95 PERCENT OF TWIN CITIES HOMES HAVE RETAINED MORE THAN 96 PERCENT OF THEIR VALUE

FOR IMMEDIATE RELEASE Contact: Wendy B. Danks, Director of Marketing
Builders Assoc. of Twin Cities
Phone: (651) 697-1954 • Cell (612) 296-5551
95 PERCENT OF TWIN CITIES HOMES HAVE RETAINED MORE THAN 96 PERCENT OF THEIR VALUE
New Study Reveals that Reports of Substantial Declines in Local Home Values is Extremely Misleading
Roseville, MN (March 29, 2009) – A new study reveals that almost all Twin Cities homes have not suffered the double-digit
declines in median home prices often reported. Traditional homes, those not in foreclosure, represent 95 percent of the
homes in the Metropolitan Area and show a median sales price decline of just 3.9 percent.
“Home prices in the Twin Cities area are either up, down or stable in the Twin Cities, depending on a range of factors, all of
which affect price,” explains Jim McComb, president of McComb Group Ltd., a Minneapolis-based real estate research firm.
“Unfortunately, none of these important factors have been taken into account in the multitude of news articles that report a
steady drum beat of double digit declines in home values.”
Chief among these frequently ignored factors which influence home prices are whether or not there is actual foreclosure or
an imminent threat of being foreclosed; the home’s location, type and physical condition; the number of homes in the immediate
area listed for sale; and the number of for-sale homes that are in foreclosure.
The McComb Group report was released jointly today by the Minnesota Builders Association, the Builders Association of the
Twin Cities and the Minnesota Association of REALTORS during their annual Builders Day on the Hill and REALTOR Day at
the Capital at a rally in the Capital Rotunda in Saint Paul.
McComb said that there are actually two distinct home markets in the Twin Cities Metro area. “One of them, and by far the
larger of the two, is the market representing ‘traditional’ homes, homes that are not in foreclosure, making up more than 95
percent of all of the homes in the two cities and their surrounding suburbs.”
“The other market, representing a mere 5 percent of all homes in the metro, are those which are ‘lender mediated,’ and are
either already in foreclosure or are threatened with foreclosure,” according to McComb.
McComb Group’s just released study of actual home price trends in the metro area reveals major differences between the
two markets. “Our analysis uncovered the facts that the national home price surveys has largely failed to notice, “ McComb
said. “Median sales prices of traditional homes—those not in foreclosure and not in danger of being foreclosed— declined
by a mere 2.6 percent in the metro area between the 4th quarter of 2007 and the end of 2008, and in several areas, such
as Edina and Woodbury, they actually increased.”
MORE
Twin Cities Median Home Values Report 2-2-2-2-2
Although there is no way to accurately compare the median sales price of lender mediated, or foreclosed, homes with their
former sales prices in a normal market, the McComb Group study found that as a group, these homes may have declined by
30 to 40 percent during the same period.
Price performance has also varied greatly depending on the type of home involved. The decline in median sales price has
been lowest for traditional single family homes, down 3.5 percent, followed by condominiums, down 4.7 percent and townhomes,
down 6.3 percent.
The same home types, when lender mediated, showed significantly larger value losses, with single family homes down 30
percent from a year earlier; condominiums down 17 percent; and townhomes down 15.2 percent. The difference between
traditional and lender mediated townhomes and condominiums was -30 and -50 percent respectively.
The McComb study shows that where homes are located in the community has also had a large effect on prices. The heaviest
concentrations of foreclosed, or lender-mediated homes, are in north and south Minneapolis, with far fewer located in
Calhoun-Isles, Southwest and Edina. This difference in the concentration of foreclosed homes has had a dramatic impact on
prices of both traditional homes and lender mediated homes in each of the areas studied.
Lender mediated sales prices of $162,000 in the 4th quarter of 2007 were about 30 percent below traditional home median
sales prices of $227,000. One year later, at the end of 2008, the lender mediated sales prices had fallen another 10
percent, to 40 percent of the traditional median home sales price. But McComb cautions that these price declines of 30 to
40 percent still only apply to a small fraction of all homes in the Twin Cities.
