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2008 Market Review/Forecast: Get the Lowdown, Check The Markets

From the Minneapolis Area Association of Realtors, Jan 22, 2009
After two-plus years of a faltering market, a recent upswing in Twin Cities homes sales during the second half of 2008 is cause for some measured optimism heading into 2009. In the Twin Cities 13-county metro area, total pending sales for 2008 ended at 44,067, up 1.2 percent from 2007. This is the first year-over-year increase in pending sales since 2004. There were 38,746 closed home sales in 2008, down only 3.5 percent from 2007.

In the second half of the year, sales picked up momentum and haven't let up since due to tumbling mortgage rates and increased affordability. Since July, there have been 15.7 percent more pending sales than there were during the same time period last year, and the most recent month saw a year-over-year increase of almost 30 percent. Home prices continued to decline, as expected. The overall 2008 median sales price was $195,000, down 13.3 percent from last year's mark of $225,000.

Reasons for this decline can be found by dissecting two unique segments in today's housing market: lender-mediated and traditional. In 2008, the median sales price of lender-mediated foreclosure and short sale properties was $145,000, a drop of 13.4 percent from 2007. The median sales price for traditional properties was $223,000, which was a much quieter decline of 4.1 percent from last year. In all of 2008, 31.7 percent of closed sales in the region were lender-mediated, up from 10.4 percent in 2007. The number of new listings on the market during 2008 decreased by 10.9 percent compared to last year, a drop of over 10,000 listings from last year and the lowest showing since 2003. This has helped stem the tide of oversupply our market has been experiencing in recent years.

The number of new foreclosure and short sale listings in the fourth quarter of 2008 was actually 4.3 percent lower than the third quarter, which is the first downward quarterly movement in new lender-mediated listings since 2003.

My Thoughts--January 23, 2009
It seems I've written a blog similar to the year before for three years running now. Yes the market is still in a challenging state, but it's not as bad as most seem to think in the Twin Cities, especially if you live in a great location. Location, location, location. Good homes in good areas still have a robust buyer pool, even in higher price brackets despite recent somber news from Wall Street and other economic fears. We are currently facing, as a nation, more economic uncertainty than most of us have seen in our lifetime, so things could very well quickly unravel at some point in the near future.

But as of now we're seeing a clear, sustained rebound in week-over-week sales. And a less-divided Washington is putting all its attention into the economy, with the understanding that housing must be among the very first areas requiring attention. So it seems likely that interest rates and recent buyer-friendly legislative efforts will continue to fuel the rebound. Further, it seems there are a lot of people who put off a move the last few years as the market slowed, and lower interest rates and the increasing desire to move on with their lives could put many of them into the market this year. So barring economic madness, it seems likely we'll see the rebound continue, at least in number of homes selling but perhaps not price as a large segment of buyers continue to hunt for deals (notice that the areas below that have highest unit-volume changes usually suffer biggest average-price drops). If it seems illogical to think we'd be rebounding this year, remember that housing thrived ahead of the recovery of the last recession too--the key is confidence among would-be buyers that jobs reports will improve sooner rather than later. Irrespective of housing, let's all hope that is indeed the case.

Back to About Us or Read the previous years Market Analysis (2007-2008)