The cold winter months are likely to chill the fall out of the credit crisis in Minnesota, but when spring time arrives housing markets are projected to be on the slide again. The credit crunch is impacting Minnesota home sales, but prices are slipping at some of the lowest rates in the country.
The price of homes are now equal to that of 2002 in much of Minneapolis, which has seen a nearly consecutive monthly fall in housing prices, but not at the rapid rate of decline in other more over-inflated markets. The cost in home values has been slower as homes marketed as foreclosures aid the market's sales.
As distressing as the low sales volume of homes are, more than half of all the homes that have been selling in Minneapolis and St. Paul, the neighboring cities known as the Twin Cities are foreclosures and short sales holding the market up better than most. Foreclosures are being marketed at some of the lowest prices in the country, a gap that often exceeds $100,000 from equal competing homes.
The difference is sending Minneapolis and St. Paul homes to lower average prices, which are forecast to hit 13.2% deflation in 2009.
 |
| City |
Forecast |
| Minneapolis |
− 13.2% |
| St. Paul |
− 13.2% |
| Bloomington |
− 11.4% |
| Duluth |
− 8.5% |
| Rochester |
− 11.6% |
In Bloomington outside the Twin Cities, developments of new homes produced a boom market, but slower sales have resulted in declining prices coupled with the impact of foreclosures. A growing trend of more new residents is still expected over the next decade, despite a slower economy.
As the economy worsens the downward pressure on housing values is projected to increase. Home prices are forecast to deflate an average of 11.4% in 2009 in Bloomington.
Homeowners in Duluth are concerned about declining home prices in the face of the worst national downturn since at least the Great Depression. Job lay-offs are hurting the region and are expected to increase during the year. But home prices are some of the lowest in the state, which protects the market to some degree from a rapid acceleration of housing deflation. Duluth is forecast to hit just 8.5% deflation in 2009.
In Rochester new home construction is nearly at a standstill, where building permits are down nearly 70%. But Rochester is holding its own to a large degree, at least better than many other areas in the country. Sales are soft, but that's typical for the cold climate during winter months. But when spring time rolls around home sales should pick up slightly to aid the market's recovery.
However, the second wave of adjustable rate mortgage resets will impact Rochester and the rest of the state as more and more homeowners are unable to refinance their mortgages, triggering more foreclosures. Rochester is forecast to see home value average deflation of 11.6% in 2009. As bad as new construction and sales are in Rochester, other places have it much worse.