The high proportion of foreclosed homes in Camden and North Minneapolis is clearly depressing the price of traditional
homes along with those which are lender-mediated. Overall median sales prices have declined by as much as 44.4 percent
in North Minneapolis, 27.6 percent in Camden, and by smaller percentages in Calhoun-Isles (1 percent) and Southwest (7.9
percent), while they have actually increased by 6.5 percent in Edina.
Of the top 100 Minneapolis Area Association of Realtors areas, sales of traditional homes have increased in 17. Median
sales prices of traditional homes have declined by less than 10 percent in 58 MAAR areas, while traditional home prices
have declined by more than 15 percent in only 11 MAAR areas. In the 17 MAAR areas with increasing traditional home
prices, fewer than 33 percent of the listed homes are lender mediated, or in foreclosure.
“The fact that lender mediated homes currently represent only 5 percent of all homes but are a much larger proportion of
closed sales is distorting the changes in home prices for traditional homes, while that fact understates the decline in sales
prices of lender mediated homes,” McComb said. “The current market for traditional homes, which make up 95 percent of
the Twin Cities housing stock, is clearly much stronger than is indicated by such widely quoted national home price surveys
as the Case-Schiller Index and Zillow.”
#####
MORE
Twin Cities Median Home Values Report 3-3-3-3-3
Key conclusions of the McComb Group study:
• Traditional homes are a separate market from foreclosed or lender mediated homes, and currently represent 95 percent
of all homes in the Twin Cities metro area.
• Foreclosed and lender mediated homes, although making up just five percent of all homes, constitute a far larger percentage
of closed sales.
• Areas with a high proportion of foreclosed homes are experiencing greater declines in median sales prices of both traditional
and lender mediated homes.
A copy of the complete report is attached.
The Builders Association of Minnesota and The builders Association of the Twin Cities represent over 4,800 builders, remodelers
and firms that do business within the homebuilding industry across the state of Minnesota.
MN REALTORS represents 19,500 real estate brokers and agents throughout the state of Minnesota.
MEDIAN HOME PRICES ARE INCREASING IN SOME COMMUNITIES
James B. McComb
President, McComb Group, Ltd.
Median prices of traditional homes have increased in 19 MLS districts since 2006, when home
prices peaked in the Minneapolis-St. Paul area. Traditional homes, those not in foreclosure,
represent 95 percent of the homes in the Metropolitan Area. Metropolitan Area median home
sales price was $230,000 in 2006 and fell to $221,000 in 2008, a decline of only 3.9 percent.
This is good news when compared to the misleading decline of 23 percent for all homes that
combine sales of traditional and lender-mediated homes in a single comparison. This
calculation, while mathematically accurate, is extremely misleading since foreclosed homes
represent only five percent of the homes but accounted for 60 percent of the transactions in the
most recent period.
Traditional home median sales prices increased by more than 12 percent in three MLS areas –
Maple Grove/Osseo (13.9 percent), Prior Lake (13.3 percent), and Chaska (12.8 percent), as
shown in Table 1. Price increases of five to ten percent were recorded in six MLS areas and
traditional home prices increased by one to five percent in 10 areas.
Table 1
CHANGE IN MEDIAN SALES PRICES OF
TRADITIONAL HOMES BETWEEN 2006 AND 2008
Number of
Price Change MLS Areas
10 Percent or More 3
5 to 9.9 Percent 6
1 to 4.9 Percent 10
(0.1) to (4.9) Percent 18
(5.0) to (9.9) Percent 27
(10.0) to (14.9) Percent 23
(15.0) to (19.9) Percent 7
(20.0) Percent or More 6
Source: Minneapolis Area Association of Realtors.
Price declines of less than ten percent have occurred in 45 MLS areas and 10 to 14.9 percent in
23 MLS districts. Median sales prices have declined by 15 percent or more in only 12 districts.
This is a far different picture than presented by a median sales price of $150,000 when traditional
and lender-mediated home prices are combined. Median sales prices of traditional homes were
below $150,000 in only five MLS districts.
