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Minnesota Real Estate Market: When will Home Values Return?

Minnesota just couldn’t escape the national housing difficulties. After a promising first quarter of 2010, home sales plummeted in the Twin Cities.

In fact, signed purchase agreements were down nearly 40 percent from a year prior. The biggest problem: the expiration of the federal tax credit. Sales have fallen off dramatically since the expiration of the tax credit in April.

The Expiration of the Tax Credit

Unfortunately, many real estate experts don’t quite know how long this dismal housing market shall last. One of the biggest concerns is that economists saw housing numbers beginning to drop off in May, before the homebuyer tax credit was extended. This showed them that many buyers were simply not ready and willing to buy unless they has an incentive – and a deadline – to prompt them to do so.

Median Home Prices Increase

However, amidst all of the sales woes, the median home price in Minnesota jumped to $182,000 in June, which was a 5 percent increase from the same time a year prior. In addition, foreclosures posted the largest annual price increase of 8 percent.

One of the reasons why home prices have increased is because there are fewer first-time homebuyers entering the market. In other words, first-time homebuyers are typically the lower end of the scale in terms of home prices, and if you take them out of the equation, home values begin to rise because more expensive homes are being sold. It is expected, however, that when the first-time homebuyers enter the market again, they will drive down the median price.

Other June figures for Minnesota are as follows:

• Pending sales were down 33 percent from the same time a year ago.

• Median prices have increased in eight of the state’s 13 economic regions. Median prices for the Upper Minnesota Valley were up nearly 17 percent; the Southwest region’s median sales prices were up 10.7 percent; the median prices for the Central Region were up 4.1 percent; and the Seven County Twin Cities area’s median prices were up 6.2 percent.

• The East Central Region’s unemployment rate is now 8.8 percent. The Southwest Region’s unemployment rate is 4.7 percent (home values are increased there nearly 56 percent in June 2010 when compared to a year earlier).

• Lower inventories are helping to boost home values across the state. Foreclosures and short sales, however, are continuing to drag down home values.

When will your home’s value return? If you own a home in Minnesota, the Fiserv Case-Shiller Index predicts that home values will return to their 2007-2008 peak levels by 2013-2014.

10 Largest Cities in Minnesota: