Twin Cities home sales up, but median price sinks to $150,000

On the cusp of the spring sales season, the Twin Cities housing market showed some early signs of momentum last month.

New federal tax credits and a flurry of foreclosure sales helped boost sales, but they also pushed the median sale price to its lowest level in nearly a decade.

In February, closed sales rose 3 percent, but with foreclosures dominating the market, the median price plunged 23 percent to $150,000. Pending sales, an indicator of future activity, rose even more, according to data released Wednesday by the four Twin Cities-area Realtor associations. The number of signed purchase agreements was up 7.4 percent from a year ago, the ninth consecutive month of year-over-year increases.

Most of the decline in median price came from sales of homes that had been through the foreclosure process or were owned by people delinquent on their mortgages.

Those lender-mediated transactions represented more than 60 percent of all pending sales, with a median sale price of $125,000, down 21 percent from the same period last year.

Traditional homes fared much better: Their median sale price fell only 5.2 percent, to $205,875.

The foreclosure phenomenon is getting increasing attention as it comes to dominate the market. While a foreclosure doesn't always get used as a comparable sale when establishing value for other houses in the neighborhood, those listings are being sold at 50 percent or less of their purchase price, creating tough competition for traditional sales.

Data to be released today by RealtyTrac show that nationwide foreclosure-related filings including default and auction sale notices and bank repossessions in February rose nearly 6 percent from January, and almost 30 percent compared with 2008. That means one filing for every 440 households.

Although Minnesota saw an unusually steep increase in foreclosure activity last month -- filings rose almost 64 percent compared with last year -- only one in every 895 households received a foreclosure notice.

Even with foreclosure rates up last month, the number of homes in foreclosure still represents only a small percentage of the entire market. But they're still a growing percentage of homes that are for sale or have sold. That's why market research and real estate development analyst Jim McComb said that many segments of the broader market may not be as bad as they seem. He recently did an analysis of sales data that show what one might expect: A strong correlation between concentrations of foreclosures and declines in home-sale prices.

"There is a lot of confusion about the number, which is misleading and is even misleading appraisers and even to some extent Realtors," McComb said.

He said that prices of lender-mediated transactions are decreasing as lenders offer discounts to unload inventories of homes. Steve Fiorella of ReMax Results said that it's those price reductions -- and favorable buying conditions -- that are driving investors into the market. He said that several of his clients are trying to diversify their investments by taking money out of the stock market and putting it into real estate.

Sales also are getting a boost from buyers such as Luke Motschenbacher, a first-timer to the market who decided to buy a house after the federal government announced its $8,000 tax credit for first-time home buyers.

"There's not going to be a better time," he said.

The credit is an enhanced version of a $7,500 incentive announced last year, but with more-favorable terms: It doesn't have to be repaid if you live in the house for three years. Motschenbacher, 26, who works in the marketing department at Best Buy Co. Inc., said that the incentive has created a sense of urgency to buy.

"At my stage in life, you don't have savings built up for a down payment or for closing costs, so $8,000 makes a huge difference," he said.

In another piece of good news for home sellers, inventory and new listings fell. From February 2008 to February 2009, new listings fell 19.4 percent, causing the overall number of homes on the market to fall 13.5 percent.