Boom! Boom! Could that be the Twin Cities housing market?

The housing market has picked up big-time.

Calling all folks who are sick and tired of where they’re living.

The housing market has picked up big-time. Yep, right here in the Twin Cities.

“It’s hot,” says Jackie Day, an agent for Edina Realty in Golden Valley. “Things have really changed. I’ve sold 52 houses since the beginning of the year.” And, shades of those old bubble days, some properties, she says, are getting multiple offers.

One lure for buyers: teeny-tiny mortgage rates. In fact, they dropped to a new low this week — 3.62 percent for a 30-year fixed-rate loan, down from 3.68 percent last week and 4.6 percent a year ago. Those willing to take out a 15-year mortgage can land an even better deal, a rate of only 2.68 percent, down from 2.74 percent last week.

“Housing is really affordable right now,” says Cari Linn, president of the Minneapolis Area Association of Realtors and an agent for Coldwell Banker in Eden Prairie. The most recent “affordability index” in the 13-county metro is at 233. An index of 120 means that the median income is 120 percent of what’s necessary to qualify for the median priced home at prevailing interest rates. With rates down further, the index should rise.

First-time buyers continue to dominate the market as they have for the past few years. But things are different now, says Aaron Dickinson, also with Edina Realty. “Previously, they could get screaming deals on foreclosures or short sales. Now you have lots of people bidding up the prices.”

Result: buyers are moving to “traditional” purchases — that is, homes owned not by the bank but by people.

“The exciting part of that is that most of those sellers have to get another place,” adds Dickinson. They “buy up” to a more expensive house, causing that higher-end market to effervesce as well.

“It’s a nice progression,” says Linn. “It’s lovely to see.”

And the data are proving the case. Pending sales in the 13-county metro area for the three-month period ending on June 23 rose by nearly 21 percent (to 14,579) over last year’s numbers for the same period. (Pending sales are those in which a deal has been struck but not closed.) At the same time, the inventory of homes for sale has plummeted by almost 27 percent since last year. That’s as low as it’s been since 2004.

In contemplation of writing a story called something like “the 10 hottest neighborhoods,” I asked real estate agents where sales have been brisk. But, fearful perhaps of breaking a fellow realtor’s rice bowl, none would be specific.

“It’s slower further out from the city,” says Day. “Sales haven’t picked up there as much.”

She attributes the lag not only to high gas prices but also to people’s concern about the immense amount of time they spend on the road. “They’re very interested in walkability,” she adds.

Because inventories have dropped so drastically, says Dickinson, real estate agents have been out beating the bushes (or whatever they do) to find more listings. I myself received two letters just in the past month from agents asking me to put my place up for sale. (Sorry guys. My next move will be to a shady plot in that cemetery down on Penn Ave, and I hope not too soon.)

Some of the reluctance to put a house on the market is rooted in sheer practicality. “A lot people are still underwater on their mortgage,” says Linn. Until prices lift enough to bail them out, they’re not likely to jump at any invitation to sell.

In fact, the one blot on this stunningly bright picture is price. The 12-month moving average of the Twin Cities median sales price is down 3.8 percent from the previous year — to $154,000. (In contrast, the Case-Shiller index reported a 3.8 percent gain for Minneapolis for the year ending in April.)

Dickinson believes prices bottomed in January and that new numbers for June will show the median sales price rising to $179,000. That would be nice but still well below where it was in 2003 — at $190,000. In any case, he says, “price is the last thing to come back.”

Nonetheless, it looks as though we’re headed in the right direction.

More on Trader Joe’s

The Minneapolis City Council last week voted unanimously to quash the grocery-liquor store development on 27th and Lyndale. They never bothered to discuss the project because one of their number, Meg Tuthill, who is from the area, opposed the minor zoning change required. Her previous claims to fame: opposition to sampling of tobacco in cigar stores and outdoor dining in Uptown. And they say Puritanism is dead!

Apparently, if a member of the council objects to a project in his ward, down it goes. Tuthill’s rationale: she’s against changing the zoning code for any reason. Which is ridiculous. A zoning code is not the U.S. Constitution. Nobody is going to fight and die for it. And even the Constitution has been amended 27 times.

