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As the spring selling season got underway last month, the Twin Cities housing market showed more signs of thawing.
Low interest rates and new federal tax credits helped pending sales -- those with a signed purchase agreement -- rise to 4,407 in March, up 21.3 percent from a year ago, according to data released Friday by Twin Cities-area Realtor associations. It was the 10th month in a row for increases over the year before and the largest since December. Closed sales were up 14.3 percent.
The median sale price was $154,125 in March, dragged down 22.9 percent from a year ago by foreclosures and other lender-mediated sales. Those distressed sales made up 53.5 percent of the pending sales in the 13-county area -- a high percentage but less than February's 60.5 percent.
Has the market finally reached the bottom?
"We're making progress is the way I'd describe it," said Scott Anderson, senior economist at the Minneapolis office of Wells Fargo & Co. "It's an encouraging sign, and we're tantalizingly close, I think, to a housing bottom, at least in terms of sales and starts. I think we've still got a little ways to go to work down inventories to the point where home prices will be stable. But this is certainly a necessary precursor of that."
Christian Hodapp, a flight controller at the Crystal Airport, said a mortgage rate of 4¾ percent right now and the $8,000 federal tax credit for first-time home buyers spurred him and his fiancée to start house-hunting last month.
"We had it in mind to buy by the end of next year. We were watching house prices and they dropped within the last six months with all the foreclosures," he said. "Interest rates were so low. We want to get in at the low point and build some equity."
The couple is looking in south Minneapolis and at new developments in Apple Valley, Burnsville and Lakeville. "They are selling for $100,000 less than they were originally hoping to get for them," he said. "It's tough to turn down. It's almost hard to make a bad choice."
The decline in prices that Hodapp is taking advantage of is because of the high number of foreclosures and "short sales" -- sales for less than what is owed on the mortgage.
"The pressure on pricing is coming from the foreclosed and short-sale properties that are at significant price discounts compared to those traditional sellers that are hoping to sell their houses," Anderson said. "A lot of these are fire-sale prices that are pushing down the overall median."
Not counting the lender-mediated sales, the report said, the median March sale price was $215,000, down 2.3 percent from a year ago.
Steve Havig, president of the Minneapolis Area Association of Realtors, said the drop in lender-mediated transactions from February is good news. "The banks and lending institutions don't want that inventory. It's very expensive for them," he said. "They want it off their books so they're getting the prices down to where it's very, very advantageous for the buyers to buy."
A more balanced market
Other positive signs, according to Havig: The number of homes for sale dropped 14.8 percent and the number of days a home is on the market before selling dropped 9 percent from a year ago. "What happens when you keep adding inventory into an already stressed market and then you start taking away inventory, then it all leads to a more balanced market," he said. "For a long time, the supply was far outreaching the demand."
'Recovery in confidence'
Anderson said two factors are combining for encouraging signs in the housing markets: lower interest rates and some improvement in the economic data. "We've had a nice bounce-back in the stock market," he said. "We're seeing a little bit of recovery in confidence, and I think that's allowed some potential buyers to pull the trigger and go ahead with some home purchases."
Tom Musil, director of the Shenehon Center for Real Estate at the University of St. Thomas, cautioned buyers against trying too hard to time their purchase to the bottom of the market.
"They should really look at finding a fit for either their personal enjoyment and long-term occupancy and the needs that they have as a family or an owner, like location, amenities -- things like the fireplace and the double garage," he said. "The investor should look for something that will fit well within their portfolio, that meets their criteria in terms of improvement and that can rent for good cash flow. Those are the factors that are important. To try to gauge the market at this point is too tricky."
Suzanne Ziegler • 612-673-1707