Uptown Update

It is hard to find strong data about the real estate market, particularly for specific neighborhoods.  For this reason, I plan on writing posts that focus on certain areas (i.e. downtown, Uptown, Kenwood, Northeast, etc...) and providing information that readers can 1) understand, but also 2) find useful. 

This week we will focus on Uptown.  More specifically, we will focus on the 55408 zip code, which runs east-west from 5th Ave S to Lake Calhoun, and north-south from 26th Street to 36th Street. 

Price
Since the crash of the housing bubble started in 2006/2007, the median sales price in Uptown has fallen about 25%, down to $150,000 from a high just over $200,000.  While this is undoubtedly a steep decline, it is actually better than we have seen in many areas of the country.  In some areas of California and Nevada, prices have fallen 50%.  Relative to these states, the housing market in Minnesota has fared much better.

Median Sales Price - 55408 (Uptown) - January 2005 through October 2010

As you can see, prices have fallen steadily since the beginning of 2007.  Things really collapsed in 2008/early 2009, during the height of the financial crisis.  You can see that prices took a slight uptick in late 2009, likely the result of increased market activity due to the first time home buyer's tax credit.  Things have leveled off since, and some have argued that the tax credit did nothing but pull from inevitable future sales. 

Where are Prices Headed?
It is difficult to determine with any sort of precision what will happen to prices in the coming months/years, but there are indicators that can tell us what to expect.  One such is indicator is the relationship between what is coming on the market and what is leaving the market (see:  supply and demand).   Here's what the housing supply looks like:

Months Supply of Homes for Sale - 55408 (Uptown) - January 2005 through October 2010

 

You can see that at the tail-end of the housing boom, there was very little supply on the market.  This lead to multiple-offer situations, intense bidding wars, and ultimately higher prices.  As the housing and financial crisis set in, buyers evaporated from the market and the amount of inventory skyrocketed.  This lead to prices being driven down (and thus, the 25% drop we have seen since 2007).  Inventory slowly began coming down and appears to have flat-lined a bit.  What about the average number of days on the market to sell?

Average Number of Days on Market (CDOM) - 55408 (Uptown) - January 2007 through October 2010

As the graph clearly depicts, it is taking longer and longer for houses to sell once they come to market.  This results in offers being lower than list price, which can either slowly bring prices down or cause small price increases to disappear.

Conclusion
Like many real estate markets, Uptown is in a bit of a holding pattern.  Buyers are reluctant to buy (no equity in their current homes, job losses, pay cuts, etc..) and homes continue to come on the market.  Inventory is still high and prices are stagnant.  Ultimately, the future of the Uptown real estate market depends on a number of things, including local economic conditions, incentives to buy, and larger macroeconomic trends, among others.