2011 shows Twin Cities market still a long way from recovery.
Higher sales, but much lower prices. That pretty much sums up the Twin Cities housing market in 2011.
And those diverging realities suggest that the area is still a long way from recovery as foreclosures and short sales accounted for a significant chunk of transactions last year.
Home sales in the Twin Cities metro area during the year rose 8.2 percent compared with 2010, but the median sale price fell 11.7 percent to $150,000, according to data released Tuesday by the St. Paul Area Association of Realtors and the Minneapolis Area Association of Realtors.
There were 41,429 home sales in 2011. With the exception of 2009, a year when the federal home buyer's tax credit helped goose sales, that was the most sales since 2006. But half of the closed sales last year were either foreclosures or short sales, down slightly from previous years.
Richard Tucker, president of the St. Paul Area Association of Realtors, said while 2011 showed promise, "price increases will be the final piece of the recovery."
The market was dogged by historically high levels of foreclosures and short sales that were popular with bargain shoppers and investors hungry for deals. While demand for those distressed homes have buoyed sales, they've put considerable downward pressure on prices. The 2011 median sale price of $150,000 is the lowest in more than a decade. Since the downturn began in 2006, when the median sale price topped out at $230,000, prices have been on a downward spiral.
Cari Linn, a sales agent with Coldwell Banker Burnet and president of the Minneapolis Area Association of Realtors, said that the market has become fragmented, with the biggest price declines coming from distressed sales, which dropped 14.2 percent to $115,000. Prices on traditional listings were off only 7.8 percent to $200,000, a sign of strengthening demand, tight inventory and less flexibility from sellers. Generally, bank-owned properties sell for far less than a traditional listing because lenders want to unload those properties quickly.
Despite ongoing troubles with foreclosures, Linn and other agents point to a historic decline in listings as a sign that the market is on the cusp of recovery. Overall inventory in 2011 was down nearly 30 percent from the previous year, but was down 41.4 percent compared with 2007.
Stronger sales helped whittle away at the number of houses on the market, but there were also fewer homeowners willing to put their houses up for sale. Many prospective sellers are waiting out the market either because they don't want to sell at a discount or because they owe more on the homes than what they're worth.
The number of new listings during December fell to the lowest level since 2004.
Strong sales and declines in inventory caused the absorption rate -- the number of months that it would take to sell the existing inventory -- to dip to 4.5 months. The market is considered balanced when there's a five-month supply of listings.
The latest report does little to explain how many sellers are waiting in the wings for better prices, or how many distressed properties are in the hands of lenders and have yet to hit the market. Banks are now stepping up foreclosure proceedings in the wake of the robo-signing scandal, which caused lenders to reevaluate the way foreclosures are processed.
Because of those unknowns, Jeanne Boeh, chairwoman of the Economics Department at Augsburg College in Minneapolis, said that while double-digit price declines are very unlikely in 2012 , prices will take longer to recover than the unusually low 2011 inventory levels might suggest.
"Inventory is down because people who don't have to sell aren't," she said. "Right now, people are saying 'I'm in no hurry.'"
Jim Buchta • 612-673-7376