Last year was an economic one to mostly forget in Minnesota, and especially in the Twin Cities. The state has historically outperformed the nation, but in 2007 the housing market struggled, as did the overall economy, particularly during the second half of the year.
In terms of housing, the numbers tell it all. Prices declined statewide and in the metro region, according to two separate research sources. A comparison of the third quarters of 2006 and 2007 shows that median sale prices dropped more than 2 percent, according to a study released in January by a faculty member at the University of St. Thomas. Those in lower-priced housing actually saw prices drop more. This was likely due to the glut of houses in foreclosure in that price range that came onto the market. Foreclosures doubled last year compared with 2006.
The Twin Cities bore the brunt of the housing decline. Through November, total permits were down 23 percent over the same period a year earlier, and total approved units declined by 30 percent. Total closed and pending sales last year in the 13-county Twin Cities region were both down about 17 percent over the preceding year, while active listings rose by about the same amount, according to the Minneapolis Area Association of Realtors. Both average and median sale prices have declined. In January of this year, MAAR estimated an inventory supply of 8.3 months; five months is considered balanced.
There is some good news from the housing fallout. The St. Thomas study found that the number of entry-level homes (those under $150,000) has risen significantly, giving first-time buyers and lower-income folks a chance to own a home. MAAR's affordability index saw similar improvement.
But that's about it for the silver lining. From December, year-over-year job growth in the state ended up slightly in the red. That appeared unlikely at mid-year, but during the last half of the year, the state shed some 23,000 jobs. In December alone, the state lost 2,300 jobs and the unemployment rate jumped from 4.4 percent to 4.9 percent, the biggest one-month rise in 25 years. Despite strong growth in manufactured exports last year, the number of manufacturing jobs in the state dropped by almost 12,000.
—Ronald A. Wirtz
