Report: Richfield, Twin Cities Housing Market Takes a Slide After 2010 Incentive Year

The Twin Cities real estate market overall continued its downward spiral in the first quarter of 2011, according to the Minneapolis Area Association of Realtors’ (MAAR) quarterly report released Wednesday. New listings plummeted almost 25 percent, pending sales went down almost 11 percent and the median sales price was down almost 12 percent, when compared to the first quarter of 2010.

But, pure statistics don’t tell the whole story. Last year, the housing market was driven by two things: A glut of bank mediated homes that flooded the market and the first time homebuyer’s tax credit, which brought a horde of new buyers trying to beat the April 1 deadline. Richfield was particularly affected by both of these. The housing stock in Richfield was particularly attractive to first time homebuyers and Richfield had and still has a large number of lender mediated homes on the market.

“These are a comparison to last year, which was a tax-incentive year,” MAAR Communications Director Greg Sax said. “So the numbers are going to be down, no matter what ... At the same time, we are seeing that lender-mediated properties are still dominating the market. We’d like to see fewer of those, but it is what it is.”

The only bright spot in the first-quarter metro area statistics was the number of closed sales was up almost one percent in the Twin Cities. For Richfield, the story was, on the surface, less optimistic.

While closed sales were up overall, the number of closed sales in Richfield dropped by 33.6 percent in the first quarter of 2011 when compared with the 2010 tax incentive year. Further, the tax incentives drove traditional closed sales in Richfield up by 15.3 percent, foreclosures up 69.4 percent and short sales up a whopping 133.3 percent from 2009.

In order to get a clearer picture of home sales, it's best to compare this year's first quarter to the more typical figures of 2009. The closed first quarter sales from 2009 compared to this year dropped only 11 percent. While not good, the number is not disastrous, either. Between 2009 and 2011, closed foreclosures in Richfield went up from 98 to 144 homes and short sales rose from 21 to 38 homes. Only traditional sales lagged, falling from 300 closings in 2009 to 218 in 2011.

In addition to the decline in home sales in the Twin Cities, the median sale price for a new home dropped from $162,000 in the first quarter of 2010 to $143,000 in 2011. In addition, the percentage of the original list price that sellers received for their homes fell from 93.5 percent in 2010 to 88.4 percent in 2011.

In Richfield, the median sales price dropped from $168,900 to $151,000, mostly because of Richfield’s sizable short sale housing and foreclosure market segments. While short sale prices dropped 10.7 percent and foreclosures prices dropped 2.6 percent, traditional Richfield home sales only dipped slightly from $187,000 to $176,000. 

The price drop can be partially attributed to buyers looking for bargains.

“Price is the drawing card for many buyers,” said Ann Zickert, a real estate agent with Coldwell Banker Burnet, who lists properties in Richfield. “Buyers compare prices and see that foreclosure prices are lower. Yes, the traditional list is a better product, but a lot buyers will take a neglected product for less money.”

Zickert said that she’s now starting to see buyers who only want to look at traditional sales and have no interest in short sales or foreclosures. She also added that there are investors that offer and sometimes get homes with low-ball offers, which skew the market figures.

The recent MAAR report also showed that the average number of days between when a property is first listed to when an offer is accepted swelled from 132 days in the first three months of 2010 to 153 days in the first quarter of this year. Also, the number of new listings fell from 23,754 in the first quarter of 2010 to 17,845 during the same period this year.

The swelling was much less severe in Richfield and the average days on the market were 115 days, which actually came down from 2009’s 124.

In spite of the numbers, Cari Lynn, president-elect of MAAR, expressed an optimistic outlook.

“Layoffs have decreased, and we are building on 13 consecutive months of job growth, which bodes well for local real estate,” she said in a statement. “In addition to new housing demand, we should eventually see the mortgage delinquency rate drop and fewer distressed sales pressuring prices downward.”

Market analysts at MAAR say that the figures show that overall, the Twin Cities is doing better than many other metro areas like Detroit or Miami, where prices have dropped as much as 70 percent in some areas.

Sax said the real estate industry is “cautiously optimistic” about the upcoming summer and fall.

“That’s where we feel like we’ll start to see some relief,” he said. “It isn’t going to be extreme, but it won’t be as trying as last summer.”

To see MAAR's Richfield report, see the attached PDF.