A few Twin Cities real estate reports have come out recently for the area. They may all paint slightly different aspects of the picture, but together they give great perspective.
We'll start with the first report to come out. The Standard & Poor's/Case-Shiller home price index released at the end of December indicated that the Twin Cities home prices declined by .5% from September to October, which followed a 1.9% increase during the previous month. Overall, the report found that home prices in the Twin Cities metro area had dropped 8.4% in a year.
However, a separate report issued earlier in December by the Twin Cities Realtors association painted a slightly brighter picture of the local housing market. Their survey found that the metro area's $170,000 median sale price in November actually increased slightly from $169,000 in October. While $170,000 is down 3% from 2008.
A report from this month from the same group further ingrains that idea. The report shows the median home sales price for December again fell just 3% compared with December 2008. In December, closed sales were up 8.9%, but pending sales were down 0.8% as cold weather and the holidays came around.
All of these statistics indicate that the Twin Cities market could be bottomed out.
Twin Cities housing construction activity was up again in December compared to 2008, indicating that the local home building industry could also be headed for an uptick in 2010. For December 2009, metro area cities issued 260 permits for 423 new housing units, up from 158 permits issued for 223 new housing units for December 2008. The combined value of those planned units is also more than double those from a year ago: $89.7 million in December 2009 vs. $38.9 million in December 2008.
The National Association of Realtors isn't very optimistic, though. Nationally, signed purchase agreements fell 16% in November after rising in October. With the home buyer tax incentives hanging in the balance during that time (and later extended), housing may be at risk of weakening when federal homebuyer incentives expire later this year. Since many of the homes selling right now are priced lower and are likely purchased by first time home buyers, we could likely expect home sales to weaken here, too, if incentives expire.
Couldn’t talk about home sales and construction without talking about short sales and foreclosures. Mortgage foreclosures and short sales accounted for nearly half of all Twin Cities housing sales in 2009 and should continue to play a major role in the 13-county area’s housing activity in 2010, likely keeping sales prices down and inventory up.
Even so, with 18,980 active listings at the start of 2010 according to the Minneapolis Area Association of Realtors, the local housing market's inventory is at its lowest point since April 2005. That's about 5 months worth of home sales, so that's right where the market should be. As long as home buyers continue to sign purchase agreements, this year could be at least slightly better for Twin Cities real estate and beyond.
Right now, tax incentives for first time buyers are in full swing, mortgage incentives are always in play, interest rates are low, and inventory is still high enough to keep prices down. Now is the time to buy a Twin Cities home!