Twin Cities Real Estate Market Snapshot for January 2010
Even during the traditionally slow winter selling period, the Twin Cities housing market saw home sales prices increase slightly in January 2010 compared to last year. It is the first year-over-year increase in over 3 years. The number of houses sold remained essentially flat compared to January 2009.
"We've safely weathered the worst of the housing market decline, despite continuing worries about future home foreclosures," said George Karvel, a real estate professor at the University of St. Thomas.
The Minneapolis Area Association of Realtors reported the January median sale price to be $157,000, a 1.3% increase. That was the first time since July 2006 that the median sales price was higher than previous year, according to the Realtors association. Though the 1.3% isn't a vast increase and it doesn't mean that the Twin Cities real estate market has for sure bottomed out or had a reversal, it is still welcome news.
MAAR indicated the rise in the median selling price was entirely due to "lender-mediated" sales, meaning foreclosures and short sales. The average lender-mediated selling price was up 3.3%, to $125,000, while the median value of traditional homes sales was down 7.9%, to $198,000.
The Realtors association also pointed to future risk factors in the housing market, including unemployment and foreclosures., Though foreclosures were down in 2009, it's still too soon to tell how many are in the pipeline for 2010. Additionally, the end of the federal home buyer tax credit could affect the home sale rate. If the credit isn't extended again, it will expire on April 30. It's getting to be crunch time, so if you want to take advantage of the first time home buyer credit, you need to be into the process by now.
In related news, the extension and expansion of housing tax credits has likely contributed to an increase in building permits in January. Residential building permits increased 49% in January 2010 over figures from January 2009, according to a new report from the housing research and consulting firm, Twin Cities Market for Metrostudy. The quarterly report also shows that new housing starts improved every quarter throughout the year. Nearly 1,000 of last year's 3,300 housing starts took place in the fourth quarter - a 25% increase compared to fourth-quarter 2008. It's the first year-over-year rise in almost five years.
New construction on homes has a ripple effect in the economy. People tend to buy build and buy new houses when they are secure in their jobs. The construction of new homes spurs spending on materials like lumber and new windows. They also give construction and factory workers jobs. Their money spent locally can boost Twin Cities businesses. Let's not forget that new homes tend to be the "step up" from a first home: When the new home buyer moves out, first time home buyers are likely moving in.
Meanwhile, new home inventory is declining. At the end of the fourth quarter, there were 3,051 new houses in the Twin Cities market, a 30% decrease from 2008 and a 56% drop from 2007. Of those new homes, 1,548 were under construction, 1,115 were finished vacant properties and 388 were model homes.
Being flexible is helping some builders increase sales. Introducing new homes costing less than $300,000, like the homes under construction in Blaine MN at the Legacy Creek development, have helped in this budget-conscious environment.