Minnesota Home Prices Reduced in Face of Slow Selling Season

Chuck Eckberg was stunned when his clients last week announced they wanted to drop the $419,000 price on their house by $20,000.

The house, in Woodbury’s Eagle Valley subdivision, had been on the market just 44 days and was receiving great showings, said Eckberg, a real estate agent with Edina Realty. And price reductions are something sellers typically resist like a colonoscopy.

“I didn’t think we needed to reduce at all,” said Eckberg.

Welcome to an ultra-competitive spring housing market. Motivated sellers are cutting prices. And that new willingness to move the product marks the end of last year’s stare-down between buyer and seller - and could spell a sharper falloff in Minnesota home prices over the next year.

“They’re trying to beat other sellers to the punch because they don’t want to suffer through anything they saw, or many experienced, last year,” said Eckberg.

To be sure, there are holdouts, and sellers have been adjusting and trimming prices for many months now. But the shift in seller sentiment appears to be amping up this spring, Realtors say. Serious price reductions that typically don’t start until closer to the July 4 make-it-or-break-it point, are happening now.

“I think people are finally saying ‘I get it,’ ” said Steve Hyland, home mortgage broker manager of Edina-based Split Rock Real Estate.

After chugging up during the boom, home prices around the Minnesota housing market fell flat last year. Median sale prices have dipped into negative territory in recent months. Part of it is a plethora of offerings to choose from.

For-sale listings around the Twin Cities haven’t broken the record of 31,368 set last July, but as a national housing recession unfolds they have swelled again to 28,362. And that doesn’t capture all the empty newly built homes around.

Jeff Green, an agent with Edina Realty’s Anoka/Coon Rapids office, said several of his clients have taken reductions in recent weeks. The cuts are just nicks of 1 percent to 2 percent, but sellers are doing that more often now, he said, “taking steps to get in line.”

That’s great news for home purchase loan shoppers, but tough on owners and investors watching their prized pots of gold shrink. Such shrinkage packs a punch. Already one national economist has linked the reality of cutting home prices to drops in confidence among higher-income consumers in the recent University of Michigan Consumer Sentiment Survey.

When houses stop appreciating or lose value, foreclosures increase as overextended owners find themselves unable to dodge bullets by home mortgage refinancing or quickly unloading debt by selling. Indeed, the national surge of defaults and foreclosures has driven the subprime mortgage implosion that has grabbed headlines recently.

Depending on how deep it goes, a round of price slashing could lead to Twin Cities home prices falling more quickly in months ahead. No one is forecasting a dramatic drop-off given the area’s relatively stable economy. Local Realtors, always an optimistic lot, anticipate flat prices this spring.

If a small March price bounce happens ” then hallelujah!” said Hyland.

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