Home sales rise, but not prices

A continuing glut of foreclosed homes on the market joined forces with the $8,000 first-time home-buyer tax credit to push Twin Cities home sales up and prices down last month.

Signed purchase agreements were up 34.4 percent from the same month a year earlier, and the number of closed sales was up 27.8 percent, area Realtor associations said Wednesday. But the average selling price of a house was $169,000, down from $180,000 in October 2008.

Realtors attributed the lower sales prices to the number of lower-cost foreclosed homes on the market. In October, 38.3 percent of pending sales were either foreclosures or short sales. In a short sale, banks agree to sell a home for less than the mortgage balance to avoid the legal expense of foreclosure.

But there were some potential warning signs. New listings and current listings both declined in October, perhaps signaling that the market was in a holding pattern. Current, or active, home listings dropped 22 percent from a year ago, while new listings dropped 10.8 percent.

Local real estate officials said the decline reflected a normal late-autumn slowdown.

"Purchasers are buying up the current listings," said Rae Jean Malone, president of the St. Paul Area Association of Realtors in Woodbury. "But I don't know why new listings are down. People could be waiting until after Christmas to put their houses on the market."

But the impact of the tax credit, originally set to expire in November, overshadowed other factors in October home sales, real estate officials said.

"The tax credit expiration date probably pushed sales to occur in October that wouldn't have happened otherwise," said Jeff Allen, research manager for the Minneapolis Area Association of Realtors in Edina. "Having the new tax credit should further expand the housing market."

Congress recently extended the $8,000 tax credit for first-time home buyers through the end of April and added a new $6,500 tax credit for buyers who have lived in their present homes for at least five years.

The October selling price of traditional homes was down 13.2 percent from a year ago, while foreclosed or short-sale homes were down 4.4 percent, the Minneapolis Realtors said.

"The foreclosures brought the sale prices down," Malone said, noting that lower-priced foreclosed homes depress the prices of traditional homes. "Appraisals of traditional homes must take into account the value of foreclosures."

Allen said the decline in the median selling price was the result of two factors, foreclosures plus the large number of bargain-oriented buyers seeking properties in the $200,000 to $250,000 range.

Despite the lower selling prices, houses that were sold weren't on the market as long in October, 128 days vs. 141 a year ago, the Minneapolis Realtor group said. And the houses that were sold in October were discounted a bit less, selling for an average of 94.6 percent of their original listing price, up from 91.3 percent a year ago.

There was less discounting from listing price because many homes drew multiple offers, Malone said.

Sales of foreclosed homes continued to outdistance short sales, with banks slow to make decisions on whether to accept consumer bids. Real estate executives said they hope banks will speed up the process.

"Unfortunately a short sale can take a long time, and even then the home buyer doesn't know if the sale will actually go through," Allen said. "We hope banks step up and improve the process next year."

"I think the banks are short-staffed," Malone said. "It can take six months for a bank to get back to a real estate agent that has an offer."

The housing supply, meanwhile, has declined but still remains in the range of five to six months, Minneapolis and St. Paul real estate officials said. A year ago, the supply was about 10 months.

Steve Alexander • 612-673-4553