The Star Tribune reported on Metro Area Home Prices on Thursday, Jan 17th.  Their report stated that “The final numbers for 2007 are in: The median sale price declined 2.2%. This year might see another drop.”   The article further goes on to explain that this drop in median sales price is the first drop seen in 20 years! Many sellers are puzzled by this information, as it seems to them that prices were falling even prior to 2007.   There are specific geographic areas of the Twin Cities marketplace which did experience median price declines prior to 2007. There are also specific types of property which have experienced price declines, such as New Construction, and Properties listed above $500,000.

So, what exactly does this mean? The bulk of the inventory generally falls in the “first time home buyer” price range.  While specific sections of the marketplace have experienced declines prior to 2007, the “overall median sales price” was not declining because the bulk of the inventory, lower price range homes and townhomes, was stable enough to prevent an overall decline.  This past year, 2007, even the lower price range homes and townhomes began to decline.  This can easily be seen when watching the drastically discounted prices Banks are accepting for their foreclosure inventory homes. 

The overall “median price decline” means that we have now hit a point where the “first time home buyer” price range properties have also declined. Being the bulk of the inventory, they were influential enough to affect the overall “median sales price.”  The Star Tribune article carefully went on to describe that the predictability of the marketplace for 2008 is volitle.  The increasing number of investors stepping in to buy deeply discounted property is a positive sign, the overall low interest rates and lower asking prices are very attractive for buyers.  It’s a wonderful time to find that “once-in-a-lifetime” opportunity property. 

There is still an oversupply of inventory and it may take many months to bring the inventory level down.  Unfortunately, one of the ways inventory falls is by adjusting price downward until properties are absorbed into the marketplace.  There is also a significant number of Ajustable Rate Mortgages which will re-set in the nest two years.  Hopefully, some of the recent legislation designed to “temporarily freeze rates” for qualified homeowners, will prevent a high number of future foreclosures.

Our market’s price declines are small compared to recent appreciation rates since 2000. It is a wonderful time to “move-up” to a larger home.  Even if you sell your current home for a few percentage points less than it might have sold for in 2004, you will save far more money when you buy a new, bigger home and save an equal percentage on the purchase.  Rates are holding under the 6% mark for many qualified buyers.  This marketplace, is a dream come true for many people who are financially qualified to take advantage of it!

Thanks for reading,
Sheryl