The council’s I’ll-kill-your-project-if-you-kill-mine practice is stifling decent development projects all over the city. Trader Joe’s is a chain store, but it would have offered the neighborhood an amenity, improved the look of the street, boosted the tax base and increased employment by 75 permanent jobs. Those might have been benefits to the whole city, which is what Tuthill and her colleagues should be thinking about. Now, unless the landowners can launch a legal challenge, the development is dead.

Meanwhile Finance & Commerce is reporting that parcels across the street on which are perched two run-down houses have been sold to somebody who wants to put up a liquor store.

Here we go again.

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Comments (19)

  1. Submitted by Paul Udstrand on 07/06/2012 - 09:29 am.

    Affordable housing

    I don’t know why you people think affordable housing is bad for the economy? The prices we saw in 2003 were a bubble, why is that so hard to understand? Why do you think bankers had to come up with so many whacko kinds mortgages in order to sell houses in 2003? Because people couldn’t afford housing that’s why. If you see those 2003 prices again, it will another bubble. We never had a housing shortage that justified those prices, and if we’re going get into sustainable communities people need to be able to afford to move. It’s not just about the interest rates, it’s about affordable prices. Median income has gone DOWN in the last 5 years, what makes you think people can pay more for housing?

    Increased home sales may be a good sign, but home prices need to stabilize until unemployment drops another 3% and median income has risen for two or three years in a row. We don’t need rising house prices.

    • Submitted by Lance Groth on 07/06/2012 - 11:51 am.

      Well said

      Couldn’t agree more. Since the 90’s we’ve been lurching from bubble to bubble, and every time one pops, the economy hemorrhages anew and people get poorer – except for those at the top. The last thing we need now is increasing housing prices and new froth in the housing market; the economy is not strong enough to support it.

      Speaking of affordable housing, I took a look at rental prices in the St. Paul downtown and crocus hill areas, and am shocked at how they’ve increased over the past 2 years. Several hundred $ more per month in many cases. People just keep getting squeezed between expensive housing and a weak economy – this is not good.

  2. Submitted by Ross Williams on 07/06/2012 - 09:44 am.

    What is the “right” direction?

    “Nonetheless, it looks as though we’re headed in the right direction.”

    This has been the same media story from the real estate industry for the last five years. Its irresponsible reporting to use people with a vested interest as sources.

    But then, they wouldn’t be sources if they thought you were going to encourage people to stay out of the market. Real estate agents make money whether the market goes up or down as long as people are buying and selling. Their interest is in the market being active and the media serves us story after story about why people should be in the market whether its low interest rates, “affordable prices” or increasing values.

  3. Submitted by mark wallek on 07/06/2012 - 10:28 am.

    More owners needed

    In North Minneapolis we have soime good renters, but others need replacing by real live on site owners. This way, money will be invested in the neighborhood instead of being removed as it is now.

  4. Submitted by Brian Simon on 07/06/2012 - 10:36 am.

    head in the sand

    Apparently Ms Harris didn’t read the numerous comments from neighborhood residents opposed to putting trader joes on lyndale. Having lived briefly at that intersection, I agree its a terrible.fit for the neighborhood. Certainly that building is becoming an eyesore & sunnyside is missed; but that is not to say that TJ’s is the appropriate development for the site.

  5. Submitted by Paul Udstrand on 07/06/2012 - 11:30 am.

    Boom means bust

    Put another way, we don’t need a boom that will only bust later. We need stability, not boom-bust cycles. Have we learned nothing in the last five years? You can’t organize an entire economy around realtor commissions. Housing is about living somewhere, not just buying and selling.

  6. Submitted by Neal Rovick on 07/06/2012 - 11:59 am.

    Two comments:First, people

    Two comments:

    First, people have to be able to pay for their home. The fundamental fact that people really couldn’t afford the houses they bought in the boom made the bust inevitable. Funny money, funny mortgages, balloon payments, teaser rates, adjustable rates all were used to get people into homes that they didn’t have the income for the payments. The basic rule of thumb remains, you shouldn’t pay more than 3 times your household income in house payments (PITI). Until unemployment drops and wages rise, house values cannot rise without funny money. Buying more house than you can really afford means that your housing personal crisis is only a layoff, illness, car replacement or maternity leave away. At about $160K, median house price corresponds pretty well to 3 times median income.

