Fourth Quarter Market Update 2008

Market Update- Fourth Quarter 2008


Consumer activity in housing appears to be making a comeback thanks to a combination of declining mortgage rates and downward movement of home prices largely as a result of lender-mediated and foreclosed home listings. Pending sales continue to trend ahead of last year with the last four to five months seeing an increase and the last three months posting a healthy 25 percent more pended sales than the same time in 2007 according to the Minneapolis Area Association of REALTORS (MAAR). We also continue to see improvement in the months supply of inventory with absorption rates declining to 8.5 months from 10.5 months in August.
According to MAAR, the November Home Affordability Index (HAI) is up by 19 points over October to 180 (up 27.7 percent from last December). Its the highest recorded HAI since MAAR began tracking in 1990, making homes more affordable than we've seen them in recent history, especially when combined with low mortgage rates. What a great time to be a buyer!
Edina Realty in the Marketplace
YTD November 2008, homes priced under $250,000 comprised nearly 70 percent of our total units sold compared with 63 percent of our units in 2007.
Edina Realty continues to lead the market with 19.3 percent market share YTD; our closest competitor has 13.1 percent market share according to the Regional Multiple Listing Service of Minnesota (RMLS) for the previous 12-month period.
Appointment activity in October and November measured by Edina Realty's Appointment Center was up nearly 5 percent over 2007 and 5.5 percent ahead of 2007 overall.
From Jan. 1 to Dec. 5, 2008, Edina Realty was mentioned in an estimated 325 newspaper articles, radio and television segments. Around 275 press releases and media pitches went out touting new products, services, technology, events, agents and Foundation grants.
In a report listing the most popular national real estate search terms, Edina Realty showed up 26th among 56,220 search terms. The data is based on a sample of 10 million U.S. Internet users and was collected by Hitwise within the Business and Finance “ Real Estate" industry for the four weeks ending 10/25/2008.
Consumers are increasingly using Edina Realty's foreclosure search. Since it was launched in July, the landing page has seen nearly a 40 percent increase in traffic.
This year, the Edina Realty Foundation awarded 197 grants totaling $342,000; offices and departments held 37 fundraisers that brought in more than $50,000. Note: these figures are for the 2007- 08 fiscal year running from 10/01/2007 - 9/30/08.
The Marketplace
As of Dec. 11, mortgage rates fell to 5.0 percent. That means, on an average $250,000 home loan, a consumer can expect to save $238 per month – more than $85,000 over the life of the loan - at a 5.0 percent rate versus a 6.5 percent rate that we had in July. On a related note, there are some consumers who may be waiting for the rumored 4.5 percent rate to make their move. We'd like to discourage them from waiting for a number of reasons: it may not happen, inventory levels may change as a result of it, and home prices may be driven up. Essentially, you get your choice: price or terms. Customers can either take advantage of the current rate at lower home prices or a lower rate at higher prices. Let your clients know that there are options to lock and roll their mortgage rates with Edina Realty Mortgage for a fee if they're concerned about missing out on an even lower rate.
According to MAAR, the median sales price in the 13-county metro area is $175,000 - down 19 percent from 2007.
We see a growing number of foreclosures out there, but we're working our way through them and are not experiencing the same inflated rates locally that the population is experiencing nationally.
Overall median sales price of homes is being pulled down by foreclosures. However, according to MAAR, Foreclosures and Short Sales in the Twin Cities Housing Market: Q3 2008 Update, traditional properties that aren't lender mediated are experiencing more subtle price declines about -4.6 percent compared with -9.1 percent for lender mediated.
The Mortgage Bankers Association reports that for all of Minnesota, the 2008 foreclosure rate is expected to be 1.39 percent; 1.81 percent in the metro area.
According to RealtyTrac, six states accounted for more than 60 percent of all foreclosure activity in the third quarter: California, Florida, Arizona, Ohio, Michigan and Nevada. Minnesota and Wisconsin ranked relatively low on the list at 25th and 31st respectively.
We expect next quarter to look very similar to last quarter in terms of buyer activity. According to MAAR, we should expect a decline in overall supply to continue into January, with an anticipated increase in the supply of lender-mediated market share.
Brainerd Lakes Area
According to the Greater Lakes Area Association of REALTORS (GLAR), YTD sales of all homes in the area are down 17 percent from 2007 and down 30 percent from 2006; lake properties are down 32 percent over the last two years.
New listings overall are down 8.5 percent from 2007; lake home listings are up 12 percent.
Foreclosure rates are below the Twin Cities.
Average days on market have increased 19.6 percent over the last two years.
Lake property sales $200,000 to $900,000 are down 30 percent from 2007 and lake properties priced over $900,000 are down 39 percent from 2007.
45 percent of sales over $1 million (33) were cash sales. Depreciation factor of lake properties over the last two years is approximately 20 percent.

If you would like more information about homes for sale, recent sold homes in your neighborhood or foreclosures, go to our web site at:

http://www.edina-realestate.com/

Mortgage Rates Drop, Affordability Jumps

Monthly stats for November were released last week. These were main points:

A combination of substantial declines in mortgage rates and the continued downward movement of home prices is leading to an unusually attractive affordability environment. Rates declined well into the 5 percent range in the last month the best rates of 2008 and the most attractive since 2003. Add Novembers tantalizingly low median sales price of $175,000 down 19.2 percent from the same time last year and the lowest November showing since 2001 and you have extremely healthy affordability.
MAARs Housing Affordability Index (HAI) jumped 19 points in the last month, and currently sits at 180. This is up 27.7 percent from last Decembers mark of 141 and is the highest recorded HAI since we began tracking the data in 1990.
Lender-mediated home sales, which accounted for 53.5 percent of pending sales and 47.3 percent of closed sales, posted a November median price of $130,881. This is a drop of $5,000 from last month and a decline of 20.7 percent from last year. Traditional properties, which exclude foreclosures and short sales, had a November median sales price of $225,420, a decrease of 2.0 percent from last year.

Weekly Market Activity Report

As fall turns into winter and winter turns dark and cold activity in the Twin Cities housing market has entered its annual hibernation. On a weekly basis, new listings, total inventory and sales are all declining as consumers batten down the hatches and prepare for the holidays. Relative to this time last year, however, activity is stronger. For the week ending December 6, there were 597 signed purchase agreements (pending sales), which is up 27.6 percent over the same week last year. Roughly half of these sales 54.7 percent were lender-mediated foreclosures or short sales.
On the supply side, new listings were relatively flat, up only 0.7 percent for the same time period comparison. The total supply of homes for sale currently sits at 27,035, down 8.2 percent compared to this time last year. Expect the decline in overall supply to continue into January. At the same time, expect the lender-mediated market share of that supply to increase.