The above tale was compiled from 2008 median sales prices of traditional homes contained in
Table 2. Homeowners of the 19 MLS areas with increasing prices will undoubtedly be
encouraged by reports of increasing prices. Homeowners in the 76 MLS areas with median price
decreases can be comforted by the fact that most traditional homes have declined by far less than
the 23 percent reported in a recent news article. Median sales prices have declined by 23 percent
or more in only five MLS areas.
This analysis was prepared utilizing information collected by the Minneapolis Area Association
of Realtors.
Table 2
2006 MEDIAN SALES PRICES COMPARED TO
2008 TRADITIONAL HOME MEDIAN SALES PRICES
2006 2008
Median Median
Sales Price Sales Price Percent
Code MLS Area Total Traditional Change
365 Maple Grove/Osseo $ 247,000 $ 281,400 13.9 %
642 Prior Lake 279,900 317,000 13.3
397 Chaska 234,900 265,000 12.8
302 Mpls. – Central 270,000 296,519 9.8
386 Hopkins 205,900 222,083 7.9
368 Hennepin – Northwest 375,000 403,300 7.5
385 Edina 385,000 410,000 6.5
741 St. Paul – Downtown/Capital Hts 195,000 205,500 5.4
727 Stillwater/Bayport 299,000 315,000 5.4
373 Golden Valley 268,000 280,000 4.5
610 Eagan 237,800 247,000 3.9
392 Eden Prairie 288,950 300,000 3.8
726 Woodbury 281,000 287,700 2.4
740 St. Paul – Crocus Hill 266,000 272,000 2.3
640 Shakopee 218,000 222,500 2.1
396 Chanhassen 293,500 298,000 1.5
387 Minnetonka 271,768 274,900 1.2
391 St. Louis Park 234,500 237,000 1.1
309 Mpls. – Southwest 287,000 290,000 1.0
614 Apple Valley 226,000 225,000 (0.4)
374 Plymouth 293,000 291,500 (0.5)
748 St. Paul – Town & Country/Merriam Park 275,500 273,500 (0.7)
750 St. Paul – Mac/Groveland/River Road 278,000 275,500 (0.9)
304 Mpls. – Nokomis 225,000 222,750 (1.0)
626 Lakeville 278,950 272,768 (2.2)
612 Burnsville 233,375 227,800 (2.4)
300 Mpls. – Calhoun Isles 263,590 257,250 (2.4)
380 Bloomington West 247,000 240,000 (2.8)
708 White Bear Lake 245,000 237,500 (3.1)
746 St. Paul – St. Anthony/Midway 206,350 200,000 (3.1)
725 Pine Springs/Lake Elmo/Oakdale 227,000 219,900 (3.1)
765 Arden Hills/Shoreview 242,500 234,750 (3.2)
303 Mpls. – Longfellow 207,500 200,000 (3.6)
752 St. Paul – Highland Area 274,400 263,700 (3.9)
616 Rosemount 248,200 238,450 (3.9)
766 Moundsville/New Brighton/St. Anthony 225,000 215,000 (4.4)
617 Hastings 202,000 193,000 (4.5)
608 Inver Grove 205,450 195,000 (5.1)
709 Forest Lake Area 240,250 226,950 (5.5)
644 Savage 266,950 252,000 (5.6)
707 Ham Lake 340,000 320,950 (5.6)
772 Lexington/Circle Pines 192,000 181,155 (5.6)
Table 2 (cont.)
