Time to pop open the champagne?
Numbers of homes sold and pending home sales in the 13-county metro area this March were up significantly, compared with March 2008, according to the Regional Multiple Listing Service report released this morning.
The numbers: Pending sales are up 21.3 percent, and closed sales are up 14.2 percent over the previous March. The median sales price, however, was $154,125, down 22.9 percent from March 2008.
The sales tally, though, has been inching up since January.
So is this cause for celebration?
Talk to Rae Jean Malone and other sellers of real estate and hear hope in their voices.
“We haven’t been this busy in the last two years as in the last two weeks. It has been unbelievable,” said Malone, an agent with Keller-Williams and president of the St. Paul Area Association of Realtors and Western Wisconsin, talking about the last half of March. Her office had 333 listings and an “all-time high” of 1,106 showings last month, compared with the March 2008 tally of 398 listings and 593 showings.
She’s thinking positive, as is Steve Mooney, professor of real estate at St. Cloud State University. Rising numbers are “a good sign,” Mooney said, “because we haven’t seen anything positive in so long.”
Still, most observers advise caution.
“It’s a positive sign,” agreed George Karvel, distinguished professor of real estate at the University of St. Thomas. But good times aren’t just around the corner, he cautions. The down times are far from over, he said, despite the hopeful attitude of local real estate agents.
“They all want to believe it’s going to turn around and be better,” Karvel said. “It will be, eventually, but not this month, and probably not this year. It’s going to be a long, slow process to absorb the excess supply of housing available in the marketplace.”
Click on chart to enlarge
Lest we forget, last week’s U.S. economic reports were disturbingly gloomy: a 15th consecutive month of job losses and nearly 6,000 bankruptcies a day in March.
“Better than last year is not saying much; on the other hand, it’s better than saying worse than last year,” said University of St. Thomas economics professor Agapitos Papagapitos. Last year was “a pretty lousy year,” Papagapitos said, suggesting a long haul back to normalcy.
So, what’s going on?
The rise is leavened, area real estate agents say, by lower home prices, thousands of foreclosed properties, enticingly low mortgage rates — under 5 percent — and such incentives as the so-called federal First Time Homebuyer Credit. Also, figure in other incentive programs, such as the 2008 Minneapolis Advantage program which in its pilot year enabled 50 buyers to purchase homes with $10,000 loans.
Next, factor in spring, when the housing market traditionally heats up.
The result: Folks are plowing their money into mortgages.
“I think buyers are finally understanding, you know, that we’re not going to see this [extremely favorable market] again,” opined Brad Fisher, president-elect of the Minneapolis Area Association of Realtors.
Fisher acknowledged that 60 percent of homes sold in February and March were foreclosed or bank-owned properties, available at value prices, but he and others said what real estate folks call “traditional” home listings, those sold by private parties rather than lending institutions, are also coming back into the market.
It’s that “traditional” kind of sale that’s going to help stimulate the economy, Malone said. “When a house sells, it moves the economy: People need trucks to move, go to Home Depot to buy things and fix up the house, go to furniture stores. There’s so much employment in a house.” It’s that stimulus idea at work.
Still, for the housing market to return to “reasonableness,” as Karvel puts it, the “excess housing supply (more sellers than buyers) has to be absorbed, the fear of job loss and unemployment and declining economy has to abate. Until people are going back to work, you’re not going to see a lot of effort to purchase homes. You are going to have some bargain hunters,” he said.
And the home-buying times are great for people with secure jobs who are first-time buyers or those with easy-to-sell properties wanting to move up, most agree.
$8,000 tax credit
That’s the idea of the First-Time Homebuyer Credit, a part of the $787 billion stimulus bill called the American Recovery and Reinvestment Act, a keystone in the Obama administration’s plan to revive the real estate market and the economy.
There are i’s to dot and t’s to cross, of course, but under the plan, qualified first-time home buyers and those who haven’t owned a home in at least three years can buy a home by Dec. 1 and receive 10 percent of the purchase price in a tax credit, up to $8,000.
