Home sale price drop is deepest of the year in Twin Cities

Winter came early to the Twin Cities housing market.

Closed and pending sales were both down about 20 percent for November, while prices posted their deepest year-over-year decline of 2007.

The figures, released Wednesday in reports by Twin Cities-area Realtor associations, depict a housing market swooning into what is normally its somnolent time of year.

The number of closed home sales in the metro area was 19.3 percent lower than in November 2006, according to the Minneapolis Area Association of Realtors. The number of pending sales -- purchase agreements signed for sales that haven't yet closed -- was down 21 percent.

The median price of closed sales was $216,500, down 5.1 percent from November 2006, the Minneapolis association said. The number of new listings has fallen over the past two months but the total inventory of houses for sale is up 9.4 percent compared with November 2006.

At the end of the month, a record 30,126 homes were for sale, 32.6 percent more than two years ago.

That translates into more than 13 homes for each likely buyer, up from 10.3 last year and nearly twice as many as two years ago. At the current sales pace, it would take more than nine months to clear the houses now for sale off the market.

The only encouraging signs for sellers are that affordability continues to improve and that certain segments and locations of the housing market are doing much better than others.

A family with the median income for the area now has 141 percent of the income necessary to buy a median-priced home, assuming a 30-year fixed mortgage and a 20 percent down payment.

Condo sales sagging

Dale Cremers, a longtime land developer and investor with Kensington Equity in Burnsville, said the price decreases are being driven in part by the condo and townhouse market segment, faring worse than single-family homes.

The numbers are also being influenced by weakness in outlying communities, where large subdivisions often feature newer houses of similar style, leaving sellers to compete largely on price.

The relative strengths of communities near to and far from the Twin Cities can be seen in comparing recent results from Edina and Isanti. In Edina, the median sale price in November increased 6.7 percent. In Isanti, the median sale price for the 11 transactions in November was down almost 27 percent. Market observers said similar comparisons can be drawn between other close-in and outlying communities.

New home supply falling

However, the supply of new houses on the market is finally beginning to fall. Earlier this week the Builders Association of the Twin Cities said 380 permits were issued in November to build 615 new units. That's a 22.8 percent decline in permits and a 29 percent decline in new units. So far this year, there has been a 30 percent decline in the total number of new units.

According to the Minneapolis Realtors, new construction inventory as part of the overall number of homes listed for sale through the Regional Multiple Listing Service declined by 22.6 percent last month.

In a statement released Wednesday, Steve Hyland, president of the Saint Paul Area Association of Realtors, said that he's hopeful that falling prices will mean a stronger market come spring.