First home-price dip in 12 years

Published

J.D. Duggan//May 22, 2023 //finance-commerce.com

Home prices dipped for the first time in 12 years last month, but leaders of two local Realtor associations say the decrease can be attributed to a long winter and a lack of inventory more than anything else.

The April numbers are out, and single-family home sales prices dropped 0.7% in the 16-county metro and 1.5% throughout the state, according to data from Minnesota Realtors and the Minneapolis and St. Paul associations. Association presidents say they don’t expect the market to slow significantly anytime soon as pent-up demand keeps the transaction rate afloat.

Even as prices lagged slightly, sellers pulled in 100.1% of the asking price in the metro and 99.3% around the state last month.

The market has “got a lot of energy,” said Emily Green, president of Minnesota Realtors. “But we need sellers.”

The number of new listings around the state dropped 27% compared with April of last year, with the metro’s trend nearly mirroring that. Homes stayed on the market for about 33% longer, at 41 days throughout the state, and the number of homes for sale climbed 1.1% to 9,561.

Closed sales around the state have also dropped nearly 31%, but Green said this isn’t a bad thing. “When you look at the closed sales numbers and see the decrease, it’s natural to think that’s negative for the market,” she said. “It’s just a reflection of lower inventory … buyer activity is still very strong.”

She said there was “very unexpected” robust activity during the pandemic, then the market had a major shift with rapid increases in interest rates, causing people to take a breath and calm activity. But sellers and buyers mellowed at the same time.

But, she added, it’s “not reflecting a decrease in the motivation of buyers to buy.” People still value homeownership, and inventory is low — especially for smaller homes and single-level homes that may best be suited for seniors.

Brianne Lawrence, president of Saint Paul Area Association of Realtors, said buyers are becoming more particular about what they’re looking for. Inspections and contingencies are coming back to the market. “It’s just a leveling off. So it’s a good sign, prices can only go so high,” she said.

She said things did slow briefly at the beginning of the year, which was “eerie for Realtors.” But it’s picked back up, but still not quite at the “frenzy” rate that was seen in the past.

Lawrence said she had a townhouse listing for around $300,000. Within 24 hours, there were 33 showings and 12 offers. But most builders are erecting homes that are $450,000 or more.

The chief economist for the National Association of Realtors predicts that interest rates will drop to 5.5% by the end of the year. Lawrence said she bought her home in 2008 at that rate, so that goal isn’t unrealistic.

Green expects demand to remain strong. Infusion of public funds into housing could only help to meet that demand.

“There’s so much interest and strength in homeownership and that’s just not changing — people want to own their homes,” Green said.

This article was published and first shared by the Finance & Commerce.com