Low mortgage rates, great deals boost statewide home sales

  • Article by: JIM BUCHTA , Star Tribune
  • Updated: October 20, 2011 - 9:18 PM

Historically low mortgage rates and great deals boosted statewide home sales in September, putting Minnesota on track to improve overall sales this year.

The Minnesota Association of Realtors said Thursday that pending sales were up 40 percent from last September while closed sales rose 24 percent to 6,521. That mirrors sales activity in the seven-county metro area, but not in all regions of the state. Some rural areas did exceptionally well, while regions with heavy job losses struggled.

The increase in sales activity over the past few months means that 2011 is on pace to be slightly better than last year, an easy comparison because sales were particularly slow in 2010. Home prices also continue to fall.

Across the state, prices fell almost 7 percent compared with September 2010. Nationwide, prices fell 4 percent, according to the National Association of Realtors.

Those declines are largely the result of high numbers of foreclosure sales, which represented more than a third of all deals last month.

June Wiener, president of the state association, said modest improvements in the job market mean more consumers have the confidence to buy.

"Prices can fluctuate as housing consumers look for bargains and sellers price their properties competitively with others on the market," she said.

The gains weren't felt evenly in the 13 economic development regions the association tracks.

In the regions where agriculture -- a sector of the economy that has done well through the recession -- sales were stronger. In areas where job losses and foreclosure rates have been high, including some of the regions that rely primarily on tourism, sales were weaker.

In communities along the Red River Valley, known for its lush and productive farmland, sales have been particularly robust.

For instance, in the valley's northwest region, sales last month were double compared with September 2010. And in the region to the south, closed sales were up 32 percent and the median sale price was flat -- a rarity at a time when prices fell almost 10 percent in the metro area.

Barbara Grande, managing broker for Coldwell Banker First Realty, said that in the Fargo/Moorhead area, sales have been brisk.

"We've had an onslaught of buyers," she said. "We've had one of our strongest months in several years."

The same is true across the state in the Rochester area, which is part of the southeast region. There, the number of closed sales so far this year is up 12 percent compared with last year, well ahead of a 3 percent increase for the state.

Duane Sauke of the Re/Max office in Rochester, said that with major employers providing food and health care -- namely the Mayo Clinic and the Hormel Foods plant in Austin -- the economy hasn't suffered as much through the recession. And it shows in the housing market, which has avoided the peaks and valleys seen in the metro area.

"There is constant demand," he said. "But the influence of foreclosures has continued to be a drag on the return or growth in prices."

In contrast, in the Headwaters region, the economy hasn't been as resilient and the housing markets there haven't fared so well. Median prices were down 15 percent from September 2010.

National data also released Thursday said that, when adjusted for seasonal variations, sales were down slightly during the month across the country, and that an exceptionally high number of deals -- 18 percent -- fell apart because buyers are getting cold feet or can't get financing.

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