Case-Schiller: Twin Cities Home Prices Down 13.8%

 
Standard & Poors has released the August 08 print of the Case-Schiller Home Price Index.  We pulled the graphic above to highlight what's happening in Minneapolis/St. Paul.

Click the graphic to make it bigger, or take our word that the average home price in the Twin Cities for August 2008 was 13.8% lower than August 2007. 

Though prices continue to slip, Teresa Boardman points out that (unlike last year) the market is slowly  moving in the right direction - toward price stability:

Teresa elaborates on the chart above:

"As the lines get closer to each other the supply of homes and the demand will be more balanced and theoretically home prices will stabilize. Last year the number of homes on the market went way up.  Supply and demand were out of balance because while listings were going up, sales were going down.  This year the inventory has been slowly decreasing all year."

10/28/08 at 09:44 AM Permalink | Comments (1) | TrackBack (0)
Filed Under: Banking Bailout, Blind Item, Case-Schiller Home Price Index, Market Stats, Minneapolis, Reports & Research, St. Paul

Making the Grade: Twin Cities Housing Market Gets a "C"

If you haven't noticed, discussion of the housing market has been relentlessly focused on price (average sales price, median sales price,) price direction, and units.

And for good reason - they are useful and telling numbers. But price movements alone do not tell the whole story. particularly if we are talking about the overall health of our real estate market, and especially it's long term prospects for recovery. 

In that case, the focus on price/units as the sole measure of the housing market is a little like diagnosing a patient with a influenza as terminally ill because they've spiked a fever.

Which is why we were pleased to see this piece from Finance & Commerce's Burl Gilyard on a recently released housing market study:

The new “Homeowners’ Market Fundamentals Index,” from Montana-based Redfish Emerging Markets LLC, ranks 185 U.S. metro areas, and the Twin Cities metro area comes in at an ignoble 108th place.

Mark McGlothlin, CEO of Redfish, noting that Minneapolis-St. Paul still gets a solid (if uninspiring) “C” grade.

Though the grade doesn't put us on any sort of honor roll, we do appreciate the study's attempt to look forward and weigh factors beyond simple price/unit metrics:

The Redfish rating system weighs five factors: population demographics, job growth, local economic development, single family market “metrics” and the health of the rental market.

McGlothlin said that Minneapolis and St. Paul were hurt in the rankings by slowing population growth, a lagging job outlook and the current supply of homes and condos available for sale on the market.

“I tell you what hurts Minneapolis the most … jobs,” McGlothlin said. “Job growth creates population growth, which drives housing demand.”

You can find the full study, and more information on it's methodology right here:
Homeowners' Market Fundamentals Index [Redfish Emerging Markets]

10/15/08 at 03:48 PM Permalink | Comments (0) | TrackBack (0)
Filed Under: Market Stats, Reports & Research

Existing Home Sales: (Earth to NAR) Tighter Lending Standards are Not the Problem

Another ugly print from the National Association of Realtors, who've today released the August existing home sales numbers:

• August sales declined 10.7% Year-Over-Year.
• August median prices declined 9.5%, YOY.
• Inventory remains elevated at 10.4 months supply

Despite the ugliness, the contraction does seem to be decelerating a bit, so there is a sliver of good news here.

Predictably, tighter lending standards are held out as the culprit (emphasis ours):

The difficulty in obtaining a mortgage increased over past couple months, making it more challenging for creditworthy borrowers to find financing,” he said. “Our hope is that overly tight lending criteria can be loosened with reasonable standards and credit so that sales activity can catch up with demand.

This is, IMHO, utter bunk.

The idea that "obtaining a mortgage right now is all but impossible" seems to be seeping into the national consciousness, aided and abetted by mainstream media and press releases like this, so let's push back on this notion a little.

We'd argue that mortgage lending standards remain very reasonable, and that the problem is not "overly tight" standards, but that we are reaping the whirlwind caused by lending standards that were far too loose for far too long.

Stay with us on this.

The loose lending era stimulated a lot of artificial, unsustainable demand, which drove prices way out of line with any reasonable market fundamentals.

It is the aftermath of this era - too much supply and not enough legitimate demand - that's driving prices down and putting many homeowners ass over tea kettle on their mortgage, not tighter lending.

No amount of yearning for the ridiculous-redefined-as-reasonable lending standards of three years ago will fix that. Those days are thankfully gone, they aren't coming back, and we'll be lucky if we escape the whole mess with an intact financial system.

