The Skinny

Minneapolis and Saint Paul: Partners in Foreclosure Absorption

Our two central sister cities—Minneapolis and Saint Paul (what, you were expecting Lakeville and Burnsville?)—have launched an ambitious collaboration designed to encourage consumers to purchase homes within their borders. With lender-mediated properties comprising a healthy chunk of the homes for sale in each city, we have to assume that the effort is motivated in part by a desire to see those properties become owner-occupied.

The fruits of their labor is a now-live website called LiveMSP, and it gives users the opportunity to learn more about any of the 80-plus neighborhoods in the two cities (here's the page for Powderhorn Park in Minneapolis, for example), as well as every financial incentive for home ownership or renovation available.

From a Strib story on the subject:

With thousands of foreclosed homes -- about 3,000 in Minneapolis and 2,000 in St. Paul -- the website, in conjunction with many new financing programs, is the latest weapon aimed at spurring home sales.

"This is the first time all this information has been pulled together, and the first time that Minneapolis and St. Paul have used social networking sites to promote housing,'' said Natalie Fedie, a project coordinator at the St. Paul Department of Planning and Economic Development.

All in all, the level of collaboration is impressive and should be applauded. As a long-time urban dweller who's lived in both cities, it's fun to see the two work together.

Click here to access LiveMSP.com and learn more.

Weekly Market Activity Report 4.27.09

Low mortgage rates, high affordability and government programs designed to encourage home purchases are continuing to spur home sales this spring despite an iffy economy. The week ending April 18 was the fourth consecutive week of pending sales activity that was more than 20 percent higher than during the same week in 2008. There were 1,083 pending sales for the week, up 21.3 percent from this time last year. It was also the third consecutive week of 1,000-plus unit sales, a first-time occurrence since 2006.
 
All these sales are quickly whisking inventory off the market at a time when new listing inventory is not growing at its typically robust spring rate. The number of total homes for sale is down 18.4 percent from a year ago at 26,318. As a result, the gap between this year's supply of homes and that of previous years continues to grow.

Click here for the full Weekly Market Activity Report.

Gallup: Jump in Home Buyer Confidence

Each year, the Gallup organization takes a poll of thousands of consumers to get a feel for whether or not they think it's a good time to buy a house.

Not surprisingly, the numbers have taken a beating the last three years. In 2008, the percentage of respondents who believe that it was a good time to a buy a house stood at 53%, the second lowest mark since 1979 (the dreaded era of 14%+ mortgage rates). This year? It skyrocketed up to 71%. The visual, courtesy of Gallup:

 

Boom-shakalaka.

Weakened consumer confidence in housing has long been a hurdle to reviving home sales activity. It likely took the same media coverage of falling housing prices that REALTORS® are often quick to rail against as "negative hysteria" to spur consumers into actually believe that it was a good time to buy again.

Department of Duh: Web Searches for Interest Rates Way Up

Another great piece from the always-interesting Hitwise Intelligence blog, which tracks the online search activity of consumers all over the world to get a feel for what we're interested in.

The folks at Hitwise compared the historical interest rates from the Bank of England with the amount of search activity that involved "interest rates" to see if there's a correlation. And, well, duh: when mortgage rates go down, search activity goes up. The visual:

While this post is based on search behavior from the UK, as opposed to North America, the trend lines are probably similar in our neck of the woods. There's been a huge uptick in searches for mortgage rates, which also helps explain the massive growth in loan applications and the recent jump in home sales.

Weekly Market Activity Report 4.20.09

Hopeful signs of a Twin Cities housing market recovery carry on thanks to a combination of no growth in the spring supply of homes for sale and still-improving sales figures.

Helping to keep inventory down is slow new listing activity, a metric that has been sluggish all year. For the week ending April 11, there were 20.7 percent fewer new listings than there were during the same week in 2008. Pending sales are still trending in the opposite direction, up 21.9 percent in year-over-year numbers to 1,046 for the week. That's only the second week of 1,000-plus pending sales or more since May 2007. If these two metrics persist, the market could be in for some serious re-balancing.

