An surprise dip in mortgage rates last month did little to warm home buyers. During October there were 4,523 home sales in the 13-county metro, a 1.5 percent decline compared with last year, according to a monthly sales report released this morning by the Minneapolis Area Association of Realtors. Because fewer of those sales were foreclosures, the median price of those deals increased 7.2 percent boost to $209,000 - the 32nd consecutive month of year-over-year price gains. Here's a peak at other hightlights from the report (we'll have a full story later today):
Here's a way to save big on the purchase of your next house: Pay cash. RealtyTrac said that cash buyers received a nearly 10 percent discount from the average market value during the third quarter. Institutional investors, those entities that bought at least 10 properties during a year, got an even bigger discount. They saved 15 percent. The report also shows that with fewer foreclosures in the market, investors are fleeing the market. They represented just 4.3 percent of all sales during the last quarter, a four-year low.
“Cash sales continue to be an important piece of the real estate puzzle right now, representing one in every three home sales nationwide in the third quarter of 2014 and helping to drive up U.S. median home prices 38 percent over the last two and half years,” said Daren Blomquist, vice president at RealtyTrac, in a press release. “As institutional investors and other cash buyers slow down their purchasing in many markets across the country, more traditional buyers — including first-time homebuyers and move-up buyers — will need to increasingly fill in the missing puzzle pieces to maintain the momentum of the housing recovery."
These cash sales represented nearly 55 percent of transactions involving homes that were bank-owned or in foreclosure, and 33.9 percent of single-family and condo sales, down from 36.9 percent during the previous quarter and unchanged from last year. In Minnesota cash sales accounted for 22.5 percent of all deals during the quarter, down from 29.4 percent in the previous quarter and 33.6 percent last year.
Here's what's most interesting: Cash sales were concentrated at the lowest and highest ends of the price spectrum. They accounted for 64 percent of sales under $100,000 and 41 percent of those that sold for more than $2 million.
Though the housing recovery in the Twin Cities metro might not be as robust as some would like, the underlying fundamentals are strong. Case in point: Mortgage delinquencies have been falling steadily, which means fewer homes are falling into foreclosure. The latest report from CoreLogic shows that the foreclosure rates in the metro during July posted another healthy decline, falling to 0.52 percent from 0.95 percent last year. The delinquency rate, an indicator of future foreclosures, was down, as well (see above chart).
And foreclosure activity in the Twin Cities continues to be well below the national average, which stood at 1.66 percent during July. So while home sales have failed to keep pace with last year's levels, the number of heavily discounted distressed sales continues to fall, eliminating a formidable drag on prices. I'll have the latest home sales report for the Tiwn Cities on October 13, stay tuned.
- Jim Buchta
House prices in the Twin Cities metro and beyond continue to rise, but at a much more moderate pace. In the Twin Cities prices were up 5.4 percent during July, slightly below the national average, according to the latest S & P/Case-Shiller Home Price Index, which uses public records to track repeat sales of the same property across the U.S.
Nineteen of the 20 cities tracked by the group saw lower annual returns during July. Las Vegas, Miami and San Francisco were the only cities to report double-digit annual gains. All cities but one posted a month-to-month gain, but 17 of them saw smaller increases in July as compared to last month
“While the year-over-year figures are trending downward, home prices are still rising month-to-month although at a slower rate than what we are used to seeing over the past couple of years" said David Blitzer, chairman of S & P's Index Committee.
Rising home prices continue reducing the number of people who have a mortgage that exceeds the value of their house. In the Twin Cities metro, 8.0 percent, or 46,099, of all residential properties with a mortgage were in negative equity at the end of the second quarter, according to CoreLogic. That's compared with 10.4 percent during the first quarter and 10.7 percent nationwide.
The states with the higher rate of negative equity:
An infusion of cash is expected to help a Twin Cities non-profit help about 20 Twin Citians with credit problems become homeowners. U.S. Bank has invested $2.6 million investment in the Sustainable Home Ownership Program (SHOP) Bridge to Success Fund, which also received funding from clients of the bank's high net-worth wealth management unit Ascent Private Capital Management.
SHOP is a partnership between Greater Metropolitan Housing Corporation and Dayton’s Bluff Neighborhood Housing Services, which sells houses, like the one in the Dayton's Bluff neighborhood pictured above and below, to people who are ineligible for traditional financing on a contract for deed that enables them time to resolve credit issues and eventually get permanent financing. That process usually takes 5 to 10 years.
Investors also include the Minnesota Housing Finance Agency and the nonprofit Family Housing Fund are also investors. SHOP is apparently one of the first programs in the country to take the approach. The program was applauded by the Federal Reserve Bank of Minneapolis.
Here's what Phillip Trier, market president for U.S. Bank in the Twin Cities, had to say about the company's involvement in the program: “In addition to soliciting private business investment, SHOP provides an attractive, socially-responsible investment opportunity for individual high-net-worth investors. Hopefully, it can serve as a template and help generate capital to support homeownership nationwide.”