With inventory low and demand high, single-family home prices are soaring.
The real estate market in the neighborhoods served by the Villager is setting records with a persistent shortage of homes for sale, multiple offers from prospective buyers and hefty increases in the prices of homes sold. By mid-July, the market had cooled some since spring. However, the inventory is still low and the demand high for single-family homes “at all price points” in the area, according to Patrick Ruble, manager of the Highland Park office of Coldwell Banker Realty.
Driving the demand for homes are low-interest rates and a surplus of money available for down payments. Americans saved record amounts of money during the COVID-19 pandemic, according to Ruble.
“The best description I’ve heard for the real estate market is that we were going 100 mph (in the spring) and now we’re going 80 mph,” Ruble said. “We still have low inventory and active buyers, but we’re beginning to see some price reductions and homes staying a few extra days on the market.”
A balanced market has a four- to six-month inventory of homes for sale, Baglio said. With the current one-month supply, she would not guess when the Twin Cities would return to a balanced market.
The Saint Paul Area Association of Realtors (SPAAR) reported that while the inventory of homes for sale declined 35.5 percent from June 2020 to June 2021 in the 16-county Twin Cities region, closed sales increased by 13 percent. The supply of homes for sale fell from two months to just one month over that same period. Meanwhile, the average sales price jumped 14.8 percent to $387,407 and the median sales price rose 13.5 percent to $334,900.
“It’s still a hot market, but it isn’t what it was (this spring) when sellers were getting 30 offers and people were lining up down the street,” said Tracy Baglio, president of SPAAR and a Realtor with Keller Williams. “Now we’re seeing a handful of offers coming in for most homes. And that’s not a bad thing.”
The housing market tends to quiet down at this time of year when many families are taking vacations before school starts. But it could heat up again in September, Baglio said. A balanced market has a four- to six-month inventory of homes for sale, she said. With the current one-month supply, she would not guess when the Twin Cities would return to a balanced market.
One reason for the low inventory, Realtors surmise, may be the many aging baby boomers who are choosing to stay in their homes rather than downsize. New home construction has picked up, but it is still lagging behind demand, according to Baglio. However, the continued low-interest rates are giving home buyers the flexibility to purchase higher-priced homes.
Median sales price on the rise
The change in median sales price from June 2020 to June 2021 varies greatly from neighborhood to neighborhood, possibly because of the low number of homes sold, especially in 2020. However, the trend in prices is definitely upward.
The median sales price increased 12.7 percent in the Macalester-Groveland neighborhood over the past year, to $400,000, according to the Northstar MLS as reported by SPAAR. It increased 5.7 percent in Highland Park, to $402,000. Saint Paul’s West End neighborhood saw a 20 percent increase in its median sales price, to $300,000. The median sales price in the Union Park neighborhoods of Merriam Park, Snelling-Hamline and Lexington-Hamline increased by 10 percent, to $385,000.
Summit Hill saw an 8 percent increase in its median sales price, to $440,000. Summit-University saw an 0.7 percent decrease, to $280,000. Downtown Saint Paul saw a 6 percent decrease in the median sales price of its homes, to $197,450. In the suburban community of Mendota Heights, the median sales price increased 54.3%, to $532,500.
In Saint Paul as a whole, the median sales price increased 10.6 percent over the past year, to $260,000; the average number of days on the market decreased from 47 to 36; and the percentage of the original list price received by home sellers increased from 99.4 to 102.6.
A seller’s market
Selling a home is more complex now than ever, according to Tom Edelstein, a long-time Realtor with the Highland Park office of Coldwell Banker. Nearly every home is staged, he said, “to evoke excitement and urgency” in buyers. Homes need appraisals and many need inspections. “There are a lot of people involved,” he said.
With the real estate market tilted toward the seller this spring, some buyers offered to pay the difference between the appraised value and the higher asking price, according to Jennifer and Sean Dunn, who operate their own real estate agency in Highland Park. For example, if the bank’s appraisal on a home listed for $750,000 comes in at $725,000, the buyer faces a gap of $25,000. Banks will only loan up to the appraised value. However, because of the hot market, buyers were inclined to find a way to pay the difference, according to Jennifer Dunn.
Sean Dunn said he knows of people who bought townhouses this spring for family members with cash and without the usual appraisal. Buyers were also willing to forgo home inspections, he said, though now they are asking for them again and negotiating a lower price if they face expensive repairs.
Not every corner of the real estate market is so bright and cheery. Condominium sales in particular have been slow, according to Marti Estey of Reidell-Estey & Associates RE/MAX Results. “Maybe it’s the communal living,” Estey said. “If you want a good deal today, you can find it in the condo market.”
On the other hand, single-family homes priced above $900,000 have sold in a week or less, according to Estey. She attributed that phenomenon to the savings people have accrued during the pandemic, allowing them to make a large down payment and reduce their mortgage. The incidence of cash payments for homes has increased, according to Estey. “There’s more of that than I’ve seen in 20 years,” she said.
— Frank Jossi
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