Edina, Minn.—April 13, 2016 – The spring 2016 market is clearly a sellers’ market, with homes in high demand neighborhoods and lower price points selling quickly, sometimes with multiple offers.
Housing demand in the Twin Cities is at a 10-year high, particularly for homes under $250,000. Pending sales were up 7 percent last month, and the median sales price was up 4 percent to $207,395. But the big story is inventory. The total number of homes for sale fell by nearly 20 percent, lowering the months’ supply to only 2.3 months, according to the Minneapolis Area Association of REALTORS®. That means that every home for sale would sell in just over two months if no new homes came on the market.
First-time homebuyers are eagerly waiting for existing homeowners to put their homes on the market. However, some owners don’t have enough equity or are worried about selling their home and not finding the right home to move into. That leaves both first-time homebuyers and move-up homebuyers competing over what little inventory is on the market.
This tight inventory situation has given rise to a unique strategy for sellers who are also buyers. Called a “reverse contingency,” some sellers are inserting a clause into the purchase agreement that makes their home sale contingent on finding another home to buy. This is the opposite of a normal contingency clause that makes a home sale contingent on the buyers selling their home. “I’ve run into this a lot in this fast-moving market,” said Dave Delay, an agent with Edina Realty’s Lakeville office. “Sellers aren’t sure they want to sell if they can’t find a home to buy.”
Delay represented a couple who received a full-price offer within days of listing their home in Rogers, Minn., but they hadn’t yet found another home to move into. So the sellers put in a “reverse contingency” clause, requesting that the buyers wait about two weeks to sign the final purchase agreement so they could find a home. Fortunately, they found a new construction model in Otsego, Minn., at which point they signed the contract and removed the reverse contingency clause.
Regardless of the inventory shortage, Greg Mason, president and CEO of Edina Realty Home Services, cautions sellers not to inflate the price of their home. He suggests sellers contact a Realtor who can conduct a competitive market analysis and advise sellers on setting the appropriate price for their home’s location and condition. “Buyers are savvy and well-educated and aren’t going to bid on a home that’s overpriced or in poor condition,” Mason said. “The better a home is priced from the start, the more likely it will attract asking price or above.”
In its quarterly consumer survey, 75 percent of people surveyed nationwide believe it's a good time to buy a home, according to the National Association of REALTORS®. Lawrence Yun, NAR chief economist, says pending sales last month rose to the highest level since last July. “Looking ahead, the key for sustained momentum and more sales than last spring is a continuous stream of new listings quickly replacing what's being scooped up by a growing pool of buyers,” Yun said. “Without adequate supply, sales will likely plateau.”
Minnesota boasts the highest homeownership rate in the nation; according to the U.S. Census Bureau, nearly 70 percent of Minneapolis-St. Paul area residents are homeowners. That’s in part because the unemployment rate in the metropolitan area is at an extremely low 3.1 percent. Plus, mortgage rates are still below 4 percent.
Homes in the upper brackets are more plentiful; the number of homes priced over $1 million is up 5.6 percent over last year. While this segment of the market has experienced marked improvement over the past two years, these sellers can expect longer time on market and less buyer competition.
Edina Realty currently has 2,350 REALTORS® operating out of more than 75 real estate offices. For more information on the spring market, visit www.edinarealty.com or call Edina Realty Customer Care at 952-928-5563.
Edina Realty is a Berkshire Hathaway affiliate and a wholly-owned subsidiary of HomeServices of America, Inc. It is one of the nation's largest real estate companies with more than 75 real estate offices and 2,350 REALTORS® throughout Minnesota and western Wisconsin. Edina Realty's family of companies includes Edina Realty, Edina Realty Title, Edina Realty Insurance and Edina Realty Mortgage. Edina Realty closed more than 32,000 real estate transactions and more than $8 billion in sales volume for 2015. For more information, visit www.edinarealty.com, m.edinarealty.com, or find us on Facebook: facebook.com/EdinaRealty; and Twitter: twitter.com/Edina_Realty