Minnesota's real estate industry enjoyed some improvement in 2011, but don't expect a roaring comeback this year, said residential and commercial real estate experts who hosted events Wednesday to review the state of their industry.
It would be a stretch to call the residential real estate market healthy. About half the sales in 2011 involved short sales or foreclosures, which sell at firesale prices. The median home sales price ended the year down 12 percent compared to 2010.
Big price gains are probably still two to three years away, according to Richard Tucker, president of the St. Paul Area Association of Realtors.
However, Tucker believes that the residential market took a good turn in 2011. "There is no question that as we look at the data and try to read what it's telling us, I do think there are positive trends in that and it's working in right direction," he said.
The big headline of last year, Tucker said, is that far fewer houses were for sale. If fewer foreclosures and short sales hit the market — and that may be a big if — that will support home prices.
That could mean prices will remain down on a year-over-year basis, but possibly to a lesser degree.
In December, there was already some evidence of a moderation in price declines, said David Arbit, a market analyst with a realtor group in Minneapolis. The median price last month was down 6.5 percent from the year before — the smallest year-over-year drop since the previous January.
What's more, Arbit notes, more homes were sold last year than any year since 2006, with the exception of 2009 when a federal homebuying incentive was offered.
"2006 was our peak bubble year. The fact that we've had the most demand since that bubble year we think bodes really well and is a promising indicator," Arbit said.
"It's always better to see higher sales rather than lower sales, but I'm reminded of the saying, 'I've been down so long anything looks like up to me,' " said Tom Stinson, state economist.
Stinson's optimism is restrained, which he made clear in comments delivered Wednesday to a group of commercial real estate professionals. The commercial real estate market improved somewhat in 2011 — landlords started collecting rent again on about a million square-feet of idle space. And multi-family housing, which is a component of commercial real estate, enjoyed particular strength.
But Stinson cautioned the crowd that there are headwinds in the economy for real estate. He doesn't expect great economic gains in 2012. If the pace of job growth continues, he says it will take about two-and-a-half years before the nation recoups all the jobs lost in the recession. That's likely to be a drag on new household formation, which is a key factor in demand for housing. People who have doubled up in housing aren't likely to launch out on their own anytime soon. Those issues will not help residential or commercial real estate bounce back.
"If you're thinking we're going to go back to where we were in 2007 or 2006, you're wrong," Stinson said. "We're not going back to where we were. We're going someplace different."