2006 MEDIAN SALES PRICES COMPARED TO
2008 TRADITIONAL HOME MEDIAN SALES PRICES
2006 2008
Median Median
Sales Price Sales Price Percent
Code MLS Area Total Traditional Change
394 Carver County $ 243,150 $ 229,000 (5.8) %
744 St. Paul – Como 216,250 203,500 (5.9)
728 St. Paul – Riverview/Cherokee 187,686 176,250 (6.1)
738 St. Paul – Home Croft/W. 7th 180,290 168,950 (6.3)
367 Hennepin- North 288,950 270,000 (6.6)
624 Farmington 233,000 217,000 (6.9)
702 Falcon Heights/Lauderdale/Roseville 246,750 229,500 (7.0)
360 Robbinsdale 199,950 185,450 (7.3)
341 Wright County (Ext Buffalo) 216,000 200,000 (7.4)
361 Crystal 197,700 183,000 (7.4)
604 Mendota/Lilydale 330,200 305,000 (7.6)
722 Newport/St. Paul Park/Cottage Grove 227,400 210,000 (7.7)
600 W. St. Paul 200,500 185,000 (7.7)
308 Mpls. – Powderhorn 183,700 169,000 (8.0)
362 New Hope 229,000 209,297 (8.6)
340 Buffalo 215,000 195,850 (8.9)
764 Blaine 229,900 209,000 (9.1)
648 New Prague/New Market Elko 250,000 227,000 (9.2)
310 Mpls. – University 240,000 217,500 (9.4)
758 Northwestern Anoka Cty 232,000 209,900 (9.5)
381 Lake Minnetonka 462,000 417,500 (9.6)
660 Goodhue County 174,675 157,675 (9.7)
646 Jordan 250,000 225,000 (10.0)
366 Champlin 233,500 210,150 (10.0)
760 Ramsey 229,900 206,900 (10.0)
762 Andover 272,475 245,000 (10.1)
378 Richfield 223,750 200,000 (10.6)
756 Elk River 230,000 204,750 (11.0)
602 S. St. Paul 196,700 175,000 (11.0)
712 Maplewood/North St. Paul 222,000 196,000 (11.7)
306 Mpls. – Northeast 210,000 184,900 (12.0)
711 Southern Chisago County 211,900 186,200 (12.1)
705 Lino Lakes/Hugo/Centerville 262,000 230,200 (12.1)
379 Bloomington East 225,000 197,000 (12.4)
767 Coon Rapids 205,900 179,900 (12.6)
650 Belle Plaine 214,125 186,975 (12.7)
398 Victoria 477,500 414,968 (13.1)
770 Hilltop/Columbia Heights 189,300 164,500 (13.1)
364 Brooklyn Park 230,825 200,000 (13.4)
771 Spring Lake Park 199,850 172,900 (13.5)
630 Northfield 220,000 190,000 (13.6)
706 North Central Suburban 264,900 228,250 (13.8)
Table 2 (cont.)
2006 MEDIAN SALES PRICES COMPARED TO
2008 TRADITIONAL HOME MEDIAN SALES PRICES
2006 2008
Median Median
Sales Price Sales Price Percent
Code MLS Area Total Traditional Change
720 St. Paul – Southeast St. Paul $ 217,000 $ 186,750 (13.9) %
721 Lakeland/Afton/Denmark 350,000 300,000 (14.3)
768 Fridley 209,900 179,900 (14.3)
769 Anoka 200,873 170,000 (15.4)
713 Bethel 240,500 203,023 (15.6)
632 Rice County 187,650 155,000 (17.4)
716 St. Paul – Hillcrest/Hazel Park/Daytons Bluff 176,000 145,000 (17.6)
710 Northeast Anoka County 279,950 229,900 (17.9)
780 Sherburne County 214,950 175,000 (18.6)
714 St. Paul – Phalen 176,450 143,020 (18.9)
363 Brooklyn Center 192,925 151,500 (21.5)
754 Big Lake Township 211,000 161,000 (23.7)
307 Mpls. – Phillips 191,580 140,000 (26.9)
742 St. Paul – Central 153,000 107,000 (30.1)
301 Mpls. – Camden 164,000 112,000 (31.7)
305 Mpls. – North 153,000 65,000 (57.5)
Source: Minneapolis Area Association of Realtors.
