Median home sale price takes a one-month plunge, but price remain up for year

Neal Gendler, Star Tribune

Published October 15, 2003 CENS17 in the Star Tribune

The median home price in the Twin Cities region fell sharply in September, and officials cited a big inventory of available homes, interest rates and a normal start-of-school slowdown for the decline.

One expert said the results mean local homeowners may be unable to reap such big gains in the value of their homes in the future as they have in recent years, sparked by low interest rates and high demand for homes.

Results from the 13-county Regional Multiple Listing Service (MLS) showed the median home price fell $7,000, to $200,500 in September. The median price is the point where half sell for more, half for less.

"This is not signaling a collapse of the housing market," said George Karvel, distinguished chair in real estate at the University of St. Thomas. "It is a return to more normal price increases."

Officers of the four metro-area Realtor associations said large monthly price swings have occurred before, such as a $5,500 spike in August. The market responds to such variables as interest rates, prices, number of homes for sale and families seeking larger homes who buy in time to move before school starts.

"You can't look at it month to month," said Jerry Koch, president of the North Metro Area Realtors Association. "You have to look at prices over several months. Historically, the price has gone down or flattened out about September."

Moreover, buyers have a lot from which to choose. At month's end, 26,605 homes were listed for sale, up 23.23 percent from a year earlier, and 38 percent above the five-year average for the month.

"You must look at the trend over time: Locally and nationally, housing markets continue to experience significant price increases, albeit less than two or three years ago," Karvel said.

"School affects the market," said Ann Brockhouse, president-elect of the Minneapolis Area Association of Realtors. "Buyers with children in school want to be in before school starts." They also tend to buy larger, more-expensive houses than do first-time buyers with small children or none. "First-time buyers still are in the market."

September's drop "might be one of those situations where, with everything on the market, sellers are taking less," said Mike Heinzerling, president of the Southern Twin Cities Association of Realtors. Indeed, several agents this week said they've seen numerous price reductions. Reductions are made for several reasons, including a seller's need to meet a deadline, an increase in competition, a slowing market or seller overpricing.

A client of Coldwell Banker Burnet agent Mark Kuzma has reduced the price twice -- a total of $40,000 -- on a five-bedroom, four-bathroom house in west Bloomington first listed in March at $339,000. "It went on at a very high price; that was [the seller's] choosing," he said. The house was taken off the market once and relisted for $30,000 less, "and we have reduced since then $10,000. I think we were a little high when we started. I think now it's appropriate." He said the sellers aren't people who'd want to discuss their feelings in public, but "obviously, nobody likes waiting."

Sales normally slow in the second half of the year, although this year July and August were unusually strong, even bringing multiple offers more common in the spring. Seasonal tapering showed up last month in the number of "sales pending" -- purchase agreements signed for transactions not yet closed. Last month's 4,741 sales pending were 2.11 percent ahead of September 2002, but were down from 5,713 in August.

Mortgage interest rates ticked up a bit this summer, a move that can have opposite effects, knocking some people out of the market but nudging undecided people to act lest rates go still higher. Rates for the benchmark 30-year loan came close to 7 percent in summer, but now have declined to 5.875 percent, Heinzerling said. His business was slowed by the increase, but since August, he's been busier than he was all summer, he said.

Heinzerling said a slowdown in September is not unusual, and "October tends to pick up as people who are buying want to be in before the holidays." In four of the past six years, more sales closed in October than September. He said evidence of price reductions is mostly anecdotal.

Agents can obtain a listing history showing previous times on the market and the prices, but with the new MLS system, reductions no longer appear and agents are apt to use an old device to make a longtime listing look fresh: cancel and relist the house so it shows up as a new listing. Typically, houses for sale attract the most attention in their first few days on the market, and if they've been overpriced and linger for months, buyers tend to avoid them thinking something must be wrong.

Even with a seasonal slowing, association officials were all smiles. The 42,995 sales closed through September are 12.12 percent ahead of the 2002 period, and Brockhouse said "we're on our way to another record year."

Neal Gendler is at ngendler@startribune.com.



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