The 'Brakes Are On' in Twin Cities Housing Market

BLOOMINGTON, Minn., Sept. 21 /PRNewswire/ -- If you have driven through any residential neighborhoods lately, you're no stranger to the recent trend of "For Sale" signs adorning the yards of many Twin Cities area homes. While the quantity of yard signs out there drives the point home that the local housing industry has slowed down, four RE/MAX Associates from around the 13-county metro share some positive insight about trends happening in the Twin Cities. They say that while it's definitely slowed down, it still has some power in it to help bring the fall market back up to speed.

Coming off the spring housing market, that offered numerous buyers the First Time Homebuyers Tax Credit, which was a major incentive to buy before April 30, the summer naturally took a downturn. According to MAAR's (Minneapolis Area Association of Realtors) August Market Overview, closed sales were down in June, July, and August. "The brakes went on," says John Lockner with RE/MAX Results in Woodbury, MN. "The brakes have been on and the market has been slowing every week since the end of the tax credit." But it's not all bad. "Buyers are still in the market," Lockner continues, "People are still relocating. Interest rates are the lowest they've ever been, and jumbo rates are down. There are lots of positives in the market and saying it's slowed down doesn't mean it's shut off." Ryan O'Neill, with RE/MAX Advantage Plus in Lakeville, agrees. "There's a lot of activity happening. It's just more competitive if you're a seller, trying to find what price your home will sell at and where it will sell. But it's not all doom and gloom because there are lots of transactions happening out there." Pending sales actually increased slightly from July to August, offering optimism regarding the number of closed transactions that could occur this fall.

New listings were also down this summer, which is a positive sign for home sellers; but with the weak demand from home buyers, buyers are still in the driver's seat. So, what should sellers, whom need to sell, do? Chris Grimes, with RE/MAX Advantage Plus in Shakopee, says it comes down to a few things. "The location of your home - and we're not going to change the location. The condition of your home; bring a stager in to make your home sparkle, and listen to that stager as much as possible. Then you've got price, and quite frankly . . . you need to price your house very aggressively." While there's a 3.2% drop in the percent of original list price received at sale from last year to this year, sellers are, on average, receiving 91.1% of their list price. Grimes says, "If sellers price the home within 10% of where it should be, it will sell . . . if it's priced right, it can be off the market in 90 days."

However, for sellers who don't need to sell but want to sell, Eric Hooper, with RE/MAX associates plus in Rogers, says it comes down to the delta cost of change. "Sellers are selling lower than they'd like, but if they're buying again they're also buying at a lower price. There's a balance there. It works better when you're buying up, rather than down, in terms of price. But in general, you have to focus on that delta cost of change . . . to leverage yourself to be in a better position than you are in." In other words, sellers need to stop focusing on the fact they're selling lower and concentrate on the idea that they're buying lower with a lower interest rate.

Even when sellers sell their house, the big push that will get the housing market back up to speed rests in the hands of the buyers. O'Neill stresses that consumers need to regain belief in the long term stability of our market. "Fears are out there with the economy, the unemployment rate, and the way everything's shaking out. But with prices where they are at buyers can invest in great real estate with very affordable monthly payments. To be able to get a 4.5% interest rate on a 30 year mortgage is crazy." Hooper says the opportunity for affordability cannot be missed. "If interest rates are down it means your monthly payment is down and that should be a good motivator for anyone interested in buying. I try to point that out to my buyers, I show them their payment with the interest rates, if the rates go up here's your new payment." While no one is really expecting interest rates to go up in the next three to five months, if the economy starts to see some positive momentum, rates very well could shift up too, and Hooper says buyers need to be ready. "If the rates go up they'll think 'oh my goodness – I missed out on an opportunity – maybe I should wait till rates come back down.' But I tell people 'no'. If you want to buy, buy now."

Buyers are also getting great deals on the cost of homes. The median sale price is down from the beginning of summer; in June the median sale price was $182,000 and in August it went down to just above $172,000. That's a 13.9% change from 2008, and down 1.6% from last year. But as buyers hit the pavement looking for the right house, and the right deal, Grimes says there's an education process for some buyers. "Just because housing prices are down 30% doesn't mean you're going to get 30% off the list price of a house. The list price is already down 20-25%. A buyer might get 10% off that price."

While the incentive of discounted home prices is helping draw buyers out, the real deal is in the low interest rates; they're currently hovering below 5% and the hope is buyers will take notice and rush into the fall market the way they did this spring for the Tax Credit. "We're hoping this fall we'll start to see buyers, that were sitting on the sidelines, come back in and take advantage of these good interest rates," says Hooper. "Imagine how much you can save on a monthly payment," says Grimes, "or how much faster you could pay it off if you paid like it was at 6%." Lockner says he just hopes buyers recognize a good deal when they see one. "There's a large effort in the real estate community to get the news out about interest rates being so low and now being the time to buy a house. The question is, is the buying public going to recognize the opportunity that's being presented to them right now." O'Neill thinks so. "People will buy, they want the American Dream. That creates demand and demand increases prices. You have to have a long term belief in real estate and the Twin Cities economy because this is as good a time as ever. If you're waiting on the side lines, dive in."

These four RE/MAX Associates don't deny that this fall could still be a tough market, but all of them are being optimistic, as well as realistic. The housing market tends to move in cycles and as the kinks continue to work themselves out this fall, buyers and sellers will still find deals and sales will close if they find, and trust, an experienced agent to help guide them through the home buying and selling experience.

SOURCE RE/MAX North Central