Mike's Blog

By Scott Carlson

(Published in the Argus Leader Newspaper,  Sioux Falls, SD - 02/15/08)

Bucking the U.S. housing slump, South Dakota emerged as the only state in the nation to post rising sales of existing homes in the last quarter of 2007.

Sales of existing homes increased 8.9 percent in South Dakota from October through December compared with the same period a year earlier, the National Association of Realtors reported Thursday.

In contrast, the Realtors trade group noted that home sales in 45 other states fell, with more than half posting double-digit declines. Sales were unchanged in North Dakota, while complete sales figures were not available for Idaho, Indiana and New Hampshire.

That news didn't surprise local economists or real estate professionals, who noted that Sioux Falls' economy remains strong.

"We are not participating in the housing bust," said Randall Stuefen, an economist in Vermillion. "Our (housing) prices did not run up, as in other areas of the country, and they are not collapsing now. The (housing) sales have been constant. It doesn't appear the sky is falling."

Stuefen predicted the Sioux Falls housing market might show some softness compared with its best boom years. But overall, Sioux Falls housing should remain strong unless there are additional shocks to the national economy, he said.

Meanwhile in the real estate trenches, one Sioux Falls executive is expecting brisk business this year.

"I think we are going to continue to flourish and see the economy rise and the housing market do well, particularly if interest rates continue to remain low," said Liz Lloyd, vice president of residential real estate at Lloyd Cos.

Lloyd noted that business in all areas of her company is up for the first two months of 2008 compared with the same period last year.

Last month, the Realtor Association of the Sioux Empire reported that homes sales declined slightly for a second consecutive year in 2007 but that the median home price rose 5 percent.

In its latest survey, the National Association of Realtors also reported that 73 of 150 U.S. metro areas showed an increase in median single-family home prices from a year earlier.

Sioux Falls was among the gainers, with its median home sale price rising from $138,000 in 2006 to $144,500 in 2007.

"The healthiest housing markets today generally are moderately priced and are experiencing job growth and often population growth, which in turn is supporting strong price growth," said Lawrence Yun, chief economist for the National Association of Realtors.

Lloyd said that definitely is the case in Sioux Falls. She noted that the community's financial services, health care industries and small businesses are continuing to grow.

Meanwhile, median home prices fell in more than half of the 150 metropolitan areas surveyed. Out of the 77 that posted declines, 16 showed double-digit percentage drops, according to the Realtors group.

Yun attributed the declines in median prices to mortgage market problems that mushroomed last fall, making loans more expensive for borrowers looking to take out "jumbo" mortgages larger than $417,000, the maximum size of mortgages that government-sponsored mortgage companies Fannie Mae and Freddie Mac can buy and market as securities.

"The continuing crunch in the jumbo loan market that began in August has disproportionately reduced the number of transactions in higher price ranges," Yun said in a statement.

Nationwide, existing homes sold at an annual rate of 4.96 million units in the fourth quarter, down 21 percent from the sales pace of the third quarter in 2006, the Realtors group said.

Mortgage lenders, would-be homebuyers and Wall Street investors alike have been grappling throughout the past year with the effects of rising defaults, the result of lax lending standards that were prevalent during this decade's housing boom. As defaults have risen, lenders have grown more cautious, which has allowed fewer buyers to qualify for home loans.

The Associated Press contributed to this report. Reach reporter Scott Carlson at 331-2318