With the Housing Affordability Index reaching 218—an increase of 40.8 percent over last year—it seems to be an awfully good time for buyers to get off the wall and on the dance floor...being mindful that 29.1 percent of the dance partners are lender-mediated.

Click here for the full Weekly Market Activity Report.

Finding Price Bottoms: Months Supply of Inventory for Foreclosure and Short Sales

We announced yesterday that the number of foreclosures and short sales on the market in the Twin Cities has dropped over 1,200 units from February to April. That's undoubtedly a valuable measurement, but it also helps to look at metrics that take into account both supply AND demand like Months Supply of Inventory (MSI) to get a feel for where we're at in this market cycle.

A quick review on MSI: MSI measures the amount of time (in months) that will take the current number of homes for sale to sell through completely given the current sales rate. The higher the number, the more supply there is relative to demand, the tougher it is for sellers, the longer it takes to sell a house. The lower the number, the less supply there is relative to demand, the easier it is for sellers, the less time it takes to sell a house.

A market that's balanced between buyers and sellers is considered one in which there is roughly a 5- to 6-month supply of homes for sale.

So, what has the recent drop in inventory of lender-mediated properties meant for MSI in the Twin Cities market? Take a look:

In the last year, the MSI of lender-mediated properties has dropped 66.2 percent from an extreme buyers market of 15.6 months supply to a relatively balanced market of 5.3 percent. The traditional market has dropped very slightly from 9.7 months to 9.5 months.

What does this picture look like historically? Glad you asked. Take a gander at this here chart:

 

Lender-mediated MSI reached a peak of about 18 months supply during 2006. Since then its been on a general path downwards despite growing inventory thanks to increasing sales. The traditional market has been on a general path upward during that time period, though it appears to have plateaued somewhat this year.

Important takeaway #1: The foreclosure and short sale segment is not a buyer's market anymore and likely will become a seller's market in 2009, which will likely lead to a price bottom for that segment.

Important takeaway #2: The traditional market still sits firmly in the buyer's market category with 9.5 months of supply. Further price declines should be expected.

Just Released: Q1 2009 Foreclosures and Short Sales Update

The Q1 2009 Update to "Foreclosures and Short Sales in the Twin Cities Housing Market" was just released to public and media. There's some more encouraging signs in this edition, most notably in the data plotted on this here chart of historical lender-mediated inventory:

 

Two things you're probably taking away from this vexxing visual: (1) Holy crap, there's a lot of lender-mediated houses for sale today than there was 5 years ago and (2) Wow, the number of lender-mediated houses for sale has really come down a lot in the last few months. You're right on both accounts.

After four years of exponential growth, the number of lender-mediated properties for sale dropped by more than 1,200 units from February 1 to April 1 of 2009. The decline is even more impressive considering that the spring market typically sees an increase in the number of homes for sale.

The drop can be attributed in part to flattening new foreclosure and short sale listing activity, but mostly it is related to heavy home sales spurred by the likes of plunging mortgage rates, a federal $8,000 tax credit for first-time home buyers and record affordability.

This quarter's edition again features an interactive, sortable data table that lets you dig into neighborhood-level lender-mediated trends. Click on any neighborhood name to get a 2 page update on lender-mediated and traditional housing activity in that area. Those look like this:

 

April Monthly Skinny Video is Online

The April Monthly Skinny Video is all up in your interwebz and its another quickfire update on the Twin Cities housing market, this time narrated by REALTOR® and MAAR board member Emily Green.

This one's got fancy sound effects and animations courtesy of our resident video guru, Chelsie Foty.

Visit here for to view or just click the embedded clip below.

Fun With Maps Volume III

Courtesy of us guys and our 2008 Residential Real Estate Activity Report(aka "The RREAR"), below is a map of lender-mediated activity in the Twin Cities housing market. The darker blues are those with a highest concentration of their 2008 sales were lender-mediated, while the lighter areas are those with a lower concentration.

I suppose technically this contradicts the stated intent of this series, since looking at this map isn't particularly "fun." But it is valuable and deserves attention.

