Minnesota housing market competitive with inventory low, demand high

During the pandemic, many people are choosing to stay home. There was a time when Minnesotans were ordered to remain at home.

Now that everyone has been inside, it’s making them think about their space.

"We’ve got a lot of people looking for more space, exterior space so they can do things outside," said Chris Galler, CEO of Minnesota Realtors.

Homebuyers are also trying to benefit from the Federal Reserve’s decision to reduce interest rates in response to the COVID crisis.

"There are good interest rates out there. You’re probably never going to see these in your life again," said Galler. "There are more buyers that qualify for homes that wouldn’t have qualified at a higher interest rate."

With the demands for homes high, many sellers are getting multiple offers. According to Galler, a new Minnesota Realtors report shows the industry has rebounded from the pandemic’s effect on the industry last spring.

"Right away in April and May, we saw a significant decline in sales, 10% decline in both months," he said. "Since then, we’ve seen a huge increase. In fact, in June, it was up almost 12 percent, in July pending sales were up 14.8% and August – we just got that number – there was a 16 percent increase in pending sales."

Those are year-to-year comparisons, he said.

The monthly report also shows an increase in the median sale price, which was up 9.3% in August 2020 compared to August 2019, from $259,000 to $283,075.

There’s been an increase in demand, while inventory remains low.

"We’re seeing hyperactivity right now," said Galler. "We’re seeing a lot of first time home buyers who are very frustrated that they’re unable to find homes. We’re seeing sellers who would like to sell their homes but are having difficulty finding a home to move into."

There were 23,329 properties for sale in August 2019, dropping to 14,875 in August 2020.

"That’s a 36% drop [in inventory] ," said Galler. "That really makes it difficult for homebuyers because there just isn’t enough homes coming on the marketplace."

He told us there aren’t as many new construction projects and baby-boomers are holding off on downsizing.

When asked how competitiveness varies statewide, Galler said, "The metro does better generally than most areas in greater Minnesota. Although, this year, we’ve seen significant traffic in the lakes areas, so from Willmar up through Brainerd, up to Duluth. A lot of people looking at vacation properties."

"It’s been a roller coaster ride for sure," said Trent Sturos, whose family has been looking for a home for more than a year. "Turns out, there was a large demand for these single-family homes and people like myself who have small families that are living in townhouses and apartments, looking to move into something bigger."

He said they didn’t have much luck in 2019 and decided to rent.

Their lease is now coming up in October, so they picked the search back up in the spring.

"The demand started going up at the same time," said Sturos. "We’ll get ready, drive out to the open house and 5 minutes before the open house starts, they close it and they’ve accepted an offer."

In other cases, he said theirs was one of many offers.

They started with a $250,000 budget, looking for a three-bedroom two-bath home.

"Those houses are gone," said Sturos. "They don’t even exist anymore unless you’re looking 45 minutes out from the cities."

They’ve boosted their budget and are looking throughout the metro but have still struggled to find the right home at the right price.

"The market has just been crazy," said Sturos. "Where everything else seemed to get much more uncertain, the real estate market has been hotter than ever."

Jennifer Mickelson of Woodbury said she had two offers for her home.

"My current home sold within 24 hours," she said.

Mickelson was looking to buy a duplex in St. Paul, but she switched gears after putting in an offer and missing out. She said she called her realtor, Sean Dunn, after seeing a single-family home on the Dunn Realty Group app.

"He said there’s already an offer in on it and it was only on the market for one day," she said.

Mickelson went over the next morning to look at it. She said she knew immediately after walking in that it was the right home.

"I said this is my house and I bought it," she said. "It was really quick, but I felt like I had to be quick. […] It is very competitive, you have to be pre-approved, you have to have all of your ducks in a row, you need to be ready to make an offer immediately."