Updated: 3:40 p.m.
The Twin Cities housing market still greatly favors sellers: The average sale price hit another record last year, as most homes changed hands quickly for nearly 100 percent of what sellers asked, according to data released Wednesday.
The Minneapolis Area Realtors group said the median selling price for area homes rose nearly 6 percent last year to $280,000. That benchmark has now increased by more than 5 percent every year since 2012.
"The market continues to be balanced toward the sellers' favor," said Bob Clark, president of the Minnesota Association of Realtors. "Until inventory increases to a more balanced level, which we don't expect to see this year, I think the market will continue to rise. Home prices will go up across all segments — town homes, condos, single-family homes."
Prices are well above those reached in the housing bubble more than a decade ago. But real estate agents say current prices simply reflect demand exceeding supply, not lax lending standards or irrational expectations.
Listings of homes for sale were flat last year. They were down nearly 20 percent in December to 7,515, compared with 2018. In 2007 during the big housing boom and bust, there were more than 28,000 homes on the market.
Real estate agents also say people are staying in their homes longer.
"The average time in a home used to be five to seven years," said David Arbit, director of research and economics for the Minneapolis Area Realtors. “Now, it's about nine or 10 years. People are remodeling. Baby boomers are aging in place, sticking around those homes a little bit longer."
Some homeowners are hesitant to sell because they worry about finding a new home or apartment that will satisfy them.
"Quite often, sellers are nervous about selling for that very reason," Clark said. "They're like, 'Where are we going to go?' ... It's a double-edged sword. Once you're done selling and you get to name things and kind of direct the transaction, all of sudden you're in the other shoes as a buyer."
Homes that sold were on the market an average of about three weeks. Sellers generally received 99 percent of their original listing price.
Prices rose at double-digit rates in neighborhoods and communities with less expensive housing that appeals to first-time homebuyers. The median sale price rose 12 percent in St. Paul's Payne-Phalen neighborhood, for instance, and 11 percent in the Near North neighborhood of Minneapolis.
"In the markets that tend to be the most affordable, you see demand surging the most, which drives prices higher," Arbit said.
Fortunately for buyers, interest rates are low. Clark said that lessens the pain from higher prices, helping keep mortgage payments down.
Patrick Ruble, president of the St. Paul Area Association of Realtors, said the region needs more new homes to rev up sales.
"We need to build more properties," he said. "That's part of it. Because of the [last] housing downturn, builders quit building. So we're kind of behind schedule. And we have more people moving into the Twin Cities, putting more demand on housing."
New home construction in the region is far off its past peaks. From 2000 to 2009, there were 227,615 single-family homes built in Minnesota. But in the following decade, 2010 to 2019, production fell to 109,582, according to the Housing First trade group and the U.S. Census.
Builders complain that overly restrictive zoning and excessive state and local government requirements make it hard to build homes that sell for less than $300,000.