Click here for a larger version.

 

The data:

District	Area	Lender-Mediated
305	Mpls – North	71.8%
742	SP – Central	70.0%
363	Brooklyn Center	66.5%
301	Mpls – Camden	66.2%
716	SP – Hillcrest/Hazel Park/Daytons Bluff	60.7%
307	Mpls – Phillips	59.8%
758	Northwestern Anoka County	57.7%
728	SP – Riverview/Cherokee	56.5%
714	SP – Phalen	55.3%
754	Big Lake Township	55.1%
364	Brooklyn Park	53.3%
713	Bethel	52.9%
780	Sherburne County	50.7%
782	Isanti County	50.7%
783	Cambridge	49.6%
340	Buffalo	49.4%
308	Mpls – Powderhorn	48.9%
756	Elk River	47.5%
767	Coon Rapids	46.9%
770	Hilltop/Columbia Heights	46.0%
707	Ham Lake	45.8%
711	Southern Chisago County	44.9%
769	Anoka	44.5%
720	SP – Southeast St. Paul	43.6%
648	New Prague	43.1%
738	SP – Home Croft/W 7Th	42.3%
710	Northeast Anoka County	42.0%
650	Belle Plaine	41.6%
762	Andover	41.0%
771	Spring Lake Park	40.3%
361	Crystal	40.1%
600	West St. Paul	39.8%
646	Jordan	39.3%
360	Robbinsdale	39.0%
722	Newport/St. Paul Park/Cottage Grove	38.9%
760	Ramsey	38.8%
640	Shakopee	38.2%
341	Wright County (Except Buffalo)	37.6%
602	South St. Paul	37.5%
612	Burnsville	36.5%
624	Farmington	36.5%
784	Northern Chisago County	36.2%
772	Lexington/Circle Pines	35.4%
709	Forest Lake Area	35.4%
617	Hastings	35.3%
768	Fridley	34.9%
367	Hennepin-North	34.3%
721	Lakeland/Afton/Denmark	33.9%
379	Bloomington-East	33.2%
366	Champlin	33.2%
725	Pine Springs/Lake Elmo/Oakdale	33.0%
712	Maplewood/North St. Paul	32.9%
362	New Hope	32.8%
386	Hopkins	32.2%
764	Blaine	32.1%
642	Prior Lake	32.1%
368	Hennepin-Northwest	31.4%
628	Southern Dakota County	30.8%
370	Sibley County	30.4%
306	Mpls – Northeast	30.2%
610	Eagan	30.0%
614	Apple Valley	29.5%
705	Lino Lakes/Hugo/Centerville	28.1%
608	Inver Grove Heights	27.7%
632	Rice County	27.4%
746	SP – St. Anthony/Midway	26.7%
397	Chaska	26.5%
740	SP – Crocus Hill	26.0%
343	Mcleod County	26.0%
626	Lakeville	25.8%
378	Richfield	25.0%
660	Goodhue County	24.9%
303	Mpls – Longfellow	24.9%
644	Savage	23.4%
616	Rosemount	23.0%
304	Mpls – Nokomis	22.9%
381	Lake Minnetonka	22.8%
394	Carver County	22.7%
726	Woodbury	22.5%
708	White Bear Area	21.4%
658	Le Sueur County	21.4%
727	Stillwater/Bayport	21.2%
618	Eastern Dakota County	20.0%
748	SP – Town & Country/Merriam Park	19.4%
365	Maple Grove/Osseo	19.4%
766	Moundsvw/New Brightn/St. Anthny Vilg	19.0%
741	SP – Downtown/Capital Heights	18.8%
310	Mpls – University	18.7%
706	North Central Suburban	18.5%
380	Bloomington-West	18.0%
744	SP – Como	17.3%
630	Northfield	16.5%
765	Arden Hills/Shoreview	16.0%
392	Eden Prairie	15.7%
387	Minnetonka	14.7%
342	Hutchinson	14.7%
391	Saint Louis Park	14.0%
396	Chanhassen	13.9%
373	Golden Valley	13.7%
300	Mpls – Calhoun-Isles	13.5%
752	SP – Highland Area	12.7%
604	Mendota/Lilydale/Mendota Heights	12.4%
309	Mpls – Southwest	12.0%
374	Plymouth	12.0%
702	Falcon Heights/Lauderdale/Roseville	11.5%
398	Victoria	9.9%
302	Mpls – Central	9.9%
385	Edina	8.1%
750	SP – Mac/Groveland/River Road Area	7.8%
605	Sunfish Lake	0.0%

