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April 6, 2009

Signs of home sales

Would-be home buyers are back in the market

By Tim Krohn

For local real estate agents, there wasn’t much to be happy about during the past winter.

But spring, stimulus money and attractive financing are bringing hope and results.

“The agents have been busy the past few weeks. People are looking and people are buying,” said Tom Atwood of Century 21 Atwood Realty in Mankato.

With the housing inventory finally dropping, real estate agents are even seeing something they haven’t witnessed for quite some time.

“We’re starting to see multiple offers on properties, which we haven’t seen for a while. It used to be the norm, but not in the past year,” Atwood said.

The market remains decidedly geared toward the buyer.

Median home values are down in the Mankato region by about 5 percent in January and February compared to a year earlier. The median sale price in the region in February was $123,550.

That’s far less of a drop than the 20 percent fall in the Twin Cities in January compared to a year earlier.

And buyers have other things working in their favor. First-time home buyers can take advantage of a $7,500 tax credit rolled out as part of the stimulus package. Interest rates are at about 4.75 percent on a 30-year loan, a 50-year low. And the affordability factor is the best it’s been in at least two decades.

The affordability index looks at the median income in an area compared to the median home sales price. In the 10-county Mankato area, the affordability number is 221, meaning that people making the median income could, theoretically, buy more than two median-priced homes and afford the payments.

“The Realtors Association has been doing that affordability index for about 20 years and this is the best it’s ever been,” Atwood said.

He said home shoppers are saying they believe housing prices have hit bottom.

One segment of the housing market has been brisk in recent months — the sale of low-priced foreclosed homes.

“The real distressed properties, they are going fast and they’re priced that way. The companies that have them just what to get rid of them,” Atwood said. “The down side is they are in tough shape and buyers have to realize they have to come in and do some work and hope they don’t find anything seriously wrong.”

The other end of the market is decidedly slower.

“With the upper-end homes, it’s a very, very slow market.”

Atwood said the brisk sale of foreclosed homes and an uptick in sales to first-time home buyers means the inventory of homes on the market is finally falling, which increases demand and may start edging prices up.

In the Twin Cities, home prices in January took their steepest annual dive yet, according to the latest Standard and Poor’s Case-Shiller home price index, while the number of residential construction permits issued locally in March fell to one of the lowest monthly totals on record.

The housing market there remains ravaged by foreclosure-related activity and still has a backlog of inventory. Still, the 20 percent fall in prices was less of a drop than in December, which might indicate the end of falling values is near.

Mary Bujold, head of Minneapolis-based Maxfield Research Inc., said dramatic price drops are attracting more first-time home buyers into the market. She’s even spoken to a few residential developers who are looking to buy land again, she said.

“I would say that we’re at or very near the bottom,” Bujold told the Star Tribune last week. “We’ve already started to see some inklings of improvements.”

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