A surprise dip in mortgage rates last month did little to warm home buyers.
During October, there were 4,523 home sales in the 13-county metro area, a 1.5 percent decline compared with last year, according to a monthly sales report from the Minneapolis Area Association of Realtors.
And far fewer of those sales were foreclosures, helping boost the median price of those deals 7.2 percent to $209,000.
“Traditional activity is going strong,” said Emily Green, president of the Minneapolis Area Association of Realtors (MAAR). “That helps strengthen prices, which in turn encourages more sellers to list their homes, giving motivated buyers more options.”
For housing, October is never a month worth remembering, but the most recent downturn is part of a long-term trend that’s raised concerns that the housing recovery has stalled.
That’s not the case. Instead, the downturn is being blamed on a positive, fundamental shift in the buyer pool: With fewer foreclosures coming to market, investors are fleeing.
During September, the mortgage delinquency rate in Minnesota fell to just 2.4 percent, nearly half the national average, according to CoreLogic. In October, there were only 443 foreclosure sales, a 41 percent decline compared with last year. At the peak of the housing crisis that began in 2008, foreclosures accounted for nearly 55 percent of all home sales in the Twin Cities. Last month, they represented less than 10 percent.
Housing markets across the country are in the midst of a similar adjustment, though after a particularly slow start to the year, buyers picked up the pace in recent months. From August to September, existing home sales increased 2.4 percent and are now at their highest pace in 11 months, according to the National Association of Realtors. On a year-over year basis, sales are up 1.9 percent.
Pending home sales — an indication of future closings — inched 0.3 higher during September nationwide. Pending sales have remained above a key threshold for the past five months, suggesting stronger sales in recent months.
Some of that momentum can be attributed to an unexpected decline in mortgage rates this fall. During the middle of October the average 30-year fixed-rate mortgage dipped below 4 percent, the lowest in more than a year. Rates have increased slightly in recent weeks, but only marginally. The average rate for the 30-year now stands at 4.19 percent, according to the Mortgage Bankers Association.
In the Twin Cities and beyond, home prices have been on the rise for more than a year, though analysts surveyed by Zillow.com say they won’t be back to their prerecession peak until early 2018. Also in that survey, analysts forecast U.S. home values to end this year 4.8 percent higher than at the end of 2013.
Mike Wilen, a member of the Metropolitan Group at Coldwell Banker Burnet in Eden Prairie, said that despite discouraging sales figures, he’s working with more prospective buyers than he has in the past.
“Statistically, you always see a bit of a slowdown moving into the holidays, but with more listings we’re seeing a little more activity,” he said. “But there’s more to look at, and they [buyers] are taking more time to decide.”
Many of Wilen’s buyers are first-timers and move-up buyers who want to live in Minneapolis or the inner-ring suburbs, where there’s been little new construction and until recently few options. That’s beginning to change. Last month, there were nearly 6,000 new listings in the metro. Overall, there were more than 17,000 properties for sale in the Twin Cities last month, 4.3 percent more than October 2013.
“There are a lot of options,” said Mac Walters, a 28 year-old business manager who’s been shopping for a house in Minneapolis or one of the southern suburbs. “But you have to be ready to jump.”
This will be his second house. Walters bought the first one when he was 18 and houses were selling at breakneck speed. He made an offer on that one even as the agent was putting the sale sign in the front lawn. He paid a premium for the property, more than it’s worth today, so he plans to keep it and rent it out.
“It’s different today,” Walters said. “It’s nice to be able to take the time to look, especially as a move-up buyer. I’m in no rush.”