Rogue Housing Market Still Recalibrating to the New Abnormal

Minneapolis, Minnesota (August 11, 2010) – The Twin Cities housing market has found itself in a bit of a holding pattern in recent months, and July is no exception. The $175,000 median sales price was a 2.3 percent increase over July 2009. Pending sales in July were down 37.6 percent compared to last year, which is certainly less than ideal but expected. Due to weakened buyer demand, inventory grew modestly to 27,249 active listings, an increase of 5.4 percent over last year.

“It would appear that demand has stabilized and should slowly return in the coming months” said Brad Fisher, President of the Minneapolis Area Association of REALTORS®. “We hope that it returns to the market before prices have a chance to respond to the growing inventory.”

Traditional sellers (nonforeclosure and non-short sale) enjoyed a 5.0 percent price increase to $222,500, foreclosure prices remained flat at $119,000 and short sales posted a 3.5 percent price gain to $147,000.

The traditional and foreclosure submarkets had a significant decline in pending sales, while short sales actually had a small increase.

There were 3,226 signed purchase agreements in July, a decrease of 1,948 contracts from last July. Seller activity also slowed, with 6,926 new properties coming onto the market. Year to date (YTD), pending sales decreased 13.3 percent from last year but are up 3.7 percent compared to 2008. New listings posted a 0.4 percent YTD increase compared to 2009.

All active listings experienced a minor spike. The supply-demand ratio increased 63.5 percent to 8.64, primarily due to declining demand and not a surplus of new product. This means that there are about 8.6 homes available per buyer for August.

Although the tax credit ended over three months ago, its negative externalities are finally beginning to pass. March and April enjoyed a big boost in sales performance at the cost of May, June, July, and most likely several additional months.

“The economy is currently driving the housing market and not vice versa” said MAAR President-Elect, Pat Paulson. “The housing sector once generated corresponding construction, manufacturing and other jobs which in turn fueled economic growth. That hasn’t been the case of late.”

All information is according to the Minneapolis Area Association of REALTORS® (MAAR) based on data from the Regional Multiple Listing Service of Minnesota, Inc. MAAR is the leading regional advocate and provider of information services and research on the real estate industry for brokers, real estate professionals and the public. MAAR serves the Twin Cities 13-county metro area and western Wisconsin.

The Media Has Incorrect Information

I rarely watch the news, but earlier this week, I turned it on. Much to my dismay, I sat there listening to one of the news anchors talking about how bad the real estate market is and how much worse it will get when the tax credit stimulus is over at the end of next month!

I thought, “are you kidding?” First of all the real estate market (here in Hutchinson, MN) is so much better than it has been for the last couple of years, and the tax credit stimulus ended on April 30, 2010! (Anyone expecting to participate in the tax credit needed to be entered into a purchase agreement by 4/30/10.)

So, in a matter of a few minutes, I remembered why I don’t watch the news. The information they are giving isn’t always correct!

Read What You Sign!

Many investors today are searching out property that has been foreclosed on in the Hutchinson, MN area. They are finding some really good values on properties, that with a little work can be turned around and sold for a profit.

There is one warning that buyers of foreclosed properties should be aware of. In the contracts that these buyers sign with the sellers (ususally mortgage companies), there is a clause that says that the “servicing company” has the right to step in and buy the property any time prior to closing.

This doesn’t happen real often, but it is happening. When the “servicing company” comes in and exercises their option to purchase the property, the investor/buyer is out any money they have spent to that point. This includes any inspection fees, appraisal fees, etc.

So, just a little warning to investors/buyers that are purchasing foreclosed property. Read the papers you are signing so there are no surprises!

Summer is in Full Swing

Now that the school year has ended here in Hutchinson, MN, there are so many things for you and your family to enjoy.

Music in the Park begins next week and features different performers each week. Bring your blanket and lawn chairs to library square each Monday night to take it all in.

The walking trail along the whole north side of the Crow River features a great place to walk, run, bicycle, etc. for the entire family. Stop along the way and enjoy the ducks, geese, pelicans, deer, etc. in the Gopher Campfire sponsored sanctuary.

The Hutchinson Area Chamber of Commerce has a good listing of all the activities that take place throughout Hutchinson, so visit their website at
“explorehutchinson.com.”

Spend time enjoying all that Hutchinson, MN has to offer.

The Real Estate Market (first 30 days after the tax credit expiration.)

According to the Minneapolis Area Association of Realtors, home sales in the Twin Cities housing market took another dip as the hangover from the tax credit expiration continued. For the week ending May 22, there were 624 pending sales—a precipitous drop of 42.5 percent from a year ago.

The biggest drops in sales since the credit ended can be seen in the traditional seller market (i.e., anything that’s not a foreclosure or short sale) and in the middle price ranges from $150,000 to $350,000. Pending sales have dropped in those ranges from 1,085 the week the credit ended to 384 for the week ending May 22. In sum, it may be a difficult summer market for home sellers.

