New housing report reveals promising signs of recovery but values still low
Signs of the long-awaited housing recovery may be on the horizon according to the newest housing report from the Minnesota Association of Realtors. The group is optimistic about the industry, especially given the number of pending sales in the state.
Pending sales were up 26.2 percent in May compared to transactions in May 2010. Pending sales are contracts that are written but not closed.
"Pending sales for Minnesota were up significantly," said Russ Portele, President of the Minnesota Association of Realtors. "However, many of the other indicators still show the effects from last year's Homebuyer Tax Credit and lower consumer confidence."
May is the first month of transactions that were "tax credit free." Last year's Homebuyer Tax Credit incentive offered a first-time purchaser an $8,000 credit and many existing homeowners qualified for a $6,500 tax credit if they purchased a home before April 30, 2010. Sales have been difficult to compare as homebuyers rushed to take advantage of the credit in the spring of 2010.
Many Minnesota homeowners are concerned about the value of their properties and in May the year-to-date numbers still looked dismal. Statewide, median sales prices were down 9.2 percent compared to May 2010 to $139,000.
"This is not an uncommon situation when the market is stabilizing," said Portele. "Individual monthly prices can fluctuate as housing consumers look for bargains as more sellers place properties on the market. In May, housing inventories grew 11 percent and days on the market grew to 139 days."
Lower home values do mean positive things for housing affordability. Minnesota's Housing Affordability Index (HAI) increased in May as low interest rates and distressed properties made housing more affordable to consumers. The HAI measures the median income of a Minnesota family compared to the median home price. Statewide, the HAI is 132 - which means the median family income is 132 percent of the level required to purchase a median priced home. Historically low interest rates have also helped keep housing affordable to a majority of Minnesota families.
The Minnesota Association of Realtors is the largest professional trade association in the state with nearly 18,000 members who are active in all aspects of the real estate industry.