Inventory and months of supply in Minneapolis-St. Paul dropped to record lows in June, with inventory dropping 31% since last year to the lowest reading since January 2004.

Months of supply dropped 44.6% to 4.4 months, well below the six-month supply indicating a balanced market, according to a report released Thursday by the Minneapolis Area Association of Realtors.

Cari Linn, president of MAAR, said the low supply is "already becoming an issue."

"We've got a nice supply of buyers here, and they are looking for properties. So we are seeing more multiple offers this time than we've seen in a long time," Linn said, mentioning instances where properties racked up multiple offers within a few hours of listing.

The Minneapolis area has long been an attractive place to live. At 5.2% unemployment, the area has the second lowest jobless rate in the country for areas with a population of 1 million or more, coming in just behind Oklahoma City.

"We're hoping that all of this good news comes out and we get more traditional sellers to the marketplace, because they may now be on the fence and waiting for prices to go up," she said.

The number of homes for sale in the area has dropped for 17 consecutive months, and is now at 17,103 active listings. Sellers introduced 6,359 properties to the market in June, 8.1% fewer than June of 2011.

With the small number of homes on the market, Linn said buyers are now jumping at distressed sales when they may have previously avoided them. This led to more buying of distressed properties than distressed properties entering the market, which Linn called "a good sign that the market is becoming more traditional-based."

Distressed sales in the area accounted for 30.6% of all new listings and 34.6% of all closed sales, the lowest numbers since June 2008 and August 2008, respectively. For both distressed and traditional homes, June saw 4,917 purchase agreements in the area — 16% higher than June 2011.

The low inventory and heavy demand also means homes on the market are selling much faster than they were last year. According to the report, homes sold in 113 days on average, down 22% year-over-year, with cash buyers making up 19.3% of all closed sales.

This has caused prices to rise significantly over last year. The median sales price rose 10.7% to $179,500 — the second-largest gain since January 2004, and fourth consecutive month of year-over-year gains. Excluding only June of 2010, home prices are at their highest level since October 2008.

Traditional median home prices were up 3.4% to $215,000, while foreclosure prices were up 10.5% to $124,700. Only short sales saw a price decrease, coming in at 2.7% below last year at $126,500.

jhuseman@housingwire.com
@JessicaHuseman