The Minneapolis Association of Realtors released their Weekly Market Activity Report today and for the 15th straight week the Twin Cities real estate market has seen significantly less transactions than a year ago.  We continue on a pace of an approximately 40% sales decline from last summer, even while interest rates continue at record low levels.

For 12 consecutive weeks now, the number of homes for sale in the Twin Cities housing market has been higher than it was a year ago, and the gap between this year’s inventory and last year’s inventory at the same time has been steadily growing. There are currently 27,784 homes for sale, up 8.1 percent from this time in 2009. Inventory is not growing due to an influx of new sellers putting their homes on the market. Rather, its growing due to a drop in buyers who once were absorbing supply.

For the week ending August 21, there were 601 signed purchase agreements, down 40.6 percent from a year ago. That’s the 15th consecutive week of significant declines compared to a year ago.

With supply growing and fewer buyers to purchase it, home sellers can expect a challenging fall and downward pressure on home values. Motivated sellers who want to move quickly may have to pursue aggressive pricing to attract buyers.

With the end of the summer home buying season just about over one has to wonder what this fall is going to bring.  One thing is for certain, there aren’t many buyers out there and those sellers are facing even further drops in house values and longer time on market.

While I sell all over the Twin Cities and focus on Dakota County, I have a special affinity for Rosemount since I live there.  Recent sales data keeps coming in to discuss the rotten state of the housing market but it might be more instructive to give specific data for a city like Rosemount.  Therefore, I decided to look at home sales statistics year to date through August.

Rosemount, MN Data

The Minneapolis Association of Realtors puts out monthly data on each city showing the overall sales transactions by month and year (seen above) but it doesn’t go very deep to show what might really be happening for real sellers who are interested in trying to market their homes in today’s tough real estate market.

So far in 2010 there have been 130 completed sales transactions for single family homes in Rosemount through August 24, 2010.  You can see from the chart above that there were 174 through July but that includes townhouses and condos.  While 130 transactions might not sound bad they break down as follows –

In other words, only about 1 in 3 sales are a traditional seller and we are averaging a paltry 8 sales/month for those sellers in 2010.  There are more homes being sold that are bank owned and short sales (bank mediated) than traditional sales.

Median Sales Price Decline

The table below gives a very good idea of what’s happened to average sales prices through the decline in home prices over the past 5 years -

Rosemount has seen a drop in median sales price from almost $250,000 to approximately $200,000 today – almost a 20% decline.

Other Statistics

Other data you can gather from looking at the 47 sales that have taken place includes:

• The average Cumulative Days on Market for the homes that sold was 159 days.  In other words, those houses that did finally sell had a long wait to find a buyer
• The average home had a final sale price of $104/finished square feet but this varied by $20+ each way (ranges from $80-$130)
• Of the 47 transactions, 31 of them had seller concessions needed to finalize a deal.  The average seller concession for those 31 deals was $7,567
• The average discount was 5.2%.  This is the amount of the final sale price from the list price at time of sale and includes seller concessions as a discount
• Only 12 of the 47 homes were sold without ever having a price reduction.  In other words, almost 3 of 4 had a price that was too high to start with.  The market is still saturated with both sellers who start out too high and Realtors who set too high an expectation to get a listing and then push price reductions later.

Conclusion

For those people that want to sell their homes, one of the most important decisions in selecting a Realtor is finding someone who can best set expectations about the current market.  To do that you need to have data that gives the most accurate measure of the current state of the market.  This view into the Rosemount, MN home sales statistics through August, 2010 is an example of what you should be asking for as it is readily available from the MLS.

The best time of the year for housing sales is traditionally the summer but the summer of 2010 continues to be a dud.  The Homebuyer Tax Credit which expired in April is having a significant impact on sales which even interest rates approaching 4.5% can’t seem to help. 

As you can see from the chart above, not only are sales down dramatically from April, they are down 40% from 2009.  As was pointed out by the Minneapolis Association of Realtors:

The effect of the tax credit is becoming clearer with time. March and April enjoyed record-breaking performance at the cost of June and July (and possibly continuing into the future). In other words, the credit shifted would-be summer buyers forward. There aren’t enough buyers left to sustain March and April sales figures. A short-term demand spike was created at the expense of long-term market stability. 

