Minneapolis home sales are up, but prices are down again
Tuesday, October 28, 2008 at 11:01 am
- 2 Comments
It’s become a broken record of late: Home-price declines breaking records. With the economy on the skids and the subprime crisis still unfolding, home values are getting devoured first. This morning the S&P/Case-Shiller home-price index was released, revealing that the trend doesn’t show any signs of slowing down. The 20-city index showed year-to-year August price declines of 16.6 percent. Minneapolis saw a drop of 13.3 percent over the year period, with a 1 percent decline from July to August.
Recent reports indicate that home sales are up, a possible sign of a turnaround, some analysts say. But trusting in that marker is like Greenspan relying on capitalism or ghosts relying on astrology–it’s meaningless and totally futile. Home sales are up as a result of the sharp increase in foreclosures and short sales, a bad sign for homeowners and an already shaky economy. In fact, according to the most recent report from the Minneapolis Area Association of Realtors, the inventory of foreclosures and short sales–property sold for below its current loan value– has increased more than 64 percent of the past year. Of the current homes for sale in the Twin Cities, nearly 30 percent are foreclosures or short sales.
The hardest hit neighborhood in Minneapolis is on the Northside, where lender-mediated sales (short sales and foreclosures) account for 69 percent of the inventory of homes for sale in October. Powderhorn is a close second with nearly 52 percent. And the suburbs aren’t immune to the growing problem. Foreclosures and short sales make up more than 63 percent of all the October homes sales in Brooklyn Center.
In St. Paul, the Central neighborhood’s current home sales are more than 63 percent lender-mediated, while Phalen’s foreclosures and short sales have risen to 60 percent this month.
2 Comments
Comment posted October 29, 2008 @ 12:04 pm
Yep, the same thing is happening in San Diego, California. The MLS is full of foreclosures and short sales, with the foreclosures flying off the listing.
Comment posted November 3, 2008 @ 9:40 am
Great coverage! But I do have some advice and critique for you.
I take issue with you on two points 1)The importance of rising sales volume, and 2)For not pointing out that averaging sale data, reflects the large volume of bank mediated sales, and don’t accurately predict values of individual homes.
Point 1) Rising sales volume is one of the most important metrics in our current market. We have a supply side issue (among others). As the number of homes offered for sale declines, supply and demand come back into balance. Your statement that home sales is a “meaningless” and “futile” metric reveals a fundamental misunderstanding of the market.
Point 2) Value statistics take all sales into account, and the increased volume of bank mediated sales artificially lowers these stats. Bank sales occur at all price points, but the majority are below the median price range. Investment buyers are very active in this market, and are behind a lot of the rise in sales volume. A relocation, or move up buyer may not be able to consider bank sales due to time and condition requirements. Bank sales come with additional risk, long timelines, typically poor condition, and are most common in lower price ranges. Unless you own an “average home” (which doesn’t exist) then the average stats are only useful in a general sense, they don’t predict specific home values in any way at all.
You have some specific neighborhood number here which is great. I wonder if you’re aware that areas like Eden Prairie, Edina and SW Mpls are still seeing average sales price rise, in some cases by double digits?
Thanks for a good article keep it up.
Ben Kolkman REALTOR | LAKES Sotheby’s International Realty
4388 France Ave. So., Mpls, MN 55410
mobile: 612.599.4161
http://www.AquaTerraRealEstate.com
Ben.Kolkman@SothebysRealty.com
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