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« December 2010 | Main | February 2011 »
Our local REALTOR Association reports:
Buyers were more eager to get back in the game than sellers for the week ending January 15. There were 1,286 new properties added to the Twin Cities residential real estate market, down 22.9 percent compared to the same week last year. This marks the third consecutive week of year-over-year declines in seller activity after three consecutive weeks of year-over-year gains.
There were 558 Pending Sales for the week, down a slight 2.3 percent from year-ago levels. That's the smallest decline in purchase demand in six weeks.
Active Listings for Sale were up 6.3 percent to 21,744 homes. That's the fourth consecutive week of decreasing inventory gains compared to last year.
This is exactly the news we have been talking about recently. Rising interest rates and less inventory is compelling many buyers to get their home search on track NOW. No more "waiting for the bottom." The time is now.
Minnesota’s housing market has struggled mightily over the last few years as financing excesses ballooned values and encouraged consumer overspending in many
areas of their private lives. However, what goes up must come down. As oil prices reached record levels, household budgets became stressed and a number of risky loans tipped major banks and the economy into a significant recession.
Although some areas are still experiencing declines, most of the Minnesota housing market has regained its footing and is looking at a strong, slow and sustainable recovery. Values in most areas have found bottom with median home prices statewide ($150,000) the same as they were at year end 2009. This mid-point price (as many homes sold above as below the median) reflects the broadest indicator of the direction home prices are taking. The year-end average sales price is up 8.1% over year-end 2009. Home price stabilization is critical to the housing recovery and indicators look very positive that the worst is behind us.
A home available for purchase is another key indicator of the housing markets condition. The inventory of homes for sale was down 12% at the end of 2010. Fewer properties available will help restore the balance of home buyers to home sellers. When there are too many home sellers, prices fall. Similarly, when home buyers out number home sellers, home prices increase. This was very apparent during the housing bubble when home buyers rushed to buy and then more recently as home sellers facing difficult financial situations tried to sell. Many Minnesota markets have more home sellers than home buyers, however the number is moving in the right direction.
Both pending and closed transactions moved in a positive direction as we closed out 2010. December 2010 closed transactions increased when compared with the same months in 2009 (+12%) and 2008 (+24.9%). This two-year swing in consumer confidence is another sign that Minnesota has turned the corner and is moving forward. Pending transactions, homes in which contracts were drafted but close in the future, were up +19.8% and +34.6% over December transactions in 2009 and 2008 respectively.
In the coming months transaction figures will fluctuate lower because of last year’s federal home buyer credit program. Artificial incentives increase consumer activity over the short-term and must be kept in perspective when they are removed at a future point.
Real estate is and always has been a solid long term investment. When reviewing statistics it is important to consider the long term trend lines. Economic conditions, interest rates and jobs are critical components that have a significant impact on the housing market. As we begin 2011 the key indicators are pointing toward a steady recovery.
Read the December Statewide Housing Report at www.mnrealtor.com/HousingReport/Dec.
2010 was a Jekyll and Hyde of sorts. Fortunately, 2011 is predicted by leading REALTOR groups to be a more optimistic market. In saying this, it is important to note that we should not expect double-digit appreciation rates, lenders throwing money around, the evaporation of the existence of foreclosures and short sales and the finding of buyers to be an easy feat. Rather, here is what we CAN expect to see:
1. Improved Consumer Confidence. Consumer confidence was hurt the most with loss of jobs. When this happens, people become more risk averse and stop borrowing money and making large purchases. We expect this to improve in 2011.
2. Employment. Job growth trends have been positive for the past 7 months, and while not moving rapidly, they are moving in the right direction.
3. Interest Rates. The increase in interest rates has often been touted as a positive to the real estate market because it can spur "on-the-fence" buyers to move into action and complete a purchase. Some, however, believe the low rates will create the opposite effect on the market. i.e. Those who refinanced into low interest rates will now feel less desire to make a move, as trading their existing low interest rage for a higher rate will not seem as attractive. In the short-term, we disagree with this view, as those who refinanced more than likely had little plans to make a more in the next 3-5 years anyhow. From a long-term perspective....absolutely, this could have an effect.
4. Financing. We expect contract for deed financing will become increasing popular, particularly as a growing number of people will be unable to obtain a qualified loan from a lending institution. The reason for this has to do with tightened credit. Those with solid credit histories should have no problem obtaining a mortgage. Those who have struggled (or those who perhaps acted irresponsibly) may see setbacks of 3-5 years before they can be qualified to buy a home. This ultimately takes many would-be buyers out of the market. As a result, many sellers will be offering contract for deed as a financing alternative to buyers. Additionally, many buyers may opt for downpayment assistance programs.
