Monday, January 29, 2007

Is the Twin Cities Market Turning? A Closer Look at 2006 MN Homes Sales Statistics

Despite some of the negative slant the media coverage has given the 2006 Housing Statistics, there is actually some good news to report. According to the St Paul Area Association of Realtors Public Policy site, some of the changes were expected and not all the news is bad for the Twin Cities real estate market.

Here is an excerpt of the article.

Twin Cities, Minnesota (January 17, 2007) – Following five consecutive years of record or near-record home sales and strong home price appreciation, 2006 was the year that the Twin Cities housing market took an expected breather. The pause will ensure long-term stability and accessibility.

Buyer activity finally calmed and the year ended with 47,906 closed sales, a decline of 16.3 percent from 2005, according to the four Twin Cities-area REALTOR® associations. Newly signed purchase agreements—pending sales—showed a similar decline of 17.7 percent, posting 51,526 units.

Conversely, seller activity was robust. There were 108,022 new listings placed on the market in 2006, up 8.9 percent from the previous year. Despite a trail-off as the year progressed and new construction inventory was absorbed, sellers were active enough in 2006 to easily set a record for new listings.

All that supply colliding with lowered demand meant that the buyer gained more control over the process in 2006, and it showed in home prices. The median sales price in 2006 was $230,000, an increase of 0.5 percent compared to 2005. Total sales volume was $13,339,983,209, down 14.6 percent from last year.

“Since 1998, price growth has been extraordinarily high, between 6 and 12 percent each year,” said Wayne Gilbert, 2007 president of the Southern Twin Cities Association of REALTORS®. “The calm in appreciation was expected and is a natural byproduct of the market shift.”

As prices moderated and interest rates softened in the latter part of 2006, affordability conditions have improved significantly in recent months.

“The changes in the market during 2006 are often painted in a negative light, but they’re helping lay a solid and necessary foundation for the future,” said Jeff Dotseth, 2007 president for North Metro REALTORS® Association.

“Interest rates are still low, there’s a lot of inventory to choose from and housing is getting more affordable,” Steve Hyland said, 2007 president of the Saint Paul Area Association of REALTORS®. “It all adds up—2007 should be a great year to buy and sell real estate.”

But before sellers start to celebrate it is important to remember that the Twin Cities is a big area. Some areas did see a bump in the median sales price in 2006, some markets were flat and others did see a drastic decrease in the sales price of a home.

My clients in the the areas of St. Paul and to the north and east know this all too well. Ramsey and Washington Counties did post modest increases in the median sales price of homes. However there are neighborhoods that are not faring as well as others. While North St. Paul/Maplewood have modest increases in value (1.0%), the east side of St. Paul is not faring as well (Phalen -0.7% and Hillcrest -1.6%). Further north in Anoka County, the median sales price was flat. The Blaine area did see modest increases (2.2%) but most communities like Andover, Ham Lake and Lino Lakes saw as much as a 7.5% decrease. The median home price in Chisago County has decreased as a whole (-3.6%). Communities including Forest Lake, Wyoming and North Branch are in Chisago county and post similar results.

What does this mean to Sellers and Buyers in the North East Twin Cities Metro for 2007? Pricing is going to continue to be key. It is more important than ever to look at current sales, within the past 3-4 month, to determine what to sell your home at. Buyers still have plenty of options and are taking their time to find a great home at a GREAT price.

Signs point to a good year for the 2007 Twin Cities real estate market as a whole. But, keep in mind that "Location, Location, Location" is a huge consideration and some market adjustments will take longer in some areas.