Home sales plummeted 42 percent in the Twin Cities area last month, the sharpest year-to-year decline among 20 metropolitan areas surveyed by the National Association of Realtors.
Nationwide, the number of homes sold in July dropped 26 percent compared with 2009, reaching their lowest level in more than a decade.
The national declines were steeper than economists had expected, sending stock markets down and causing more doubts about the health of the broader economy.
Record low mortgage rates haven't been able to lift housing from its doldrums, caused by falling consumer confidence, a stalled economic recovery and the April 30 expiration of the federal home buyer's tax credit that had kept sales brisk for months.
Locally, economists and real estate agents were at a loss for the metro area's particularly poor results. "It's very confusing to me," said Scott Anderson, senior economist with Wells Fargo.
Anderson's theory is that Twin Cities home buyers tend to be fiscally conservative, so the tax credit had a bigger effect on demand here in the way of particularly strong sales during the last half of 2009 and early 2010.
Those sales borrowed from future demand, causing buyers who would have bought this summer to accelerate their purchases.
In fact, the situation in the Twin Cities might not be as dire as July results appear. Home sales so far this year are only slightly behind last year, down 3.8 percent compared with the first seven months of last year. And there were several months when the number of home sales locally surged compared with the rest of the country. In July 2009, for example, home sales posted an annual increase of almost 28 percent, followed by annual increases of 28 percent in October and 67 percent in November -- the biggest increase that month in the 20-city survey.
Joel Meyer saw first-hand what happened when the tax credit went away. He and his wife, Gloria, listed their Plymouth house for sale on April 1 and got plenty of lookers, but no offers. When the credit expired on April 30, showing activity on the house, which has about 2,000 square feet and a big back yard, dropped off.
"It's been sporadic," Meyer said. "There's been some interest, but not enough to take it to the next level."
That's one of the problems, agents say. Now that the tax credit has expired, there's no sense of urgency. Not even mortgage interest rates, which have fallen seven straight weeks to record lows, have been able to stimulate the market.
"There's no real rush to go out and buy a house," said Wells Fargo managing director and senior economist, Mark Vitner.
The Meyers have dropped their home's price twice from $309,900 to $287,500, with no action. They're not alone. A recent survey by Trulia.com showed that Twin Cities sellers offered a higher percentage of price reductions than anywhere else in the nation, an average of 42 percent of all listings with prices dropped by an average of 9 percent.
Still, the median sale price of houses in the Twin Cities during July actually rose 2.3 percent to $175,000, largely on the strength of upper-bracket home sales. Brad Fisher, president of the Minneapolis Area Association of Realtors, said that sales of homes priced at $1 million or more increased 10 percent last month, the only price range to show an increase in sales.
In the 20 communities included in the latest report from the National Association of Realtors, home prices remained relatively stable, rising only 0.7 percent to $182,600. Some of the worst housing markets in the country, including Las Vegas and Detroit, weren't included in the sample, which represents a cross section of markets in four census districts.
Nationwide home sales fell to a seasonally adjusted rate of 3.83 million units in July, compared with 5.14 million in July 2009. The results were worse than economists expected, according to a Thomson Reuters poll; they had predicted sales of 4.7 million existing homes.
Like many sellers who would like to move if they could, Sarah Lemanczyk said that she and her husband aren't willing to lose big money on their three-bedroom St. Paul rambler. They bought the house before they had children because it's within walking distance to trendy Grand Avenue with its many restaurants and shops. But now they're eager to sell so that they can move to a house with more space for their three young sons. But after a price reduction to $210,000 and an open house that no one attended, they've decided to stay put.
"We bought the cheapest house in a good neighborhood thinking that the smallest house in the best neighborhood is your best investment," she said. "Turns out no one wants to buy anything, anywhere, no matter."
Jim Buchta • 612-673-7376
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