Twin Cities’ home prices drop 10.25 percent during 2011

The median price of a Twin Cities traditional-sale home (not a short sale or foreclosure) dropped 10.25 percent during 2011, according to an analysis released today by the Shenehon Center for Real Estate at the University of St. Thomas’ Opus College of Business.

The St. Thomas Residential Real Estate Price Report Index tracks the median prices for traditional home sales, short sales (homes sold for a price less than the outstanding mortgage balance), and sales where the home’s mortgage has been foreclosed.

According to the latest report, the median price of a traditional-sale home in the 13-county Twin Cities market decreased from $212,250 to $190,500 during 2011, for a loss of $21,750.
A chart that accompanies this month’s index shows that in January 2005 (a month near the apex of the residential housing bubble) the median price of a traditional-sale home in the Twin Cities was $232,500. By December 2011 – a span of seven years – that median price dropped $42,000, or 18.06 percent.

“This data is in stark contrast to the 31.35 percent decrease recorded by the Case-Shiller Index between January 2005 and October 2011, which is the most recent Case-Shiller data available,” explained Herb Tousley, director of real estate programs at St. Thomas.

Why the difference between Case-Shiller’s 31.35 percent and St. Thomas’ 18.06 percent? The widely used Standard and Poor’s Case-Shiller Home Price Index uses data from repeat sales of single-family homes and – unlike the St. Thomas index – does not distinguish between a traditional, normal market sale and a distressed sale. Traditional sales are those unaffected by foreclosure or the threat of foreclosure.

The percentage of distressed sales in the Twin Cities continued its upward trend in December, increasing from 48.8 percent in November to 50.18 percent in December.

“There are still a large number of foreclosures and short sales that need to clear the market in coming months,” Tousley said. “These sales will continue to have a depressing influence on the market as a whole. A return to a healthier residential market will not happen until the percentage of distressed sales consistently remains below 35 percent and traditional home prices stabilize and start a sustained recovery.”

The university’s Residential Real Estate Price Report Index tracks a total of nine data elements to measure the health of the Twin Cities market.  For comparison purposes and to gauge how the market is doing, the university assigned a baseline index value of 1,000 to the housing bubble apex in January 2005. Each month’s index can be compared to the previous month, year or market peak to understand the relative strength and direction of the Twin Cities housing market.

The good news is that the index that tracks foreclosure sales appears to be bottoming out. The index score was 612 in November and 613 in December, and for the second half of 2011 the foreclosure index was running between 610 and 620.

“The beginning of a recovery in the foreclosed-market fundamentals will be an important step toward the housing-market recovery,” Tousley said.

For the year 2011, according to the St. Thomas index, the median sale price dropped for all three categories of sales, as did the university’s composite index score.

Meanwhile, from November to December:

  • For traditional sales, the median price dropped 0.26 percent, from $191,000 to $190,500.
  • For short sales, the median price dropped 5.06 percent, from $128,500 to $122,000.
  • For foreclosure sales, the median price increased 5.52 percent, from $104,250 to $110,000.

Charts and more details can be found on the Shenehon Center’s website. A free, monthly index via e-mail is available from Tousley at

Research for the St. Thomas index was conducted by Tousley and Dr. Thomas Hamilton, associate professor of real estate at the university.