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Bullish Twin Cities housing market leaves young buyers hating life

Says one prospective Twin Cities home buyer: "It's depressing. My husband and myself never foresaw this being such a nightmare."

Says one prospective Twin Cities home buyer: "It's depressing. My husband and myself never foresaw this being such a nightmare." Renee Jones Schneider, Star Tribune

"Scarred" best describes the young married couple.

They've been scouring listings in St. Louis Park and various Minneapolis neighborhoods -- including Bryn Mawr, Northeast, and Kingfield -- for more months than they wish to remember. 

They want to purchase their first home. They're armed with pre-approval for a $250,000 note. They've got 20 percent for a down payment.

Still, obstacles between finding a home and actually buying one remain. 

The hurdles are many. Lack of available homes. A pool of competing buyers. What seem like lofty asking prices for less-than-stellar properties. Fairly priced houses listed in the morning only to be under contract by afternoon the following day. Bidding wars that raise the bar beyond what they can afford or stomach.

"It's depressing," says Diane, who asked that only her first name be used because she doesn't want to tip off a prospective seller of their economic situation. "My husband and myself never foresaw this being such a nightmare.

"I'm the one responsible for identifying possible houses. Every time one comes up that looks interesting, we get our hopes up only to be disappointed. In our experience it's either the asking price is way too high for what's being sold or it's gone before we even had the chance to go see it."

Welcome to the trials and travails of Twin Cities home-buying in 2017.

It appears it's a market that won't be changing anytime soon. According to an analysis by the University of St. Thomas, the seller's market is geared to become even more bullish this year. 

About a decade ago, prior to the housing market crash, there were typically more than 20,000 homes for sale at any given time in the Twin Cities. Last year, that number had fallen to between 11,000 and 15,000 at any given time. The university study predicts the same kind of tight numbers for 2017. 

"That forecast is because of a few different factors," says Herb Tousley, director of St. Thomas' real estate programs. "Builders haven't been building new homes at the rate they did in the past. Homeowners, who had negative equity during the recession, have recovered some of that back, but are still reluctant to put their houses on the market. People who might want to move, say, into a bigger house, are delaying that decision because they know once they sell their house, they'll be on the other side of the equation. Since they know it's such a seller's market, they don't want to do that." 

Sixty thousand homes were sold in the 13-county region last year. The median sale price in December 2016 was $229,000, up from $220,000 during the previous December.

Homes priced under $200,000 represented a quarter of the market's inventory, but almost 40 percent of the sales. Meanwhile, houses priced between $200,000 and $400,000 made up 40 percent of the homes on the market, but accounted for nearly half of sales.

Says Tousley, "The historically low supply of homes, which has been most acute since mid-2015, will continue to fuel the median sale price increase throughout the coming year."

Which means what was a 4 percent increase last year will be more like 5 percent for the coming year.