Twin Cities home buyers squeezed by dearth of listings

Low supply and growing demand are putting pressure on those shopping for homes in the Twin Cities.

Homebuyers signed 5,861 new purchase agreements last month, a 12.6 percent increase over March 2015.

But Cotty Lowry, president-elect of the Minneapolis Area Association of Realtors, says new listings are up just a half a percent and the number of homes for sale is near a 13-year low. He says much of the demand is from first-time homebuyers facing rising rents.

"That takes a lot of the entry-level inventory away," Lowry said. "If you look at last year, for every five homes that were on the market in March of last year, there are now four homes on the market."

Demand is especially strong for starter homes but few are being built because land prices are high, says Bob Clark, president of the St. Paul Area Association of Realtors.

"It's very difficult when you combine the land prices with what it costs to build a home in the starter market — in that $250,000 to $350,000 level," he said. "It's very difficult to do that with the land costs."

The median sales price rose nearly 6 percent last month to $222,000.