The Skinny

October Housing Supply Outlook

The October Housing Supply Outlook just hit your intertubenetz. As usual, here's some quick takeaways from this dense and detailed look at supply-demand dynamics in the Twin Cities housing market:

Takeaway #1: If you're buying a home in the price range below $120,000, you're gonna have to move fast. There's only 2.9 months of supply in that range, which places it in the extreme seller's market category. The reason for the tight inventory picture? There's been a huge upsurge in home buying activity—sales are up 127.5 percent in that category over the last twelve months.

Takeaway #2: The number of new construction properties available for sale continues to shrink rapidly as builders pull back from creating new inventory. The current inventory of 2,426 listed new construction properties in the MLS system represents a drop of over 1,200 units from a year ago.

Takeaway #3: Unfortunately for builders, new construction home sales have also rapidly declined, falling by 18.8 percent (over 800 units) in the last twelve months.

Click here for the full Housing Supply Outlook.

 

Weekly Market Activity Report

Fall is officially on in the Twin Cities, but it hasn't slowed the housing market as much as usual. After the school year begins, we typically see a drop in buyer activity, but the 2009 fall market is remaining robust due in large part to the final weeks of the tax credit for first-time home buyers. There were 1,056 pending sales for the week ending September 26, up 41 percent from the same week last year.
 
As a direct result, inventory is dropping like a stone. There are approximately 24,500 homes for sale in the 13-county metro area, down more than 20 percent from a year ago.
 
The October 2009 Supply-Demand Ratio (SDR) comes in at 6.88 houses per buyer, down 22.5 percent from last year. The SDR has shown year-over-year drops of 30 percent or more for the past few months, but we're projecting that the year-over-year decline for October will be smaller because pending sales are likely to be significantly lower if the federal tax credit for first-time buyers is not extended. If the credit goes *poof*, it will remove buyers from the market.

Click here for the full Weekly Market Activity Report.

 

Weekly Market Activity Report

The Labor Day fluctuations came and went, and the Twin Cities housing market is better for it. Pending sales for the week ending September 13 rose dramatically to 1,043, which is 33.5 percent above last year's total for the same week. We must assume that a healthy chunk of this buyer activity can be attributed to first-time home buyers taking advantage of the tax credit before it expires on November 30.

New listings came in at 1,846, up 3.2 percent in a year-over-year comparison. Home sellers have recognized a window of opportunity in recent months and are listing with a little more frequency, but the overall inventory of houses for sale is still below that of the last three years and our Supply-Demand Ratio (which measures the number of houses available per buyer) remains 30.3 percent better than where we were a year ago.

Click here to see the full Weekly Market Activity Report.

Traditional Sellers: It's "Go" Time

Or so says local REALTOR® and our data-friend (is that a word?), Aaron Dickinson in a recent blog post.

With foreclosure inventory dropping like a stone and often subject to multiple-offer price wars, and short sales still requiring a substantial amount of time and effort to close, Dickinson argues that traditional sellers have a unique window of opportunity in the fall market to nab a buyer. And that's especially true for first-time buyers who need a quick close to get in before the November 30th tax credit deadline.

From the post:

• The first time home buyer $8000 tax credit expires on November 30, 2009 and most transactions take 3-5 weeks to close after an offer is made.
• Buyers will have to have chosen and negotiated on a house by the end of October to have a reasonable assurance of closing prior to the expiration of the credit.
• Banks do not have great concern over deadlines when dealing with REOs, so they are not likely to consider November 30th a “make or break” date even though the buyer will.
• Buyers making offers on short sales risk missing the tax credit if the answer from the seller’s lender takes to long or isn’t acceptable.
• In the coming weeks Buyers will find that the only option they have available to them has been the one who has been ready and waiting for this moment: the Traditional Seller.

If you are a Traditional Seller and your house is currently listed, keep it listed through Halloween if you can.  In past years the market quickly quiets after school starts but this year appears to be very different.  If you’ve been considering taking an additional price reduction, take it as soon as you can so you are priced correctly when the buyers’ interest swings your way… this will likely be you last-best-hope for selling till March 2010.

