Buyers spring for falling home prices as housing affordability hits its highest point in five years
Make no mistake: we are firmly entrenched in a buyer’s market. The long-anticipated market corrections are finally out in full force. Aggressive seller pricing and steadily improving buying opportunities continue to be the hallmarks of the 2008 Twin Cities housing market so far, according to the Minneapolis Area Association of REALTORS® (MAAR) based on data from the Regional Multiple Listing Service of Minnesota, Inc.
The number of homes for sale continues to post record levels despite a drop-off in new listing supply. Fewer new listings into the spring market should help bring the market back to balance. A 6 month supply of homes on the market is viewed as a balanced market. At the end of February, there were 29,842 homes for sale in the Twin Cities metro area. This equates to 8.72 homes for each buyer expected during the upcoming month.
Historically, the spring market always brings an increase in what sellers receive relative to their original asking price this will continue into summer months as buyer activity improves. With builders, banks and traditional home sellers facing a challenging environment, serious sellers have priced their product to move. The decline in median sales price is just as much a function of what kinds of properties are being sold as it is a slashing of listing prices. According to MAAR's February Housing Supply Outlook, there recently has been a large increase in the sales of properties priced under $150,000, which does have the effect of skewing the overall median sales price downward.
The foreclosure sales will help decrease the inventory but will limit the number of homeowners wanting to sell their starter home and move-up to something bigger and better. Many of the lower quartile homes selling stop the ripple effect of move-up buyers. Lower down payment loan options in the move-up market fueled the robust years from 2001 to 2005. Uncertainties in the lending industry have kept sales in check despite extremely attractive buying environment. However, the recent FHA loan limit increase should have a positive effect on buyers searching for secure financing."
The MAAR Housing Affordability Index (HAI) shot up eight points from last month to 157. That's good for 16 points in the last two months and the healthiest HAI figure since 2003. According to MAAR President Elect Steve Havig, "This is arguably the most attractive buying environment we've seen in the Twin Cities in a decade,"