Home sales brisk but slowing

Jim Buchta, Star Tribune
June 11, 2004

Housing sales this spring unexpectedly whopped last year's record in the Twin Cities area, and last month was no exception.

There were more than 5,500 closed sales in May, an increase of 11.8 percent over 2003, and the median sale price rose more than 8 percent, according to data issued Thursday by the Realtor Public Policy Partnership.

Nevertheless, the market is showing the first inkling of a slowdown. The number of pending home sales last month (a signal of future activity) and the number of new listings dipped. That's a sign, Realtors say, that we could see a slight drop in the number of closed sales in June.

"I think we were unprepared for the activity we've seen in 2004," said Decklynn Theisen, sales agent with Prudential Metrowide and president of the Southern Twin Cities Association of Realtors. "But I think it's a natural evolution that things will slow down somewhat."

According to data compiled by the partnership, which includes members of the North Metro Realtors Association, the St. Paul Area Association of Realtors and the Southern Twin Cities Association of Realtors, sales during March, April and May set records this year.

"I was a little surprised that the market is continuing at the pace that we've seen," said John Lockner, president of the St. Paul Area Association of Realtors and sales agent with Re/Max Results.

Realtors thought 2003 couldn't be bested, but many are now saying that 2004 will give those records a run for their money. Early this year, the National Association of Realtors predicted that the market had peaked during 2003, but the group's chief economist, David Lereah, recently revised his expectations.

He's now saying that unexpectedly strong job growth will offset the effect of rising interest rates, which are now hovering between 6.2 and 6.3 percent for a 30-year fixed-rate mortgage. That will help push existing-home sales to a record this year.

Decreases in pending sales aren't unusual during the late spring and summer as prospective buyers take a summer break, but given the near-record number of homes now for sale, agents say the market is beginning to show some signs of moderation. That's likely to translate into longer market times and more modest appreciation. During each of the past two months, annual sale price increases have stabilized at about 8.25 percent, while the total dollar volume of closed sales has been increasing close to 20 percent in large part due to higher prices and strong demand for more-expensive new housing.

"Anecdotally, I would expect a slowdown," Theisen said. "We need to educate sellers as to the pricing and condition of homes. That's going to be really important this summer."