Housing market more stable as listings decrease

With home buyers on the sidelines and builders taking a breather, there's a sign of stability in the still-overstocked Twin Cities-area housing market:

Seller activity is beginning to wane.

The number of new listings in April was down 11.5 percent from a year ago, and down 9.5 percent for the first four months, according to a report Tuesday by Twin Cities-area Realtors' associations.

It's not the recovery that sellers have hoped for -- the median sale price, which rose for the second consecutive month, still was down almost 8 percent from April 2007 -- but it's a sign that the number of homes on the market, still at historic high levels, may be hitting a plateau.

"There's a long ways to go before we're out of the buyer's market, " said Pat Paulson of Exit Lakes Realty in Wayzata. "It's a long process, but it starts with reduced seller activity."

The declines are largely because of a steep decline in the number of new houses, condominiums and townhouses being built in the Twin Cities area. The Builders Association of the Twin Cities reported Thursday that the number of new units planned so far this year is down 61.7 percent from the same period of 2007.

In April, home builders were issued 180 permits to build 293 units -- one of the slowest months in years. Some builders say that even though inventory levels have dropped significantly, they're still not building houses without buyers lined up.

Still, home builders are bracing for challenging times as they wait for the number of homes on the market to fall. During April, the number of unsold newly built homes in the metro area fell 15.9 percent from 4,425 in April 2007 to 3,721 last month, according to data from Marketgraphics.

New houses are most attractive to those who don't have to sell to in order to buy, including first-time buyers and established homeowners who don't have a mortgage or can afford to handle the debt on two homes.

Builders are seeing very price-conscious purchasers "looking to ensure that they make the most prudent decision they can," Noonan said. "They're not wanting to rush to judgment and buy only to find out that prices have dropped further."

The association doesn't track the price of new-home sales in the metro area, but a 6.63 percent decline in pending home sales last month left the median sale price of existing homes in the metro area at $204,500, below the $222,000 of April 2007 by 7.88 percent.

Paulson said he doesn't expect much of a recovery until late this year or early in 2009, but he expects to see gradual signs of improvement that will give sellers and buyers more confidence. But it's going to be a fragile recovery. As inventory levels fall and buyer activity increases, sellers who have been waiting on the sidelines will become emboldened to list their houses. That could only interrupt progress.

A recovery depends in large part of mortgage interest rates, which have dipped in recent weeks to just below 6 percent for a 30-year fixed-rate mortgage, and on access to credit. In the wake of the subprime mortgage meltdown, qualifying for a mortgage has become more difficult. Lenders want more documentation and a bigger down payment.