1
HOME PRICES: UP, DOWN OR SIDEWAYS
James B. McComb
McComb Group, Ltd
Home prices are either up, down or stable in the Twin Cities area depending on a number of
factors. None of these factors are considered in the multitude of press releases that report a
steady drum beat of double digit declines in home values. There are many factors that influence
home values. Some of these include:
• There is no threat of foreclosure
• The home foreclosed or headed toward foreclosure
• Where is the home located
• The type of home
• The physical condition of the home
• Number of homes in the area that are for sale
• The number of for-sale homes that are in foreclosure
All of these factors influence home values and the change in value from year to year.
Fortunately, the Minneapolis Area Association of Realtors (MAAR) has published extensive
home sales comparisons for Twin Cities area that bring some facts to this subject. There are two
home markets in the Twin Cities: homes that are not in foreclosure are termed “traditional”
homes and represent about 95 percent of the homes in the Twin Cities. Homes that are in
foreclosure or threatened by foreclosure are termed “lender mediated” and represent about five
percent of all homes. Median sales prices of traditional homes declined by only 2.6 percent
between the 4th quarter of 2007 and 2008 indicating a modest change in value for homes that are
not foreclosed.
Table 1
CHANGE IN MEDIAN HOME PRICES: 4th QUARTER 2007 TO 2008
TRADITIONAL AND LENDER MEDIATED HOMES
Lender All
Traditional Mediated Homes
Median Sales Price
2007, 4th Quarter $ 227,000 $ 162,000 $ 216,500
2008, 4th Quarter 221,000 131,000 176,000
Percent Change (2.6) % (19.1) % (18.7) %
Number of Closed Sales 26,385 12,351 38,736
Percent of Sales 68.1 % 31.9 % 100.0 %
Number of Homes 972,800 49,000 1,021,800
Percent of Homes 95.2 % 4.8 % 100.0 %
Closed Sales as a Percent of Homes 2.7 % 25.2 % 3.8 %
Source: Minneapolis Area Association of Realtors.
There is no way to compare the median sale price of lender mediated homes with their former
sales prices. However, the decline in value would be larger than the 19.1 percent decline in
lender mediated prices contained in Table 1. This reflects the year to year change in median
prices for lender mediated homes.
2
Comparing median sales price traditional homes with lender mediated homes indicates a larger
decline. Lender mediated median sales prices of $162,000 in the 4th quarter of 2007 were about
30 percent below traditional home median sales price of $227,000. A year later, the lender
mediated median sales price was 40 percent below traditional home median sales price. These
price changes would be valid if the mix of homes is similar in both groups. It is more likely that
the mix of traditional homes are somewhat larger in size and more expensive than lender
mediated homes. Even if these price declines of 30 to 40 percent are representative, it only
applies to about five percent of the homes.
Lender mediated homes represent only about five percent of all homes, but account for 32
percent of the closed sales. Traditional homes represent 95 percent of the homes and 68 percent
of the sales. Sales of traditional homes represent only 2.7 percent of traditional homes, while
sales of lender mediated homes represented about 25 percent of the foreclosed homes. These
two groups of homes are dissimilar and any analysis based on the combined total of traditional
and lender mediated homes will be misleading. The price decline in traditional homes will be
overstated and the decline in lender mediated homes will be understated.
The previous analysis demonstrates that there are two housing markets in the Twin Cities: 1)
homes that are not in foreclosure or threatened by foreclosure, owned by families that may or
may not have a mortgage or are able to maintain their monthly payments with no difficulty; and
2) homes that are/were owned by households that are strapped financially and cannot maintain
their monthly mortgage payments and in many cases properly maintain their homes. The local
press has reported numerous instances of deterioration and damage that occurs to unoccupied
foreclosed homes that need not be repeated here.
These two markets can best be visualized by an analogy with a used car lot and two cars. One is
a well maintained vehicle with low mileage, owned by a retired widow. The other is an older,
poorly maintained junker that looks like it just competed in a demolition derby. Clearly, these
two vehicles are not comparable and the former will sell for more than the latter. In the same
way, well cared for traditional homes are not comparable to many of the foreclosed homes that
are being sold. These junker homes are pulling median and average home prices down.
