Home buyers firmly in driver's seat

Numbers for the Twin Cities area confirm what home sellers already knew: It's becoming a buyer's market.

Jim Buchta, Star Tribune

Published April 12, 2006 in the Star Tribune

The selling spree continues.

The number of houses placed on the market in the Twin Cities metro area last month smashed records, rising 23 percent compared with the same period last year, according to a report released Wednesday by the Minneapolis Area Association of Realtors.

In fact, it was the eighth consecutive month of record-setting listing activity in the 13-county metro area, giving buyers a serious edge and putting downward pressure on price increases.

"I have never seen the market quite like this," said JoAnne Torvick of Edina Realty, who has been in the business close to 30 years.

With nearly 11,000 new listings on the market last month -- compared with about 8,800 in March 2005 -- buyers have negotiating power they didn't have last year, and sellers appear to be compromising on price like never before.

Orv Fillbrandt, a sales agent with Re/Max Associaties Plus in Edina, said he recently had a client trying to buy a new townhouse, but they couldn't sell their current home. In an attempt to move things forward, the builder offered to reduce the price on the townhouse if the buyer would drop the price on the home by the same amount.

With that kind of wheeling and dealing happening, the median home sale price in March rose only 2.7 percent over last year, to $225,000. Annual price increases peaked at 11.8 percent in 2001; they dipped to 6 percent in 2005.

The Minneapolis Area Association of Realtors expects price growth to fall to more historically normal levels, in the 2 to 4 percent range, for the rest of the year.

Still, sales agents say the sky is not falling. With mortgage rates still within 2 percentage points of all-time lows and a local economy that's the envy of some beleaguered big cities, there still is strong buyer demand.

Fillbrandt is optimistic that stronger sales this month will help eat up some of the supply that has lingered on the market. April is typically the best sales month of the year, he said. Indeed, buyers are taking advantage of opportunities that they haven't had since at least since 2000, when the longest-sustained run-up in prices began.

The number of home sales closed last month was up 2 percent from a year ago, and agents say that houses that are priced right and in good condition still are selling quickly.

"But if you're testing the market and you're priced too high, then you're going to be sitting on it for a while," Edina Realty's Torvick said.

Agents say that entry-level houses still are selling well and that the time it takes for homes to sell rises as you go up in price. During much of March, there was a 4.7-month supply of houses for sale marketwide, but there's nearly a 12-month supply of houses priced at more than $1 million. (Those figures are based on how long it would take to sell the current inventory of homes on the market.)

At the same time, rapidly rising inventory levels are masking the net effect of relatively strong demand. Pending home sales -- an indication of how many home sales will be completed in April and May -- were 11 percent lower than in March of last year.

"It's opportunity time out there right now" for buyers, said Todd Shipman, president of the Minneapolis Area Association of Realtors, and a sales agent with Great Minneapolis Realty Co.

Shipman said that although sellers are having to price their houses more competitively and be willing to offer discounts to buyers, they'll have the same opportunities when they become buyers. "Sellers need to level off their expectations on the sell side, but you'll pay less on the buy side," he said.

For example, Shipman said, he showed one couple a house in Edina last fall but they passed on it at $585,000. This spring, it's back on the market -- at $540,000 -- and the couple is reconsidering.

"So now they can let their listing go for less money," he said, "and still achieve the same dream and the same goal."

Jim Buchta • 612-673-7376

Jim Buchta is at jbuchta@startribune.com.




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