After seven months of steady gains, the median price of homes for sale in the Twin Cities took an anticipated seasonal downturn in September, according to the Residential Real Estate Price Report Index, a monthly analysis of the 13-county Twin Cities area prepared by the Shenehon Center for Real Estate at the University of St. Thomas’ Opus College of Business.
“As we moved from summer into early fall, the Twin Cities housing-market cycle began to repeat itself,” observed Herb Tousley, director of real estate programs at the university.
The median price of a traditional (nondistressed) home decreased nearly 5.5 percent, from $219,900 in August to $207,900 in September. (Distressed property sales are foreclosures or short sales, which are homes sold for a price less than the outstanding mortgage balance.)
The volume of closed sales in the area, meanwhile, dropped 21 percent, from 5,088 in August to 4,018 in September.
“The good news here is that compared to the same period a year ago, median prices and the closed-sales volume are both showing a healthy increase,” Tousley said.
September 2011 to September 2012 comparisons show that the median price of a nondistressed Twin Cities home increased 6.6 percent while the number of closed sales is up 7.5 percent.
In addition to the sale price of homes throughout the Twin Cities, St. Thomas has developed a composite index that uses eight additional data elements to track the health of the traditional, foreclosure and short-sale markets. Compared to the same month a year ago, the September 2012 index for nondistressed sales shot up 9.28 percent, the largest increase seen in the last seven years.
Tousley said that the September 2011 to September 2012 improvement continues a trend that began in May. He is not yet ready to say that the market has finally recovered, however. “In our opinion, the median sale price of traditional, nondistressed homes will have to remain above the prior-year’s levels through next spring. Once we see an entire 12-month cycle of median prices above the previous year’s levels, then we will know that the market has officially bottomed out and is on the path to a sustained recovery.”
St. Thomas’ monthly analysis looked at the number of homes on the market and made some predictions.
The number of homes for sale continues to remain at record-low levels. There were 16,245 homes for sale in September 2012, down from 22,663 in the same month a year ago.
“A relatively high number of homeowners who have negative equity, which means they owe more than their home is currently worth, and uncertain economic conditions are keeping many homes off the market,” Tousley said.
“These conditions will keep the number of homes for sale chronically low for the short term, and this shortage will begin to favor sellers who will benefit by rising prices.
“As housing prices rise, the number of homeowners with negative equity will decline and more homes may become available for sale.
“This most likely will temper any drastic price increases. Look for this trend to bring steady-to-slowly-rising home prices and a similar pattern for the number of homes put up for sale. These conditions, combined with very low interest rates, should sustain the recovery of the housing market – as measured by year-to-year median house prices – into next year,” Tousley said.
More details about the market can be found on the Shenehon Center’s website.
Research for the monthly reports is conducted by Tousley and Dr. Thomas Hamilton, associate professor of real estate at the university. The index is available free via email from Tousley.