Good News/Bad News -Less Buyers/Better Buys

This latest Press Release from MAAR addresses the most recent Market Statistics

Tighter Credit Standards, Typical Fall Slowdown Shrink Buyer Pool

Housing Affordability Improves

Minneapolis, Minnesota (October 10, 2007) – Tighter credit standards are a factor in the recent decline in home sales in September, according to the Minneapolis Area Association of REALTORS® (MAAR) based on data from the Regional Multiple Listing Service of Minnesota, Inc. Buyer activity fell in an environment of abundant choice, improved interest rates and motivated sellers. Newly signed purchase agreements (pending sales) in September fell relative to the same month last year by 24.4 percent, posting 2,839 unit sales. Similarly, closed sales are down 22.6 percent for the same time comparison.

“The consumer’s interest in real estate is always strong, as evidenced by the popularity of real estate shows on television,” said Deb Greene, president of MAAR. “We see motivated buyers and sellers in our market, but at the same time we’re now experiencing a return to more traditional, stricter lending practices that were in effect before the boom.” Greene also stated that lenders are placing more scrutiny on appraisals, income, employment history, and other factors, which is resulting in reduced home purchasing power for some buyers.

Builders and sellers continued to pull back in response to the market. New listings in September were down 9.4 percent from September 2006, the eighth consecutive month of year-over-year declines in listings. Year-to-date, there has been 3.2 percent fewer homes placed on the market than this time in 2006. This is good news for thinning out inventory and returning to a more balanced market.

The median sales price in September was $225,000, down 2.1 percent from last year. The Percent of Original List Price Received at Sale also declined slightly to 94.2 percent. Nationally, home prices have increased for the first time in 13 months, according to the National Association of REALTORS®. “In this buyer’s market, sellers should listen to buyer feedback and the honest and frank pricing advice of a professional REALTOR®,” said Greene.

Interest rates are near 45-year lows and declined further in September, and the MAAR Housing Affordability Index improved to 131 in October—both encouraging signs. Improvements in affordability will help lay a healthier foundation for the eventual market turnaround.

Kevin Knudsen, president-elect of MAAR said, “We need to remember that there are still positive changes taking place. Affordability is improving, the lending environment is returning to solid fundamentals, interest rates are still historically low, and buyers now have a golden opportunity to purchase a home. A time of ‘crisis’ often turns out to have been a time of opportunity in hindsight.”