Have you noticed home sales are down but prices are up?

Larry LaVercombe is a writer, filmmaker, and activist, born in Detroit and arrived in Minneapolis in 1975. He lived in a treehouse in San Diego before getting an MFA from the USC Film School. He writes most days, and as Team Larry he has been selling residential real estate in Minneapolis for 26 years.

Check it out: This graph at right indicates the number of closed sales in our Southwest Minneapolis area over the past 10 years. You will note the “COVID spike.” Then note: The average number of sales per month went way down and has stayed down for two years.
The number of homes sold is down 25% over the last two years as compared with the previous eight years.
Meanwhile, prices continue to climb.
How can this be? Number of sales are down 25 percent and prices are up?
Call the supply and demand police!
And that’s exactly what it is. There is not enough supply.
Many of you may have noticed an uptick in the number of homes that went on the market in late September. That was a blip. There is not enough supply, and in my opinion, there will never be enough supply again in Southwest Minneapolis.
The number of new listings in the past two years is also down from the previous 20 years.
Why? Interest rates – but here’s the catch:
It’s sellers that care about interest rates, not buyers.
Buyers get it. Those 3% rates are gone forever. The rate for the foreseeable future is between five and seven. So, if they want to buy in the foreseeable future – if they want to buy in the next six years – the rate issue is behind them. The rates are what the rates are.
Sellers, on the other hand – Most sellers refinanced five years ago, and they now have a rate of 3%. Few of them are completely paid off. So, when sellers look at downsizing, (not being able to purchase with cash) they are looking at selling a 3% loan and buying a 6% loan. Their square footage will go down, and their mortgage payment will go up.
“No, thank you,” they say, and thus, we have fewer people listing their homes.
Combine that with census data forecasting more population growth in Minneapolis, and we now have a “permanent shortage” of single-family housing here.
ON TOP OF THIS – Our current market is also complicated by two separate uncertainties. One, of course, is our uncertainty about the election. Who knows what is about to happen.
The other uncertainty has to do specifically with the real estate industry. Since The Lawsuit, the big change is that MLS will no longer publish a pre-determined buyer’s broker commission.
One new change since then is that the local realtors’ association has now made it a requirement that any agent scheduling a showing must have a signed buyers’ representation agreement for the buyer they are showing it to. If a buyer wants a private showing, they must either call the listing agent directly, or they must sign an agreement that stipulates the amount of commission that the showing agent will earn if they purchase the property.
Will this result in fewer agent showings? Will more people get their first look at open houses? Will some buyers call the listing agent, and begin the process “unrepresented?”
No one will know anything until Nov. 6. And beyond that, it will likely be the spring market before we see how much the real estate industry has changed.
My prediction: Expect slim pickings and slow appreciation until it begins to go gangbusters.