Weekly Market Activity Report 4.13.09

It’s becoming a wild and active spring for the Twin Cities housing market. First, pending sales ought to give REALTORS® some joy in their Easter baskets, with 1,004 reported for the week ending April 4—a 28.7 percent increase over last year and the best single week since May 2007. New listings went skyward compared to last week with 2,055 for the week ending April 4, but they remain 11.2 percent behind the same week a year ago.

The recent jump in sales is bringing the supply of available homes down even further. There are currently 26,085 homes on the market in the region—17.5 percent below this time last year and good for 7.7 months of supply.

Finally, like Warren Robinett in Adventure, this week’s WMAR has its own Easter egg tucked away. The Housing Affordability Index for April has grown to 218, which means the median family income is 218 percent of what’s necessary to qualify for the median priced home. For those of you scoring at home, that’s a 40.8 percent increase over where we stood last year at this time and is 77.3 percent over our low point of 123 in July 2006. We have to bear in mind that increased lender-mediated activity makes that number supernaturally high.

All in all, dropping prices, low mortgage rates and government incentive programs for home buyers are making this a spring to remember.

Click here to view the full Weekly Market Activity Report.

Home Sales Heat Up

We released our monthly stats news release today. Here's what we said:

Twin Cities home sales kicked into a whole new gear in March, according to the Minneapolis Area Association of REALTORS® (MAAR) based on data from the Regional Multiple Listing Service of Minnesota, Inc.

This is more than just a seasonal shift. The 4,407 pending sales in March 2009 were up 21.3 percent from March 2008. That's ten consecutive months of year-over-year increases in pending sales and the largest such increase since December—another month in which mortgage rates dropped precipitously. First quarter pending sales are up 13.7 percent from 2008, a jump of 1,267 units.

Of the month's pending sales, 53.5 percent were lender-mediated foreclosures and short sales—down from the last two months.

The median sales price for all properties of $154,125 in March is down 22.9 percent from a year ago, skewed heavily downward by the increased prevalence of foreclosures and short sales. The median March sales price of traditional homes was $215,000, down 2.3 percent from a year ago. Lender-mediated homes posted a March figure of $122,000, down 23.0 percent from a year ago.

Three key barometers of market recovery showed signs of hope in March:

1. The March Average Days on Market Until Sale is 9.0 percent lower than a year ago.
2. The March Percent of Original List Price Received at Sale is 0.6 percent higher than a year ago.
3. The April Supply-Demand Ratio, which measures the number of houses for sale per buyer, is 23.5 percent lower than a year ago.

An uptick in sales over the last ten months has combined with a decline in new listings to draw down the total number of houses for sale. There are 26,104 homes for sale in the Twin Cities, down 14.8 percent and 4,548 units from one year ago.

April Housing Supply Outlook

The April Housing Supply Outlook just hit the streetz, y'allz. As usual, here's a few items to keep an eye on in this highly detailed monthly report:

• New construction homes continue to go the way of the dodo bird. There are currently 3,149 new construction units listed for sale in the MLS system, down 25.0 percent and over 1,000 units from a year ago. Unfortunately, sales are down even farther, which has pushed the Months Supply of Inventory for new construction properties up to 11.3 months.

• You may have heard the news that home sales are increasing in the Twin Cities. The rise is entirely in the single-family detached segment, however, as both townhomes and condominiums are selling less frequently this year than they did a year ago.

