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The Twin Cities housing market got a whiff of stability in January, when home sales prices increased slightly -- the first year-over-year increase in more than three years -- and the number of houses sold remained essentially flat compared to a year ago.
"We've safely weathered the worst of the housing market decline, despite continuing worries about future home foreclosures," said George Karvel, a real estate professor at the University of St. Thomas.
The Minneapolis Area Association of Realtors reported a 1.3 percent increase in the January median sale price, to $157,000. That was the first time since July 2006 that the median sales price was higher than the year before, the Realtors association said. And it occurred during the traditionally slow December-January selling period.
However, Karvel said the 1.3 percent increase isn't significant because it falls within normal month-to-month home price variations.
"The housing market is still weak and is dominated by the effects of foreclosed and short-sale properties," Karvel said. (In short sales, a bank and a homeowner agree to avoid foreclosure by selling a home for less than is owed on it.) "The market is not collapsing on us any further, but there are no immediate signs of improvement."
But the Realtors group said that even insignificant increases in the housing market are welcome news.
"In light of the three-year roller coaster we've been riding, 'ho-hum' (performance) sounds glorious right now," said association president Brad Fisher in a statement.
The Realtors association said the increase in the median selling price was entirely due to "lender-mediated" sales, meaning foreclosures and short sales. The average lender-mediated selling price was up 3.3 percent, to $125,000, while the median value of traditional homes sales was down 7.9 percent, to $198,000, the association said.
The Realtors association also pointed to future risk factors in the housing market, including the end of the federal home buyer tax credit, which expires April 30, and plans by the Federal Reserve to stop buying mortgage-backed securities in the near future, which the association said could lead to higher mortgage rates.
Karvel said mortgage rates won't rise by the Federal Reserve's declining purchase of securities. Interest rates will only rise if the Fed decides in the next six months or so that inflation has become a problem, and then by other means, such as discouraging banks from making loans, he said.
And he has other worries. Foreclosures could remain problematic because of high unemployment and "the magnitude of home price declines over several years means that many people can't hold on any longer."
Also, banks have deliberately been keeping foreclosed homes off the market, Karvel said. "We don't know the size of this shadow inventory of foreclosed homes," he said. "So while there could be substantial future foreclosures and home loan defaults, we don't know what the magnitude will be."
Steve Alexander • 612-673-4553