September home sales fell in the Twin Cities metro area

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September home sales fell in the Twin Cities metro area

Updated: October 13, 2014 – 9:52 PM

End of foreclosure frenzy brings market shift, higher prices.

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The odd condition of the Twin Cities home real estate market continues: Inventory is up, sales are down, but prices are up.

Photo: David Ryder, Bloomberg

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By Jim Buchta jim.buchta@startribune.com

Higher house prices beckoned sellers to list their homes in the Twin Cities area last month. Buyers weren’t as plentiful.

During September there was a 7 percent jump in number of properties listed for sale, but a 7 percent decline in home sales compared with last year.

It’s a condition that should have produced lower prices. Instead, the median price of home sales rose 5 percent to $205,000 in September, the 31st consecutive month of higher year-over-year prices.

The disparity between falling sales and rising prices is a reflection of a recent shift in the market: With foreclosure rates nearing pre-crisis levels, the investors who once dominated the market are quickly fleeing.

While the decline in sales is frustrating to many would-be sellers, this change in fundamentals is being viewed as a positive sign.

“This is a healthy trend for the market,” said Herb Tousley, director of the Shenehon Center for Real Estate at the University of St. Thomas’ Opus College of Business. “And I expect this trend to continue into the first half of next year.”

Across the nation, foreclosure rates have been on the decline, especially in markets where the economy is improving. That’s been particularly true in the Twin Cities metro, where the unemployment rate is lower than the national average and economy has improved more swiftly.

During the 12-month period ending in August, there were 5,407 completed foreclosures in the Twin Cities metro, about half as many as during the previous 12-month period, according to a report released last week by CoreLogic, which tracks the U.S. house market.

With fewer deeply discounted foreclosures in the market, bargain hunters armed with cash have virtually disappeared, dramatically reducing the number of shoppers.

Last month, for example, foreclosures and short sales represented only 12 percent of all sales in the Twin Cities compared with 22 percent last year at this time and 35 percent in 2012. As a result, there was a 4 percent increase in the number traditional sales, but a 45 percent decline in distressed sales compared with last year.

The shift is taking some of the steam out of the recovery, but the sales are strong by historical standards. The total number of homes sold in the U.S. during August was only slightly below the 10-year average, according to the National Association of Realtors. In the Midwest and South regions, sales actually exceeded the 10-year average.

More competition

Houses in the Twin Cities metro are still selling at a much faster pace than normal, and the supply of properties on the market remains slightly below what’s considered necessary for a balanced market.

Still, many sellers are left wondering why buyers aren’t competing for houses.

“Our expectations were to see a sold sign on our home within three months of listing,” said Jen Mohs. She and her husband, Don, put their house in Chaska on the market in mid-August.

The couple listed the house, a spotless five-bedroom, four-bathroom split-level with a screened porch overlooking the back yard, for $339,900 so they can build a one-level rambler on a lake. After more than 40 days on the market, they’ve had plenty of showings, but still no offers.

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waiting game: Realtor Greg Anderson, right, with Don Mohs at Mohs’ Chaska house, which has been on the market for over a month.

Courtney Perry • Special to the Star Tribune