Real estate values in Southwest Minneapolis have traditionally been strong.  Even during the slowest periods, values in Southwest have appreciated and demand has been high.  Unfortunately, condo owners in Southwest may not fair so well this time.

There are very specific reasons the real estate markets has slowed.  The number of properties for sales has increased dramatically, over building has occurred, and bad mortgage decisions are coming back to bite.  But the question everyone is asking is not why things are slow, but rather, when it will improve?

Southwest condos are like the canary in the mine shaft, they will tell us if the market is picking up speed or still loosing ground come spring. 

Like all markets Southwest condos have been hit hard by the slow down.  The two graphs below show the erosion of the market.  The first graph, from 2003, shows a solid sales activity at all points in the range of values.  The second graph, for 2007, shows spotty sales activity.  Sales in some price ranges had disappeared; sales at other price ranges are OK.  The same range of values exists, but there are holes in the market at various prices.  Notice the lack of sales in the $160k to $170k range. 

Average sale price today is the same as it was in 2003.  It was up slightly in 2005 but has come back down since then.  When sales prices are not rising some sellers find themselves in very difficult situations.  Someone who purchased in 2003, and financed 100% of the price, who now needs to sell, may not be able to sell high enough to pay off their mortgage let alone the fees and expenses associated with selling.

There may be relief in sight however, depending on sales and new listing activity in the coming months.  Current inventory levels are far better than average.  While most markets are looking at 5-7 months worth of inventory, in Southwest there are only about 3 months worth of condos for sale.  This means that based on current sales volume, all the properties currently for sale would be gone in about 3 months, assuming no new listings were added to the market.  Put another way, there are 3 times as many listings as there are sales in a month, or, to put in yet another way...there are 3 listings for each buyer.

Sales should pick up in the spring, a very predictable trend in Minnesota, but if the number of properties for sale rises as well, competition among sellers will continue to depress values.  When there are more sellers than buyers, the seller with the best quality and value usually wins.  So, to improve the value offered, sellers who can lower their price do, and get the buyers.  A seller who can not afford to lower their price may not sell at all.

Southwest has been, and will continue to be a solid real estate investment, condos included, but you have to be in it for the long haul.  Don't "day trade" real estate.  There is a lot of chaos in the market right now, sales are sporadic and people are anxious.  But this chaos creates opportunity.  Look for gaps in the market, and exploit them.  With a comprehensive understanding of the market, opportunity can be found and taken advantage of.  Do your home work, and seek advice from market experts.  If you make the right moves now, the slow market could be the best one for you.