“It’s a bonus thing,” says Keith Hittner of Coldwell Banker Burnet in Apple Valley who’s seeing “a lot of people who were on the fence, who maybe did not have money saved up” now motivated to buy a home. He’s seeing people borrow from 401(k) accounts for a down payment and then repaying themselves with the stimulus money.
Other agents talk about some buyers being able to go to family members who “gift” them the money for a down payment. If they want, they re-pay the gift, Fisher said.
Malone had four sales in one recent week of first-time home buyers, including a 25-year-old scientist, a 28-year-old “single guy with a good job” and a 27-year-old single woman.
Agent Masami Suga, with Edina Realty in St. Paul, says she’s worked with about a dozen first-time homebuyers since the beginning of the year, most purposefully going after the tax credit. “It’s sort of like a grocery store creating a limited offer deal. There’s a sense of urgency,” she said.
“It’s opening up the market to people who otherwise wouldn’t be able to do it,” agreed Hittner. “Are they beating the door down over it? No, they’re not.”
Agents try to encourage sales by spreading news of the credit and low mortgage rates. Edina Realty and Coldwell Banker Burnet, for instance, tout the $8K tax credit on their websites. Some agents, like Jeff and Judy Boldt with Keller Williams, take a more direct marketing approach. They pulled together a market newsletter and sent it to “pretty much anyone we had an address for,” Jeff Boldt said.
Nationally, other efforts are being taken to spur sales. The National Association of Home Builders answers frequently asked questions about the tax credit on its website. Lennar Corp., a home-builder in 18 states including Minnesota, offers new homebuyers up to six months of mortgage payments as high as $1,800 if the buyer should lose his or her job. Recently, the California Association of Realtors announced an offer to make first-time buyers’ mortgages for up to six months if they lose their jobs.
Still, Hittner and others in real estate say they would have preferred a $15,000 tax credit, rather than what he calls this “half-measure.” The larger credit would have spurred sales for “move-up” buyers as well, he said. “My son is a perfect example. With a baby on the way, they want to move into a larger home, but he can’t sell his home for what he owes on it.”
Hittner suggested the idea might have been defeated because it was a Republican, rather than Democratic, idea.
Some young buyers were already looking to buy before the tax credit came along.
That was the case with 26-year-old Nate Lamusga and his fiancée, Kristin Sandau. They had already squirreled away money and started a house search.
The tax credit “wasn’t the deciding factor, but it played a little bit of a role” in his house purchase, Lamusga said, echoing the responses of several other prospective or recent home buyers contacted. “It’s not that we needed that money. We weren’t about to get into something we couldn’t afford,” said Lamusga.
For this young couple, the stimulus means they’ll receive a tax credit of $8,000, money they’re planning to use to update the $170,000, four-bedroom house in Savage they bought last month and to help pay for their May wedding and honeymoon.
Already, their home purchase has caused an economic ripple. The couple has spent about $1,500 on the interior: spackling walls, painting, replacing bathroom vanities. Refinishing the hardwood floors is next, probably once that tax credit appears with the tax return, Lamusga said.
Another happy result of the house purchase: the bride-to-be’s dad was the real estate agent handling the purchase and he put the sales commission toward paying for a wedding with 300 guests.
Maybe Christian Hodnapp, an air traffic controller, says it best. “It all came together at a good time.”
Hodnapp says he and his fiancée, a public schoolteacher, are getting serious about buying. The situation “lets you get into a house with a lot less saved up” and into the “kind of house if it were on the market a couple of years ago, you would not have been able to afford,” he said.
For the time being, Karvel says, the real estate market apparently has stopped its descent. But look at the numbers of homes still for sale and how long it could take to sell them.
His advice for homebuyers? “I’m telling my son-in-law and daughter, ‘You don’t have to rush into the market. Prices aren’t going up tomorrow. Look. Think,” Karvel said.
“We need a protracted period of positive sign after positive sign. It’s like we’re recovering from a very bad illness. Will we recover? Yes. How long will it take? We don’t know,” Karvel said.
Cynthia Boyd writes on education, health, social issues and other topics. She can be reached at cboyd[at]minnpost[dot]com.