December Home Prices in IGH Up Double Digits Over 2010

If December sales figures are any indication, the residential real estate market in Inver Grove Heights could be on the mend.

Statistics released Wednesday by the Minneapolis Area Association of Realtors show more home sales closed in the city last month as compared to December 2010. What’s more, average and median sales prices experienced double-figure increases.

Last month, 28 home sales closed in the city, seven more than during December 2010. The median sales price jumped 25.4 percent to $188,750, and the average price was 15.1 percent higher, at $222,259.

December’s positive numbers were a bright spot in what was another down year for residential real estate in Inver Grove Heights, as well as the Twin Cities metropolitan area as a whole, says MAAR. Although more homes sold in Inver Grove during 2011 as compared to 2010—311 to 278—the median sales price fell 6.3 percent to $155,000, and the average price dropped 3.5 percent to $193,052.

Those decreases would have been steeper had December’s sales figures not shown such dramatic improvement over the previous year.

Overall, the Twin Cities real estate forecast is still chilly, but there are at least a few rays of sunshine poking through the clouds.

In 2011, the median sales price of homes in the 13-county Twin Cities region fell to $150,000, down 11.7 percent from the already depressed levels of 2010. (The area’s median sales price peaked at $230,000 in 2006.)

Inventory, however, fell a dramatic 28.7 percent from 2010, and is now at the lowest level in eight years. The time it would take to sell off all active properties in the region—a standard measure of real estate inventory—has dropped 36.5 percent to 4.5 months.

Inver Grove’s inventory figures show a similar decline, falling 26.9 percent to 4.7 months.

Ordinarily, a big drop in inventory would lead almost immediately to rising home prices. But the region’s median price is still being held down by the flood of properties being sold through the foreclosure process or through short sales, said Richard Tucker, vice president of Coldwell Banker Burnet in Burnsville.

Exactly half of all closed sales in 2011 were either foreclosures or short sales, and such “distressed properties” typically go for about 60 cents on the dollar compared to traditional homes.

The real estate market has witnessed a unique situation in the “past four or five years,” Tucker said.  At the beginning of the downturn, “we were at very high inventory levels. … the economic crisis forced all that to go down.

“The last piece of (the) recovery will be (an improvement in the) average sales price,” triggered by a scarcity of supply, Tucker said. “That’s the direction we’re heading.”

Tucker noted that the National Association of Home Builders this month included the Twin Cities to its list of 76 “improving housing markets,” which measures housing permits, employment and housing prices for at least six months. 

Among other “optimistic indicators” he cited: The region’s relatively low 5.4 percent unemployment rate, historically low interest rates and the fact that rental-vacancy rates in the region are at record lows.