Market Update - Warehouse District

Previously, I did a rather lengthy post about the housing market in Uptown.  I promised to do the same for other Minneapolis neighborhoods, and so here we are.

Today's market update is for the Warehouse District in downtown Minneapolis.  Specifically, this update will address the 55401 zip code, which conveniently happens to contain all of the Warehouse District!

Median Sales Price - January 2005 through January 2010 - Warehouse District (55401)

In terms of median price, the Warehouse district has actually not performed as poorly as many other Minneapolis neighborhoods.  For example, during the period between January 2009 and 2010, while most neighborhood were still experiencing drops in median price, the Warehouse District actually saw the price rise from about $235,000 to almost $250,000. 

It's also interesting to note that although the Warehouse District has certainly not been infallible in terms of price, this neighborhood experienced its major price drops well before the overall housing market hit the skids in late 2007/early 2008.  There are a plurality of possible explanations, but I would venture to guess that the Warehouse District's diversity of property types (residential, multi-use, commercial, warehouse, etc..) has helped it stave off the worse effects of the housing crash.  Think of it in terms of personal investing - it makes sense to diversify your holdings so that if one stock falls, other stocks are rising, essentially mitigating your level of risk exposure.  The same concept is playing out in the Warehouse District. 

Percent of List Price Received - January 2005 to January 2010 - Warehouse District (55401)

But while it appears the Warehouse District is performing well relative to other neighborhoods, other indicators point to potential trouble ahead.  The graph above depicts the percentage of the original list price that buyers are paying for properties in the Warehouse District.  As you can pretty clearly see, there is a definitive trend occurring that looks worrisome for the neighborhood.  The percent of list price paid has been consistently trending downwards, which does nothing to push prices up higher.  Without price increases, property owners with negative equity are stuck and the fluidity of the market is seriously challenged (check my previous post titled "Drowning" for more on the equity crisis the housing market faces). 

Months Supply of Inventory - January 2005 to January 2010 - Warehouse District (55401)

The above graph depicts the number of months worth of housing inventory currently on the market.  I think this is something to be positive about, as it looks like there has been a sizable decrease in the amount of inventory sitting on the market.  High amounts of housing inventory indicate a large sell off in the market without ample buyers.  This tends to push housing prices down as fewer buyers compete for more houses.  Buyers have a great advantage of sellers and can typically dictate many of the terms of the sale.  

The sudden decrease in inventory is a good sign because I think it indicates a return of buyers to the market.  Although many people out there are debt-rich and cash-poor,  buyers are returning to purchasing and consumer confidence can sometimes be a self-fulfilling prophecy.  I would expect to see this number to continue to decrease, back to more "normal" levels (is there such thing as "normal" anymore?).

Conclusion

I think the Warehouse District, like other neighborhoods in Minneapolis, will continue to see some improvement in 2011.  I think buyers are gaining some confidence and the housing market should reap some of those rewards.  We are seeing decreasing inventory and relatively stable prices, and so it should just be a matter of time before we see prices start to creep upwards.  By no means are we "out of the woods yet," and many people fear for the worse in other real estate sectors (i.e. commercial real estate), but I think most signs generally indicate that there is reason to be optimistic.