Real Estate Market Makes Modest Gains

There is an identifiable trend in local real estate threading through both July and August: more sales, fewer new listings and shrinking inventory. However, prices remain at rock-bottom levels.

“We have a way to go,” said Richard Tucker, president-elect of the St. Paul Area Association of Realtors. “If we continue to reduce inventory it will tighten up supply and you'll see price increases.”

Nevertheless, the local real estate market is showing some signs of a rally, Tucker said. For instance, after a long absence bid wars have made a bit of a comeback — at least for homes in the lowest price range.

"We've seen multiple offers on homes under $200,000. That is a great indicator," Tucker said. "Houses in that tier in good condition are going pretty quickly, which is a very positive sign. Sales like that free the people in those houses to move into next price tier as well."

According to a monthly report released by the Minneapolis Area Association of Realtors, the Burnsville real estate market made a modest showing in August after a bit of a boom in July, when the association logged 77 closings — 208 percent increase over July of 2010. This August, 70 properties changed hands, a 27.3 percent gain over August 2010.

At the same time, the amount of new listings has decreased. Only 822 new properties have entered the market in Burnsville, a 14.6 decrease over statistics taken in August of 2010.

Higher sales and fewer listings have cut down on the glut of properties available. The report indicates that the overall inventory in Burnsville real estate has fallen by 25 percent. In August 2010 there were 473 homes available. By August of 2011, the number of homes on the market stood at 353, leaving six months of inventory.

That being said, the market continues to be out of balance. In Burnsville, supply and demand are equitable when there are 2 to 4 months worth of listings, Tucker said.

Though all signs indicate that the market is regaining health, prices are still depressed and falling. The median sale price in August 2011 was $132,250, an 18 percent decline from August 2010. The average length of time on the market also increased significantly. In august of 2010, a Burnsville property typically stayed on the market for 125 days. That number has risen to 132, a 5.4 percent increase.

Tucker attributed slack and declining prices to the steady trickle of foreclosures leaking into the market and lack of consumer confidence.

“Prices are fabulous and rates are great so you'd think that people would be coming out in droves, but they don’t have confidence,” Tucker said.

Uncertainty is also holding would-be sellers back: those who would move from a starter home to a higher tier property.

“There are plenty of people who would love to sell their home and move up. The challenge is that the price of their home has come down so that they are at or below their mortgage,” Tucker said.  

Real estate agents and local officials are seeing mixed results in the local commercial market as well. Vacancy rates in Burnsville sit at about 21 percent, said Skip Nienhaus, the economic development coordinator for the City of Burnsville

 “There’s no question that it’s slightly up, but it’s slightly up everywhere,” Nienhaus said. “It’s about 2 to 3 percent (above pre-recession rates). I think we are probably ahead of most cities that we are at least turning space over.”

About 36 or 37 new businesses have moved in over 2011. Nienhaus said the city’s centralized location has helped the commercial market through tough times.

In general terms, the downturn has been less severe on the local commercial and industrial real estate market than communities in other states or rural Minnesota, said Whitney Peyton, the senior managing director of CB Richard Ellis in Minnesota.

"Our downs are not as low and our upturns are not as high," Peyton said.

Industrial properties seemed to fare better than proeprties in the office or retail markets, which seem to be stagnant, Peyton said. However, the most difficult sale is a property that has been vacant for long periods.