As we noted in our post from last week (see "Neighborhoods Where Traditional Homes are in Shortest Supply"), this has already started, to a degree. Sales of traditional, non-lender-mediated homes are up below $150,000 where first-time buyers can afford.

Sounds like "go" time for sellers.

 

Weekly Market Activity Report

Once again, the six-day gap between where Labor Day fell in 2008 and where it fell this year is causing our year-over-year weekly numbers to look weird. For the week ending September 12, you'll see a steep drop-off in new listings and pending sales, but there's no such dip last year.
 
New listings for the week ending September 12 were 1,624, a 12.9 percent drop from this period last year. Pending sales agreements also dropped precipitously to 840 from 1,070 a week ago, 7.3 percent higher than this week last year.
 
Next week's figures should begin to provide more relevant year-over-year comparisons. As the final days of the tax credit tick down (72 days and shrinking), we'll be watching market activity with heavy interest. Stay tuned.

Click here for the full Weekly Market Activity Report.

September Monthly Skinny Video Online

The September Monthly Skinny Video is up live on the internetz now.

This month's edition is narrated by Deb Greene, past-president of MAAR, and is another quickfire update on the Twin Cities market. Click here to view in a separate window or just check the embedded clip below.

Weekly Market Activity Report

In 2008, Labor Day fell on September 1; this year, it fell on September 7. That six-day gap is enough to make our year-over-year comparisons of weekly market activity look a little goofy this week. For instance, for the week ending September 5, there were a whopping 42.9 percent more pending sales than there were a year ago, but this is only because Labor Day—a holiday that notoriously silences the local real estate market for several days—fell during that week last year and didn't this year. Expect similar confusion next week.
 
Independent of these numerical oddities, sales are still extremely robust as the days remaining on the first-time buyer tax credit continues to tick down. 78...77...76...
 
New metrics updated this week:

Housing Affordability Index: At 195, it towers over last year's affordability by 29.1 percent. Falling prices continue to do their job, at least for buyers.

Months Supply of Inventory: The 6.9 months of inventory available is 30.3 percent below this time last year.

Click here for the full Weekly Market Activity Report.

Neighorboods Where Traditional Homes Are In Shortest Supply

Last week we looked at which neighborhoods were seeing their inventory of available foreclosures and short sales dwindling. The general conclusion: lender-mediated properties are going fast and buyers have to be quick and aggressive to secure them.

This week we're looking at the other side of the coin: homes listed by traditional sellers. In general, these properties are not selling quite as quickly than their cheaper lender-mediated cousins and are still facing challenging conditions. As of September 1 there was 10.1 months of traditional supply compared to 4.0 months of lender-mediated supply.

But there are some areas where traditional properties are moving relatively quickly. Let's take a look at the Top 30 neighborhoods by Months Supply of Inventory. You'll probably notice some patterns. Think urban and first-ring suburban, dudes:

Homes Listed by Traditional Sellers
		Months Supply	Active Listings
1	303 - MPLS - Longfellow	2.7	55
2	744 - SP-Como	3.8	51
3	361 - Crystal	4.0	62
4	304 - MPLS - Nokomis	4.3	192
5	750 - SP-Mac/Groveland/River Roa	4.4	72
6	363 - Brooklyn Center	4.8	73
7	378 - Richfield	4.9	118
8	306 - MPLS - Northeast	5.1	123
9	752 - SP-Highland Area	5.1	82
10	308 - MPLS - Powderhorn	5.7	92
11	379 - Bloomington-East	6.0	93
12	362 - New Hope	6.1	60
13	602 - South St. Paul	6.1	67
14	360 - Robbinsdale	6.1	72
15	746 - SP-St. Anthony/Midway	6.2	69
16	310 - MPLS - University	6.4	42
17	309 - MPLS - Southwest	6.4	287
18	748 - SP-Town & Country	6.5	41
19	301 - MPLS - Camden	6.8	150
20	742 - SP-Central	7.0	70
21	738 - SP-Home Croft/W 7Th	7.0	30
22	768 - Fridley	7.1	85
23	770 - Hilltop/Columbia Heights	7.2	78
24	771 - Spring Lake Park	7.3	22
25	766 - Moundsvw/New Brightn/St.Anthony	7.3	150
26	391 - Saint Louis Park	7.4	301
27	702 - Falcon Hghts/Lauderdale/Roseville	7.5	159
28	716 - SP-Hillcrest/Hazel Park/Dayton's Bluff	7.5	191
29	720 - SP-Southeast St. Paul	7.5	39
30	714 - SP-Phalen	7.5	113

