John Murphy’s MEDINA REAL ESTATE REPORT

The Minneapolis Association of Realtors has a great chart depicting the steady and remarkable growth in median sales prices for housing in the Twin Cities.

This chart shows the growth from 2001 to 2007.  The pricing peak for the Twin Cities was July 2006.  Since then we’ve been in decline.  Based upon this chart, the median sales price is down a little over 5% from one year ago.

Here’s a snap shot of the pricing activity in the past year.

I’m posting this before I’ve had the opportunity to read this 40 page report, “Foundations for Future Growth in the Remodeling Industry” published by the Harvard Design School John F. Kennedy School of Government.  I’ll post more comments about it once I’ve gone through it.

With all the talk about mortgage brokers taking advantage of people, this is an important article to read form the Wall Street Journal.

From the article:

Borrowers often see mortgage brokers as their allies, searching far and wide for just the right home loan at an attractively low price. But many brokers are making it clear they don’t see things that way. They are fighting efforts by federal and state politicians to impose a fiduciary duty on them to put their customers’ interests first, as lawyers, real-estate agents and financial planners generally are required to do with their clients.

“The mortgage broker does not represent the borrower,” says Chris Holbert, president of the Colorado Mortgage Lenders Association. “We sell access to money.”

Real estate agents almost always operate under an exclusive right to represent contract with buyers.  With that comes several duties that the agent owes the client.  One of the things agents owe their clients is a fiduciary responsibity to put their clients interests ahead of their own.  That is not the case with mortgage brokers and loan officers.

It’s critical to find loan officers you can trust.

From the Minneapolis Area Association of Realtors’ Weekly Market Activity Report:
“The song remains the same from week to week in the spring Twin Cities housing market; new listings are flat relative to the previous year while buyer activity declines further. New listings for the week ending May 19 were 0.7 percent behind this time in 2006, posting 2,656 new units. Of these new listings, only 301 were new construction, bringing the new construction share of our total current inventory to 16.1 percent compared to 19.7 percent one year ago. Newly signed purchase agreements (pending sales) were down 21.5 percent from the same week last year, continuing the trend of significant declines seen in recent weeks.

The residential market discord reflects a period of widespread recalibration of home values, lending standards, housing affordability, supply-demand dynamics, and construction activity; and the climax of this is depressed consumer confidence relative to real estate. The frenzied boom we saw from 1998 to 2005 was so extreme that it necessitates the market correction currently underway. The uncertainty surrounding our shifting market causes angst for both consumers and REALTORS® alike, but the adjustments now taking place will inevitably lead to long-term health and stability to our market.”

Here’s the full report.

One of the good items that I see out of this report is that the new construction listings are down 3.8 share points which is a 19.2% drop in new construction listings.

As mentioned before, new construction typically represents about 15% of the market.  Clearly the builders got ahead of themselves.  It would be good to see that number get back to 15% since the new construction tends to have a disproporionate impact on the market because new construction tends to lead in price increases and decreases.

From the Minneapolis Area Association of Realtors:
“Buyer activity in the Twin Cities housing market remains low compared to the past several years, with newly signed purchase agreements (pending sales) for the week ending May 12 falling 21.8 percent behind the same week in 2006. Seller activity posted an increase of 4.7 percent for the same year-over-year comparison—the first annualized increase in four weeks.

Inventory continues to grow as the summer selling season approaches. There are approximately 34,000 single-family housing units for sale in the metro area, 11.6 percent more than were available at this time last year. New construction homes comprise 16.5 percent—roughly 5,550 units—of total inventory.”

New construction has generally represented 14-15% of inventory. The fact that it is now 16.5% of all inventory demonstrates the continuing challenges builders are facing in this climate.

There remain too many builders in the Twin Cities. It’s time for many of them to close up shop and find something else to do. Many have already turned to remodeling, but that is facing some challenges as well.

Here is the 19 page pdf report published by the association. Notice on page 19 that the housing supply for $1 million+ homes in the Twin Cities is now 19.8 months for existing homes and 26.1 months for new construction.

The Minneapolis Area Association of Realtors reports that based upon the RMLS (Regional Multiple Listing Service) for the 13 county metro, the median price of a home sold in April ‘07 compared to April ‘06 was down 3.5% from $230,000 to $222,000.   That average sales price dropped 4.8%.

The YTD average sales price in the metro is down 1.5% from $272,971 to $268,780.

It’s a gorgeous morning in Medina, MN today. Here’s the view that I woke up to this morning….

Where was the media when all of these lending scams were going on during the boom?  The media is all excited to report on the fallout from many of the hustlers and scammers who took advantage of people during the real estate boom.  (And certainly those stories should be told so that all of us will be better prepared when we run in to these types of people in the future).  However, now that the boom is over, the media is there to report on the people who were hurt.

The media pretends to be the protector of the public interest.  Where were they when all of this was going on 12-24 months ago?

The National Association of Realtors reported their April existing home sales numbers on Friday.  The picture still looks pretty rough for home sellers.  Sales volume fell 2.6% in April compared to March ‘07 and they were off by 10.7% compared to April ‘06.

Housing inventory rose to 8.4 months supply up from 7.4 months supply in March.  There are now 4.2 million homes for sale in the U.S. - a record.  Calculated Risk has some great charts on these figures. 

New home sales (i.e. new construction) soared in April by 16% but prices also fell by 11% as builders slashed prices to improve inventory levels.  According to the Associated Press, the numbers continue to give a mixed signal as to whether or not the nation’s housing slump is over.

My take on this is we need to see a continued drop in prices to get housing moving again.  This is no different than having a sale at Macys.  If you want to increase sales volume, you need to have a sale.  With builders finally reducing their prices, they are encouraging buyers to come back to the market.

New home sales were up in the West (27.8%), the South (8.5%), the East (3.8%) but they were down in the Midwest by 4%.