According to new data from the Minneapolis Area REALTORS® and the Saint Paul Area Association of REALTORS®, market activity in the 16-county Twin Cities metro continued to recover from the April and May declines.
After double-digit declines in April and May, the number of purchase contracts signed in June increased 6.2 percent from last year. That brought the number of pending sales to 6,819 for the month, the highest June figure since 2004. Some of the pent-up demand from April and May was shifted into June instead of being cancelled outright.
Most of the increase was in the single-family segment. Newly built homes also saw a large gain as buyers were eyeing more space and perhaps a second home office, but also found existing options limited. Record low mortgage rates were another motivating factor for buyers—particularly first-time buyers.
Sellers are struggling to keep up, though that may be changing. After greater than 20.0 percent declines during April and May, new listings shrank 14.6 percent in June. The share of the list price that sellers received was still down slightly from last year, but at 99.6 percent, it remains at a very high level. The region had 1.8 months of supply in June, indicating a strong and under supplied sellers’ market. A balanced market has around 5 or 6 months of supply. By contrast, the over $1M luxury segment had more than 11.0 months of supply in June.
The Federal Reserve pushed interest rates on a 30-year fixed mortgage to around 3.0 percent—the lowest figure recorded in more than 50 years. Attractive interest rates can partly offset declines in affordability. Despite that being a motivating factor, the limited supply of homes for sale is one of the biggest challenges for buyers. Sellers are slowly gaining more confidence around health concerns, but a resurgence in COVID-19 cases could dampen that. While condo sales were still lagging, the data shows buyer and seller activity in Minneapolis is comparable to surrounding cities and suburbs.