2007 Minneapolis Real Estate Outlook not as good as 2006
Recently the 4th General Session on Economic and Housing Outlook met in Chicago and was presented by two top economists, Doug Duncan, Ph.D and Lyle Gramley, Ph.D. They shared their forcasts for the housing market and issues also linked to mortgage finance. Here is some data they compiled:
1) Homes are staying on the market for an average of 7 months
2) Condominiums are taking 8 months or more to sell and have supersaturated the market
3) Total mortgage production for 2006 is expected to decline by 19% based on the following:
- new home sales are down 18%, just over 1 Million units
- existing home sales are down by 9%, to 6.42 Million
- purchase have dropped by 8%
- refinances dropped by 29
4) The total mortgage production for 2007 is not much better. Production is expected to decline another 14%, mostly driven by:
- new home sales down 8%, just under 1 Million units
- exisiting home sales projected to decline another 8%, to 5.94 Million
- purchases will go down 5%
- refinances will drop another 25%
As you can guess, this is not great news. However Duncan made a point to remind us all that the short and long term trends need to be considered. These figures, for perspective, closely resemble 2003 home sales, which was the third consecutive year of record home sales.
Remember the word I have used before in previous posts, normalizing? Duncan agrees, and says the market is definately normalizing, returning to its long term trend line. Many people forget that what we have experienced the last few years has included unprecedented low mortgage rates, record high price appreciation, and looser underwriting guidelines. The National Association of Realtors has always said it would not last and I have always agreed. (Remember the stock boom a few years ago that was suppose to go on forever? It did not last either.)
Sellers be forewarned: Duncan made a point of warning sellers that their current price expectations, if based on earlier selling prices for neighboring homes, advice from “smarter neighbors”, and on-line home valuation sites, may not paint an up-to-date figure on what their home is worth, and better yet, what their home might actually sell for. Seek out a local real estate agent to get a more accurate outlook on price.
Look for my second installment in the next coming week!