The good news is that new supply is also slowing, which means the market is already self-correcting to avoid a surge in unneeded inventory. New listings fell to 1,581 for the same reporting week, a decline of 15.8 percent from this time last year.

The Supply-Demand Ratio has been updated for June and shows a figure of 5.05, which means there are 5.05 homes for sale for each buyer in the month. That’s a 10.9 percent increase over the mark seen a year ago and is a result of the decline in buyer activity.

Here in Hutchinson, MN the market activity for May, 2010 was still pretty good. We’ll have to see if our housing market sees the same declines as reported for the Twin Cities market.

There Is a New Sign in Town

Recently we unveiled our new for sale signs in the Hutchinson, MN area. You’ll see them on the homes we have for sale as well as homes that have recently sold.
After 25 years of using the other signs, we decided it was time for a new look.
The new signs are in the shape of a house and have brochure boxes attached to the chimney.
We hope you enjoy the new look.

Expiration of Tax Credit

The expiration of the tax credit clearly motivated buyers to take action by April 30. Last week, there was a significant 31.2 percent jump in Pending Sales versus last year, bringing the total number of contracts written to 1,469. But for the first time this year the number of New Listings was down. A total of 1,803 of them entered the market, 11.5 percent lower than a year ago.

Some encouraging figures include a Days on Market count of 127, down 15.3 percent compared to last year, and Percent of Original List Price Received at Sale of 93.6 percent, up 4.0 percent over last year.

These statistics include all of the Regional Multiple Listing area not just Hutchinson, MN.

We expect buyer activity to continue over the coming weeks, although not with the same level of urgency due to the expired tax credits and a slight seasonal lull before we get into the heart of summer.

Sales Activity Continues

No one was really sure what was going to happen once the stimulus money expired on April 30, 2010.

We have been pleasantly surprised to see that many calls are continuing to come in and people still want to buy and sell their homes!

This activity is certainly a good indication that the housing market may very well be coming out of its slump here in Hutchinson, MN.

The interest rates continue to be favorable for buyers. That fact coupled with favorable prices on homes, makes this a great time for buyers to buy homes and sellers to sell their homes.

Hutchinson Leadership Institute

Yesterday, I had the opportunity to serve on an Ethics Panel for the Hutchinson Leadership Institute. This is an excellent leadership program offered through the Hutchinson Area Chamber of Commerce.

I was quite impressed with the group who were attending this leadership program. The questions they had were inciteful and the discussions were very good.

I applaud the Hutchinson Area Chamber of Commerce for providing this Leadership program to ensure that Hutchinson will have many good leaders in the years to come.

I would highly recommend this program to any business’ who are looking for ways to develop their employees potential.

Home Prices Continue to Stabilize As Oversupply Issues Improve

For the third consecutive month, home prices in the Twin Cities 13-county metropolitan area showed a year-over-year increase. We haven’t seen three consecutive months of progressively increasing year-over-year growth since June 2004.

The March median sales price of $165,000 was a healthy 7.1 percent increase from $154,125 last March. That’s the strongest year-over-year increase since May 2005. Part of the reason for the stronger upward movement is that a lower share of home sales are foreclosures as compared to last March. Short sales are another story.

“There are definitely some promising indicators and several positive trends at this time,” said Brad Fisher, President of the Minneapolis Area Association of REALTORS® (MAAR). “However, we need to keep a close eye on several submarkets, including short sales, new construction, and high-end properties.”

The median sales price of traditional homes (excluding foreclosures and short sales) in March was $199,900, down $11,600 or 5.5 percent from $211,500 last March.

Foreclosures posted a slight 0.3 percent increase to $118,000, while short sale properties posted a 2.0 percent decline to $147,000. Although short sales have become the new problem child on the block, the 10.0 percent decline in bank-owned new listings after a period of unprecedented growth is good news for everyone.

There were 5,051 signed purchase agreements in March, an increase of 14.6 percent from a year ago. The spring market continues to have a flurry of activity as we approach the April 30 deadline for the federal home buyer tax credit. Home sales are expected to continue to increase as buyers move to take advantage of this substantial market incentive.

This increased buyer activity has brought inventory down and restored some sense of equilibrium to the market. April’s supply-demand ratio of 4.39 means that there are 4.39 homes available per buyer for the month. In March 2008, that mark was 8.16. While the rate of inventory decline has been slowing in recent months, supply and demand is far more balanced than it was two years ago. This is a critical sign that the market is correcting oversupply.

“The oversupply issue has corrected in much of our market, and that has led to price stabilization,” said MAAR President-Elect, Pat Paulson. “This provides reason for cautious optimism.”

All information is according to the Minneapolis Area Association of REALTORS® (MAAR) based on data from the Regional Multiple Listing Service of Minnesota, Inc. MAAR is the leading regional advocate and provider of information services and research on the real estate industry for brokers, real estate professionals and the public. MAAR serves the Twin Cities 13-county metro area and western Wisconsin.