Uptick in home sales may be a signby Jessica Mador, Minnesota Public Radio
Finally, some positive news from the housing market. The latest numbers show that Twin Cities home sales are up slightly over last year, a sign that the housing market is beginning to stabilize.
With the large number of foreclosures and other unsold homes keeping housing prices low, it truly is a buyer's market. But more buyers out bargain hunting can mean good news for sellers.
St. Paul, Minn. — Just a week ago, Jeremy Ellison and his wife put their St. Paul house on the market. They recently had a baby, and they are looking for more space. But in this economy, Ellison wasn't sure they'd see any buyers. He says he was prepared to wait.
"We know we have a great house, but the market isn't what it used to be. We weren't expecting to have eight showings in the first week. It's just incredible," he said.
They had three showings on just the first day.
Realtor Dennis Breining says he was surprised, too. He says that kind of activity was unimaginable last year.
"I saw many nice homes not sell last year, that were priced appropriately for the market, in good to very good condition and they didn't sell," said Breining.
As the housing market crashed and foreclosures saturated the market, Breining says most sellers waited months for their first showing.
In their five years there, the Ellisons added a major addition to their 1919 house, knocked down walls and put in a brand new kitchen. Breining says it's the kind of renovation that attracts buyers, even in this shaky market.
"It became a three bedroom house, so that greatly increases the salabilty and value of the home," said Breining. "And they created a master bathroom, so now they have a master suite, which is really what a lot of buyers look for, but is really hard to find in this price range and in this neighborhood."
With all of the homes on the market these days, Breining says sellers need all the help they can get.
But it may be getting a little easier. The latest data from the St. Paul Area Association of Realtors shows that homes are selling faster than they were last year.
Seasonally adjusted by the Minnesota Department of Employment and Economic Development, the numbers show positive growth in four out of the last five months. That's a trend we haven't seen since 2004.
It could be because most of the sales last month were lender-mediated, including foreclosures and short sales, where the seller takes a loss. These homes typically go for much less than their original value.
"This is what economics says should happen: prices have dropped and it's getting people back in the marketplace," said College of St. Scholastica economist Tony Barrett. Barrett says the housing market has finally hit bottom. It's the first critical step toward healing the economy.
"This isn't so much going to cause retail sales to improve," said Barrett, "but the fact that people are feeling confident enough to go out into the marketplace and take on long term debt to buy a house is an indication that they might also be willing to go out and buy a new car, or just go shopping or go on vacation."
The Twin Cities hasn't suffered as badly as parts of Arizona or Florida, because the metro doesn't have the same glut of newly built, unsold homes. He says unless there is another piece of very bad news, the recovery should last.
But with the recession forcing thousands of people onto the unemployment rolls, more foreclosures are expected this year, and new housing construction is still in freefall.
That's why state economist Tom Stinson says it's still too soon to know whether the economy really is on the road to recovery. What is clear, he says, is that a housing correction won't be enough.
"Really, what has to happen for the economy to turn around is for credit markets to start functioning more normally and for the consumer to start buying again, and neither of those are going to be driven by housing at this point," he said. "Those are big separate issues that have to be dealt with," he says.
He's hoping the Obama economic plans will offer the market a much needed boost. Stinson says spring will be the real test -- that's when Twin Cities home sales typically pick up.
Homeowner Jeremy Ellison is hoping he won't have to wait that long. But buyers have their pick of homes right now, and he knows he and his wife may have to take less than their asking price. Even so, he thinks they'll do okay.
"We figure that when we go to buy, those sellers are going to be taking a loss as well. We are in a market where we are going to get more for what we are paying on the buy side, even though we are losing a little bit on the sale side, as well," he said. "So, it pretty much will even out for us, we think."
That kind of attitude is what economists say will help drive the recovery.
- Morning Edition, 02/23/2009, 6:50 a.m.