Median sales prices of lender mediated homes are lower than traditional homes for two reasons:
1) foreclosed homes are often poorly maintained and have suffered damage while vacant; and 2)
lenders are foreclosing on homes faster than they can sell them. The only way to reduce their
inventory of homes is to lower prices until they sell. Purchasers seeking to purchase a lender
mediated home are under no pressure to buy, but the lender is under pressure to sell. This drives
prices down.
Location and community have a tremendous impact on price trends in both traditional and lender
mediated home prices, as shown in Table 2. Of the top 100 MAAR areas, sales of traditional
homes are increasing in 17 areas. Surprisingly, median sales prices of lender mediated homes
are also increasing in 17 MAAR areas: by more than 20 percent in four areas. Median sales
prices of traditional homes have declined by less than 10 percent in 58 MAAR areas. Traditional
home prices have declined by more than 15 percent in only 11 MAAR areas. Lender mediated
home prices have declined by less than 10 percent in 26 MAAR areas, and by more than 15
percent in 35 areas. In most of these areas, declining prices lender mediated homes represent 33
to 65 percent of the current listings. In the 17 MAAR areas with increasing traditional home
prices, fewer than 33 percent of the listed homes are lender mediated.
3
Table 2
PERCENT CHANGE IN MEDIAN SALES PRICES: 2007 TO 2008
TRADITIONAL AND LENDER MEDIATED HOMES
Number of MLS Areas
Lender
Percent Change Traditional Mediated
20.0 Percent or More 4
15.0 to 19.9 Percent Increase 2
10.0 to 14.9 Percent Increase 1 2
5.0 to 9.9 Percent Increase 4 3
0.1 to 4.9 Percent Increase 12 6
No Change 1 1
0.1 to 4.9 Percent Decrease 22 10
5.0 to 9.9 Percent Decrease 36 16
10.0 to 14.9 Percent Decrease 13 21
15.0 to 19.9 Percent Decrease 6 14
20.0 to 24.9 Percnet Decrease 2 6
25.0 to 29.9 Percent Decrease 2 4
30.0 to 34.9 Percent Decrease 2
35.0 to 39.9 Percent Decrease 4
40.0 Percent or More 1 5
Source: Minneapolis Area Association of Realtors.
The type of home also has an impact on the change in median prices, as shown in Table 3. The
decline in median sales price has been lowest for traditional single family homes (-3.5 percent)
followed by condominiums (-4.7 percent) and townhomes (-6.3 percent). Median sales price
declines are much greater for lender mediated homes. Median sales prices of lender mediated
townhomes declined by 15.2 percent, followed by condominiums (17.0 percent), and single
family homes (18.3 percent) from a year earlier. The median sales prices of lender mediated
single family homes in the 4th quarter of 2008 were 41 percent below traditional single family
homes. The difference between traditional and lender mediated townhomes and condominiums
was -30 percent and -50 percent, respectively. These declines may be overstated due to the
difference in the mix of homes in each group.
Table 3
CHANGE IN MEDIAN SALES PRICES; 4TH QUARTER 2007 AND 2008
Traditional Lender Mediated All Homes
2008 Change 2008 Change 2008 Change
Single Family Detached $ 236,400 (3.5) % $ 138,900 (18.3) % $ 189,700 (17.5) %
Townhomes* 175,000 (6.3) 122,950 (15.2) 150,000 (16.0)
Condominiums 181,050 (4.7) 92,550 (17.0) 152,750 (17.4)
* Includes twinhomes.
Source: Minneapolis Area Association of Realtors.
Foreclosed homes in the Minneapolis area in 2008 are shown on Figure 1. The heaviest
concentrations are in north and south Minneapolis. Overlaid on this figure are the Multiple
Listing areas for Camden (301), North Minneapolis (305), Calhoun-Isles (300), Southwest (309),
and Edina (385). These contiguous areas were chosen because they represent areas of high and
low rates of home foreclosures and differing changes in median sales prices. The concentration
of foreclosed homes in Camden and North Minneapolis are readily evident as are the relatively
fewer foreclosed homes in Calhoun-Isles, Southwest and Edina. This difference in foreclosed
homes has a dramatic impact on prices of both traditional homes and lender mediated homes.
