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Rochester avoids worst of real estate sales slump

By Mike Klein

Post-Bulletin, Rochester MN

Rochester enjoyed relative prosperity during the nationwide real estate slowdown in 2007, with a 6.9 percent drop in single-family home sales and average home prices that stayed roughly steady.

Nationwide, sales of existing homes fell 12.8 percent last year, the steepest drop in 25 years. Some places did far worse: Home sales in the Twin Cities during 2007 fell 16.4 percent, and the median home price in January was down 16.4 percent from a year earlier.

"We were pleasantly surprised that they (Rochester numbers) aren’t as bad as others," said Micki Miller of Edina Realty, president of the Southeast Minnesota Association of Realtors. Miller added that home sales activity this year is picking up already, especially among entry level homes.

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Rochester sales, which are for new and existing homes, fell to 2,112 in 2007, the lowest since 2002.

There were several reasons for the drop, said Duane Sauke, owner of RE/MAX of Rochester:

  •  The highly favorable housing market in 2004 and 2005 used up much of the supply of potential home buyers.
  •  The banking industry cracked down on lenient loan rules in 2006.
  • The slowing economy hurt home buyers’ confidence.

While sales peaked in 2005 with 2,300 homes, sales last year were still healthy, Sauke said.
Southeast Rochester was the city’s hot spot, with sales increasing 10.6 percent. "Southeast (Rochester) just does have a lot of good, standard, entry-level homes that tend to always sell well in any economy," Miller said. Sales also increased in northeast Rochester by 5.08 percent.

Average sale prices in Rochester increased slightly in the northwest, northeast and southeast quadrants, but dropped 3.6 percent in the southwest quadrant.

Rochester’s home prices probably didn’t rise as much during the real estate boom as they did in cities on the coasts, and now they’re not falling nearly as much, said Tom Hamilton, associate professor of real estate at the University of St. Thomas' Opus College of Business in St. Paul.

Sauke expects the market to start improving at the end of 2008, with a boost from job growth. "There is strong reason to feel confident in future job growth," thanks to a promising local bioscience industry, the new University of Minnesota campus in downtown Rochester, Mayo Clinic’s continued growth and other good signs, he said.

Krista and Mark Topolski found it a stressful experience when they sold their southwest Rochester home in 2007 to move their family to Virginia to fulfill Mark’s military commitment.

They put the house on the market in January 2007, moved in July and didn’t sell the house until December, although they dropped the listing price several times. The national news of falling home prices over the summer scared prospective buyers; others were cautious because they had lost their money when they sold their previous homes, Krista Topolski said. "People think they’re going to wait until it bottoms out," she said.

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"We definitely learned a lot. One thing is your house is your home. You need to enjoy it and not necessarily look at it as investment because there are no guarantees," she said. "We loved the house and the neighborhood."

In the 11-county southeastern Minnesota region, home sales in 2007 were down 11.2 percent to 5,209, the lowest total since 2002. The average sale price in southeastern Minnesota was down 2.2 percent to $163,401, from $167,123 in 2006, which had been the highest ever.

Southeastern Minnesota had some hot spots. In Austin, sales were up 7.2 percent, and in Blooming Prairie/Bixby/Pratt they were up 18.4 percent. Both areas have average home prices below the region’s average, the statistics show.

"Places that were affordable did well," Miller said.

For more information, visit Postbulletin.com/weblinks.

www.semnrealtors.com

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