Of the areas of the United States that seem to show a sustained rebound in real estate, Minneapolis and Minnesota showed some signs of economic strength by the third fiscal quarter of 2010 that have translated to price and sales strength since 2008.
The reason why Minneapolis, Minnesota seems like it can weather any additional real estate volatility is because The Standard & Poor’s metropolitan real estate index indicated a 10.7 percent year over year gain in real estate prices in June 2010.
Additionally, The Bureau of Labor Statistics reported a year over year drop in unemployment from 8.3 percent to 6.8 percent for the State of Minnesota between 2009-2010. Add to this a report by the Star Tribune of Minneapolis-St. Paul stating home sales have increased 3.8 percent despite a fairly large drop of over 8 percent since last year.
To pinpoint what areas in the United States are experiencing rebounds one might fair well to closely examine employment, population, gross metropolitan product and real estate sales statistics by metropolitan region and geographical region. The results of this may demonstrate the potential for growth in a real estate sector of a metropolitan area such as Minneapolis, and perhaps a state, but the results may still be questionable.
Even if real estate figures show a rebound, it may only be macro-economic in nature i.e. a numerical ‘trickle-up’ that serves only as a general indication of increased wealth, and that says little of the overall distribution of wealth via real estate in a particular area. Reasons why one might be skeptical of strong real estate rebounds in most areas of the U.S. are described below.
• Western pending home sales trends
The National Association of Realtors has indicated the Western region of the United States had the highest regional value of pending home sales as measured by the July, 2010 Pending Home Sales Index (PHSI). However, all four regions measured by the index were close to their respective four year lows indicating little regional recovery in home sales since 2009.
• Southern annualized regional home sales
Additional data released by the N.A.R. suggests little change for August 2010 as total existing home sales by region having been trending down since May 2010. In November and December of 2009 home sales numbers for the four regions measured peaked at approximately 2.3 million homes and in July of 2010, aggregate home sales in the Southern region had dropped the least at an annualized 19.8 percent.
• Midwestern states show less damage
The Bureau of Labor Statistics, Brookings Institution, and Federal Reserve Bank of New York all indicate some Midwestern states as having less damaged regional economies in terms of lower unemployment, fewer mortgage delinquencies and smaller metropolitan product differentials than other areas in the U.S. These states however, may have been less damaged by the economy because their economies weren’t necessarily on fire to start with i.e. stable rather than volatile.
• County sub-prime mortgage delinquencies
According to the Federal Reserve Bank of New York (FRBNY), in the second quarter of 2010, many if not all states experienced a negative mortgage delinquency rate in terms of the mortgage sample measured. These statistics illustrate a real estate rebound in any U.S. regions faces considerable market pressure against increases in home sales and pricing values.
• State unemployment and housing
Areas of the United States where real estate has begun rebounding are the same locations were regional industry and economy has also rebounded. Since housing prices and sales are linked to employment, and local economics, it is a reasonable leading indicator to consider when assessing rebounding real estate markets. This data can then be confirmed against existing home sales data and trends to test the strength of the hypothesis.
• Short-term vs Long-term data
Additional factors to look at in determining local economic rebounds are both short-term and long-term real estate statistics. Short-lived rebounds can be brief and less convincing than month-over month patterns and external regional economic conditions can also affect how well and if a local housing market will rebound. This difference in short-term vs long-term real estate patterns can be seen in national real estate trends that can influence smaller real estate markets. The National Association of Realtors indicates real estate sales for each of the four regions measured are at their lowest point since July 2009.
1. http://bit.ly/97Stbj (Federal Reserve Bank of New York)
2. http://bit.ly/aFfPTZ (National Association of Realtors)
3. http://bit.ly/dwrAU2 (Standard & Poors)
4. http://bit.ly/13xWA (Bureau of Labor Statistics)
5. http://bit.ly/176dwR (Brookings Institution)