“It is somewhat puzzling that demand is this flimsy considering interest rates are at 50-year lows,” said MAAR President-Elect, Pat Paulson. “Until macro-economic indicators such as unemployment and job churn improve, the housing market isn’t likely to make large strides.”

Houses are selling but the pressure to be priced right and have a home that shows well continues to be of paramount importance.

The Minneapolis Area Association of Realtors just published their Weekly Market Activity Report for the week of June 14, 2010.  For the 5th week in a row there has been a drop in new sales as the aftermath of the Homeowners Tax Credit which expired in April has seen buyers be a scarce commodity.

Pending sales for the week ending June 5 were 57.0 percent behind the pace seen a year ago, dropping from 1,226 in 2009 to 527 today. This is the fifth consecutive week-to-week drop in signed contracts. While activity is down across the board, lender-mediated foreclosures and short sales are slowly increasing their market share of sales because traditional home sales have declined sharply. During this week last year, 37.8 percent of pending sales were lender-mediated; this year the share is 43.3 percent.

Thankfully, new supply is not growing in lock-step. The 1,521 new homes placed on the market for the most recent reporting week were 29.6 percent less than last year at this time. This has helped keep the Months Supply of Inventory metric at 6.9 months, down 9.3 percent from May 2009.

There is some activity happening.  All of my current listings had showings this weekend and my newest listing had 10 couples through an open house on Sunday and there are 3 showings scheduled today.

The Minneapolis Area Association of Realtors just released their Weekly Market Activity Report for the Twin Cities real estate market.  For the week ending on June 4th the Twin Cities market continued to see a significant decline in home sales which is mainly attributed to the end of the Homebuyer Tax Credit which ended on April 3oth.

As the weeks following the tax credit expiration unfold, buyer demand continues to slow. The 600 purchase agreements signed for the week ending May 29 were 34.6 percent below the previous year—the fourth consecutive week of year-over-year decline in Pending Sales.

Refreshed supply is also in decline, as New Listings posted a fifth consecutive week of year-over-year decline, landing at 1,474 for the most recent reporting week—a 5.9 percent decrease from a year ago.

Current sales are about half of what we saw the last week of April so despite the continued low interest rates there are a lot fewer buyers in the market right now. 

Last fall I wrote a post about Rosemount’s Evermoor Development describing the different neighborhoods that make up the 560 acre development.  It has proven to be one of my most popular entries and has encouraged me to focus more energy on providing more information to homeowners on very specific markets.

Evermoor 2010 Home Sales

Through June 5, 2010 there have been 24 closed transactions year to date in Evermoor.  That might seem like a good number until you look a little closer at the details -

There are quite a few new homes being sold, especially in the Glendalough neighborhood being built by Lennar which has seen 10 new home transactions in 2010.  Glendalough has quite a bit more space to build in and should be active with new homes for the next couple years.  The other 4 are in the new DR Horton called Westport which has almost filled all of their empty lots.

Four of the bank owned sales are also really new homes as the remaining unsold Bard’s Crossing Condominiums are bank owned and accounted for 4 of the sales. 

Only 2 traditional sellers have sold homes for more than $350,000 in 2010 including the highest priced sale at $563,000 which was my listing.  Both of those listings were in the Westmeath/Drumcliffe neighborhood.  There are a large number of existing owners that paid a lot more than $350k for their homes.  As a point of comparison, there are currently 40 active listings in Evermoor and 25 of them are priced above $350k.  Of the current 40 listings 2 are bank owned and 5 are potential short sales.

There are currently 7 pending transactions, including 2 new homes and 3 townhouses in the Talcott Glen neighborhood.

Potential Going Forward

Evermoor is still the premier development in Rosemount and one of the nicer ones in all of Dakota County.  Its overall size, integrated trails & parks along with newer homes and unique neighborhoods sets it apart as a place to live and raise a family.  The following video gives you a brief feel for the types of homes you see in each of the neighborhoods of Evermoor -

Recent road improvements, new shopping/dining choices and additional planned public transit options are all helping to shape Rosemount as a great place to live.