There's not a second- or third-ring suburb in the bunch. You'll also notice that these neighborhoods tend not to contain too many expensive homes. The median prices in these neighborhoods tend to fall in the low-to-mid ranges that are affordable to a larger swath of home buyers. And when you think about perhaps the largest factor driving buyer demand right now, it makes a lot of sense: the first-time home buyer tax credit, dummy.

Let me show you what I mean:

 

I'd call that a pattern.

First-time home buyers are extremely active due to the tax credit and—unless mom and dad have chipped in a ridiculous amount of money to help—first-time home buyers don't typically buy homes in the $500,000 and above price range.

What we've got is an extremely bottom-heavy market (insert inappropriate metaphor here) with robust activity in the price ranges typically populated by first-time buyers, and a declining market still searching for a bottom in the higher price ranges.

Takeaway: traditional home sellers in the mid-to-low price ranges have a serious window of opportunity for the next month to find a willing buyer, especially with foreclosure inventory becoming so scarce. When the tax credit expires in November, the landscape might look a little different.

Prices Increase as Sales Remain Strong

Home prices continue to show signs of strengthening in the Twin Cities housing market. The median sales price for the 13-county metro region in August was $175,000, down 12.5 percent from a year ago but up once again from July. From March 2009 through August 2009, the median sales price has grown from $154,125 to $175,000. Prices were flat during the same period last year.

Prices are stablizing due to strong buyer demand—especially in the lower price ranges—buoyed by low mortgage rates and the federal tax credit for first-time home buyers. For the 14th consecutive month, there were more pending sales than there were the prior year. August saw 4,897 signed purchase agreements, up 11.0 percent from August 2008.

The growth in sales is no longer confined to lender-mediated homes as it had been earlier this year. Traditional home sales in August were up 4.2 percent from a year ago, and traditional home sales below $150,000 were up 40.8 percent. Homes in the upper price ranges are still experiencing slow conditions.

Good news for sellers: the percent of original list price received at sale continues to improve—the August mark of 94.1 is 1.5 percent higher than last August—and total days on market until sale continues to drop.

The median sales price of traditional homes in June was $209,000, down 8.2 percent from a year ago. Lender-mediated homes posted a May figure of $125,000, down 10.7 percent from a year ago.

With the tax credit expiring in November, closed sales should stay robust for at least the next two months. Time will tell what the market looks like after that, but there will be less inventory left.

September Housing Supply Outlook

The September Housing Supply Outlook is online now. As usual, here's a few quick takeaways from this hyper-detailed look at the Twin Cities housing market.

Takeaway #1: The single-family detached market segment is rapidly approaching a balanced equilibrium. There are currently 6.3 months of supply available in that segment compared to 8.0 and 11.7 months in the townhome and condominium segments, respectively. The lower price ranges of the single-family detached segment are actually now extreme seller's markets, with only 2.3 months of supply available under $120,000, for example.

Takeaway #2: Sales continue to boom below $200,000 as first-time buyers move to take advantage of the final days of the federal tax credit. Expect sales to continue at a brisk pace for the next two months as the "last call before bar close" buyers take advantage of the final days of this substantial market incentive.

Click here to view the September Housing Supply Outlook.