    Second, Trader Joe’s have abysmal parking facilities. Given that they are not marketed as “neighborhood” store but as a “destination” store, their parking provisions are inexcusable and really negatively impact their neighbors. If you are pulling in people from miles around, you should be required to provide adequate parking facilities.

    • Submitted by Susan McNerney on 07/06/2012 - 03:11 pm.

      Misplaced blame

      If you’re going to place the blame for the real estate crisis entirely on people who “couldn’t afford their homes” then you either haven’t paid much attention over the last few years, or you’re a privileged individual who simply has no idea what most of America is facing. Three things:

      – The 2008 financial crisis was the result of deregulation of securities and mortgage markets, and the bizarre financial instruments that were made possible by that deregulation. Specifically CDOs and REITs. If you don’t have much background in that, I suggest going to the NPR web site and listening to This American Life’s excellent overview, titled “The Big Pile of Money.”
      – As the crisis wore on, it didn’t really matter if you bought a house you could afford or one you could not afford. Though the first wave was heavily subprime, the crisis quickly began to consume people who were prime borrowers that had bought homes they could most certainly afford at the time. These people just didn’t anticipate 12-18 months of unemployment followed by a much lower-paying job. For many who were foreclosed, it was just a matter of not being wealthy enough to have several years of emergency savings in the bank. At that point America became a dangerous lottery, and you only won if you happened to work for a company that didn’t lay you off. That usually had nothing to do with ability or hard work. I was lucky. I know many who were not.
      – Banks deliberately targeted low income neighborhoods for sub-prime loans in the time leading up to the crisis. Their tactics were highly aggressive and deliberate. Wells Fargo was caught referring to one of its mortgage departments “ghetto loans” because of their loan sharking in places like North Minneapolis (you can google that to bring up the articles). You can blame the borrowers all you want, but if multi-billion dollar companies are spending their marketing and legal resources on swindling low-income people into sub-prime loans, those companies deserve a large percentage of the blame.

      • Submitted by Pat McGee on 07/06/2012 - 04:01 pm.

        Well said.

        I was one of the lucky ones. When my position was eliminated more than once I was sooo very lucky to find another position where I work. I know many who weren’t. While I wasn’t going to lose my house (a bit of luck in buying low and staying put long enough to pay it off), I lost many many nights of sleep worrying about losing my family’s health insurance.

      • Submitted by Neal Rovick on 07/06/2012 - 04:45 pm.

        I’m not blaming anybody with my comments–there is more than enough to go around.

        Consenting adults borrowed more money than they could afford.

        Consenting adults loaned far more money than the borrowers could afford.

        Consenting adults insured loans against losses in far excess of their reserves.

        Consenting adults bought and sold real estate “securities” without any secure value.

        All parties operated in an atmosphere where, if prices could rise forever, everything would be OK.

        If the loans could be rolled over for a greater amount every few months, the consumer would have money to keep the economy going, the loan officers would keep their jobs and bonuses, the bond assemblers would keep their jobs and bonuses, the insurers would keep getting premiums without any payouts required, the financial giants would continue to grow, and the economy would continue to roll on.

        BUT, the rub is, when prices rise out of all reason and it would require even greater heights of self-deception to buy at unaffordable prices, the market dies. And the economy dies with it.

        It should be noted that the collapse started in California where prices were rising so fast and so high that buyers could not or would not even make the FIRST house payment. They assumed they could flip the house for great profit without bothering to make payments–well before the bank would start foreclosure. This meant that the loan makers could not sell the mortgage to bond assemblers or that the mortgage would be returned from the bond assembler as “bad” within months and contaminate recently assembled bonds. At this point, the entire real estate bubble started to roll-up and die.

