Home values in the Twin Cities have slipped for the first time in seven years, according to a new analysis from online real estate research company Zillow.
In April, home values in the Minneapolis-St. Paul metro fell 0.04 percent compared to March, according to the analysis, marking the first month-over-month dip since February 2012. Zillow put the median home value for April at $270,700, which is still above the national median home value of $226,800 for the month. The nationwide figure marked a decline as well: 0.1 percent from March to April.
Skylar Olsen, Zillow’s director of economic research, says it’s historically “rare” for home values to decline. The current blip, she says, is likely a matter of the “market correcting itself” after the housing boom and bust in 2007-2008.
Home prices had grown at an unsustainable pace in the years after the recession, Olsen says. “Part of what we’re going through now is still a bit about recovering from that,” she adds. “We didn’t really ever return to normal.”
While she doesn’t expect another foreclosure crisis, whether the downturn means home values have peaked remains to be seen.
“I think it is possible,” Olsen says. “But there are two possibilities in front of us. One of those possibilities is that home values will sawtooth forward, and that the blip we’re seeing is just a bit of a ripple…The other potential that’s facing us is that home values will continue to grow negative for a few more months…And that means we have hit a bit of a local peak.”
In the latter scenario, Zillow researchers don’t expect home values to drop in “a huge kind of way,” Olsen adds.
Meanwhile, according to year-by-year figures, home values in the Twin Cities actually grew more than 5 percent, according to Zillow’s research.
David Arbit, director of research and economics at the Minneapolis Area Association of Realtors, cautions against using month-to-month comparisons for home values. In a place with climate extremes, such comparisons could skew the bigger picture, he explains.
“We’re not seeing declines yet, but we saw a little bit of deceleration in the pace,” Arbit says. “It was still positive price gains.”
Olsen maintains that Zillow’s research was “seasonally adjusted” to account for major weather fluctuations.
“The reason we’re focusing on month-to-month is because it’s a very recent inflection point,” she says. “It’s a possible turning point here in prices that isn’t necessarily captured in the year-over-year.”
And the year-over-year figures have been getting steadily lower, too, she notes. For instance, Twin Cities median home values grew by 7.14 percent in January, but by March, they had only grown 5.86 percent.
For buyers, the changes shouldn’t be cause for concern, though.
“As a buyer who’s buying in the long term, this shouldn’t bother you,” Olsen says. “It’s still a good time to buy in the sense of interest rates being fairly low, so locking in that lower rate is still important over the long term.