Home sales: The slide goes on

The number of Twin Citians who put their houses on the market last month was up modestly from a year ago, while the median price fetched by homes that sold was down, according to data released Monday by Twin Cities-area Realtor groups.

October new listings were up 2.7 percent from October 2006, although the total so far this year is 3.2 percent lower. Meanwhile, the median sale price fell to $220,000 -- a 3.5 percent decline compared with October 2006.

On the plus side, pending home sales -- an indication of future activity -- rose 14.6 percent between September and October -- the first September-to-October increase in that category since 2001.

The monthly statistics are a sign, optimists say, that more buyers are taking advantage of the sluggish housing market and that some sellers are being more realistic about pricing.

"It's opportunity time out there for buyers. We've been shouting this from the mountaintop for some time, and smart buyers are beginning to take notice," said Deb Greene, president of the Minneapolis Area Association of Realtors. "Sellers are motivated, there's an excellent inventory of well-priced, high-quality homes to choose from, and mortgage rates are phenomenal."

Still, the market remains clearly in correction mode. Closed sales were down 17.7 percent in October compared with October 2006.

For the first 10 months of 2007, sales are almost 16 percent lower than last year at this time.

However, 2.89 percent more sales closed in October than in September of this year. That increase was unexpected and unseasonal, because the market typically slows in the fall before picking up again in February and March.

John Murphy, sales agent for Edina Realty and a specialist in the western suburbs, said that because the mortgage meltdown didn't really hit Wall Street until mid-August, the October uptick might be a sign that shoppers have a better sense of what's happening in the markets.

"Buyers are trying to find their legs again in October," he said. "So it doesn't surprise me that there was more activity."

Adjusting expectations?

The statistics suggest that buyers and sellers are starting to adjust their expectations. Fewer people have listed their houses this year and more are pricing them according to more recent market conditions.

Just how motivated were sellers last month? The Minneapolis Area Association of Realtors said sellers received only 93.1 percent of their original list price, down significantly from two years ago when sellers were getting on average 97.7 percent of their asking price.

Although access to credit is tighter for some borrowers in the wake of the subprime implosion, recent declines in mortgage interest rates and falling sale prices have increased affordability for some buyers. The association said that its housing affordability index rose 7 points to 138, the highest November mark since 2004. That means that the median family income is 138 percent of what's needed to qualify for the median-priced home using a 20 percent down payment and 30-year fixed-rate mortgage. Mortgage rates, according to HSH Associates, averaged 6.3 percent this month, up little from 6.1 percent in November of 2005.

"While uncertainties in the subprime lending market are still limiting the number of new qualified buyers for now, affordability gains are helping to level the playing field," Greene said.

Two years ago the median sale price in October was $230,000, 4.4 percent higher than now, but Murphy said that given the level of inventory, prices could come down even more. "It doesn't necessarily mean prices have to come down a lot," he said. "But 5 to 10 percent off the current asking price seems reasonable. Whether or not that will get buyers back into the game is hard to know."

He added that there are still plenty of buyers, but many are being patient and are waiting for listings to "age," or to sit on the market until a seller makes a price reduction or gets desperate.

"Buyers are still looking for deals," he said. "And most sellers aren't willing to give them the deals buyers are looking for."

Jim Buchta • 612-673-7376

Jim Buchta • jbuchta@startribune.com