Twin Cities Housing Market: Anemic
New tatistics released Wednesday confirm what the rising home foreclosures, tightened credit standards for home loans and forlorn for-sale signs have been suggesting for months:
The Twin Cities housing market is in a clear recession.
During the first six months of the year, the number of closed sales was down 16 percent while inventory continued to increase.
However, some economists believe there’s evidence that the Minnesota housing market has hit bottom and could begin a recovery in 2008.
There even are some pockets of strength, where buyers still are competing for houses and sales are being made in just a few days.
“This is more or less what we expected,” said economist Tom Stinson. “The economic damage appears to be largely limited to the housing and housing-related sectors, so while this has been a real disastrous time for people that are in those sectors it hasn’t spilled over into the economy.”
Not since the dot-com bust has so much attention been focused on a single sector of the economy, as home sales, prices and consumer confidence have headed downward so soon after one of the most prolonged real estate booms in history. Buyers, sellers and brokers have been left with whiplash.
“It’s nerve-racking,” said Deneen Price, whose south Minneapolis house has been on the market since April.
The Minnesota mortgage holder gave the house a top-to-bottom face-lift and has had more than 30 showings, but she has yet to receive an offer.
And this isn’t the first time she’s tried to sell. She listed the house for $234,900 late last year but took it off the market just before the holidays to give her family a break.
She recently knocked $5,000 off the asking price of her three-bedroom house in the Longfellow neighborhood in hopes of drumming up activity, but she’s had no luck.
“I thought it would be on the market for just a minute,” she said.
Such stories have become the rule rather than the exception, but experts say price reductions are going to be necessary to help burn off the excess inventory that has been piling up for more than year.
New listings fall
As of July, 9.36 houses were on the market for every buyer, according to the Minneapolis Area Association of Realtors.
But the number of new listings added to the market in June fell 7.7 percent, a direct response to a slowdown in new-home construction and recognition among prospective sellers that it’s now a buyer’s market.
Market watchers say inventory levels will shrink naturally, too, as home price reductions make homes more affordable to a broader segment of the market, while population and jobs in the metro area continue to increase.
The Twin Cities market parallels the Minnesota housing market as well as the national market, which has so far defied predictions of a turnaround.
The National Association of Realtors on Wednesday revised its forecast for sales during the rest of the year, saying home sales will fall 5.6 percent for 2007, down from an earlier forecast of 4.6 percent.
The association also said that new-home sales will fall 17.7 percent, a slightly better prediction than an earlier estimate of 18.2 percent.
The NAR is looking for a rebound sometime in 2008, when it sees sales of existing homes rising 4.2 percent, and new home sales up 1.4 percent.
The NAR said that it expects the median sale price nationwide to fall 2.6 percent to $240,100 this year, then rise 1.8 percent in 2008.
Minnesota mortgage rates still low
No one can say for sure that a local turnaround was certain, but they agree that it’s likely given the fact that most housing slumps are triggered by rising mortgage interest rates and accompanied by other drags.
In contrast, mortgage rates are still near the best they’ve been in about 40 years, and the rest of the nation’s economy is doing well.
Economists blame the housing market downturn instead on a host of problems stemming from the recent bull market in the sector, including overzealous investors and speculators and an excess supply of new houses and condos.
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