[quick aside: It is also amusing that an organization so quick to blame the Media for "talking down" the real estate market is essentially trying to convince the public that mortgages are so hard to get you shouldn't even bother to try, when that really is not the case.  We'd argue this hurts demand, and does not help their cause.]

Now, lending standards have tightened, for sure, and the cost of borrowing for some (still creditworthy) borrowers has increased, but just as a for instance:

Here's a snapshot of what a typical (average credit, has a job, with a non-excessive amount of consumer debt) owner occupant borrower can do to finance a home in the Twin Cities:

1. She can purchase a home, using conventional 30 year fixed rate financing, for 5% down.
2. She purchase a home, with 3% - 3.5% down, with an FHA 30 year fixed rate mortgage.
3. She can purchase a home, using "Jumbo" (loan amount > $417K) financing with 10% down.
4. She can split a Jumbo loan in two, using a conforming (<=$417k) first mortgage, and a second mortgage, to avoid egregiously high "Jumbo" fixed rates.
5. She can qualify for a monthly mortgage payment that takes up more than 50% of her gross monthly income.
6. If she happens to be a first time buyer, she can get a reduced interest rate and up to $15,000 in targeted down payment/closing cost assistance.

With the exception of Jumbo financing, in any of the above cases, even assuming the very worst (but still acceptable) credit profile, our borrower would be hard pressed to pay more than 6.75% for a 30 year fixed rate, and if she had good to very good credit, a rate of 6% or less is in play.  Hell, with an FHA, the down payment does not even need to be hers - it can be a gift from a relative.

Now we ask you, in reading the above, does this strike you as an "overly tight" lending environment?

And to the Realtors in the audience: Don't be afraid to let your clients know that getting a mortgage is not as tough as they may have been led to believe.  Come on in, the water is fine.

09/24/08 at 11:58 AM Permalink | Comments (4) | TrackBack (0)
Filed Under: Financing Options, First Time Buyer, Market Stats

July Stats for Twin Cities Show Mixed Outlook for Housing Market

We'd be remiss in not pointing out that the local realtor orgs have disgorged the July numbers.

Jim Buchta at the Strib hits the high points:

• Home sales up 6.2% from a year ago.
• Pending home sales notched the first monthly increase in 30 months, still down 7.6% year-over-year

An increase in sales and pending sales is touted as perhapsmaybe an early sign of a turnaround or "bottom."  It might well be, but before we start toasting, remember a few points:

1.  Sales are up, but at what price?  Yes, more sales will help clear out the excess inventory, which is part of the problem, but lots and lots of sales at ever lower prices will not a turnaround make.

2.  Month-to-month data on pending home sales can be noisy/volatile: A single month-to-month increase in the last 29 months is not necessarily a sign of a nascent turnaround.  Simply that July was better than June.  If we string a few of these months together, that may mean something, BUT

3.  Pending sales are not closed sales: They are signed contracts pending closing. Nothing more, nothing less.  In our experience, and from what we have heard from nearly everyone in the industry, (and with "lender-mediated" - foreclosures, short sales, etc. - sales accounting for something like 20-30% of activity,) the pull-through rate on pending sales is as poor as any time in recent memory.

In other words, many pending sales, and more than what most would consider "normal" simply never make it past the contract stage, and don't close.  (lots of reasons for this, but that is another post.)

Says Jeff Allen, head stats dude the MAAR, (and creator of the research blog The Skinny) who was kind enough to answer a couple of questions on this for us:

"Cancellation rates on pending sales are tough to quantify right now. Normally, we see closed sales follow a similar trajectory as pending sales a month or two later.  We have not seen this same level of correlation recently."

Jeff also promises a sexy graphic illustrating the divergence of pending vs. closed sales, which we will run right here if he can mash the data for us and make pretty.

08/13/08 at 04:43 PM Permalink | Comments (3) | TrackBack (0)
Filed Under: Market Stats

All Real Estate Is Local: Best and Worst Zip Codes

Felix Salmon has up a great little graphic (via Jake at Econompic Data) based on a Businessweek comparison of the best and worst performing zip codes in major metropolitan areas.

A very simple way of pressing home the point that despite the general negativity in the real estate market, some areas continue to appreciate, (and these areas tend to be of the long established and higher-priced ilk.)

