Metro home market shows improvement
Twin Cities housing statistics are showing some signs of improvement, according to area realtor associations. But experts say the numbers do not necessarily suggest the region's housing market is getting healthier.
A number of indicators showed improvement.
Troubled homes represent a smaller portion of residences with a signed purchase agreement. In May they represented 43 percent of pending sales, down from about 60 percent in January.
The troubled homes, known as lender-mediated, include foreclosures and short sales, where the lender forgives some of what's owed on the house.
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A large number of lender-mediated homes indicate an unhealthy market.
Home prices also increased. The median home price rose by $12,000 to about $165,000 between April and May.
But real estate expert George Karvel at the University of St. Thomas says the median price can go up and down based merely on the mix of homes sold.
"Prices of homes as they're reported can go down simply because smaller homes are being purchased. Prices of homes can go up simply because during that month more expensive homes were purchased. It doesn't mean all home prices are going in the same direction as the data would indicate," he says.
In May, it appears to be the case that more expensive homes did sell.
Regardless, home prices down about 20 percent compared to May of 2008.
State economist Tom Stinson says lender-mediated sales, at better than 40 percent of the total, are still a huge chunk of the market.
"It's always good news to see something that's a little optimistic, but really the data is pretty weak compared to a more normal year," he says.
Housing inventory remains another concern, even though, according to the Minneapolis Area Association of Realtors, it's down about 27 percent compared to last year.
A 5-month supply is healthy. The current supply of homes for sale is about 7.6 months. But that number is somewhat misleading.
Excluding troubled lender-mediated homes, the inventory stands at about 9.9 months.
The $8,000 first-time homebuyer tax credit in the economic stimulus legislation has spurred new demand for homes, but state economist Tom Stinson is concerned about rising interest rates.
"Interest rates have suddenly gone up again. That's got to, other things being equal, inhibit purchasers and have an impact on the market as well," Stinson says.
He says higher borrowing costs could cancel out gains from the tax credit, though he's hoping interest rates will head back down to their historically low levels.
Interest rates on a 30-year mortgage are at their highest level this year around 5.7 percent.