As an Evermoor resident I help homebuyers and sellers in Rosemount to get the most value from their Realtor when selecting someone to work with since I know the neighborhoods and home values so well.

The supply of homes available for sale in the Twin Cities is broken down by price range on the Minneapolis Realtors Association Monthly Housing Supply Outlook report.  The report for May 2010 is shown above and breaks down the available listings by significant price breaks.

Analysis

A balanced supply of homes is considered 5-6 months.  What that means is that if no other homes came on the market (new listings) it would take 5-6 months to sell all of the existing listings based on the projected sales.  If the supply is more than 6 months it’s a buyers market, less than 5 months it’s a sellers market and 5-6 is a balanced market.  Based on the above report we can see a number of important things -

• The supply of homes in each price range has been trending downward for every price range except $1M plus as compared to a year ago
• There is actually a shortage of homes in the least expensive price range.  This is partially because fewer bank owned properties are coming on the market and partially because the Homebuyer Tax Credit helped push a lot of buyers into the buying inexpensive homes.
• In the middle price points ($150k – 250k) it’s really somewhat of a balanced market. 
• In the $350k-$1M price ranges the average time on market starts to get quite long – even longer than the average listing period of 6 months
• Finally, if you have a $1M+ home, be ready for a very long time on market as there are way more homes than buyers in this price range.

Conclusion

One of the things a Realtor must do is set expectations for their clients regarding the state of the market and what to expect in the sale of their home.  Having a house for sale is a stressful time.  There’s the constant battle to have a home ready to show on short notice and the dreams of selling to fulfill the goal of moving on to the next place.  Providing good information to clients around the state of the market is something can expect from bill.wallace@results.net

As expected, pending sales continued their post-tax credit deadline swoon in the Twin Cities housing market for the week ending May 15. There were 830 purchase agreements signed for the week, a large drop from the mark of 1,469 seen two weeks ago during the final week of the credit. The most recent week represents a 32.8 percent decrease from the same mark last year.

New Listings are also in decline, with the 1,582 posted for the week coming in at 19.3 percent behind a year ago. The decline in new supply is helping to offset some of the decline in sales, which is serving to hold inventory relatively steady for the time being.

It remains to be seen whether the large drop in activity is a temporary post-credit blip or a harbinger of a longer-term demand “cool down.” We’ll continue to keep an eye on the numbers in the weeks ahead.

There was a lot of concern among both Realtors and home sellers about what would happen once the Homebuyer Tax Credit expired on April 30th.  The graph above is created from data in the Northstar MLS and shows all pending sales for single family homes in Dakota County.

As you can see, we had a large peak of deals get agreed to in late April.  The first week of May looked pretty good but there is evidence that some backdating of transactions was taking place and some deals don’t get moved to the pending status until the inspection is done, even though it’s considered an agreed to Purchase Agreement.

The week of May 9-15 is probably our best example of what the impact of the Tax Credit expiration will have as we saw a significant drop in deals.  This seems to coincide with the amount of showing activity that is happening in the market place. 

Interest rates remain very attractive and while deals are certainly taking place, the pressure on prices will continue to be felt for some time in the future.

The Twin Cities housing market reacted as anticipated in the week following the end of the government tax credit. For the week ending May 8, there were 1,133 Pending Sales, a 4.4% drop below last year at this time. The year-over-year decline, which was the first since March 6, was likely owing to the number of buyers that acted in advance of the end of the tax credit.

Three other important numbers:

• Housing Affordability has dropped slightly for the month of May to 202. This is a 7.8 percent decrease from last year and is a product of both rising home prices and interest rates.
• After peaking in mid-April, New Listings continue to fall, settling at 1,550 units, down 24.7 percent from the same week last year.
• Months Supply of Inventory seems to be settling as well. At 6.7 houses per buyer, this is 13 percent below last year. This, too, is an indicator of some leveling in the market between buyers and sellers.

My Take

I heard lots of stories of people back dating contracts to show deals completed before the April 30th tax deadline.  The real test will be next weeks report.  The number of showings at our offices listings were down sharply this past week.  I anticipate a rather large drop in pending deals next week.