Minnesota's Real Estate Source

Sellers In Minneapolis Offering Price Reductions More Than Other U.S. Cities August 16, 2010

With pending home sales down sharply in July, sellers in Minneapolis are offering price reductions more often than in any other U.S. city. With sales down, the inventory of houses on the market is growing. A picture of the post-tax-credit housing market is emerging, and it isn’t pretty. Reports released Wednesday 08/11/10 showed pending home sales in the Twin Cities down, the inventory of houses on the market growing and sellers in Minneapolis offering price reductions more often than in any other U.S. city.

The Minneapolis Area Association of Realtors reported that signed purchase agreements plummeted during July, falling almost 38 percent to the lowest monthly level in nearly a decade. The drop shows how much demand has declined since eligibility for the federal tax credit ran out in April.

Meanwhile, sellers had cut prices at least once on 42 percent of all active for-sale listings, with an average markdown of 9 percent, according to a separate report from Trulia.com. It’s the second consecutive month that Minneapolis topped the list for the most markdowns — although sellers in Detroit offered the deepest price cuts, an average of 26 percent. The numbers reflect a housing market stuck in a quagmire of worry and uncertainty, even with mortgage interest rates at 50-year lows.

While the latest data from Freddie Mac show 30-year fixed-rate mortgages at about 4.5 percent, nationwide mortgage originations for home purchases have fallen to about half of what they were in 2003. Freddie attributes the decline in part to a sharp rise in the number of people who pay cash for their houses. When mortgage money was easier to come by, few buyers paid cash, but in recent months the number has risen to more than 25 percent. In addition, prospective buyers are having trouble qualifying for mortgages, either because they lack a cash down payment or they’ve lost the equity in the home they already own.

Although Twin Cities sales activity was down, sale prices during July rose slightly, particularly for traditional sellers — those not facing a foreclosure or short sale. The median traditional transaction rose 5 percent to $222,500 in the metro area, while the median price of foreclosure sales was flat at $119,000. The median sale price of short sales rose 3.5 percent to $147,000. Median for all sales was $208,000.

Brad Fisher, president of the Minneapolis Area Association of Realtors, said more sales of upper-bracket homes last month probably caused the higher median sale prices. Pending sales of houses priced from $500,000 to $1 million rose by 6 percent, and it was the only category where the number of transactions went up. Transactions were flat in the $1 million and up category, but declined in other ranges.

If sales continue to fall and the number of new listings continues to rise, it could signal a tough autumn for sale prices. Already, it’s a strong buyer’s market. Although the number of new listings that came on the market last month was down almost 10 percent, the total number of houses on the market rose slightly to 27,249, a 5.4 percent increase over last year at this time. That’s primarily because of the steep drop in sales; the number of new listings so far this year is about the same as last year.