Local Magazine Housing Guide:
Useful Insights, Stale Data?
If you’re in the market for a Twin Cities home — or just want to see how your neighborhood stacks up — the current issue of Mpls.-St. Paul Magazine is a must-read. But before you rely on the article to buy or sell, you may want to check with your realtor first: the magazine’s housing statistics don’t accurately reflect the current market (at least based on my unscientific sampling).
The feature article* in the current issue (July ’08) of Mpls.-St. Paul Magazine is an exhaustive survey of the local housing market titled “Best Places to Live” (you’ll have to pop for $4.50 to buy the magazine just like I did– the article’s not online). The highlight of the piece consists of thumbnail sketches of the “Twin Cities’ twenty best neighborhoods.”
According to the authors, the picks are based on historical and recent sales figures; crime statistics; school quality ratings, and “the subjective insights of real estate industry professionals.” The profiled neighborhoods are conveniently organized by “First-Time Buyers,” “Moving Up,” and “Empty Nesters.”
While I wouldn’t necessarily pick the same 20 neighborhoods — I probably wouldn’t pick the same movies or restaurants, either — the choices are certainly intelligent, defensible, etc. There’s also a nice sidebar explaining MLS district vs. neighborhood names: Longfellow, which happens to be both, can be especially confusing.
However, the article’s Achilles Heel — and it’s a big one — is misleading market data (too rosy, it pains me to say).
In particular, each neighborhood profile is accompanied by one statistic: the annual change in sales volume from April ’07 to April ’08. While that number is important to economists, lenders, contractors, and realtors(!), in my experience the public only really cares about one thing: prices.
So readers seeing that Jordan was “+13.3%” would most likely think, incorrectly, that prices had climbed that much the previous 12 months. Wrong. According to the magazine, that’s how much sales had increased.
Even that number seems off. Using a different but arguably more targeted snapshot — sales closed the last 90 days (basically April, May, and June) vs. the same time period in ’07 — yields an entirely different picture.
Instead of finding a 13% increase in single family home sales, a little digging into the Multiple Listing Service (“MLS”) database shows that Jordan experienced an almost 32% drop in sales volume — from 22 homes sold last Spring to 15 this Spring. Worse, the average sales price plummeted from $303,713 then to $237,273 now — a 22% drop!
So what does the magazine have to say about Jordan?
“Small-town Scott County requires a tough commute to Twin Cities business centers, but for now that’s OK for residents here. House prices in thoroughly planned Jordan cover a wide range and are holding their values much better than in other exurbs.”
I’d hate to see how the other exurbs are doing.
The same disparities popped up in the two other neighborhoods that I spot-checked.
The number “-3.2%” appears next to “Minneapolis — Isles/Kenwood/Cedar Lake,” one of the article’s eleven “move-up neighborhoods.” However, comparing single family home sales the last 90 days vs. the same period a year ago, I come up with a drop of 22% (65 homes sold then vs. 51 this year). The average price had fallen from $711,316 to $547,719, or 23%.
Similarly, the magazine says that Plymouth is “+4%.” My statistics, using the same criteria as before: volume down 20%, prices down 6%.
Certainly, different numbers can be teased out of the same database. Techniques include tweaking the time frame (to be more meaningful, as I did); switching between “averages” and “median’s”; making the search area bigger or smaller (Jordan, the MLS district (#646), is distinct from Jordan, the municipality); including condo’s and townhouses in addition to single-family homes (I focused on just the latter); and omitting foreclosures and short sales (I didn’t).
However, the article’s chosen statistics still seem to paint a picture at odds with the current market. That perception is only reinforced by the table included at the end of the article, which provides data for 88 Twin Cities neighborhoods. Unfortunately, the table — culled from Mpls. Board of Realtors statistics — focuses on 2006-2007.
Last December . . . hmm, that’s when Hillary Clinton was the presumptive Democratic nominee, oil was under $100 a barrel, and Bear Stearns (and Wall Street) still appeared to be solvent.
To be fair, dated or misleading market data may not matter to the magazine’s readers as much the article’s (genuinely helpful) insight into the various neighborhoods it profiles. After all, at any given time, most people aren’t actively buying or selling. Hopefully, the ones who are have realtors to help them crunch the numbers.
*Note: While Mpls-St. Paul Magazine doesn’t quote me or the City Lakes Real Estate blog by name, this blog is clearly the source for the following paragraph on page 96: “In Mid-May, Edina Realty cited the ‘pull of central areas — downtown, uptown, closer-in suburbs” as the “single biggest trend of the spring season.”
Contrast that with this excerpt from my April 28 post: “Perhaps the single biggest trend afoot is the “centripetal” pull of the core neighborhoods — downtown, uptown, and the close-in suburbs.”
What’s the link? Edina Realty issued a May press release quoting an Edina Realty branch manager, paraphrasing this blog, that apparently found its way to the Mpls.-St. Paul Magazine journalists. As they say, “Oh, well . . .”