As temperatures drop, there's less incentive for people to buy a home -- especially given that at this time last year, the federal government was offering tax credits for new homebuyers.
In fall of 2009, first-time home buyers were rushing to purchase homes before the tax credit expired. It ended up being extended and expanded to people who already owned homes, but that first deadline created the sort of demand that sellers have not been able to enjoy this year.
In September, pending home sales in the Twin Cities area were down by more than 37 percent from the previous year -- a large drop that the Minneapolis Area Association of Realtors attributes mostly to the expiring tax credit.
"The demand has slackened," said Brad Fisher, the association's president.
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With no tax credit and the typical cold-weather slowdown near, Fisher said the economy must show significant improvement for the housing market to improve in the coming months.
Some housing industry observers agree that the lack of a homebuyers tax credit this year is making the market look worse off than it is.
George Karvel, chair of real estate at the University of St. Thomas, said month-to-month sales will continue to decline the rest of the year. Pending sales were down slightly from August to September, according to the realtors association.
"Housing goes through a normal decline in the volume of sales once school begins," Karvel said. "I would expect that the decline in housing activity is not because of increasing economic problems as much as it is attributable to the normal slowdown that occurs in September, so I wouldn't be alarmed."
The median sales price is also down for the second consecutive month. And there are more houses up for sale than there were a year ago.
Fisher said his group expects inventory to decline in the coming months, just as it normally does when the weather turns. People often take their homes off the market during the holiday season.
Karvel said fewer houses on the market can be a positive sign.
"If that begins to decline, then you'll begin to nick away at the excess inventory, and that will be a signal that you're moving in the direction of some sort of recovery in the housing market," he said.
But Karvel said he and some of his colleagues fear there are many houses that could still go into foreclosure. Bank of America and some other banks have frozen their foreclosures, but Karvel said that doesn't change the fact that many homeowners are behind on their mortgages.
"There's a huge overhang of future foreclosures that will come to the marketplace, is what we believe," he said. "It's not like the inventory of unsold housing is getting significantly smaller."
Jeanne Boeh, a professor of economics at Augsburg College who follows the housing market, said it's important to note that it takes most housing crises six years to recover.
"We're essentially about halfway through," she said.
In terms of the median sales price, which was down by 2.4 percent in the Twin Cities last month at $166,000, Boeh said the metro area is better off than many cities around the country.
The Twin Cities doesn't have the high unemployment rates and large percentages of people spending more than 30 percent of their incomes on housing that have signaled plummeting home prices elsewhere, Boeh said.
"We're not going to fall off a cliff, but we're not going to get better for a while," she said.