Calhoun-Isles includes the more affluent residential neighborhoods surrounding the Lakes of
4
Isles, Cedar and Calhoun. Foreclosures are much higher in the area east of Hennepin Avenue,
which is a less affluent neighborhood. Southwest includes the areas south shore of Lake
Calhoun, Lake Harriet and Minnehaha Creek, and the more affluent neighborhoods adjacent to
Edina. The distribution of foreclosed homes in Edina is very sparse compared to other
communities. This difference in foreclosed homes has a dramatic impact on prices of both
traditional homes and lender mediated homes.
Figure 1
2008 FORECLOSED HOMES; MINNEAPOLIS AREA
5
Median sales price of traditional homes is lowest in North Minneapolis and highest in Edina, as
shown in Table 4. Median sales prices have declined by 44.4 percent in North Minneapolis, 27.6
percent in Camden, and by smaller percentages in Calhoun-Isles (1 percent) and Southwest (7.9
percent). Median sales prices in Edina have increased by 6.5 percent. Median sales prices of
lender mediated homes have declined 43.5 percent in Camden and 36.6 percent in North
Minneapolis. The declines in Calhoun-Isles, Southwest, and Edina have been smaller. Price
declines have been larger in Camden and North Minneapolis because 25.9 and 38.9 percent of
the homes, respectively, have been foreclosed since 2005; while the percentage of foreclosed
homes in Calhoun-Isles is 3.9 percent, Southwest 2.4 percent and Edina 1.4 percent. The large
inventory of foreclosed homes is pulling down the price of both traditional homes and lender
mediated homes in Camden and North Minneapolis. The impact of lender mediated homes on
prices is much smaller in Calhoun-Isles, Southwest and Edina.
Table 4
TRADITIONAL AND LENDER MEDIATED HOME SALES; 2008
SELECTED MLS AREAS
301 305 300 309 385
Camden North Calhoun Isles South West Edina
MEDIAN PRICE
Traditional Homes
Median Price 2007 $ 154,800 $ 117,000 $ 259,900 $ 315,000 $ 385,000
Median Price 2008 $ 112,000 $ 65,000 $ 257,250 $ 290,000 $ 410,000
Change From 2007 (27.6) % (44.4) % (1.0) % (7.9) % 6.5 %
Lender Mediated Homes
Median Price 2007 $ 85,000 $ 62,900 $ 171,500 $ 212,000 $ 224,000
Median Price 2008 $ 48,050 $ 39,900 $ 162,300 $ 186,500 $ 188,000
Change From 2007 (43.5) % (36.6) % (5.4) % (12.0) % (16.1) %
Number of Homes
Traditional 6,659 3,920 7,426 16,703 15,171
Percent 74.1 % 61.1 % 96.1 % 97.6 % 98.6 %
Foreclosures 2,326 2,492 301 403 217 *
Percent 25.9 % 38.9 % 3.9 % 2.4 % 1.4 %
Total 8,985 6,412 7,727 17,106 15,388
Closed Sales
Traditional 251 211 396 603 599
Percent of Homes 3.8 % 5.4 % 5.3 % 3.6 % 3.9 %
Lender Mediated 492 535 62 82 53
Percent of Homes 21.2 % 21.5 % 20.6 % 20.3 % 24.4 %
Percent of Closed Sales
Traditional 33.8 % 28.3 % 86.5 % 88.0 % 91.9 %
Lender Mediated 66.2 71.7 13.5 12.0 8.1
Active Listings (1-1-09)
Traditional 136 84 296 184 403
Percent of Homes 2.0 % 2.1 % 4.0 % 1.1 % 2.7 %
Lender Mediated 184 172 39 42 19
Percent of Homes 7.9 % 6.9 % 13.0 % 10.4 % 8.8 %
Percent of Active Listings
Traditional 42.5 % 32.8 % 88.4 % 81.4 % 95.5 %
Lender Mediated 57.5 67.2 11.6 18.6 4.5
* 2006 foreclosures estimated at 28.