        THAT is why the fundamental ability to pay–backed by secure, well-paid jobs–is key to a healthy real-estate market.

        A rising real-estate market without that WILL collapse.

  7. Submitted by mark collier on 07/06/2012 - 02:05 pm.

    shoddy journalism?

    I agree with Ross W’s comment: I don’t see how calling a few real estate agents, with vested interests, counts as legitimate journalism. These remarks about the housing market lack context and could be highly misleading for potential buyers. Also, anyone who has been to Uptown knows that putting a TJs on Lyndale ave is a terrible idea. Traffic and parking are already bad enough. C’mon Marlys, you can do better than this…

    • Submitted by Pat Berg on 07/06/2012 - 03:30 pm.

      Or mislabeled

      In reading through the Trader Joe’s addendum at the end of her piece, I found myself double-checking which section of MinnPost this was in. Because if this isn’t an opinion piece, then I don’t know what is!

  8. Submitted by Connie Sullivan on 07/06/2012 - 04:24 pm.

    I, too, am confused about the weird juxtaposition here of two different kinds of essay: one, on the real estate market, gives figures and some realtors’ enthusiastic comments that are easy to see through because they’re thrilled that the housing market’s up again. It can be called journalism, of the reporting sort.

    The second, though, is pure anger on the part of Marlys Harris, which she expresses in snide remarks and jabs at a Council Member who happens to believe–as many who know the zoning code do–that spot zoning is almost always a negative factor on a street, a block, in a neighborhood. Spot zoning contradicts planning, and it’s not as if Minneapolis’s master plan is all that old, in its most recent incarnation. The piece ignores completely the rejection by neighbors of Trader Joe’s, or any need for another market in their neighborhood.

    So, who knows why MinnPost let Marlys Harris mix these two very different pieces in one. Her second, on Trader Joe’s, ignores any news factor, and is nothing more than a personal blog.

    And, God knows, the world is too full of baseless and emotional blogs and peope who don’t know how to distinguish news from opinion.

  9. Submitted by Paul Udstrand on 07/06/2012 - 05:12 pm.

    Realtors…

    Realtors have been “expecting” the end off the housing bust for five years. Nowhere is more irrational enthusiasm to found than amongst realtors. I know it’s been rough but those folks have no predictive ability whatsoever and they seem to think that if they predict it, they will come… so they keep predicting a boom. I remember two years ago when another Minnpost writer sent up a piece based in the realtor associations predictions that if you wanted to get in on the good prices you’d better by now because prices were gonna go up up up! That was two years ago.

    I haven’t seen anyone blaming just home buyers by the way. I think we all know that many were fooled into thinking they could afford over-priced homes by everyone from banks to realtors. I think the worse gimmick was to tell people that they could refinance at lower interest rates after a year or two, or lock-in at an existing rate. People weren’t told that in order to do that they have to re-mortgage and qualify for the lower rates, or a new loan at a fixed rate, and that a years worth of mortgage payments wouldn’t give them the credit scores they needed. The whole industry was riddled with legal scams that got people into houses they couldn’t afford. We don’t want to go there again. I think that’s what Neal and I are saying.

  10. Submitted by Lauren Maker on 07/08/2012 - 12:35 pm.

    Illegal scams is more like it

    Both Paul and Neil seem to think “consenting adults” were at the center of this problem. I live in North Minneapolis and I can tell you that the scams run on my community were not of the legal variety. Bogus, inflated appraisals, fradulent mortgages by the mortgage companies and the realtors, total mispresentation of the mortgage terms and conditions, not to mention the totally misleading marketing of refinancing products. That doesn’t include the many varieties of flipping scams.
    All of this lead to real estate values going sky high–with matching real estate tax increases, for the sold properties and the rest of us as well. My home, purchased for $76,900 in 1993, at one point was valued by the City at $235,000, with no major improvements since purchase. All “value” increases were due to the surrounding, primarily bogus, real estate activity in my community. Currently, my tax value is down to $153,600.
    During the height of the real estate boom, I was getting a half dozen refinacing offers A DAY in the mail (Countrywide and friends). As I was being squeezed by medical costs at the time, they sounded very tempting–I could see how someone on the financial brink could have easily been reeled in. Many were. It was not just coincidence that these refinancing miracles, APR’s, and poison pill provisions were targeted in communities of color–the same ones the big banks have been redlining for standard mortgages for years. You may think we were just foolish in our financial choices. I think it’s more like deliberate deception targeting the regular, reliable pool of victims.