• Similarly, the recent uptick in sales has missed the upper bracket market. Home sales above $190,000 are down 20.0 percent in the last year.

Click here for the full April Housing Supply Outlook.

Weekly Market Activity Report 4.6.09

There's no April Foolin' this time of year regarding the Twin Cities housing market. We're able to report several encouraging signs this week as the market seems to be "Def" to any signs of slowdown.

 

For the week ending March 28, pending sales continue to reflect strong growth, increasing 28.2 percent over last year. Our oversupply continues to draw down, with new listings declining by 12.2 percent for the same time period comparison. The total number of houses for sale is 26,131, a decline of 16.2 percent from this time in 2008.

 

Meanwhile, there are three key indicators of recovery at work: (1) Days on Market Until Sale continues its downward trend, dropping 9 percent over last year to 150 days (2) Percent of Original List Price Received at Sale is definitely not Bringin' on the Heartbreak as we're showing our first upward year-over-year move in (a rock of) ages, increasing by 0.6 percent this month (3) Our Supply-Demand Ratio fell to 5.57, which means there are 5.57 houses for sale for each buyer in April, down 23.5 percent from last year.

 

With mortgage rates at historic lows and the $8,000 federal tax credit for first-time home buyers, it's not surprising to see some positive hysteria in our local marketplace. We're certainly excited; thus the untucking of our dress shirt this week. It's been a long time since we've been able to pour some sugar on you.

 

Click here for the full Weekly Market Activity Report.

 

Two Stories That Explain Each Other Perfectly

A lot of attention is given every month to the release of the Case-Shiller Index, a national gauge of housing values with a unique statistical process. While there are undoubtedly both pros and cons to the methodology, the REALTOR® community has been unnecessarily venomous to the Index, often calling it out as some sort of quackery. So let me make it clear up front that the point of this post will not specifically be to harangue it.

But...

Much ink was spilled yesterday about the release of the January Case-Shiller Index, which showed January's housing prices falling by a record amount. The typical headline for this story reads much the way the Star Tribune's take on the story does: Twin Cities Home Prices Suffer a 20% Plunge. And our overall median price numbers from MLS data show a very similar picture, with recent declines in prices reflecting 20-25%. In other words, dear homeowner: your home lost 20% of its value in the past year.

But the problem with this oversimplified assumption, and the problem with the world's current statistical tools for measuring the movement of housing prices (both for Case-Shiller's methods and for ours) is that what kinds of properties are being sold is having a dramatic skewing effect on our metrics.

Case-Shiller's methods do not account for distressed foreclosure or short sale properties, which comprised roughly 60% of Twin Cities home sales in January and February.

How fitting then, that the Star Tribune has a great story the day before the launch of the January Case-Shiller numbers that helps explain the 20% drop in overall home prices to perfection:

The market for foreclosed and stripped houses has gotten so bad on the North Side of Minneapolis that lenders are walking away from some closings barely clearing any money when they unload a house.

Just ask real estate agent Scott Ficek. He represented investors at a closing Friday at which the lender walked away with a grand total of $69.60.

That's because normal closing costs plus city assessments against the property at 1914 Russell Av. N. nearly ate up the entire $12,500 sales price.

In the last 9 months, banks and lenders have aggressively discounted the asking prices of their foreclosures in an attempt to clear them from their balance sheets. They've cut prices so far that they're sometimes netting next to no cash on the actual sale of the home. The pleasure of removing the liability from their balance sheet makes the minuscule financial return worth it.

In a world where 50-60 percent of what is being sold is a part of this metrowide "liquidation sale," it's no wonder that the standard metrics are relatively worthless at this point. The market must be separated into lender-mediated and traditional categories to make any sense of it. And so far, traditional home values aren't declining at a clip of anywhere close to 20%. The reality, so far, has been closer to 5%.

Takeaway #1: Take any news story or headline you hear stating that housing prices have dropped "x" percent with a boulder-sized chunk of salt.

Takeaway #2: We need better metrics to understand home prices. Our methods of looking at median price AND the Case-Shiller method of looking at paired sales just aren't getting it done.