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First-time buyers help drive up pending home sales 23.5%
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Lower mortgage rates and first-time home buyers rushing to find good deals before the $8,000 federal tax credit expires made for a busy Twin Cities housing market in September. Pending home sales rose 23.5 percent over a year ago, with 4,986 signed purchase agreements, the Minneapolis Area Association of Realtors reported Monday.
That's the 15th consecutive month of year-over-year increases. Pending sales are 75.6 percent higher than they were in September 2007. Because they can fall through, pending sales are a somewhat volatile measure. Closed sales in September were flat year-over-year.
The first-time home buyer credit, devised to help jump-start the housing market, is set to expire Nov. 30. Buyers must close on their home on or before that date to qualify. Realtors suggest buyers give themselves at least 45 days from finding the home to closing, meaning time is running out.
But Realtors are saying that even move-up buyers are starting to dip their toes into the market. "People are really waking up," said Larry Kriedberg, a real estate agent with Coldwell Banker Burnet in Minneapolis. "People are saying 'We've waited. We see that the market is good as a buying person. We want to get into the market because that interest rate is so low.'" Rates for 30-year fixed-rate mortgages have hovered around 5 percent or lower in recent weeks.
But Scott Anderson, senior economist at Wells Fargo, said he thinks higher interest rates are on the horizon as the dollar weakens and the Federal Reserve slows its purchase of mortgage debt. "The road to recovery is not going to be in one direction, and we're going to see a lot of ups and downs month-to-month. And we're still pretty pessimistic that we've hit bottom on home prices," he said.
While median sales prices have increased from the $150,000 to $155,000 range seen last winter, prices since June have hovered in the $170,000 to $175,000 range. Last month's median sales price of $170,000 represents a 2.9 percent dip from August to September and a 10.5 percent drop year-over-year. The last time the median sales price was around $170,000 was in the second half of 2001.
Excluding lender-mediated sales, median sale price of traditional homes dropped 5.3 percent from a year ago to $200,712. Realtors say it's typical to see seasonal price drops in the fall, when kids go back to school and families tend to put home buying and selling on hold.
Sellers, though anxious to see median prices rise, are benefitting from less supply and increasing demand. Listings are down, which should "help balance the market" by soaking up the supply, said Steve Havig, president of the Minneapolis Area Association of Realtors. Supply also is down. There is a 6.6-month supply on the market, compared to 9.5 months at this time last year. The National Association of Realtors says optimal housing inventory is six to seven months and directly attributes the improvement to the tax credit.
There is less than five months' supply in the under-$190,000 price range, which tends to appeal to first-time buyers. There is concern that the housing market will cool after the credit expires. The housing industry is lobbying Congress to extend it into 2010.
In the foreclosure market, inventory is down 60.9 percent in October compared with a year ago. However, Kriedberg, who handles a lot of bank-owned real estate, said the first quarter of 2010 could bring another wave of foreclosures as houses currently listed as short sales -- when banks agree to accept a sale price that is less than what is owed on the mortgage -- fail and enter foreclosure.
It can take months for banks to approve a short sale, forcing buyers who can't wait to find other properties. "It's extremely important for lenders to become flexible to move that inventory through the system," Havig said. A new wave of foreclosures could cause the median price to drop anew.
Kara McGuire • 612-673-7293
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