Continued: Twin Cities homes sales in June rose 33%

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There was at least some good news for homeowners in the June housing report from Twin Cities Realtors groups. But the timing of a housing recovery still depends on when the influx of foreclosed homes into the market subsides.

Pending home sales in the metro area in June were up 33.7 percent from this time last year, to 5,183. That number was the highest for the month of June since 2005, and marked 12 consecutive months of year-to-year increases, the Minneapolis Area Association of Realtors said Friday.

In another favorable trend, the number of properties for sale at the end of June dropped 21.6 percent from a year ago, to 26,204, the Realtors association said. The more scarce property is, the higher the price is likely to be.

"Sellers still face a challenging market, but things look better for them than they have in a while," said Brad Fisher, president-elect of the Realtors association.

In the Twin Cities, the housing market is showing slow improvement. Closed sales for June were up 20 percent, but more than 40 percent of those sales were the result of foreclosures or "short sales," where the lender agrees to a sale for less than the amount of the mortgage.

Still, the percentage of home sales that were the result of foreclosures or short sales was down from 59.7 percent in January.

"The fact that short sales and foreclosures are coming down as a percent of total home sales is a good sign that could lead to at least a short-term bounce in housing values," said Scott Anderson, vice president and senior economist at Wells Fargo & Co. in Minneapolis. "But some economists worry that there could be another flood of foreclosures because of the rising unemployment rate and the weak labor market."

Greg Sax, a spokesman for the Minneapolis Area Association of Realtors, agreed.

"It's hard to say when we'll get to the end of the foreclosure crisis, because there may be more coming that we don't know about yet," Sax said. "That's why we don't want to paint too rosy a picture."

Home prices still remain depressed compared with last year. In the Twin Cities, the median sale price in June was $173,500, down 15.4 percent from a year ago but up from $165,000 in May.

However, the median June sale price of "traditional" homes -- those not in foreclosure or a short sale -- was $210,000, down 7.7 percent from a year ago.

For foreclosure sales and other sales involving lenders, the median June sales price was $124,025, down 16.8 percent from a year ago.

Anderson said the Realtors report confirms what economists have believed: The housing market recovery will lag behind the recovery in the national economy. The national recession may end in the third quarter of this year because of federal stimulus spending and increased manufacturing to fill depleted product inventories, he said. Not so in housing.

"We're in the final innings of the housing downturn," Anderson said. "Sales activity has picked up in the Twin Cities for almost a year now, and that seems to be working down inventories of homes for sale. But we're not looking for home pricing to come back in the third quarter. I expect that the decline in home values will slow down. And by a year from now there will be modest improvement in the housing market, and a sustainable recovery in home values."

The Realtors association thinks that Twin Cities housing values will stop declining by the end of the year.

"But whether prices will actually go up is trickier to predict," Sax said.

Steve Alexander • 612-673-4553

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