Months Supply of Inventory by Property Type:

Weekly Market Activity Report

For the first time in 9 months, the number of weekly new listings coming on the market was actually higher than it was a year ago. The 1,641 new homes on the market during the week ending August 29 represent a 3.3 percent increase from a year ago. The slight year-over-year uptick is due in part to growth in the number of new, traditional, non-lender-mediated listings.
 
For the most recent reporting week, the number of brand new traditional listings (excluding re-lists that have already been on the market sometime in the last 12 months) has grown 20.3 percent compared to a year ago. Home sellers are becoming more active, likely in response to the increase in home sales seen throughout the year.
 
And if you look at three of our newly updated metrics, it becomes obvious why more sellers are jumping in:

• Days on Market Until Sale – 133 days, a drop of 7.1 percent from a year ago.

• Percent of Original List Price Received at Sale  – 94.1, up 1.5 percent from a year ago.

• Supply-Demand Ratio  – 5.46 homes per buyer in September, down 30.3 percent from a year ago.

Click here for the full Weekly Market Activity Report.

Neighborhoods Where Lender-Mediated Homes Are Getting Scarce

Last week we touched on the quickly changing dynamics of the foreclosure and short sale market in the Twin Cities, where homes are selling at a faster pace and for closer to their original asking price than they typically have in recent history. The Pioneer Press followed up with a story.

This week we're looking at which neighborhoods are seeing their supply of available foreclosures and short sales dwindle the fastest. In other words -- which areas of the Twin Cities are seller's markets in the lender-mediated segment?

Below is a list of the 30 MLS areas that have the lowest Months Supply of Inventory for lender-mediated homes. Bid fast in these burgs:

Lender-Mediated Properties
		Months Supply	Active Listings
1	618 - Eastern Dakota County	0.4	1
2	782 - Isanti County	0.6	1
3	308 - MPLS - Powderhorn	1.7	48
4	769 - Anoka	1.9	22
5	604 - Mendota/Lilydale/Mendota Heights	1.9	5
6	738 - SP-Home Croft/W 7Th	1.9	10
7	305 - MPLS - North	2.0	88
8	301 - MPLS - Camden	2.0	102
9	754 - Big Lake Township	2.1	50
10	363 - Brooklyn Center	2.3	90
11	364 - Brooklyn Park	2.4	197
12	309 - MPLS - Southwest	2.4	26
13	340 - Buffalo	2.4	39
14	303 - MPLS - Longfellow	2.4	25
15	306 - MPLS - Northeast	2.4	41
16	742 - SP-Central	2.4	66
17	310 - MPLS - University	2.5	11
18	361 - Crystal	2.5	35
19	746 - SP-St. Anthony/Midway	2.5	18
20	307 - MPLS - Phillips	2.5	22
21	378 - Richfield	2.6	43
22	304 - MPLS - Nokomis	2.6	49
23	397 - Chaska	2.7	30
24	771 - Spring Lake Park	2.7	12
25	614 - Apple Valley	2.9	72
26	772 - Lexington/Circle Pines	3.0	13
27	744 - SP-Como	3.0	16
28	713 - Bethel	3.0	26
29	768 - Fridley	3.1	41
30	600 - West St. Paul	3.1	29

Remember, a balanced market between buyers and sellers will have 5 to 6 months of supply available. With that definition in mind, most of these areas would be categorized as extreme seller's markets, for lender-mediated homes at least.

In fact, 94 of the 106 areas we looked at had less than 6 months of lender-mediated supply available.

By no means does this mean that we are through the foreclosure and short sale crisis. Far from it, in fact. Defaults and pre-foreclosures are on the rise and we should also expect that the theoretical "shadow inventory" of unlisted foreclosures that banks are holding will come on the market at some point this year or next.

What it does mean, however, is that market conditions for buyers in these neighborhoods are very tight. Multiple offers and very short market times on lender-mediated homes will be more common, and buyers will have to move quickly and aggressively.

