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Home sale prices dipped in 2007 for the first time in at least 20 years and are expected to remain flat or fall slightly in the coming year, officials from several Twin Cities-area real estate groups said Wednesday.

The decline is bad news for anyone trying to sell a house and also is an indication of downward pressure on housing prices across the metro area -- sobering news for anyone who bought at the peak of the market or has borrowed heavily against the value of their house.

During 2007 the median sale price of single-family houses, condominiums and townhouses fell to $225,000, a 2.2 percent decline from 2006.

However, the median sale prices still are $10,000 higher than the $215,000 median price that prevailed when market activity reached its peak in 2004.

But the first price decline in two decades of record-keeping debunks the long-held notion that home prices in this market don't fall.

• The number of foreclosures in Minnesota doubled in 2007.

• The nation's biggest banks have lost tens of billions of dollars investing in mortgages that couldn't be repaid, sparking a global credit crunch and threatening a recession in the United States.

• Some home builders have resorted to mass auctions to unload new but empty homes.

Closed sales during 2007 in the Twin Cities metro area fell 16.4 percent to 40,055, and pending sales fell 15.5 percent to 43,560. At the same time, the number of new listings that hit the market declined. During 2007 there were 105,044 new listings on the market, down 2.8 percent from last year, but well head of activity in previous years.

Despite the steep declines in construction, few companies closed or consolidated. But many projects, including some high-profile condo projects in downtown Minneapolis, were canceled or put on hold.

Despite those cancellations, the downtown Minneapolis condo market buoyed last year's construction figures. Minneapolis led the new-unit list, with plans for 1,012 units, mostly condominiums. Woodbury ranked a distant second with 459 units, followed closely by St. Paul with 409.

Condo construction in the coming year is expected to slow dramatically as the already-overbuilt market catches up with itself.

"I think our numbers are going to be way down in 2008," said Minneapolis-based market research analyst Mary Bujold of Maxfield Research. "We needed to continue to curb supply because we still have too much out there."

That doesn't mean new construction isn't selling and that there isn't strong demand in certain areas. She said that in Minneapolis, resales of existing condos in 2007 were on par with the previous year and that prices inched upward a bit, a counter to what happened throughout the broader market.

From Star Tribune

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