Housing Market Takes Small Strides Toward Recovery

The housing market is moving in a positive direction toward improvement, according to the latest Minneapolis Area Association of Realtors (MAAR) report.

"Sellers listed 5,562 new homes on the market, down 16.8 percent from last year. Buyers entered into 3,752 purchase agreements, up 37.4 percent over September 2010 levels. That's the fifth consecutive month of double-digit, year-over-year gains in buyer demand—primarily driven by slowed activity at this time in 2010," MAAR said.

MAAR also reports that the market is experiencing the largest inventory decline in more than seven years. Rosemount data shows similar trends.

"A leaner inventory count combined with stronger purchase demand has moved the market toward balance," MAAR said.

"The trends are incongruent on the surface. When the number of new listings decreases, and the number of homes sold increases, we would expect to see home prices increase. However, the median sales prices of homes continued to decline," Sheryl Petrashek, a local Re/Max realtor, said. "Buyers are purchasing the lowest priced properties, usually the bank-owned homes and short sales.  It’s true, there are more buyers than last year at this time, and they are purchasing distressed properties instead of traditional sales."

Last year for the months of August/September, the average sale price for Rosemount homes was $218,294. This year at the same time, the average sale price of Rosemount homes has decreased to $190,043, according to Petrashek.

"A significant factor pointing to positive signs for Rosemount real estate is the decline in inventory of homes, combined with the increase in total purchases," Petrashek said. "If the decline of inventory of homes continues, traditional home sellers may evade the need to reduce asking prices any further." 

"There is a proven relationship between absorption rates and price stabilization," said Brad Fisher, president of the Minneapolis Area Association of REALTORS®. "But, there is typically some lag time between improved market balance and price movement."

"[However], when buyers continue to purchase distressed properties instead of traditional homes, traditional home sellers are pressured into reducing their prices to better compete with the distressed homes," Petrashek said.

There is one more positive trend Petrashek wanted to touch on. "Banks have finally begun to do a better, more efficient job of approving short sales. Increasing the efficiency and probability of getting a short sale approved has been enough encouragement for buyers to pursue these distressed homes with more confidence. Traditional home sellers can no longer simply highlight their ‘non short sale’ status as a way to attract buyers."

"[Basically], what we're seeing is beyond the usual seasonal improvement," said Cari Linn, MAAR President-Elect in a MAAR release. "Small steps, for sure, but taken without outside incentives. That's progress in my book."