Twin Cities Housing Market in 2010: Frozen & Depressed
Last year was the worst for home sales since the Minneapolis Area Association of Realtors began tracking home sales in the Twin Cities metro area nearly 10 years ago. The number of Twin Cities homes sold slipped in 2010 to 37,365, down 17% from 2009. It was even lower than 2008, which many industry experts had hoped was the bottom of the market. Median sales prices did rise a modest 2.3%.
Rob Grunewald, associate economist for the Federal Reserve Bank of Minneapolis, said that while the construction industry saw more promising numbers during the last weeks of the year, a full thaw for the housing market isn't likely during 2011. "While the overall Minnesota economy is expected to recover moderately in 2011," he said. "The housing industry faces conditions that will likely keep home prices and building at relatively low levels."
Though 2010 started off at a run due to the $8,000 federal first time home buyer tax credit, once it expired expectations for the year were low. At the end of the April deadline, Twin Cities real estate sales practically stopped in its tracks. Prices didn't plummet drop significantly as expected because of an increase in sales of traditional listings and upper-bracket houses, while prices of lender-mediated foreclosure and short sales properties fell.
"It was like two different markets," said Pat Paulson, president of the Minneapolis Area Association of Realtors. He said that during the last week of April there were 1,460 pending sales, the highest weekly level since 2005. Since then sales have fallen to about 600 deals a week with the exception of the last couple weeks of the year.
"The last half of the year is fresh in my mind, and I'd say it was disappointing," he said. "We knew there'd be a drop-off, but we didn't expect it to be such a steep drop. But the good thing is that prices didn't free fall."
For 2011 the association predicts that sale prices will rise a few thousand dollars, to $175,000, but that depends entirely on interest rates and how quickly foreclosures are processed. Though interest rates have risen slightly to near 5%, the decline in sale prices has caused an increase in housing affordability. That's why sales agents are optimistic that the market will improve slightly, or at least stabilize.