    • Submitted by Neal Rovick on 07/09/2012 - 09:07 am.

      …Bogus, inflated appraisals, fradulent mortgages by the mortgage companies and the realtors, total mispresentation of the mortgage terms and conditions, not to mention the totally misleading marketing of refinancing products. That doesn’t include the many varieties of flipping scams….

      Those we characteristics of the entire mortgage market in the boom.

      (quote)

      ……..But the suburbs are catching up in the race to the bottom, and there are currently more suburban residents than city dwellers living below the poverty level. Per CNN Money’s story about the Brookings Institution’s analysis, there were 15.4 million suburbanites living in poverty in 2010, compared to 12.7 million living below the poverty level in cities. Whereas poverty levels rose 11.5% from 2009 to 2010 in the suburbs, they inched up 5% in cities.

      From 2000 to 2010, the poor populations skyrocketed in the outskirts of many cities: The Atlanta, Austin, Dallas, and Milwaukee areas are among the 16 spots around the country where the number of suburban residents below the poverty level more than doubled during the decade. During the recent years of economic strife (2007 to 2010), the U.S. suburbs added 3.4 million poor, compared to 2 million more poor people in cities……

      http://moneyland.time.com/2011/09/26/suburban-ghetto-poverty-rates-soar-in-suburbia/#ixzz208LcvT4N

      (end quote)

      I live in a inner ring suburb, and my house value went up to the point where I couldn’t afford it if I were starting out at that point. I also got multiple refinance offers, but I didn’t.

      Now, if I were desperate for money, or felt I was being priced out of the real estate market forever, or felt that I was missing out on a extraordinarily low mortgage, or thought I could make a ton of easy money by flipping houses, or have income by constant cash-out refinancing….

      But all of those ideas were all operational elsewhere, too.

      The fact remains…

      YOU CAN”T HAVE A RISING REAL ESTATE MARKET IN THE ABSENCE OF RISING INCOMES.

      Period.

  11. Submitted by L.A. Krahn on 07/09/2012 - 08:37 am.

    The more of these columns I read, I suspect

    The journalism Central Corridor Funders Collaborative and The McKnight Foundation are funding focuses on quantity over quality.

  12. Submitted by Paul Udstrand on 07/09/2012 - 08:48 am.

    Yes Lauren

    Behind every bubble is a white collar crime wave, and the housing bubble was no different. This crises was produced by a combination of legal and illegal behavior. But we’re talking about the economics of home prices and sales today, we weren’t debating the cause of the housing crises. The housing crises began back in the 90s with multiple changes that legalized a number of bad practices that had been illegal since the Great Depression. I have explicitly said that I’m NOT blaming home buyers exclusively but for some reason you seem to want to keep accusing me of doing so.

    It was not illegal to tell people the could refinance, lock in, afford payments they couldn’t afford etc, it was just really bad advice, and as far as I know it’s still not illegal. Yes, there was also fudged paper work, dodgy accounting by the banks, and deliberately misinformed investors, and that was all illegal.

    The discussion here is weather or not home prices should start rising again as part of a “boom”. I don’t see anyone advocating a return to the white collar crime wave of the housing bubble, that’s why we’re not talking about the illegalities of the housing bubble, it’s not because we’re not aware of them.

    It might be useful to remind us of the criminal aspects of the housing bubble, but you can do that without trying to pick a fight with people who agree with you but are talking about something else. I don’t mind arguments, but I’m not actually arguing with you, I’m just talking about something else.

  13. Submitted by Paul Udstrand on 07/11/2012 - 07:53 am.

    Weather or not….

    Have you guys seen the Whether report today? Sometimes the mind and fingers don’t sync up quite right.

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