Depreciating castles

Minnesota State Roundup

Published July 1, 2007  | July 2007 issue

Fortunately for many cities in the Ninth District, the housing crunch has not exacted much of a toll compared to elsewhere. The Twin Cities metropolitan area hasn't been so lucky. Though it has fared better than many major metro regions across the country, the district's largest metro region by far has also absorbed the biggest gut shot to its housing market.

In 2006, the ratio of active listings to each buyer rose about 50 percent over the previous year in the Twin Cities, which signaled that a once blistering-hot housing market was in for a cooling. About one-third of the 150 or so communities tracked by the Minneapolis Area Association of Realtors saw median sales prices decrease in 2006; cumulatively, average home prices grew just 0.5 percent for the year after averaging almost 9 percent annually over the previous decade.

So far, this year has seen more of the same. From February to May, home sales were down about 10 percent, and average prices also dropped. From May 2006 to March 2007, median prices for closed homes fell from about $235,000 to $222,000.

In May, the region had 5,000 more listings than its five-year average. Data from the Minneapolis Area Association of Realtors show that six- and 12-month supplies of homes for sale are up for every price level, as well as among previously owned and newly constructed homes.

Builders are stepping back some; through the first three months of this year, 35 percent fewer housing permits were issued in the Twin Cities. But the glut of housing has been more difficult to eat into because foreclosures have been high in the Twin Cities. In Hennepin County, home to Minneapolis, foreclosures doubled to 1,200 in the first three months of 2007 compared with the same period a year earlier, according to RealtyTrac, a private firm that tracks home foreclosures nationwide.

Throughout the Twin Cities, there were 2,468 foreclosures—or 95 percent of all foreclosures in Minnesota, according to RealtyTrac. Despite the increase, however, the Twin Cities ranked in the top third in terms of lowest foreclosure rate, adjusted for population, among the nation's largest 100 metros.

Ronald A. Wirtz