In the Twin Cities, North Oaks nabbed the top spot, marking 15% appreciation.  South Minneapolis's 55409 (basically the Kingield neighborhood and other areas east of Uptown near 35W) zip code saw a 24% drop.

08/04/08 at 10:54 AM Permalink | Comments (0) | TrackBack (0)
Filed Under: Market Stats, Minneapolis, Reports & Research, Twin Cities

Home Price Declines: It Aint Over Until It's Over

With the S&P Case Schiller Home Price Index posting record declines for May, the old adage holds: It Ain't Over Til It's Over.

As for the Twin Cities, the decline was only very slightly better than the composite averages, as you can see below (click to biggify.)

As we always point out, these metro area focused numbers may not apply to your own backyard, so for more specific city-by-city data, The 100, published by the Minneapolis Area Association of Realtors, is a great place to start.

07/29/08 at 10:13 AM Permalink | Comments (0) | TrackBack (0)
Filed Under: Market Stats

Case Schiller Says: Twin Cities Market Still Contracting

No surprise here, as the S&P/Case Schiller Home Price Index shows the continuing unwind of our local real estate market.  Median sales prices for March (year-over-year) were down 14.1%, in near lock-step with the reported national average of 14.4%.

Bloomberg reports the most useful summary, which can be applied to our market, and nearly all others:

"There is excess supply, weakening demand, prices are falling and will continue to fall,'' said Kevin Logan, senior market economist at Dresdner Kleinwort in New York. "Housing sales are still trending lower.''

We'd only add that demand in many quarters is not so much weakening as it is being curtailed by tighter lending standards and those that can't sell their current home (at a loss) to enter the market as buyers.

05/27/08 at 01:52 PM Permalink | Comments (3) | TrackBack (0)
Filed Under: Market Stats, Minneapolis, Reports & Research, Twin Cities

Foreclosures: Impact on Real Estate Market May Not be as Severe as Expected

We're talking about foreclosures and short-sales folks, or, as a new report from the Minneapolis Area Association of Realtors terms it: Lender-Mediated Sales.

Jeff Allen, research director at the MAAR and Aaron Dickinson, Edina Realty agent (and blogger) are responsible for this tight little report, entitled "Foreclosures and Short Sales in the Twin Cities Market" which gets to the heart of some questions that have been on a lot of minds lately. 

Chief among them: Just how much of the current market activity is foreclosure/short sale related, and what are the broader impacts?

The report itself confirms a fact that many of us tracking the issue anecdotally have suspected: Almost 30% of closed sales (Q1 2008 - see graphic above) are/were in some stage of foreclosure or other "lender-mediated" status, such as a short sale.

One surprising data point gleaned by Jeff and Aaron was the fact that there is a fairly stark dichotomy between lender-mediated and traditional real estate activity in our market.  Check out this graphic:

The key takeaway from this is that Median sales prices outside the universe of lender-mediated properties have only deteriorated by 3.9% over the last year.  One possible conclusion to be drawn from this is that the rising tide of foreclosures and short sales lender-mediated listings and sales are not putting as much downward pressure on prices of traditionally marketed properties as we would have imagined, and has been reported.

This obvious good news is also seasoned by this fact, from the report:

The actual number of traditional seller new listings has fallen by 27.4 percent over the last two years...So clearly, homeowners are holding steady in their current residences with greater frequency and home builders are producing far less new inventory.

In other words, many sellers, sensing a bear of a market, are simply opting out, while those that are selling, aren't taking nearly the bath that one would expect.

Though it is still early on, and we have a lot of ground to cover before the real estate contraction is over, this report presents a far more optimistic view of the state of our housing market than we, and many others, would have expected. 

Yes, prices are falling dramatically in the aggregate, but the bulk of the carnage is occuring in the lender-mediated market, and the traditional market is holding up rather well, all things considered.

Anyway, go read the report - too much good stuff to list it all here - and kudos to Jeff and Aaron for putting this together.   

05/06/08 at 08:45 AM Permalink | Comments (14) | TrackBack (0)
Filed Under: Foreclosures, Market Stats, Reports & Research, Short Sales, Twin Cities

Around the Horn: Local Blogs on the Twin Cities RE Market

Wanted to take a moment to hoist up a few posts from Twin Cities real estate blogs that caught our eye (in other news: Pending Home Sales are Down 22% yoy nationally)

Teresa Boardman publishes the tough-to-get-at numbers nobody wants published:

[U]sing data from our RMLS which is deemed reliable but not guaranteed I come up with 2223 single family homes, condos, and town homes currently on the market in St. Paul.  Of the 2223, 667, or 30% of them are in some stage of foreclosure.

