Low interest rates and a growing economy helped first-time buyers persevere in a tight starter-home market in 2019, which pushed Twin Cities prices to record highs, Realtors said Wednesday.

The median sale price in 2019 was $280,000 – a 5.7 percent jump from 2018 and the highest it’s been, according to an end-of-year analysis by Minneapolis Area Realtors and St. Paul Area Association of Realtors, which track metro-area residential real estate activity.

Home prices have gone up about 87 percent since their lows in 2011. They’re about 22 percent higher than in 2006, when prices peaked before the housing crash.

Highest demand comes from first-time buyers looking for homes priced under $350,000. That’s also where supply is lacking, Patrick Ruble, president of the St. Paul Realtor group, said in a news release.

“Buyers, looking for entry-level options and more affordable choices, felt the most pressure,” Ruble said. “We have a healthy market and look forward to some of the sticking points, such as the limited inventory, easing in the coming year.”

Buyers looking to trade up had an easier time. With better supply and less demand for homes priced above $500,000, wealthier buyers had more to choose from and more leverage in negotiating a price.

Mortgage rates fell from about 4.5 percent to 3.7 percent throughout the year. That, combined with low unemployment and rising wages, offset declining affordability and kept sales strong, especially in the second half of the year, said Linda Rogers, president of Minneapolis Area Realtors.

Homes were on the market longer in 2019 than they were in 2018 – a shift that Realtors said could mean the balance between buyers and sellers is changing. But homes are still selling at a very fast pace. Homes spent about twice as long on the market in 2014. During the recession, in 2008, homes sat on the market for nearly four months before selling.

The average time a house spent on the market in 2019 was 49 days, though half of homes sold in 2019 did so within 23 days. Homes priced over $1 million were on the market for about 80 days, compared to 20 days for those under $350,000.

In all, 76,345 properties were listed for sale in 2019 and 59,843 homes were purchased. Both of those metrics are up slightly (less than 1 percent) since 2018.

Single-family homes and new construction saw the biggest gains in sales. Single-family home sales increased 1.5 percent, while condo and town-home sales declined by a similar rate (1.7 percent and 1.4 percent, respectively).

New construction sales increased by 7 percent.

Source: By Taryn Phaneuf  – Researcher, Minneapolis / St. Paul Business Journal Feb 5, 2020