Feb. 3: Pockets of recovery in housing outstate
- Article by: JIM BUCHTA
- Star Tribune
- February 3, 2012 - 10:10 PM
Home prices in the Twin Cities and most of the state sank last year as foreclosures took their toll, but outstate areas with strong employment and key industries experienced gains or softer declines.
Statewide prices were down 8.4 percent in 2011 and the Twin Cities fell 11.4 percent. But in the extreme southwest corner of the state, where agriculture has helped keep land prices high and families employed, prices jumped.
That nine-county area, which includes the cities of Worthington and Marshall, posted a median price increase of 4.1 percent, according to the Minnesota Association of Realtors. It was the biggest gain in the state last year.
"In areas where there are jobs, where there's a feeling of economic hope, there has been some recovery, or at least a stop in declines," said Dan Williams, program director for Lutheran Social Services in Duluth who works with struggling homeowners in about 50 Minnesota counties. "More than ever, [stable] real estate values are isolated in those areas where there is more employment," he said.
For example, in Rochester, which is in the southeast region, the Mayo Clinic and IBM helped the area weather the downturn. The median sale price for the region, while down 5.9 percent, fared better than the state average.
"The market has shown clear signals that a foundation is being built," said Duane Sauke, owner/broker at ReMax of Rochester. He said that 2011 broke a five-year decline in sales for a roughly 15-mile radius of Rochester.
In the Moorhead area, part of the west-central region, prices fell 3.8 percent but also did better than the state. The area has been buoyed by a growing agricultural industry, which has resulted in stronger demand for housing. The Moorhead market is closely connected to Fargo, N.D., which is just across the Red River.
Daryl Braham, managing broker at Prudential Premier Real Estate in the Fargo-Moorhead area, said the most populated parts of the Red River Valley never got as overheated as the Twin Cities.
"We didn't have that bubble, so we didn't have that correction," he said.
In that area and others that have fared better, a relatively low unemployment rate meant that those communities didn't succumb to high foreclosure rates. Sauke said in the Rochester market, distressed sales account for less than 20 percent of all listings, while in the Twin Cities-area more than 40 percent of all listings are foreclosures or short sales.
But recent reports have shown that foreclosure rates have been falling in the Twin Cities over the past two years. The latest data from the Minnesota Homeownership Center said the number of pre-foreclosure notices sent during the fourth quarter of 2011 was down 30 percent compared with a year earlier.
But experts warn that foreclosures could jump again. Banks are now stepping up foreclosure proceedings in the wake of the robo-signing scandal, which caused lenders to reevaluate the way foreclosures are processed.
Herb Tousley, director of the real estate program at the University of St. Thomas, said that in the Twin Cities and beyond, foreclosure sales will have to represent fewer than 35 percent of all deals before prices will stop falling.
He also points to declining inventory as a step toward stabilization. Across the state the number of new listings fell 15.4 percent -- a good sign for sellers who now face less competition, but also a sign of deeper trouble in the market. Inventory is falling in part because many homeowners, especially those in rural Minnesota, are wary of listing their homes for sale at a time when prices are falling.
"The challenge is that there are so many unknowns that, even in our marketplace, people are sitting on the sidelines," Braham said. "There so many unknowns and people are not sure how they should proceed."
Jim Buchta • 612-673-7376
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