Real Estate Market Shows More Signs of Recovery

Home sales slump slows; buyers still in charge

Home sale prices dipped slightly last month, while the decline in pending sales was less severe than in previous months. Interest rates remain low.

Although the spring market housing market isn't going to break any records, it is showing some signs of recovering from the deep doldrums of late 2006, according to data released Monday by four Twin Cities-area Realtor associations.

The most telling indicator of what to expect in the coming months is pending sales for January, which were down 6 percent from January 2006, compared with double-digit declines during much of 2006. That's about 600 fewer transactions than were posted when the market peaked in 2003 and still within historical averages.

Pending sales are signed purchase agreements for transactions that have not yet closed.

Deb Greene, president of the Minneapolis Area Association of Realtors, said she expects that sales pace to continue into the year. She's seeing increasing open-house traffic and more buyers who dropped out of the market last fall getting back into the market this spring.

"I think we're in a rebound year now," said Greene, who confesses to being an optimist. "We're getting into a more accessible marketplace, which is much ... healthier."

What's bringing the buyers back?

In part, fear of missing near-record low mortgage interest rates, which rose slightly last week. At the beginning of January, the average rate on a 30-year fixed-rate mortgage was 6.18 percent, according to mortgage funder Freddie Mac. That number rose to 6.28 percent on Thursday.

The increase caused the housing affordability index to fall slightly to 137. That means that the median family income is 137 percent of the necessary income to qualify for the median-priced home with a 20 percent down payment and a 30-year fixed-rate mortgage.

"Buyers are finally realizing rates aren't going to stay where they are forever," Greene said.

Buyers have more choices than ever, too. Inventory remains at record highs, but the increases have been much more moderate than during most of 2006, when monthly listings jumped as much as 40 percent.

Last month, the number of new listings was up 5 percent. That, too, is relief from the double-digit increases during 2006, but it was still the highest number of new listings added during January since the boom began six years ago.

Prices, too, have been relatively favorable to buyers. During 2006 the median sale price of houses sold through the Regional Multiple Listing Service rose only 0.5 percent. January's median price, $225,000, was down 1 percent from January 2006.

Steve Hyland, president of the St. Paul Area Association of Realtors, said in a prepared statement that while the overall median price of active listings remains consistent with the past 12 months, the median price of pending sales is the lowest in two years.

"Sellers appear to be much more motivated than we've seen in previous months," said Hyland, broker-general manager of Split Rock Realty in Edina.