An uptick in home sales near the end of 2010 sparked cautious hope among professionals for a real-estate market turnaround — if not this year, at least by 2012.
"It's a good time to buy," said Eric Brownlow, president of the SouthEast Minnesota Association of Realtors. "The market is turning around."
Interest rates remain near historic lows, about 4.75 percent. And housing values lie some 15 percent to 45 percent below their peak at the height of the boom.
In Rochester, 87 home sales were reported in December. That compared to 57 sales during the same period in 2009. Every other month in 2010 reported fewer sales than the year before.
"December was strong, and I chalk it up to interest rates," said Brownlow, an agent with Coldwell Banker At Your Service Realty. "Interest rates started to creep up in December. That made some people nervous."
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Job growth and restoration of consumer confidence are also necessary to complete the turnaround, Brownlow said.
Duane Sauke, who heads SEMAR's Multiple Listing Service and owns RE/MAX of Rochester, said mixed sales results in January cast doubt in his mind whether a lasting recovery is imminent.
There were fewer completed sales, but more new purchase agreements, compared to January 2010.
"If we can see growth three to four months in a row," Sauke said, "then we can say the market is showing signs of recovery."
Still, "blip after blip" of industry data seems to point to a turnaround, said Kit Johnston, branch manager at Universal Mortgage.
The foreclosure rate is slowing, rental costs are rising relative to the cost of a mortgage, and inflation has been held in check, he said.
"I really think the worst is over," Johnston said, "but it's going to take some time."
New lender regulations, imposed to prevent a repeat of the lending practices that fueled the housing bubble — and burst — are a positive step, Johnston said. Starting in January, lenders were required to pass state and national written tests, and background and credit checks.
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Borrowers are subject to greater scrutiny than recently, having to prove steady employment, sufficient income and a down payment for their mortgage.
"It's back to the old way," Johnston said. "The same way you'd qualify someone 10 years ago."
That heightened screening potentially will test the patience of some buyers, Sauke said, but many buyers are entering the process with their eyes open, and with lower expectations than they had five years ago.
"There's been a values reset," Sauke said. "It appears they (buyers) are willing to live with one less bedroom … or without spending so much money on high-dollar features."
The trend prompted Brownlow to declare "a new generation of responsible homeownership."
"Obviously, there's going to be more responsible lending," he said, "but I think there's also going to be more responsible borrowing."
What stands between Rochester and a sustained turnaround?
Sauke says job growth is "the trigger" for a recovery to begin.
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"Everything else has had time to sort itself out," he said.
There also is slack in the market, caused by a variety of factors, including a first-time homebuyers' credit that expired last June.
The $8,000 credit may have prompted some homebuyers to take the plunge in 2010, rather than waiting until 2011 or 2012, as they otherwise would have.
But the credit also had the effect perhaps of prompting some buyers to buy sooner than they otherwise would have.
"We used up tomorrow's lunch," Sauke said.
By 2012, the real-estate market should be back in banquet mode.
Said Sauke: "We will have been in a long-enough malaise."
