“Twin” factors of housing affordability, and a relatively resilient job sector, make Minnesota real estate a land of opportunity for bargain hunters and first-time buyers. While the state’s quieter corners are characterized by less price volatility, statewide home prices are falling. The twin cities of Minneapolis and St. Paul have been hit especially hard, and the real estate markets there are projected to fall 15% in 2009. See the following article from Housing Predictor for more on this.
Despite having one of the better unemployment rates in the nation, Minnesota isn’t out of the housing crisis yet. The chief indicator of the economy in the current economic downturn is the unemployment rate since an economic recession has never been experienced in the U.S. through downward pressure by consumers, who make up 70% of the nation’s economy with their purchases. When consumers are out of work they buy less and don’t qualify for home mortgages.
Some of the most affordable homes in the country are for sale in Minnesota, and many are now down to 2000 price levels. The cost of homes in every part of the state is declining, despite higher employment levels than most other areas of the nation.
The volume of home sales has been rising in Minneapolis and St. Paul, the neighboring cities known as the Twin Cities. Nearly half are foreclosures and bank assisted short sales holding the market up better than most. Foreclosures are selling at bargain prices in Minneapolis and St. Paul, where the inventory of REOs has been reduced. First time buyers taking advantage of the federal government’s tax credit have boosted the number of sales.
But foreclosures are forecast to increase as a second round hits the market and bankers will slash home prices to get the excess of inventory off their books. The bargains may be good news for new home buyers, but they are anything but healthy for the overall markets in the Twin Cities, which are forecast to hit 15.1% in deflation in 2009.
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Local Minnesota Housing Markets at a Glance
| City | Forecast |
| Minneapolis | − 15.1% |
| St. Paul | − 15.1% |
| Duluth | −  6.7% |
| Rochester | −  6.3% |
On the north shore of Lake Superior, where winter snows annually chill the housing market the snow hit earlier than usual this year in Duluth. But the lower price range of the market is moving at a steady pace as first time home buyers attempt to complete their purchases in time to qualify for the federal government’s tax incentive.
The market is anything but cold in terms of housing sales below $150,000. Home sales are up in the lower price range for buyers that are able to get financing. Duluth didn’t experience a big bubble in its market like so many other places.
Homeowners in Duluth are concerned about declining home prices in the face of the worst national downturn since at least the Great Depression. But home prices are some of the lowest in the state, and that acts to aid in protecting the market from major deflation. Duluth is forecast to hit just 6.7% deflation in 2009.
Home sales have been relatively strong in Rochester, where activity has just dropped slightly from year ago levels. New home construction is at a standstill like so many other places across the country impacted by the national recession more than anything else. But Rochester is waiting on the wave of adjustable rate mortgage resets that will send more properties into foreclosure.
Because Rochester is a smaller community it’s less affected by the economic downturn than many other high-flying markets, and is forecast to experience total average housing deflation for the year of just 6.3%.
This article has been republished from Housing Predictor. You can also view this article at Housing Predictor, a real estate analysis and forecasting site.
