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The supply of vacant, unsold new homes in Minneapolis on the market dipped slightly last year, but new construction continues to saturate the market, according to a year-end report issued Monday by Metrostudy, which tracks housing data nationwide.

Its Twin Cities office said that new housing inventory stood at 7,493 units at the end of the fourth quarter, down 21 percent from a year ago. The result is a 4.6-month supply of finished-but-vacant new houses in the metro area. The market is considered at equilibrium when there's a two-month supply.

In the report, Ryan Jones, the director of Metrostudy's Twin Cities division, said that the existing home market plays a "pivotal role" in the inventory problem. That's because many people have to sell an existing house to buy a new one.

As of Monday there were more than 28,000 single-family houses, condominiums and townhouses on the market through the Regional Multiple Listing Service, according to a weekly report issued by the Minneapolis Area Association of Realtors. That's an 11.8 percent increase over last year at this time and a new record.

And for the week ended Jan. 26, there were 528 pending sales, down 16.9 percent from the same period in 2007. The association said there are now slightly more than 10 houses on the market for every expected buyer, up more than 30 percent from February 2007.

Earlier this year, the Builders Association of the Twin Cities said that 2007 was the worst year in more than a decade for home builders, with the number of planned new units falling 29 percent over 2006 and 53 percent behind the market peak of 2003.

Home builders have been focusing on selling inventory rather than building new homes, and that's caused a pile-up of unsold and undeveloped lots. The report said that at the end of 2007 there were 37,447 vacant, developed lots on the market -- a 58.4-month supply.

By Jim Buchta of Star Tribune

2007 saw inventory in the Twin Cities grow to 35,000 homes on the market (up 21% vs. 2006 and up nearly 50% vs. 2004). Foreclosures were at an all time high with over $4 trillion in adjustable rate mortgages coming due. Home values fell 2% to 15% depending on the area of the Twin cities in which you live, and average market time grew to 148 days (vs. 34 in 2004). The real problem for sellers was that in many cases they owed more on their home than the home is worth. Too many of us used our homes as an ATM - pulling out equity assuming that appreciation would continue as it had for so many years. Unfortunately, it did not!