5. Appreciation. All the indicators point towards appreciation coming, but not near the rates we once experienced. We expect appreciation to occur at about the rate of inflation - about 1% annually. Areas with distressed properties will skew this number. Savvy buyers are learning that buying distressed properties offers higher appreciation opportunties down the road.
6. Closed Sales. At pre-bubble activity levels, closed sales are lower simply because today's consumer has significantly different household composition and creditworthiness when compared to the consumer just 8 years ago. Realtor groups expect moderate growth to occur in this area in 2013/2014, as Baby Boomers seek to sell the family home in favor for something more appropriate for their needs.
Our local REALTOR Association reports:
Twin Cities home buyers and sellers both showed week-over-week increases coupled with year-over-year declines. The 1,490 New Listings were up over 120.0 percent from the previous week but down 10.7 percent from the previous year. The 475 Pending Sales were up over 70.0 percent from the previous week but down 8.7 percent from the previous year.
Moral of the story? The market has embarked on its typical new year's ascent as we begin our long drive toward spring. We likely won't match 2010 levels until the summer months – when we're finally comparing two nonincentive markets on a level playing field.
Inventory was the metric to watch for the week, as the number of active listings for sale snuck in only 7.2 percent above year-ago levels. That's the smallest inventory increase since the first full week in August 2010. As of January 18, there were 21,687 homes available for purchase. While that's plenty of product for buyers to sift through, sellers will have to ensure that their properties show well and are priced aggressively.
Summit Ponds Woodhill The Pointe Hamilton Hills Oak Hills Heatherton Ridge Ruth
New inventory in West Savage is climbing on paper, but many of what is hitting the market is relisted inventory from previous contracts. December 31 is a popular date for the expiration of listing contracts, and total inventory numbers in West Savage, Savage as a whole, and Scott County all reflect this norm. A number of sales have closed this month, including three in The Pointe. 40% (two) of the five total closed transactions in West Savage were foreclosures.
Interest rates climbed a bit this month, and this could be the cause of a sudden increase in showing activity metro-wide. Many buyers held off on purchasing a home last year, waiting for rates and home prices to continue to fall….. i.e. waiting for the bottom to hit. In recent weeks, the interest rate increase has been termed one of the best things that could happen to the market, at least in the short-term, as it may spur many buyers-in-waiting to get out and begin their home search, lest rates go higher. The rates, still in the mid-4%’s, are still very competitive.
REALTOR® Magazine just published its Cost vs. Value Report. The report compares the cost of various remodeling and repairs to how much is recouped during resale. Links to our previous posts on this subject can be found here.
Single family/townhome inventory in Savage and Scott County as a whole is down. Our West Savage absorption rate is 9.29. That means if zero new homes come on the market, it will take 9.29 months to sell our existing inventory.
Each year, our National Association of REALTORS publishes a report on the cost of some of the most popular remodeling projects and compares it to the value recouped at resale. The "Remodeling 2010-11 Cost vs. Value Report", comes from www.CostvsValue.com, and is broken out regionally throughout the United States. Complete data from the Remodeling 2010-11 Cost vs. Value Report can be downloaded for free at www.CostvsValue.com”.
An interesting trend noted by www.CostvsValue.com is that while it appears the resale values of remodeling projects are declining, much of that has to do with the scaled back approach to remodeling projects taken by consumers in response to the economic downturn. (Copyright 2010 Hanley Wood LLC Reprinted by permission.)
Projects most popluar to our West Savage area would likely be the addition of a deck, finishing the basement, garage door and/or window replacement, and a minor kitchen remodel - i.e. countertops, appliances and possibly refacing existing cabinetry. According to the report, a kitchen remodel will net sellers the most dollar-for-dollar. This is consistent with the common belief that kitchens and baths are the most important rooms in a house that need to "shine" when it comes time to sell.
A project not listed in the report, but very important and commonly seen in our community, is refinishing or installing hardwood floors and replacing carpet, both somewhat pricey projects that eventually are important for resale in a buyer-driven market. New flooring can make an otherwise tired space look fresh and current.
We are believers in keeping existing finished space UPDATED before adding additional finished space, if resale in the near future is the ultimate goal. i.e. Instead of finishing the basement of a home that needs updates on the above floor(s), spend some of those dollars updating the space that is already finished. Updated carpet, fixtures (lighting, door knobs, etc.) and countertops are some good places to start.
