Recovery still far away, despite increase in metro home salesby Annie Baxter, Minnesota Public Radio
Twin Cities realtors cheered new data out today. March home sales in the 13-county metro area were up compared to last year, and there are fewer houses for sale. This positive news comes amidst other recent, encouraging signs in the wider economy. But experts caution against declaring an economic recovery is underway.
St. Paul, Minn. — Twin Cities home sales leapt 14 percent in March compared to the same time a year ago. Rae Jean Malone, the president of the St. Paul Area Association of Realtors, seems delighted, but not surprised. Malone said low interest rates and the first-time homebuyer tax credit of up to $8,000 in the federal stimulus plan are drawing in customers.
"When they call and they say, that $8,000 credit applies to me. And that's one of the first things in the conversation when we talk with them on the phone," Malone said.
Malone said her Woodbury realty firm has been busy lately and they've hired a couple new part-time employees to work the front desk.
But Malone notes that lender-mediated properties are still driving prices down. Those are properties in foreclosure or where the lender is willing to forgive part of the mortgage. Home prices fell by about $46,000 between March 2008 and March 2009, sinking the median sales price to about $154,000.
Experts say prices will stabilize more as the inventory of homes continues to fall. That inventory has been dropping; a sign that the glut of housing is thinning out and the supply of homes is getting more in sync with demand.
But real estate professor George Karvel at the University of St. Thomas, said inventories need to shrink more. When asked if the current eight-month housing supply was approaching a healthy market, he laughed and offered an alternate number.
"No. Probably about a three-month supply of housing," Karvel said. "We have a long ways to go, but that's the number you want to watch."
Karvel said the news out today bodes well for a turnaround, but he would not yet label it that way.
The March recovery in home sales looks much less dramatic when the numbers are adjusted to permit month-to-month comparisons. At the request of MPR, the Minnesota Department of Employment and Economic Development adjusted the data using a standard method. Those figures show closed home sales have increased at a rate of just 2 percent a month this year.
Steve Hine, the director of labor market information at the Minnesota Department of Employment and Economic Development, also views the housing results with caution.
Hine said the positive housing signs, as well as some other bright spots in the economy, could just be blips and they'll require more sustained trends. However, Hine acknowledges that there is a pile of good news out there. For starters, he points to a drop in first-time claims for jobless benefits.
"Initial claims fell nationally [by] 20,000," Hine said. "Perhaps more importantly, the less volatile four-week moving average fell, granted, by a small amount, but it's the first time since early January, and that's a very solid indicator of economic turning points."
Hine notes that the stock market has risen about 25 percent in the past month, boosted just this week by Wells Fargo's good profit report.
"We saw an increase of 1.8 percent in new orders for manufactured goods in February," Hine said. "That's after six consecutive months of decline. And the Conference Board's consumer confidence index, also increased, again very slightly, but it went up in March by seven-tenths of a point after reaching its all-time low in February."
But Hine said not to expect the labor market to bounce back anytime soon. It lags the rest of the economy in a recovery.
And for state economist Tom Stinson, it's hard to get too excited about all the other good stuff in the economy in the face of Minnesota's gloomy job picture.
Try rattling off some positive economic news to Stinson -- whether it be housing indicators or anything else -- and he'll promptly direct you to the latest economic update from the state's Management and Budget Office, specifically to page 3, where there's a report on continuing claims for unemployment.
"That's not confidence inspiring," Stinson said. "If you look at compared to the peak in the last recession we have 40,000 more people on unemployment insurance."
The recession is still deep and serious, Stinson said. And while he said the economic news is looking better than it did in January and February, he still thinks a recovery is many months away.
- All Things Considered, 04/10/2009, 5:16 p.m.