes there are a few factors contributing to the turnaround in the housing market. The Realtor said that a tight supply of homes for sale is the main reason the housing market is seeing such improvement.
The Realtor added that there are a lot of consumers who have rebuilt their credit and are now looking to buy a home. Finally, Stevens said investor activity is strong in Minneapolis, where the market is just beginning to see the light. “A lot of investors are driving this market," she noted.
"It’s lack of inventory, but there are also people coming out and recovering their credit, and they’re back buying," said Stevens.
Whatever the reason, Minneapolis is finally catching up with the rest of the nation.