Is Minneapolis the new Cleveland?

Posted at 8:37 AM on November 30, 2010 by Bob Collins (5 Comments)
Filed under: Economy

Whatever recovery was underway in home market values has collapsed in the Minneapolis area. The Case Shiller Index for September, which measures the resale value of homes across the country, has shown another drop in the Twin Cities. Home values dropped an astonishing 2.1% from August to September. Only perennial economic dog Cleveland had a worse showing. Nationwide, values dropped .7%. The numbers are not seasonally adjusted.

The picture isn't much brighter compared to a year ago. While prices nationwide have increased .6% in the last year, all of the gains in the Twin Cities have been wiped out. Market values have dropped 1.2%.

The numbers don't get any better when seasonally adjusted. The values dropped 2.2% from August in the Minneapolis area. That puts the region dead last in the survey of 20 large cities. They dropped 1.3% over a year ago.

The numbers propel a renewed debate over whether government attempts to stimulate the economy really help, or just delay the inevitable bottom. The end of a government tax credit and near 10 percent unemployment have led to a decrease in demand, delaying a recovery in the industry that precipitated the worst recession since the 1930s, Bloomberg said.

City	Diff from August	Diff. from year ago
Washington	0.3%	4.5%
Las Vegas	0.1%	-3.5%
Los Angeles	-0.1%	4.4%
New York	-0.3%	-0.1%
Seattle	-0.6%	-2.6%
Nationwide	-0.7%	0.6%
Tampa	-0.8%	-4.3%
San Francisco	-0.9%	5.5%
San Diego	-1.0%	5.0%
Denver	-1.0%	-1.6%
Atlanta	-1.0%	-3.1%
Charlotte	-1.0%	-3.7%
Miami	-1.2%	-2.7%
Boston	-1.3%	0.4%
Detroit	-1.3%	-3.0%
Phoenix	-1.5%	-1.5%
Chicago	-1.5%	-5.6%
Dallas	-1.6%	-2.6%
Portland	-1.9%	-3.6%
Minneapolis	-2.1%	-1.2%
Cleveland	-3.0%	-1.9%

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Comments (5)

One question to consider is to what extent homes were "overvalued" at an earlier point in time? Past reports suggest that--in some cases--inflated market values were used allowing the owner to get loans against the "equity" in the property.

Posted by John O. | November 30, 2010 9:11 AM

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Sorry Bob, but I'm call this a "woe is me" story. If you look at the year over year numbers, we're not doing to bad. A cursory glance at that column shows us doing pretty well. If you want an increase over last year you need to be in California or the Nation's Capitol (which I'm guessing often has a robust market with high level government employees coming and going "at the discretion of the President".) If you want to consider a positive change less than 0.5% something other than a flat market you could add Boston.

Speaking of flat markets NY's flat market is the only negative number that is better than Minneapolis' -1.2%. We're in the same ball park as oft compared cities of Phoenix and Denver. We're doing better than cities like Portland, Charlotte and Tampa. And our closest geographic comparison, Chicago, did a little better than us since August but is almost 5 times worse in the last year.

Posted by JackU | November 30, 2010 10:04 AM

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The problem wasn't with the credit, which was a reasonable policy if one assumed the underlying economic malaise was a simple business cycle fluctuation. A limited duration tax credit could never be anything but a "kick the can down the road" measure. If the economy recovers before the tax credit lapsed, the tax credit helped to grease the skids and make the recession less painful.

But no mere tax credit could be expected to fix the CatastroFail that the domestic banking and investment industry has wrought on our economy. The tax credit neither alleviated nor exacerbated the fundamental systemic economic problems we face.

Posted by Chris | November 30, 2010 10:35 AM

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A more interesting study was released by Brookings (http://www.brookings.edu/), which ranks metropolitan areas globally. Pre-recession we were ranked at about 100th of 150. Post recession* we've moved up to 44th. Cleveland was in the 130s before, and is now 49th. Austin, TX is the highest ranked US city, at 26th, between Sao Paulo and Montreal.

* note that for these purposes, 'recession' is defined economically, based on when the economy resumes growth. People who remain unemployed tend to argue we're not yet out of the recession.

Posted by bsimon | November 30, 2010 2:19 PM

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This headline saddened me - that is until I actually read the article and realized it wasn't sports related. Now I see that although this article does put Minneapolis in a bad light (again, who wants to be Clevelend in any catagory?), I don't see it as worthy of this traffic-bait headline. NPR: this was a 1 month decline. How about: "September Home Prices: Have We Hit Bottom?" or "Minneapolis: Still Superior to Cleveland in Every Way".

Posted by Daniel Johnson | November 30, 2010 5:30 PM

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