( ) Decrease.
Source: Minneapolis Area Association of Realtors and McComb Group, Ltd.
MLS Area
6
Closed sales of traditional homes as a percent of total homes is relatively consistent between all
three areas ranging from 3.6 percent of all homes in Southwest Minneapolis to 5.4 percent in
North Minneapolis. Closed lender mediated sales as a percent of foreclosed homes is also
relatively consistent ranging from 20.3 percent in Southwest to 24.4 percent in Edina. The big
difference is that lender mediated closed sales were 535 in North Minneapolis and 492 in
Camden compared to 62 in Calhoun-Isles, 82 in Southwest and 53 in Edina.
Traditional home sales as a percent of total closed sales was 33.8 percent in Camden and 28.3
percent in North Minneapolis compared to a range of 86.5 to 91.9 percent in the other three
areas. Lender mediated closed sales represented 66.2 percent of closed sales in Camden, and
71.7 percent in North Minneapolis, and were considerably lower in Calhoun-Isles (13.5 percent),
Southwest (12.0 percent), and Edina (8.1 percent).
Active listings as a percent of all traditional homes are relatively consistent across all five areas:
2.0 percent in Camden and 2.1 percent in North Minneapolis, 4.0 percent in Calhoun-Isles, 1.1
percent in Southwest, and 2.7 percent in Edina. In contrast, lender mediated active listings
represent 7.9 percent of foreclosed homes in Camden and 6.9 percent in North Minneapolis. The
number of lender mediated active listings is considerably smaller in Calhoun-Isles, Southwest
and Edina, but represent a larger percentage of foreclosed homes. Lender mediated active
listings represent a much larger percent of all active listings in Camden (57.5 percent), North
Minneapolis (67.2 percent), compared to a range of 4.5 to 18.6 percent in the other three MAAR
areas.
Clearly, the high proportion of foreclosed homes in Camden and North Minneapolis is
depressing the price of traditional homes, as well as lender mediated homes. Edina, which has a
lower number of foreclosures, lender mediated closed home sales, and lender mediated active
listings, is showing market resilience with a 6.5 percent increase in median traditional home
prices between 2007 and 2008. If this analysis were extended across a broader range of MAAR
areas, it’s likely that the trends and observations would be similar.
In conclusion, it is evident that combining sales transactions of lender mediated properties with
those of traditional homes creates an extremely misleading view of home price trends in the
Twin Cities area. Lender mediated homes currently represent about five percent of all homes but
a much larger proportion of the closed sales. This distorts the changes in home prices for the
traditional homes, and understates the decline in sales prices of lender mediated homes. The
market for traditional homes (95 percent of the homes) in the Twin Cities area is much stronger
than is indicated by national home price surveys.
There are several conclusions that can be drawn from this analysis.
♦ Traditional homes are a separate market from foreclosed or lender mediated
homes and currently represent 95 percent of all homes.
♦ Foreclosed and lender mediated homes represent only five percent of the homes,
but a far larger percent of closed sales.
♦ Areas with high proportion of foreclosed homes experience greater decline in
median sales prices of both traditional and lender mediated homes.
7
♦ In those areas with very few foreclosed homes, median sales price declines are
more modest and in some cases, median sales prices are increasing.
♦ Median sales prices of lender mediated homes are declining as lenders lower
prices to reduce their inventory of these properties resulting in a buyers market for
these homes.
♦ Traditional home prices are increasing in some areas and have declined modestly
in most other areas.
♦ Foreclosed and lender mediated home prices fall sharply in areas with a high
proportion of foreclosed homes.
♦ Homes are being foreclosed faster then they can be sold resulting in growing
inventory of foreclosed homes, which can cause further price weakness.
This analysis indicates that programs designed to reduce the number of home foreclosures
benefits all homeowners by slowing the growing inventory of foreclosed homes helping firm up
prices of both traditional and foreclosed homes.
February 24, 2009

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