Recovery in metro housing market inches along

Housing market
Grace McKay, 90, was photographed with her cat Fonzie on Thursday, Oct. 18, 2012, in the Plymouth, Minn., home where she's lived since 1978. Now that the housing market is showing signs of improvement, McKay is ready to sell her home.
MPR Photo/Jennifer Simonson

Grace McKay decided this was the year to put her Plymouth house on the market. The 90-year-old and her husband bought the four-bedroom rambler in 1978. But McKay's husband died five years ago, and she's ready to move on.

"We just have to be optimistic that it will sell," she said. "And soon."

Mary Jo Quay, McKay's real estate agent, worked with her two years ago, when McKay and her children first thought about selling.

"Two years ago we didn't put it on the market, but I did some quiet marketing privately," Quay said. "Couldn't give it away."

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But since the home went on the market earlier this month listed at $325,000, McQuay said there's been a steady stream of potential buyers looking at the home, and there has even been an offer. For McQuay that's a sign the housing market has really improved.

"Now if it was $30,000 or $40,000 properties, I've seen up to 15 offers on the table," McQuay said. "But when it's moving into a higher price point, that is a recovery."

The Twin Cities housing market has continued its slow recovery this fall helped out by record-low mortgage rates. Some real estate agents say they haven't seen the drop-off in buyer interest that usually comes when the weather gets colder.

More homes are selling, and they're selling faster -- and at higher prices. The latest Minneapolis Area Association of Realtors data show the number of foreclosures on the market is 30 percent, the lowest level in five years.

The national S&P/Case-Shiller index for home prices in the Twin Cities has been on the rise since March. According to the Twin Cities' Realtors group, the overall median sales price was $174,000 in September, 12 percent higher than a year ago.

But Cari Linn, president of the Minneapolis Area Association of Realtors, said some sellers are still waiting to put their homes on the market. Linn said the total number of homes for sale is near a nine-year low of about 16,000. "Right now we've got a four-month supply of inventory. If we get much lower, it will really start turning into a seller's market," Linn said.

George Karvel, a University of St. Thomas real estate professor, said numerous factors are weighing down the housing market, including unemployment, unsold home inventories and potential foreclosures.

Housing market
Grace McKay's home, with a big backyard and lakefront lot, was for sale on Thursday, Oct. 18, 2012, in Plymouth, Minn.
MPR Photo/Jennifer Simonson

"And until the stars align and the excess housing inventory is absorbed, and unemployment declines, and confidence is slowly rebuilt on the part of consumers -- all those things have to come together before we see what I would call strength in the housing markets," Karvel said.

Minnesota's unemployment rate of 5.8 percent is 2 percentage points lower than the national rate. But home prices are still too low for some homeowners who had hoped to sell by now.

Nearly a quarter of homeowners are underwater on their mortgages, meaning they owe more than their homes are worth, according to research by CoreLogic.

David Shuler is one of those homeowners. The 32-year-old and his wife bought a townhome in Golden Valley in 2006 for just over $300,000. In 2009, they took advantage of the downturn and bought a single family home in Bloomington.

Shuler said they can't sell the townhome -- it's probably worth a third less now. He and his wife are renting it out, but he said they probably won't come out ahead in the end.

"We took a calculated risk, though; I think we kind of knew this could have happened," Shuler said. "I don't think housing is something people are going to look at as an investment going forward. Housing is a safe, secure place for your family."

The good news for people who can't sell their homes is that they should be able to find renters. The Twin Cities rental market continues to be tight, with a vacancy rate under 3 percent.

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