Friday, July 10, 2009

Twin Cities Area Real Estate Market Rebounds

It's sure looking like the real estate market in the Twin Cities reached bottom earlier this year and is in a period of solid recovery, according to the June report from the Minneapolis Area Association of Realtors. Consider the following:

1. After falling pretty consistently for months during the last two years, the median home price in the Twin Cities area has increased by almost 17% since February, and by $25,000 in dollar terms (see chart above, click to enlarge). From April to June this year the median price increased by $20,500 compared to only a $500 increase last year from April-June.

2. Pending sales in June are up by 33.7% from the same month last year.

3. Closed sales in June are 20% higher than June 2008.

4. The average sales price in the Twin Cities area increased by $23,275 from April to June this year, compared to a $1,419 increase during the same period last year.

5. The current 7.3 months supply of inventory is more than 3 months lower than last year at this time (10.6 months).

6. The current Supply-Demand Ratio (SDR) of 4.90 homes for sale per buyer is 32.6% lower than last year's SDR of 7.27 homes per buyer. (Note: The SDR is calculated by comparing the number of homes for sale at the beginning of each month with the number of total pending sales for the month. The higher the SDR, the more supply there is relative to demand.)


At 7/11/2009 12:01 AM, Anonymous Anonymous said...

What's the latest news on the U. Mich Consumer Sentiment Survey?

At 7/11/2009 12:22 AM, Blogger Jack Miller said...

Month after month, there will be more of these stories for location after location. The real estate market has turned. Houses are very affordable and the boost in psychology that is needed is the one that will feed on itself. Cars, houses and other weak sectors are ready to turn up. Strong sectors, such as cell phones, will go from strong to super strong.

At 7/11/2009 2:30 AM, Blogger Hot Sam said...

July is one of the peak housing purchase months of the year as families get settled in before school starts. Increases from June to July are entirely meaningless. Median prices do not control for house quality and thus are almost never used by serious researchers.

Minnesota's FHFA Purchase Only House Price Index fell almost 6% in the year-ending first quarter 2009. Minnesota has 19 consecutive quarters of mortgage vintages which are under water with a maximum decline of 12.2%. House sales have increased over the previous year, but at fire-sale prices. Starts and permits are still negative over the year, but not as negative as prior quarters. This means there will be no construction recovery this year.

The situation looks uglier with Case-Shiller data. Minnesota house prices fell 23.2 percent in the year-ending first quarter. Minnesota has eight and a half years of mortgage vintages under water, second only to Michigan. The decline in house prices from its peak is about 36%. Even Obama's expanded Making Home Affordable plan with a new 125% LTV cap cannot help those home owners or those who used Option ARMs!

High price tier homes are down 31.8% from their maximum. Middle price tier homes are down 35.7%. Low price tier homes in Minnesota have fallen 50% in value from their price peaks. Low tier mortgages are under water going back almost nine and a half years.

So the theme for the housing market in Minnesota is:


Minnesota's rate of foreclosures started is 1.12, the highest rate since data collection was begun in 1979. 3.22 percent of Minnesota mortgages are in some stage of foreclosure, also the highest rate since 1979. Minnesota's rate of loans seriously delinquent is 5.27 percent, again the highest rate in recorded history.

Cell phones are NOT going to lift a nation out of recession. Only residential investment and durable goods manufacture will do that.

Companies like Boeing, Caterpillar and, of course, auto makers are not too cheerful and the outlook for the rest of 2009 is grim. The only bright spot (which is temporary) are rising energy and agricultural prices.

When the Shadow Inventory of homes hits the markets, prices will plunge.

Next batter on deck: Commercial Real Estate. Apartment vacancies are at record highs. Hotel RevPAR is in the gutter. Vacancy / Availability rates for retail, industrial, and office are forecasted to rise through 2011 to record highs in many markets. Only multifamily properties can expect a recovery by first quarter 2011.

Several states have banks with extremely high concentrations of CRE and C&D loans and they are seeing record high default rates.

How's that "judgment to lead" working for ya?

At 7/11/2009 4:22 AM, Blogger juandos said...

Hmmm, Robert Miller you bring some intereting info in your comment...

The following is from the Minneapolis Star Tribune: State home foreclosures drop: Trend or just a blip?

The long and the short of the article it seems is, 'how easy will home loans be?'...

At 7/11/2009 7:07 AM, Blogger Mojo said...

#GOLD Truth passes through 3 stages: ridiculed, violently opposed, accepted as being self-evident! $GLD $GC_F

At 7/11/2009 2:02 PM, Blogger Hot Sam said...


Yes, the decline in foreclosures was just a policy blip.

Many large banks instituted a temporary moratorium on foreclosures. Last year California passed SB 1137 which required servicers to make contact with borrowers before foreclosure. It also required a minimum of 60 days notice if the property is rented. Last month California upped that ante. Now they require proof of an attempt to modify a loan prior to foreclosure. Many other states have done the same.

Some banks and borrowers under water have been biding time waiting to see if some program or policy from DC would come to the rescue. All these measures will only delay foreclosures a quarter or two. This means they will deluge the market when the logjam breaks. Rising unemployment will add to the foreclosures started.

Rumors of recovery are greatly exaggerated and motivated by politics, exploitive greed, panglossian blindness, or wishful thinking.

At 7/11/2009 2:56 PM, Anonymous Anonymous said...

"July is one of the peak housing purchase months of the year as families get settled in before school starts. Increases from June to July are entirely meaningless."


Well, I guess we should just ignore retail sales figures from November to December, too, since families are just settling in before Christmas starts!


What Robert Miller doesn't understand is that many parts of the country - like Minnesota - can get brutally cold and extremely snowy. Buyers just aren't into driving around looking for houses when windchills are 40-50 degrees below zero and the snow is waist deep. Unless they're desperate, sellers don't even bother putting their homes on the market until temps warm back up. So for all intents and purposes, summer is like Christmas for home buyers and sellers for a good chunk of the country.

"Increases from June to July are entirely meaningless." LOL!

Get out of California, Mr. Miller! A change of scenery would do wonders for you!

At 7/11/2009 8:41 PM, Blogger Hot Sam said...

It's a good thing you remain anonymous because you wouldn't want anyone to identify you as the person who spewed this nonsense.

The seasonality of house purchases is precisely the point of ignoring something as meaningless as month to month sales. The implication of the article is that the housing market is improving. To see whether that's the case, you have to REMOVE the seasonal component either by taking year over year differences or seasonally adjusting the data.

Home sales are almost always higher in some months than others, regardless of the state of the economy or the housing market. Sales figures are even less meaningful as a sign of recovery when goods are selling at a 35-50 percent discount.

So home sales are seasonally higher in MN in the summer. Really? You don't say? It never ceases to amaze me when someone thinks they've scored some zinger when all they did was prove my point.

At 7/12/2009 12:30 AM, Blogger Hot Sam said...

My mistake. I misread the post:

2. Pending sales in June are up by 33.7% from the same month last year.

3. Closed sales in June are 20% higher than June 2008.

This is the correct comparison.

I maintain the objection to median prices which are not constant quality and higher sales at prices which are 30-50% lower than last year are not surprising.

Then again, it's better than the 40+ states where prices and sales volumes are both declining.


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