Twin Cities Homes For Sale Inventory Hits 7 Year Low

November 10, 2011 By Leave a Comment

The Minneapolis Area Association of REALTORS has just announced October’s housing numbers and surprises us with a whopper:  In October 2011 there were fewer homes for sale than any October since 2004!

 

The inventory of Twin Cities homes for sale has seen a progressive decline since its peak in 2007 and that decline I believe is likely to continue into 2012.  Many homeowners today that want to sell cannot because of the market and thus are staying put and not putting their homes on the market.  Further, with the large number of foreclosures and short sales sold in recent years, the number of “move up” buyers is greatly reduced since when a foreclosure or short sale sells there isn’t a new buyer created.

Home unit sales are still down significantly from 2004′s levels though so our housing supply is still not balanced, but it is getting closer and closer each month.  We will likely in fact swing to a statistical seller’s market in the next couple years, but I don’t see that as creating much upward pressure on prices but rather will put a good support in for the prices we are at.

Filed Under: Info for Buyers, Info for Sellers, Market Stats, Opinion

Minnesota Foreclosures in Q3 2011 Down 32% from Q3 2010

November 4, 2011 By 2 Comments

This just in from HousingLink:

There were 4,935 foreclosures in Minnesota in Q3 of 2011, down 32% from Q3 2010. Q3 2011 marks four consecutive quarters with fewer than 6,000 statewide foreclosures.  While this follows four quarters in which the statewide count exceeded that number, the Q3 2011 figure of 4,935 still far exceeds the 1,618 foreclosures averaged in 2005, the first year sheriff sale records were totaled for the state of Minnesota.

Below is a chart from their very detailed report:

While this in no way means we are out of the foreclosure mess, it is another sign that foreclosure activity continues to run well below the peaks of 2010.  Fewer sheriff sales today means fewer bank owned (REO) homes for sale 6-9 months from now.  Don’t get too optimistic though as the Minnesota Home Ownership Center’s data shows that pre-foreclosure activity did tick up in the most recent quarter.

Filed Under: Community Issues, Foreclosures and Short Sales, Info for Buyers, Info for Sellers, Market Stats Tagged With: ,

Twin Cities Real Estate Market Update – October 30, 2011

October 30, 2011 By Leave a Comment

Halloween marks the beginning of the significant seasonal slowdown in real estate activity that we see each year.  As days get shorter and the weather gets colder, many home buyers and sellers settle in where they are for the winter. Buyer activity and homes for sale have both seen about a 10% decline in the last 3 months but the most significant drops for the whole year come in November and December.

By the end of the year I am predicting that we’ll be down to home inventory levels we haven’t seen since 2005… yes, that is six years ago.  Home buyer activity today though is far lower than it was in 2005 so while this is great news, it doesn’t mean we are out of the woods yet.

One trend I have noticed this year is that more buyers are having a difficult time locating what they want.  Yes, there are still a lot of homes for sale, but for certain price points and in certain areas, the inventory is extremely low.  This has lead some buyers to raise their price ranges a little to find more options, for others it has meant months of searching or in some cases putting their home search on hold.

We are by no means into recovery mode in the Twin Cities but each month it seems like the fundamentals of supply and demand are coming closer into line.  What makes this even more reassuring is that this is all happening during what is the toughest economic period in decades.  As supply continues to drop and buyer demand finds a fundamental bottom (I believe it already has) we should see prices start to stabilize.  Even price stability would be a huge win for our market!

When will we see prices stabilize?  Well is some pockets and price points I think they already have.  For most of the Twin Cities though it remains more questionable.  Ultimately the economy will have the final say over housing – until there is real job growth there will remain pressure on housing prices. When we do see economic growth, the interest rate increases that will come along with it will keep prices from climbing quickly.

The housing news in the next few months will be mostly negative as a result of our seasonal real estate cycle but it is far more important to look at the long term trends versus the month-to-month information.  When you look at the big picture, I think housing isn’t as scary as it was a few years ago.

Filed Under: Crystal Ball Projections, Info for Buyers, Info for Sellers, Market Stats, Opinion

Foreclosures and Short Sales Don’t Matter to House Prices

July 5, 2011 By 7 Comments

While foreclosures and short sales continue to be around 40% of our sales, when looking at housing prices I believe they should be completely ignored.

When looking at all Twin Cities housing sales, here is how the Median Sales Price stacks up:

median sales price - all properties - twin cities real estate

 

When we split it out to look at Foreclosures, Short Sales and Traditional Sales, we see that Traditional Seller prices have not fallen nearly as much as the composite number suggests:

median sales prices for foreclosures & short sales - twin cities homes

 

Why we should ignore foreclosure and short sale sales data

If we go back to 2005 and before, the Twin Cities had almost no foreclosures or short sales… something between 1%-2%.  The Traditional Seller market was the market just 6 years ago and once we clear the current housing downturn they will be the market again.

Still, today when Foreclosures and Short Sales account for 2 of every 5 sales, why should we ignore them?  After giving this a lot of thought the answer seems almost obvious now but certainly wasn’t before:  Foreclosures and Short Sales already affect Traditional Sales’ prices.

Today every seller is competing against all other homes on the market, including bank owned and short sale homes.  Each Traditional Seller that successfully sells their home had to go through the pricing and competition gauntlet to secure a buyer at the price and terms of the sale.  While some Traditional Sellers have stronger motivation to sell than others, they don’t have nearly the motivation to sell as a bank.  Whether a foreclosure or a short sale, the bank ultimately determines the sales price and they’re far more motivated to unload properties at whatever price they can get.  This is similar to a wholesale auction versus a retail sale.  One must also take into account that most foreclosures and short sales typically need money for repairs as well, which further decreases their value at time of sale.

So since Traditional Sales already sell at prices that take into account the competition from Foreclosures and Short Sales, by including them in sales price averages we are effectively double-counting the impact from these distressed properties.  Consequently the truest measure of where our housing market was, is and will be is found by looking at the prices that non-distressed sellers are getting in this market.

Filed Under: Crystal Ball Projections, Foreclosures and Short Sales, Info for Buyers, Info for Sellers, Market Stats, Opinion, Short Sales Tagged With: , ,
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