There is no special category for short sales or foreclosure listings in the MLS...To get the data out of our MLS system I had to read both the agent comments and public comments on every single one of the 2223 listings....

Jeff Allen, research director for MAAR, notes a divergent trend in inventory at certain price points:

If you compare the number of homes for sale today with the same time a year ago, five of the eight price ranges we track actually have less on the market. Only the three price ranges under $190,000 have more on the market now than they did a year ago. Home sellers who are priced at $190,000 or above actually have less competition for buyers this year than they did last year.

Ross Kaplan at the City Lakes Real Estate Blog unpacks the marked decline in newspaper advertising:

My (extremely prominent) ad is the only ad running in the local city section. This despite the fact that there now exactly 364 other residential properties for sale in St. Louis Park.

This is no doubt a commentary on the decline of newspaper advertising; last year, Edina Realty decided -- correctly I believe -- to drop its Star Trib ad page to focus on its own branded Web site. However, it's also a testament to the state of the market. Early April is usually the height of the Spring market in the Twin Cities. In previous years, one would have expected to see 15-20 ads, minimum, where my solitary ad appeared.

Clearly, realtors are pulling back on their marketing budgets.

04/08/08 at 09:48 AM Permalink | Comments (1) | TrackBack (0)
Filed Under: Foreclosures, Market Stats, Minneapolis, St. Paul, Twin Cities

Index Fever: Behind The Home Sales Headlines

With Today's release of the Case-Schiller home price index showing record declines, and the new OFHEO Monthly Index (PDF!) hitting the street, it is appropriate to point out a fact the we've discussed before:

There is no such thing as a "National" real estate market.  Or, put another way: National real estate statistics don't necessarily have any meaning or import for our local market, and as we've explained before, even the idea that there is a homogenous "Twin Cities" real estate market is misleading. 

For instance, we know from last week's post that Twin Cities Home Prices declined 12.5% in February, but if we drill down further into the data, you'll find some surprising variation.

In Minneapolis, comparing February 2008 with February 2007, the Average Sales Price declined 19.4%. Within that figure, however:

• Longfellow average sales price declined 37.2%
• Northeast Minneapolis average sales price increased by 7.6%

Get outside of Minneapolis into the suburbs, and there is a similar story:

• Edina's average sales price swelled by 14.1%
• Minnetonka's average increased by 26.2%
• Saint Louis Park's average sales price decreased by 2.7%
• Golden Valley's Average Sales price declined by 19.7%

Now, the above numbers can be skewed by sample size (in Minnetonka, there were only 21 closed sales in February, Saint Louis Park only closed 34) and seasonal variations, so this data may speak to how little real estate activity there actually is, as much as it describes the hyper-local nature of real estate price fluctuations. 

But you get the point.

Anyway, the preceding paragraphs are a very long segue into this point: Take any headlines relating to the real estate market with a dose of salt, and consider your source, and read the full content critically. 

Yesterday's existing home sales report is a prime example.  Let's look at a few headlines:

Existing Home Sales Post Surprise Rise [Rueters]
Existing Homes Sales in US Unexpectedly Increased [Bloomberg]
Home Resales Pick Up [NYT]

Headlines like that might lead the casual observer to conclude that the worst is behind us, and the real estate market is on the mend.  But a deeper look at the underlying factors might lead to a different conclusion:

• The reported 2.9% rise in home sales only represents a rise in February as compared to January - two notoriously slow real estate months subject to a lot of seasonal statistical "noise," weather, etc.
• Compared to February of last year, February 08 home sales have declined 23.8%
• Inventory remains elevated, and prices continue to decline precipitously in many areas.

Does not present quite the same rosy picture, does it?

Believe us when we say we are as anxious as the next person for a return to a normal, balanced real estate market - and since these decisions are almost never made on the basis of price alone, even now there remain many good reasons to buy.  Just be sure to dig deeper than headlines and National AP articles if you want to take the pulse of your hood.

Data and Stats Courtesy of The 100, By MAAR [mpslrealtor.org]

03/25/08 at 11:49 AM Permalink | Comments (7) | TrackBack (0)
Filed Under: Market Stats, Twin Cities