The "For Sale" signs that seem to be around every corner say it all: The housing market is flooded with inventory.
With a credit crunch underway, foreclosures rising and consumer confidence sagging, the number of houses for sale in the 13-county metro area is at record levels, up 10.8 percent from a year ago, according to the latest data gathered by the Minneapolis Area Association of Realtors. That's 8.72 homes for every buyer and a startling statistic if you're a seller.
But the supply of houses on the market varies by price range. For example, the March supply of houses for sale at less than $120,000 increased the most -- jumping to 11.2 months. That means that at the current sales pace, there are enough houses for sale in that price range to last 11.2 months. The market is considered balanced when there is a five-month supply.
That's in part because many in the market for starter houses can't qualify for a mortgage because of stricter lending guidelines, but also because many of the foreclosures hitting the market are in that price range, said Deb Greene, an agent with Coldwell Banker Burnet. "Foreclosures could have skewed the figures," Greene said.
Buyers and sellers of houses priced from $190,001 to $250,000 are the closest to being evenly matched at 7.6 months, perhaps because many of those buyers are first-timers who don't have to sell to buy and have the income to qualify for a mortgage.
John Murphy, Edina Realty sales agent, said that in his experience, some owners of houses priced under $250,000 can't afford their mortgage and are trying to sell.
Where will you find the most options? Million-dollar-plus homes show the deepest inventory at 20 months, but upper-bracket properties always take longer to sell and have a smaller pool of buyers. Even if those houses don't sell, the owners are more likely to still buy a second house because many have the financial means to own both properties.
"Sellers in that price range may be able to hang onto homes longer and weather the storm," Murphy said.
It's anyone's guess how long it will it take for the housing surplus to shrink, and supply and demand to balance out. But Murphy doesn't see a turnaround anytime soon.
"With inventory still 10 to 12 percent higher than it was one year ago, and pending sales activity down typically 15 to 25 percent depending on the week, it doesn't look like a turn to me."
Although the number of houses for sale is still at record levels, new listings are being added more slowly. The number of new listings the week ending March 8 is down 10 percent from last year. For the first three months of this year, new listings have dropped 5.6 percent when compared to last year.
What's it going to take to burn off some of that existing inventory? Sellers can do their part by making sure houses are in "model-home" condition and aggressively priced to move.
"Sellers have to price realistically according to market conditions, which many still are reluctant to do," Murphy said.
Lenders and banks can help by speeding up the selling process of the growing number of distressed and foreclosed properties, he said.
"It's not uncommon for it to take 30 to 60 days to hear back from a bank on an offer," said Murphy. "The faster they respond, the faster we can move through all the bank-owned property and help get this market back on its feet."
Lynn Underwood • 612-673-7619
