Minneapolis-St. Paul is defying negative real estate trends plaguing other metros as homebuyers in the area, fueled by a diversified economy and affordable prices, jump back into the market.
In May, the Twin Cities saw 5,130 buyers sign purchase agreements, up 27.3% from May of last year, the Minneapolis Area Association of Realtors said.
Sellers rolled 6,599 properties onto the market during the same month, which is 6% under the number of new home listings a month earlier.
The combination of declining inventory and attractive prices sparked price increases in the market as the median sales price grew 10.5% from last May to $169,000, making it the third-largest jump recorded since January 2004, according to MAAR.
Home prices are at their highest level since October of 2010.
The number of homes for sale overall fell 31.1% from last year to 17,262 listings, suggesting that buyers are eating through traditional and distressed asset sales, making the market a healthy performer overall.
David Arbit, research manager for MAAR, told HousingWire that the year-over-year home price increase is partly attributable to the fact that “traditional home sales have surged in popularity among consumers.” Those homes, he said, generally sell at higher prices, lifting the overall median price in the market.
Yet, the distressed side of the market also is seeing interest in buyers, with sellers in that space finding Minneapolis buyers willing to meet them at their listing price most of the time.
In the market, distressed properties are now selling for a median price of $205,000, while foreclosures are going for $116,350 and short sales go for a median price of $135,000.
Breaking sales down by type, traditional sales rose 50.1% in May while foreclosures declined 12.8%.
“May looks great on paper and on the street,” said Andy Fazendin, MAAR president-elect. “Buyers are active, sellers are starting to see some brightness on their end, and the market is rediscovering a nice balance.”
Arbit sees what’s happening in Minneapolis as a reflection of the area’s overall economy.
For starters, it’s hard to find an affordable rentals in Minneapolis, which makes buying almost a necessity, he told HousingWire.
He added that on average, a two-bedroom in Minneapolis rents for $1,200 and above, and buyers now see owning a home to be just as affordable as renting.
“If I pay a bank for a mortgage, at least I can get equity out of it,” said Arbit.
Some of the decline in inventory ties back to seasonal factors.
“Another factor driving sales and the decline in inventory is the mild winter that hit Minneapolis a few months ago. That allowed buyers to come out in droves,” Ambit said.
While Minneapolis-St. Paul is feeling the positive effects of these factors, Ambit said overall, the local economy is diversified and unemployment levels remain near the 6%-range — a factor that is keeping homebuying robust due to the area’s higher number of employed individuals.