A candid view of the Twin Cities housing market

We've been hearing a lot lately about the recovering Twin Cities housing market. While the numbers suggest the worst of times may be over, that doesn't mean things will get better soon.

That's the candid view we got recently from someone in the business.

"I'd like to say that we have hit bottom, that prices and sales have steadied. But I don't think so," said Jim Dooley, an independent real estate broker in Apple Valley who's part of MPR's Public Insight Network.

"Every scrap of good news is immediately evaluated and announced as the possible end to the downturn," he wrote us recently. "Most of those doing the evaluation are the same people that did not see the collapse coming!"

The current uptick in sales is mostly the result of the $8,000 first time buyer tax credit, and now the $6,500 three year owner credit. There would be far fewer gifts under Realtor's Christmas trees without these programs, that are scheduled to end in April 2010.

Jobs - where are they going to come from? Our state is broke (like 46 others), and more pain is going to take place in 2010. Cuts to the poor and social programs, layoffs of teachers and government workers, more people moving in with family because they have to.

Even people with reliable income and low debt are affected. Everyone needs to sell their home sometime. Buyer mentality right now is that everything is on sale. Solid homes feel the sting of the 2 foreclosed properties down the street that sold at a big discount. Less money available to put down on that retirement town home.

It is disheartening to take a buyer out to look at houses, and have 50% or more be short sales or foreclosures. Cold, empty, forlorn properties. Someone's broken dreams.

A couple weeks ago the Minneapolis Area Association of Realtors applauded November data showing only a 2.9 percent year-over-year decline in median home sale prices and a slight increase from the prior month. The November data, it said, offered the "surest sign we've seen yet that we're on recovery road..."

Dooley, though, notes there was a big uptick in real estate closings in October and November because buyers thought the first time home buyer program was going to end. He expects a drop in business as soon as the tax advantages end in April.

Looking back, he says it was easy to see the seeds of the crisis planted.

We saw it coming. Prices for years and years in Minnesota appreciated like 2 percent to four percent a year. Steady, sustainable growth. Buyers were required to "have some skin in the game", like at least $8,000+ on a bottom priced home.

Then, some brilliant lawmakers, bankers, regulators, and financial types decided to push 80-20 loans, where the buyer didn't have to put up any of their own money. NINJA loans (no income, no job, no assets - no problem!) became common.

The regulations and protections that were in place since the Great Depression were gone. Prices spiked for several years, everyone was encouraged to draw on their home's appreciated value and use it like a credit card.

Now the bubble has burst, and home prices are back at 2001-2002 levels.

We've speculated before that the housing market won't really recover until the short sale mess is cleaned up.

Dooley sees deeper problems. "In my opinion, we are in a vicious downward spiral that can only be alleviated by job creation," he said.

"I do not see any signs that the job market is improving, only getting worse ... The huge shortfall in the Minnesota state budget is going to really hurt everyone. How can 'experts' say we are in a recovery?"

12/29 BONUS INFO: My colleague Bob Collins takes a look at the newest home value data this morning and finds that thoughts of a home price rebound were premature.

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