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.

Despite The Humidity, Housing Demand In The Midst Of A Dry Spell July 19, 2010

Although June saw a 4.9 percent year-over-year median sales price increase from $173,500 to $182,000 in the Twin Cities metro, low demand overshadowed those gains. The sales price reflects the mix of homes that were selling—many of which were closings from credit-motivated first-time homebuyers. The big shift occurred in the pending sales metric, which had a 40.4 percent year-over-year decline from June 2009. The previous record high was a 27.6 percent year-over-year pending sales declines and it occurred 4 years ago.

The price gains registered across the board, but the foreclosure category had the greatest price increase of 8.7 percent. Traditional and short sales saw year-over-year price gains of 3.6 percent and 3.1 percent, respectively. Looking a bit closer, the median sales price for traditional homes was $217,000, foreclosures were $125,000, and short sales were $152,000.

The traditional market (non-foreclosure, and non-short sale) had a 41.5 percent pending sales decline while foreclosures had a 40.7 percent decline. Short Sales actually had an 11.0 percent increase in pending sales but comprised less than 1/5th of the market. There were 3,465 signed purchase agreements in June, a decrease of 2,347 contracts from last June. Seller activity also slowed considerably, with 7,278 new properties coming onto the market. In terms of YTD figures, pending sales only decreased 8.5 percent while new listings posted a 2.1 percent increase. Active listings remained fairly constant, with inventory checking in at 26,665 for June, a minor 1.8 percent increase over June 2009. The supply-demand ratio increased 46.9 percent to 7.44, primarily due to declining demand. This means that there are about 7.4 homes available per buyer for July.

The effect of the tax credit is becoming clearer with time. March and April enjoyed record-breaking performance at the cost of June and July (and possibly continuing into the future). In other words, the credit shifted would-be summer buyers forward. There aren’t enough buyers left to sustain March and April sales figures. A short-term demand spike was created at the expense of long-term market stability. “It is somewhat puzzling that demand is this flimsy considering interest rates are at 50-year lows,” said MAAR President-Elect, Pat Paulson.

All information is according to the Minneapolis Area Association of REALTORS® (MAAR) based on data from the Regional Multiple Listing Service of
Minnesota, Inc. MAAR is the leading regional advocate and provider of information services and research on the real estate industry for brokers, real
estate professionals and the public. MAAR serves the Twin Cities 13-county metro area and western Wisconsin.

Source: Minneapolis Area Association of REALTORs