Home prices set another record

By Neal Gendler, Staff Writer

Published: September 19, 2003 in the Star Tribune
Edition: METRO
Section: BUSINESS
Page#: 1D

August's $207,500 median home-sale price set another record for the Twin Cities area, leaping $5,500 from the previous record set in July.

The median - the point where half the sales are for more, half for less - was up 9.21 percent from August 2002, according to Regional Multiple Listing Service data released Thursday by the four metro-area Realtor associations.

Bob Clark, president of the St. Paul Area Association of Realtors, cautioned that the new median price ``looks really big for one month,'' but it's not wise to draw conclusions based on just four weeks.

``It could fall off next month,'' he said. ``Our prediction for this year was single-digit increases in prices.'' For the first eight months, the median price is up 7 percent from the 2002 period, he said.

The median may be boosted by more buyers getting sellers to pay closing costs and adding the amount to the sale price, said Shirlee Heitz, president of the North Metro Realtors Association.

Adding the closing costs to the sale price is possible as long as the house will appraise high enough to cover the total.

Clark and Mike Heinzerling, president of the Southern Twin Cities Association of Realtors, also have observed this phenomenon. ``Loan officers working with buyers are being more creative and suggesting buyers conserve their cash,'' sometimes to make bigger down payments and avoid private mortgage insurance, Clark said.

Business was strong last month, with closed sales up 24.47 percent from August 2002. Those transactions could have begun in late June or early August, but most were from purchase agreements signed in July, Heinzerling said.

Sales pending - purchase agreements signed for transactions not yet closed - totaled 6,653 in July, the peak for the year; normally, pendings peak in April.

The presidents attributed the July spike to rising interest rates spurring undecided buyers into action. Until rates started rising, ``buyers had no sense of urgency,'' Heitz said.

July also ``is the last opportunity to write a purchase agreement so they can be in a new home before school starts,'' said Jerry Koch, president-elect of the North Metro Realtors Association.

``Late summer is typically a busy time,'' Clark said. ``But this August and September, I have seen increased activity on all my listings - more calls, more showings and more inquiries.''

Koch said he senses an increase in demand. ``I've had two multiple offers in the last two weeks,'' the first in quite a while. Both were for homes - one in Andover and the other in Coon Rapids - selling for about $180,000.

Market indicators were up from August 2002. The 7,714 new listings processed were 5.7 percent ahead; 6,266 closed sales compared with 5,034; $1.55 billion in closed sales were up 31.6 percent from $1.178 billion; 5,713 pending sales were up 13.4 percent from 5,036, and 25,254 listings on the market at month's end were 22.5 percent ahead of August 2002's 20,611.

The five-year average of end-of-August listings is 18,565.

Industry experts said they saw no sign of economic fears among buyers. Home sales seem unaffected by an apparent start of an economic recovery that hasn't stopped big layoffs.

Heinzerling said his area has seen a big market demand for townhouses. ``They're staying in the town home for two or three years so they don't have to pay capital-gains tax [on sale profits] and taking their equity and moving to single-family homes or bigger town homes,'' he said. Two-bedroom townhouses that sold two years ago for $130,000 now are bringing $160,000 to $165,000.

Still, Realtors say most entry-level buyers aren't priced out of the market. Many buyers are two-earner households, Heinzerling said, and he just sold two houses to single men.

``People are buying based on good financial decisions,'' Clark said. ``Their debt-to-income ratios actually have gone down.'' Homes still look like a better investment than stocks or bonds, he said. ``Maybe the rental market is soft, but [rent] hasn't come down enough to deter people from going into home ownership.''

Neal Gendler is at ngendler@startribune.com.



"© Copyright Star Tribune. Republished with permission of Star Tribune, Minneapolis-St. Paul. No further republication or redistribution is permitted without the written consent of Star Tribune."