While the median sales price of homes in the Twin Cities continues to fall, there is some great news to be had as well. No, this market downturn/correction/bubble burst/armageddeon/etc. isn’t over yet but there are some fundamentals that need to change before the market can turn around and several have or are close to changing.
Pending Sales took a nice turn above 2007 sales volume in August and have stayed above the year-prior figures even with the loss of 0% down financing on October 1 and the recently worsening economy. As long as demand stays at or above year-prior levels it shows a fundamental sales level.
Inventory is also down approximately 9% from the same time last year, which is also a great sign that competition is decreasing between listings for a finite number of buyers, though pricing pressure still remains at these levels.
Housing affordability has also hit a 5 year high to 161 this month, thanks mostly to the median sales price reductions in recent months. The Housing Affordability Index from 1997-2003 was in the mid 150′s to low 160′s before falling to a stunningly low level of 131 in 2006. When buyers purchase more home than they can reasonbly afford we get the spikes in price we saw in 2002-2005 and inevitably see the fall of 2006-today.
This is not a post saying “the market has hit a bottom” but rather a post that tells you that while we are still in a difficult time, the fundamentals are beginning to lay the groundwork for an improving market as we move forward. When the market hits “bottom” I believe is now more in the hands of the economy than the in the fundamentals I’ve just presented to you.
(data and graphs courtesy the Minneapolis Area Association of REALTORS)
