Buyers hoping to purchase before the home buyer tax credits expire helped to rev up the Twin Cities market in February.
Twin Cities area home prices showed not one but two signs of stability in February, as prices rose when compared with the previous month as well as February 2009. The median sale price for homes in the 13-county metro area climbed 6 percent -- from $150,000 in February 2009 to $159,000 in February 2010. The median price in January was $157,000.
Still, the median price is one-third below the June 2006 peak.
A deeper dive into the data shows median sale prices rising and falling across the metro. In Hennepin County, prices were up 8.7 percent in February -- from $150,000 in 2009 to $163,000 in 2010. While the median price in Ramsey County is lower, year-over-year prices in February spiked 18.9 percent -- from $115,250 to $137,000. Median sales prices dropped in Anoka and Washington counties in February; they rose in Carver, Dakota and Scott counties.
Activity was up in February, especially in the lower end of the market, as buyers hit open houses in the hopes of finding their dream home before the April 30 deadline for the home buyer tax credits.
Closed sales rose 4.2 percent compared with a year ago and are up almost 2 percent year-to-date. Pending sales increased by 6.4 percent from February 2009 to February 2010, and are also up 2 percent this year.
Sellers hoping to cash-in on the $6,500 tax credit for repeat buyers added more inventory to a market that's been struggling for years now to rid itself of oversupply. New listings were up 7.8 percent in February.
Currently, there are six homes on the market for every buyer. But as mortgage banker Alex Stenback points out on his blog Behind the Mortgage (www.behindthemortgage .com), excess inventory is concentrated in higher-priced properties as well as in condos and town homes.
Housing continues to be a tale of two markets. Foreclosures are selling like hotcakes, while traditional home sales and short sales tend to sit longer.
The fact that fewer foreclosures are for sale is "tilting prices upward and stabilizing the market," Brad Fisher, president of the Minneapolis Area Association of Realtors, said in a news release. There were 751 foreclosure sales closed in February -- a 36.5 percent drop from the 1,182 sold in February 2009. Pending sales as well as listings were also down by about a third during the same period.
Much of the activity on the market is concentrated in the under-$200,000 price range, since house hunters hoping to snatch that first-time home buyer tax credit before its expiration date tend to be younger and have less money.
Tom Hamilton, a professor of real estate at the University of St. Thomas, argues that the tax incentives are keeping median sales prices artificially low. "If it wasn't for the tax credit, maybe they would have waited six months, a year, two years, but we've accelerated all of those sales to the current period. So we get a higher quantity of low-priced sales that are taking place now, deflating the median," he explains. Fast-forward to a few months from now, and Hamilton predicts homeowners will be pleasantly surprised by even higher median prices resulting from fewer lower-priced homes being sold.
Fear of more foreclosures
Some economists are bracing for a second wave of foreclosures, however, as borrowers with adjustable rate mortgages face higher resets or a job loss finally takes its toll on the family finances. More foreclosures on the market would push median prices down again.
Data released Thursday by RealtyTrac supports the notion that the foreclosure crisis isn't a thing of the past. In February, Minnesota foreclosure activity -- defined as households that received a foreclosure-related filing such as a default notice or a scheduled sheriff's sale -- was up 16.8 percent compared with February 2009 and up 6.9 percent from January 2010.
The key to a housing recovery is jobs, and a report on the Twin Cities-area economy released earlier this week by Moody's Economy.com concludes that the area is better positioned than most for an economy recovery. "Employment has stabilized and will resume growth in this quarter at a rate of about 5,000 jobs per quarter in 2010 .... The presence of employers in industries such as health care and education that are well-placed to lead the recovery will drive hiring," the report said.
Kara McGuire • 612-673-7293