All politics—and housing markets—are local, and according to Southwest Minneapolis Realtor Danny Dietl, Southwest Minneapolis' market in January 2012 looks very similar to that of January 2011.
“Interest rates still low, affordability is through the roof, and at some point that’s going to start to drive people back into the market,” he said. “The interesting thing is that Minneapolis is second in the country after New York City for residential vacancy rates. That’s driven up rental prices to the point that if you can get a mortgage, it’ll be less than your rent payment.”
Looking to 2012, Dietl said that home prices could rise in Southwest in areas that haven't suffered large numbers of foreclosures. House prices may also be further impacted by the Minneapolis Public Schools’ continuing efforts to improve its schools.
“People want to be able to send their kids to Southwest High School,” he said. “But if Patrick Henry High can offer a strong International Baccalaureate program, it can open peoples’ minds up.”
Overall, the Twin Cities real estate forecast is still chilly, but there are at least a few rays of sunshine poking through the clouds.
That’s the considered wisdom of the Minneapolis-Area Association of Realtors following a solid session of tealeaf reading and crystal ball gazing.
In 2011, the median sales price of homes in the 13-county Twin Cities region fell to $150,000, down 11.7 percent from the already depressed levels of 2010, and down further from a 2006 high $230,000.
Part of what’s going on, a spokesperson for the association said, is that numbers of houses on the market—inventory—fell a dramatic 28.7 percent from 2010 and are now at the lowest level in eight years. The time it would take to sell off all active properties in the region—a standard measure of real estate inventory—has dropped 36.5 percent to 4.5 months.
Ordinarily, a big drop in inventory would lead almost immediately to rising home prices. But the region’s median price is still being held down by the flood of properties being sold through the foreclosure process or through short sales, said Richard Tucker, vice president of Coldwell Banker Burnet in Hastings.
Exactly half of all closed sales in 2011 were either foreclosures or short sales, and such “distressed properties” typically go for about 60 cents on the dollar compared to traditional homes.
“The last piece of recovery will be (an improvement in the) average sales price,” Tucker said, noting that would happen with a scarcity of supply. “That’s the direction we’re heading.”