January brought more closings and a smaller drop in prices.
The era of double-digit price declines and slack sales may finally be over for Minnesota home sellers.
The market got off to a strong start this year, according to several reports released Wednesday. Statewide, there were 4,345 closed sales in January, a 6.4 percent increase from last year. Pending sales, meanwhile, rose 14.5 percent, according to the Minnesota Association of Realtors.
Most promising, the median sale price of all homes that closed in January was down just 0.5 percent from a year earlier, to $125,660. With the exception of two months when prices rose while a home buyer's tax credit was available, January's decline in prices was the smallest since the housing downturn began.
"I'm feeling good going into the spring," said Chris Galler, chief executive of the Minnesota Association of Realtors.
Home prices across the state have fallen nearly 40 percent after peaking at a median of nearly $220,000 in late 2005. That fall was slightly bigger than the decline in the national average, according to real estate data provider Altos Research. Economists say a more robust economic recovery isn't likely until the housing sector shows solid signs of improvement.
Galler said that he's relieved to see prices stabilizing and that, barring mortgage rate increases or a new economic calamity, prices will remain fairly steady throughout the year. He predicted that prices should start to rise, possibly as soon as December.
Though the housing market performed relatively well across the state, there were significant differences among the economic development regions the Realtors' association tracks. Sales were down almost 10 percent in west-central Minnesota but were up dramatically in the north-central region.
In general, prices outside the Twin Cities have been more stable than in the metro area largely because there have been fewer foreclosures and less speculation. In the seven-county metro area, prices were down 4 percent even though sales rose 16.4 percent, mirroring data for the 13-county metro area released earlier this month by the Minneapolis Area Association of Realtors.
Galler said that only about a quarter of all home sales statewide were foreclosures or short sales. That is compared with about 55 percent in the metro area, according to a Residential Real Estate Index, which was released by the University of St. Thomas on Wednesday.
The index, which tracks sales activity for distressed properties separately from traditional deals, highlights the struggles that the market faces when so many sales are negotiated by a lender. It showed that in the Twin Cities the median price of both foreclosures and traditional listings was down almost 7 percent compared with last year.
"They're going to be with us for a while," said Herb Tousley, director of the Shenehon Center for Real Estate at the University of St. Thomas.
Tousley said that distressed sales will be at historically high levels for at least a couple years but that the recent national mortgage settlement will encourage lenders to process mortgage defaults more quickly. "We'll now have some clarity and will see activity pick up again."
With so many sellers waiting on the sidelines and so many distressed sales on the market, inventory levels in Minnesota and across the country have been falling.
Fewer choices and falling prices are creating a sense of urgency for some buyers, causing home sales across the country to increase 4.3 percent last month, according to the National Association of Realtors for the highest number of sales since May 2010.
Jim Buchta • 612-673-7376