Lakes Sotheby's International Realty SHIPMAN + KOLKMAN PARTNERS

The Windom neighborhood is located in south of Diamond Lake Road to the "Crosstown" (Highway 62), and from Interstate 35W to the east, and 62nd Street and Lyndale Avenue to the west. Windom neighborhood's namesake William Windom was a United States senator from the mid- to late-1800s and also served as secretary of the treasury.

The southern portion of the neighborhood houses a sizeable industrial area, about 15 percent of the neighborhood's land. The rest of Windom is a quite, safe residential community, tucked neatly away from the hustle and bustle of city traffic. Ironically, one of the largest highway construction projects in our history, the crosstown reconstruction, is occurring along the neighborhoods border. Windom's community association hosts a Fall Festival in August a popular family event. The Windom Open Elementary School, a magnet school in south Minneapolis draws students from across the metro area.

Windom's housing stock is made up of many 1940-1960 era bungalows and ramblers. A variety of apartments, retail/commercial, and industrial properties are also found in Windom.

I wanted to wait a few weeks to be sure, but I think it's time to call it, the market has hit bottom!

The result of good fundamental market trends (sales activity continues to be reliable, and new listings are coming on the market more slowly) hitting bottom means we'll see improvement in the real estate market in the future.

The graft below showing the total inventory of homes for sale shows that we now have fewer homes on the market today than at this time last year.

This reduction in the number of homes for sale is in my mind the most important factor to consider when discussing the current market. The current over supply (a Buyer's Market) is essentially the problem with real estate. As supply comes into balance with demand, appreciation rates will start climbing.

Average Sales Price and the Number of Transaction are also important factors to be watching, however not as indicative of the future. Average sale prices are down in many areas (up in others) and may continue to drop, as a result of the large volume of deals in low price ranges (mostly investors buying up foreclosures). Similarly the number of overall sales is down in many markets (new construction especially). Here again, I'm not worried, sales volume has been rising for years, and rising faster than population growth. People move far more often today than in the past. So the number of sales is down, how often do we expect people to move, every other year?!

Don't get distracted from the good news, and see the forest through the trees! Supply and demand have begun to come back together after moving farther and farther apart.

Next time someone tells you prices are down, or sales are slow; tell them this, "We have fewer homes on the market now than at this time last year. This is a sustained trend, and will continue, eventually bringing supply and demand into balance, resulting in rising home values." Then casually ask if they think this might be a good time to put some money into real estate?

Soapbox recently posted an article on the valuation of McMansions stating that "bigger houses are not always worth more than smaller houses". As a Realtor in Minneapolis, working in older urban neighborhoods I witness this phenomena all the time, and commend Todd Huttunen for writing about it.

In Southwest Minneapolis, Edina, St. Louis Park and other areas we are experiencing the replacement of old homes with new on a VERY routine basis. And it's changed the whole game when priced homes. I am specifically talking about highly prized neighborhoods, with solid historic housing, full of shopping and entertainment options, close to the city, but with safe desirable community. The original housing in these neighborhoods, doesn't offer many of the elements people desire in their homes, i.e. large kitchens. Time has also plays the same evil tricks on homes as it does on our bodies. The result is that more and more often homes are being torn down, or completely gutted, and replaced with new.

I've watched many builders make the mistake of over building in these neighborhoods resulting in both lost profits, and in some cases the scorn of residents. Remodeling decisions are equally difficult. Many a home owner in these areas has put a lot of time and money into a remodeling only to see the home torn down after selling.

In the replacement housing market, in Southwest Minneapolis and Edina, more sq. ft. does not necessarily fetch a higher sale price. Smaller, higher quality, homes with truly classic design are most attractive to buyers and cost less to build.

Signs of the Bottom

They say you don't know the bottom until you reached it. Real Estate markets move slowly, however, and the bottom of this market won't come up and slap us across the face, rather it will slowly emerge and turn into recovery over a 2-3 months time.

I see the bottom, and feel it as well. It's clearly visible in the current market stats, and I hear it at open houses, in the calls I receive and in the activity on my listings.

The market stats for the past few weeks have been really nice. New listings are down and pending sales are up. The Twin Cities real estate market has fit bottom and is poised for recovery!

Point 1: Fewer New Listings = Reduction in Supply

The number of new listings in 2008 has been dramatically less than last year. We are still over supplied with more homes for sale than there are buyers for, however, the single most important factor for a recovery in the Minneapolis real estate market is a reduction in the number of homes for sale.

The graph above shows the decline the number of new listings each week, compared to last year.

Point 2: Sales Active Decent

I'd love to say, "sales are great, everyone's buying, get going!" but the reality is sale are just OK. The number of sales this year has been slightly less than last year each week. I predict that in coming weeks we will see sales activity rise higher than the same week last year.

With sales in a stable, while slightly depressed, pattern and the number new listing dropping, the overall number of homes on the market is falling.

Inventory has been higher every week (compared to the same week in the prior year) every year, for as long as I can remember. We may be on the verge of a historic change, however, for the first time in years, the total number of homes for sale in the Twin Cities, Minneapolis and St. Paul real estate market may, in the next few weeks, drop below the number from the same time last year!!!

If that is right, we will have fewer homes on the market that last year! (Do you smell the recovery coming?)

Stay tuned to see if these predictions are accurate. Happy House Hunting!

Location, location... yeah you konw the rest! But seriously, look at these stats for SW Mpls and tell me is a bad market.

In 2007 the average SW Home Seller was on the market 112 days, and received 95.3% of their asking price.

$310,000 was the Median Sale Price in 2007 ($200/sq. ft.)

Up 8% from 2006 Median of $287,000

Up 47.6% from 2001

Also, a very important development in the Metro Market occurred this spring, the Number of Listings has started to fall. The current housing market "down turn" is based on high inventory levels resulting in a Buyer's Market. Sales volume has weakened as well, but fundamentally our "problem" is a simple over supply issue. As the supply of homes drops, the balance between supply and demand will improve, strengthening the market. It'll take quite some time to balance out, but I am going on record here and now, the recovery has begun (as long as the recession isn't too bad)!

Loving Mpls,

Ben