With supply of homes for sale at 10-year low, prices rise

A few times a year, realtor Pat Paulson gathers his colleagues at Exit Realty Metro in Minneapolis and pores over housing data.

After looking at the numbers on Thursday, they learned that even though the number of new listings in the Twin Cities rose last month, homes for sale are in short supply. But Paulson believes that's largely good news.

Like many in the housing industry, he thinks the market is stabilizing now that there are fewer lower-priced foreclosures and short sales on the market. That has lowered the number of homes coming up for sale — but also helped boost prices.

In March, the median sales price rose to $190,000. Half the homes sold in the Twin Cities fetched more; half sold for less. The median sales price has posted annual gains for 25 straight months.

Prices also are rising because there's so much competition for homes for sale with the supply at a 10-year low. That's encouraging more traditional sellers to put up a "for sale" sign.

"New listings for March were up 5.5 percent," Paulson said. "Sellers are starting to put their homes on the market basically."

But as Paulson observes, in March at least, buyers didn't show as much gusto. The number of signed purchase agreements was down compared to the same month last year.

Ryan Lange, a realtor who also works at Exit Realty Metro, said with all the talk of price gains, sellers might be getting greedy when they price their homes. That could turn buyers off.

"I'm starting to feel everyone's starting to realize that the market's rebounding [and] 'You know what, let's price it real high,'" he said. "Things are overpriced right now maybe."

That's a mistake Kathleen Lenk hopes to avoid. Thursday morning she listed her three-bedroom house in south Minneapolis for $233,000. She wanted to set an "attractive price." Buyers are already responding.

"I got three showings already today, so that's a good sign," she said.

Tired of caring for the 105-year old house herself, Lenk hopes to unload it quickly.

Even with sales somewhat depressed last month, sellers have been able to lock in a sale in less time than a year ago — and they're receiving more of the original list price.

At Exit Realty Metro, agents are collecting their commission checks for sold signs that went up in March. Dave Doran received a big one Thursday for selling a house for nearly $900,000.

"If anyone's available at 4:30 we're going to buy Dave a drink," said Exit Realty Metro's broker, Carlson Brooks.

"Accepting!" replied Doran.

Realtor groups say the growing supply of traditional homes bodes well for the market. But buyers are still complaining the supply is tight.

Unless more buyers see homes and prices they like, those commission checks may not lead to many more cocktails.