Many of the areas on this list are neighborhoods that were hit first and hardest by the foreclosure crisis. Now with home buying activity on lender-mediated homes skyrocketing they're seeing their inventory dwindle quickly. The question that many neighborhood and city leaders are naturally asking themselves is: who's buying them — future home owners or future landlords?

The federal tax credit for first-time home buyers has an occupancy clause that undoubtedly helps tip the scales in the direction of home owners, but we have to assume that a healthy chunk of these properties will become rental units owned by investors.

Weekly Market Activity Report

In 2006, the inventory of homes for sale was plentiful and buyers were in short supply. Regular followers of our weekly report will have noticed that a shift has been in the works for several months. The week-to-week patterns of pending sales and inventory resemble market patterns from last year, but pending sales have consistently outperformed last year's numbers. In fact, the most recent week's 1,012 signed purchase agreements represents a 23.7 percent increase over last year and is the 59th week of the last 60 with a year-over-year increase.
 
Active listings are dwindling, down 21.2 percent from last year. Inventory supply has dropped from 10.5 months to 7.2 months in the last year, and it has dropped quickly in the lower price ranges where sales activity is the strongest. Shift, change, adjust, correct, stabilize—take your pick of these words when describing today's housing market, and you'll be right.

Click here for the full Weekly Market Activity Report.

Banks Now Get Closer to Their Asking Price Than People

For the last two years foreclosures and short sales have typically seen their final sales prices be much lower than their initial asking price. Properties would sit on the market longer and see more price reductions as buyers hadn't yet developed the feverish taste for lender-mediated homes they've now cultivated.

Obviously, things have changed.

With low mortgage rates, the first-time home buyer tax credit and affordable prices in the mix, sales of lender-mediated homes have jumped 131.7 percent in the last year. This increase in buyer demand—combined with a relative lull in new foreclosure activity—has tilted the supply-demand picture dramatically in the lender-mediated segment. Foreclosures are selling quickly, and for much closer to their original asking price.

Some hard data to back up the soft anecdote:

  

As you can see, lender-mediated homes in the past year have seen their Average Percent of Original List Price Received at Sale increase a whopping 5 percentage points (trust me, that's a lot for this metric) to 94.2 percent. You'll also see that the traditional seller is now receiving slightly less compared to lender-mediated homes—the first time we've ever seen that.

The big shift has taken place just in the last few months. Take a look at the huge upswing in what lender-mediated properties are receiving since March:

 

Bam.

A major cause of this upswing is likely a new pricing strategy from banks, who are now pricing homes aggressively downward right away at the time of first listing in an attempt to spur action. The huge deluge of home buyers interested in these properties is also helping, obviously. Reports of multiple offers and bidding wars on these properties are far more common today than they've ever been.

With sales expected to remain brisk through the end of November (not coincidentally when the tax credit will expire), this upward trend should only continue.

UPDATE: Chris Snowbeck (aka "The Snowman") from the Pioneer Press wrote an article based upon this blog post that appears today and features some nice commentary from area realtors. Click here to view.

Survey Says: HVCC Causes Deals to Go Sour

The fact that the new Home Valuation Code of Conduct (HVCC) has been on the minds of REALTORS® both locally and nationally has not gone unnoticed. In a recent survey we asked our members about their experiences with the new code.

We made an exception to our normal "one-question only" rule and took additional info on number of properties affected, price ranges, areas within the Twin Cities, and anything else you were willing to share. Next week, we'll provide some of those additional comments. This week, we have the Yes/No split to this question:

Have you had a home sale go sour because of the new HVCC? By "go sour" we mean that the sale fell apart and the HVCC and appraisal problems were the primary cause of the the sale falling apart. 60.7% of respondents said yes, 39.3% said no.

Obviously, there's probably some selection bias at work here; respondents are probably more likely to participate in a survey if they have been personally affected by a low appraisal. Regardless, a robust share like 60.7 percent is significant and indicates that HVCC is definitely making its presence felt in the local real estate market, for better or worse.