Minneapolis housing market: Busted, again

What do you have that we don’t have, Seattle? If there are two cities that are joined at the hip, Seattle and Minneapolis are at the top of the list. Unless, of course, the list is the resale price of homes in the Case Shiller Index, which was released today.

There’s Seattle at the top of the list — the only city in which the price of homes went up (seasonally unadjusted) from February to March, according to the survey. And there’s Minneapolis, down there at the bottom. Again.

Change from February
San Francisco
Los Angeles
San Diego
New York
Las Vegas

That’s eight straight months of decline and three straight months in which the decline was more than 3 percent from month to month. It’s still not as bad as Detroit 2008 (nine straight months of price declines of more than three percent), but the Minneapolis housing market has lost its right to feel superior to just about any other city.

Minneapolis area housing prices are now back where they were in the Clinton administration, having dropped 44.9% from their 2007 highs.

Planet Money at NPR says it’s only going to get worse.

  • Dave Detlie

    How did we ever reach the point where we thought that doubling and tripling the cost of one of life’s basic necessities was a good thing?

    Or think that people whose income hadn’t changed could afford double or triple the housing costs?

    Or that a $50000 house was suddenly worth $150000?

    Or come to think of it, that 2 trillion dollars of toxic assets were suddenly worth 41 trillion dollars of wealth?

  • Vivian

    @ Dave


  • bsimon

    “What do you have that we don’t have, Seattle?”

    Good question, I’d like to know too. Of course a lot depends on what’s happened in Seattle in the other 59 of the last 60 months.

  • Bob Collins

    But aren’t we past the “bubble” stage? If housing prices are what they were 11 years ago, what *is* a reasonable expectation of a value increase, given inflation etc?

    One of the things that is most distressing about the housing industry — aside from it being impossible for mere mortals to understand — is the financial institutions’ reaction to the mortgage problem.

    Almost from the beginning, it was often impossible to find out who even owned foreclosed homes, let alone what logic dictated that a home abandoned is a better deal for everyone that a home occupied.

    When I was with the Funk family in north Minneapolis last week, one of the more poignant stories was their neighbor — or their former neighbor — who had to quit his job to take care of his dying mother.

    She died, and he lost the home. It is now wide open and abandoned, made worse, of course, by the tornado.

    Throughout the mortgage meltdown — and none of this is going to get better until *someone* gets a handle on that problem — it seemed that banks saw no difference in the value of a home occupied vs. abandoned.

    I don’t know what the answer is; but by now it’s clear what the answer isn’t. Isn’t it?

  • Bob Collins

    //Of course a lot depends on what’s happened in Seattle in the other 59 of the last 60 months.

    Pretty much like everyone else: 7 down months in a row, preceded by a bounceback that looked like a recovery, but was actually a mirage. Down 7.5% year over year. Down 30.9% from its peak.

    Seattle’s values are back to July 2004, so I guess they’re four years ahead — or is it behind? — the Twin Cities.

  • matt

    Hi Bob,

    The bubble is gone but the headwinds are still strong – very hard to commit to a house in this job market, nobody wants to catch a falling knife, and if you have a house that you want to sell you have to, gulp, accept that paper loss as a real one. An easy way to help on this would be to allow loss recognition for real estate on your taxes.

  • Nathan

    //and if you have a house that you want to sell you have to, gulp, accept that paper loss as a real one

    That is a big part of the picture. For me, I would be interested in a larger home for my growing family, except that our townhome is worth half as much as when we purchased, so we’re not moving anytime soon until those numbers change.

    Add to the picture that there are sooo many foreclosed properties, the prices are really depressed. Were the foreclosure numbers not as bad in Seattle maybe?

  • uneducatedeconomist

    >>But aren’t we past the “bubble” stage?

  • matt

    Also on the macro level, GDP is figured using expected inflation numbers…the number used for Q1 was 1.9% – actual inflation was closer to 3 so we are flat to recessionary right now. This would suggest that the stimulus and fiscal policy over the last few years have only slowed the leak in the bubble and so we have not bottomed yet.

    A positive though is that many people are talking about how low prices are and how that doesn’t seem to be correct which is the opposite of what they were saying just before the bust. Once TLC runs a reality show based on falling home prices we can finally call a bottom.

    But back to the inflation numbers, if they continue to trend the way they are they will push into mortgage rates and create another headwind.

  • Russ Doering

    How’s this. Taking out short sales & foreclosures won’t change 44& much.