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July metro home sales up 6.2 percent

But sales of foreclosed homes accounted for part of the increase.

By JIM BUCHTA, Star Tribune

Last update: August 12, 2008 - 1:36 PM

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Twin Cities home sales picked up slightly last month, rising 6.2 percent compared with a year ago, according to a monthly report from metro Realtors groups.

Part of the increase, however, was because of sales of foreclosed homes and other distressed properties, which again pushed down the median sale price in July.

Though pending sales so far this year are still down 7.6 percent compared with the same period last year, it was the first time in 30 months that there's been a year-over-year increase in monthly pending sales, and it was largest such increase in 41 months, according to the Minneapolis Area Association of Realtors.

Association leaders said that while the recent increase in sales and a continual decline in the number of new listings on the market is extremely encouraging, the market still faces some challenges.

"A one-month upswing is good news, but we'll need to keep our eyes on this," said Kevin Knudsen, the group's president.

In a statement issued Tuesday, Knudsen said that the market is getting a boost from buyers who see opportunity in the growing number of lender-mediated houses that are on the market, including many first-time and entry-level buyers who couldn't afford to buy two or three years ago when demand was insatiable and prices were out of control.

"Lender-mediated" sales include foreclosed homes and homes that lenders allowed to be sold for less than the mortgage amount, called "short sales."

While those listings have been a bonus for cash-strapped buyers, they've been a serious drag on the median sale prices of homes sold through the Regional Multiple Listing Service. Last month, the median sale price across the board was down 10.7 percent last month to $208,000.

Much of that decline was due to sales of lender-mediated homes, which fell 8.4 percent to $151,000 compared with last year at this time, while the median sale price of traditional home sales fell just 3.8 percent to $229,900.

Market fundamentals in the Twin Cities metro area remain strong -- mortgage interest rates are still near generational lows and the local economy is relatively healthy -- but the market still faces major challenges including access to credit.

Many first-time buyers with less than perfect credit, for example, are finding it difficult to get financing and lenders are now requiring larger down payments than they have in the past; many move-up buyers are finding it difficult to sell their current house for what they think it's worth as they compete with a record number of low-priced bank-owned listings.

And that's why after steady monthly increases in the number of new listings hitting the market, many sellers are deciding to wait out the market. The number of new listings in July was down 8.2 percent, causing the total number of listings on the market to fall 4.2 percent compared with last year.

Jim Buchta • 612-673-7376

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