Twin Cities home prices near bottom?

  • Article by: JIM BUCHTA
  • Star Tribune
  • October 1, 2008 - 9:19 AM

As investors wait and worry about Wall Street, home sale prices -- the source of much of today's financial turmoil -- continue their free fall throughout much of the country, though there was a bit of good news for the Twin Cities area.

In the 20 largest U.S. metropolitan areas, July home prices fell a record 16.3 percent from a year ago, according to the latest Standard & Poor's Case-Shiller report. It was the biggest annual decline on record even in the Twin Cities metro area, where home prices during July fell 13.1 percent compared with the same time last year.

Despite the double-digit annual price declines, there was some good news for the local market: Home prices in the Twin Cities rose for two consecutive months this summer. From May to June, prices rose 0.9 percent, and from June to July, prices rose 1.3 percent -- the largest increase of all 20 communities surveyed.

Tom Musil, director of the Shenehon Center for Real Estate at the University of St. Thomas, said that although those increases are a positive sign and cause for some optimism in light of what's happening in the broader markets, it's going to take several months of such increases before it's safe to call a bottom to the market.

"There's nothing clear to discern from that data, except that's it's a little bit of good news," Musil said.

The Case-Shiller report, which is based on thousands of repeat sales of the same single-family houses, mirrors sale-price data from the Minneapolis Area Association of Realtors, which include sales of all single-family houses, condominiums and townhouses that were listed and sold through the Regional Multiple Listing Service.

But the Realtors' report also shows an uptick in sales from month to month this summer -- a dramatic increase in year-over-year sales, at least for one week.

The latest report from the Realtors group, for the week ended Sept. 20, shows that the number of pending sales rose 42.8 percent compared with the same week last year. In fact, during the past seven weeks there were 5,866 signed purchase agreements -- that's an increase of more than 1,500 units compared the same time last year.

In the Twin Cities, the median sale price of houses sold through the Regional Multiple Listing Service during August fell 13 percent, to $200,000. The median is the point at which half sold for more, half for less. The median sale price of lender-mediated sales -- foreclosures and sales for less that what is owed on the mortgage -- was down almost 10 percent, while the median sale price of traditional sales fell only 4 percent.

Some say that the Case-Shiller model offers some advantages over other methodologies because it compares sale-price pairs, or the price of the same house when it's sold more than once during a particular period. The Realtors report, while more comprehensive in its scope because it includes all housing types including new construction, offers a median sale price of all homes that are sold during a particular period. That can be affected by a variety of factors, including the kinds of homes that are being sold.

Jim Buchta • 612-673-7376

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