Realtors call 2021 a banner year for home sellers. For buyers? Not so much.

Jan. 24—After recently putting a Bloomington home on the market, Denise Mazone almost immediately informed the somewhat overwhelmed seller that a barrage of offers had flown in the door. Mazone, a Realtor, sold the property in a single day.

Low interest rates, historically low inventory and housing demand that has grown to a 20-year high made 2021 a seller's market for Twin Cities residential properties for the 10th year in a row, despite some slowdown in both price gains and sales activity toward the latter half of the year.

What's that mean for homebuyers, especially first-time homebuyers?

"It seems like seven is my lucky number," said Mazone, president of the Minneapolis Area Realtors and owner of the Mazone Real Estate Group. "We might put out seven different offers."

LOOKING FOR A NEW HOME? BE PREPARED FOR DISAPPOINTMENT

Like Mazone, Jason Miller tells clients in the market for a new home to prepare to be disappointed when their first offer is rebuffed, and their second, and possibly their fifth and sixth.

With bidding wars now the norm, and the average seller netting more than 100 percent of their list price, "it's the emotional roller coaster of falling in love with a home, losing out, falling in love again," said Miller, a St. Cloud Realtor and incoming president of the statewide Minnesota Realtors association. "In a normal year, if someone were to lose out on two or three offers, they'd be done."

On Monday, officials with the St. Paul Area Association of Realtors joined their counterparts in the Minneapolis and Minnesota Realtors associations in reviewing key highlights from the year in home sales.

Driven by high demand and crimped supply that has hit a 20-year low, statewide median sales prices last year rose 11 percent to reach a record $339,000, with activity varying widely by market segment.

Single-family homes, townhomes and previously-owned homes all saw increased sales activity, for 0.8 to 3.5 percent growth. The numbers of condo sales, to the surprise of some industry insiders, grew by more than 25 percent. Foreclosure sales, short sales and sales of new construction all decreased. Luxury properties valued at $1 million or more flew through the proverbial roof, reaching a record high after increasing 50 percent.

"It's the whole market shifting up," said Mark Mason, president of the St. Paul Area Association of Realtors. "The amount of homes listed was relatively the same — down 1 percent from the year before — but there's more buyers looking at the same time."

LOW INTEREST RATES REDUCE COSTS AS PRICES RISE

Realtors consider a "balanced" market — where housing supply and demand are roughly comparable — one that holds five or six months of inventory. Currently, they're seeing an average of 1.2 months of inventory, with properties averaging 28 days on the market, a 35 percent decrease from the year before.

The Realtors agreed that if there's one thing that would help steady the market for homebuyers, it's new units. But labor shortages, supply chain problems and the rising cost of lumber have weakened new construction activity, just when it's needed most. Those factors have also raised costs. Miller said in the St. Cloud area, existing construction might sell for $130 per square foot, while new construction might cost $200 per square foot.

"We've got a 10-year backlog of undersupply of new homes to make up for," Mason said.

The good news for homebuyers, said Mason, is that low interest rates mean that even as home prices rise, actual monthly payments aren't going up in step.

Technology has created new avenues for both buyers and sellers.

The Multiple Listing Service now offers a "Coming Soon" feature that allows sellers to list their homes up to 21 days in advance of going on the market, though four to seven days is more typical. A seller could post pictures and specifications of an upcoming home listing on a Monday, go away for the weekend, have their Realtor show off the property on Friday, Saturday and Sunday and return home on Sunday evening to multiple offers.

Based on the "Coming Soon" feature, some buyers are even submitting offers sight-unseen, Miller said.

New-to-the-market homebuyers would be well advised to ask their Realtor about first-time homebuyer programs, which can greatly reduce down payment and closing costs. Still, expect to go on a bit of a journey that could span a credit repair regimen, consumer education classes and other commitments long before you're ready to make your first offer.

"What I typically do is help them get their credit repaired," said Mazone, who said she works with many first-time buyers. "It could take a couple months. It could take a couple years."

RENT CONTROL CURVEBALL

St. Paul voters went to the polls in November and approved a sweeping rent control ordinance that limits annual residential rent increases to no more than 3 percent. Those rules take effect in May. At the same time, Minneapolis voters authorized the Minneapolis City Council to craft its own rent control regulations, which are expected to come together over the following months.

In reaction to rent control and rising market costs, several large developers have already announced they've had trouble acquiring financing and they're hitting pause on housing projects in St. Paul, including four buildings at Highland Bridge, the former Ford Motor. Co. campus in Highland Park. How long that pause will last in the face of heavy housing demand remains to be seen.

Eric Meyers, director of government affairs for the Minneapolis Area Realtors, said while it may be too soon to tell exactly how the market will play out, he's seeing early evidence of developers building to both condo and apartment specifications, "to flex between the two offering types."

He also foresees some developers putting fewer units in the ground in St. Paul or Minneapolis and focusing their energy instead in the suburbs.

"Instead of building your new development in Minneapolis, you might build in Bloomington," he said.