Key Market findings for the Twin Cities

Posted By Joe on September 13th, 2010
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The Minnesota housing market has certainly cooled off as summer winds down.   All indicators are pointing to  shrinking housing demand and an increase in supply.   The one positive indicator as of 9-7-10 is housing affordability.   This key stat looks at the affordability of the average home, and its at level not seen for many years.  

Lower Pending Sales

The running three month average for pending homes was down 42% for period ending Aug 28th.   This is obviously more of a decline than most predicted after the expiration of the tax credit.   Fewer buyers are transacting in the market place due to many of those buyers purchasing ahead of their normal timeline to take advantage of the tax credit.

Supply Rising

For month end there were nearly 8 buyers available for every active home on the market.  This is a 56% increase over the same period in 2009.   This is increasing in part because of the amount of sellers bringing their home on the market that are forced to sell due to foreclosure or potential foreclosure.   In order for the supply demand ratio to starting heading back the other direction employment levels will have to start improving.   The amount of new home buyers entering the market is certainly not as strong as it would be if we were in period of significant job creation.

4th Quarter Outlook

The overall outlook for the 4th quarter is mixed.   As we approach the election buyers are more likely to sit on the fence than they would be in a non election year.   What will drive our local market will be the diverse economy that we are blessed with here in the Minneapolis -St. Paul metro area.   There are companies bringing people in fairly regularly, although at a slower pace than in previous years.   The challenge remains dealing with a post stimulus housing market.   It most likely will take another 6 months or so to find what our normal supply demand ratio will look like.  It will take this long to see buyers coming back into the market that werent  borrowed ahead during the stimulus.   The major damage caused by the stimulus is the false demand it created.    

Looking forward

We all need to remember why people move in the first place.    New Job, divorce, empty Nestor’s,expanding family, corporate relocation, and marriage are the natural forces that create movement in the market.   People will not stop having kids, companies will not stop moving around key people, couples will not stop getting married and divorced, and people will not stop pursuing the American Dream.   This in a nut shell will always insure houses will be bought and sold even in the most uncertain times economically.   Just don’t expect a housing boom anytime soon with the amount of distressed loans that still remain.

Home Buyer Tax Credit Extended

Posted By Joe on July 2nd, 2010
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Minnesota home buyers that were taking advantage of the tax credit, but had a delayed closing due to short sales, foreclosures or other factors beyond their control can rest easy.   The tax credit has now been extended through Sept 30 of this year.   This should give buyers plenty of time to navigate through the short sale process or other delays they are experiencing.   We experienced a lot of stress with last minute closing even though most of us felt the goverment had no choice but to extend.  There were in excess of 200,000 home sales that would have fallen apart if the credit did not get extended.   With the housing market slowing down considerably since the April 30th deadline it would have been a huge blow to the market if they did not extend.   A link to the article on CNBC is below.

http://www.cnbc.com/id/38048135

Mortgage Rates Lowest in 39 years

Posted By Joe on June 30th, 2010
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Mortgage rates reported the end of last week averaged 4.69% as reported by Reported by Freddie Mac.   Buyers looking to purchase in the near future certainly should be pleased at the record low rates and unmatched affordability in the Twin Cities housing market.  Regardless of price range, if you are shopping for a home in Minnesota there are great buys regardless of price point.  Some of the best deals we are seeing as a group are upper bracket homes.   With supply in excess of 3 years on homes over $1M the selection is vast.   First time home buyers will notice a much smaller selection in terms of months worth of supply.   As the selling season progresses without the tax credit, these low mortgage rates should keep sales from plummeting as some are predicting with the end of the tax credit.

Minnesota Homeowners could benefit from new rule

Posted By Joe on June 23rd, 2010
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A recent article by the associated press talks about Fannie Mae’s new proposal to punish sellers who strategically default and just walk away.  The theory behind this is to prevent people from just giving the property back to the bank and deciding its better for them to have no more involvement.  The problem with this is another foreclosure in your Minnesota neighborhood is not good for your property value!   A copy of the article is as follows:

NEW YORK – Government-sponsored mortgage purchaser Fannie Mae is trying to encourage distressed homeowners to find alternatives to foreclosure by banning those who walk away from getting new loans for seven years.

Troubled borrowers who do not try in good faith to work out a deal, but have the capacity to pay, are targeted by the policy announced Wednesday.

“Walking away from a mortgage is bad for borrowers and bad for communities and our approach is meant to deter the disturbing trend toward strategic defaulting,” said Terence Edwards, executive vice president for credit portfolio management.

A strategic default occurs when a homeowner stops making payments on a mortgage despite being able to do so. It has become increasingly common in communities where housing values fell sharply and homeowners are “underwater,” or owe more than their houses are worth.

Fannie Mae said that in locations where the law allows, it also plans to take legal action to recoup outstanding mortgage debt from borrowers who strategically default. The company plans to instruct its servicers to monitor delinquent loans facing foreclosure and recommend cases to pursue for such judgments.

A spokesman for fellow government-backed mortgage buyer Freddie Mac said its current policy requires at least a five-year wait. Freddie Mac will “take a close look” at the new Fannie policy, said spokesman Brad German. “We’ll consider it in light of current market conditions in order to manage our risk as effectively as possible.”

Fannie and Freddie were created by Congress to buy mortgages from lenders and package them into bonds that are resold to investors. Together, they own or guarantee almost 31 million home loans worth about $5.5 trillion. That’s about half of all mortgages.

The wave of foreclosures affecting Fannie and Freddie loans has caused a major problem for the U.S. government, which effectively guarantees the loans.

The government seized control of Freddie and Fannie in September 2008, a rescue that has cost taxpayers $145 billion so far. The two companies show no signs of becoming self-sufficient.

In announcing the new policy, Fannie Mae said homeowners who make a good faith effort to resolve their situation with their mortgage companies, and those who have extenuating circumstances, will be eligible for new loans in a shorter time period. The company did not detail how long the wait might be.

Fannie Mae shares fell 1 cent to close at 41 cents. Fannie Mae shares finished unchanged at 48 cents. Both companies plan to delist their shares from the New York Stock Exchange because they don’t meet listing requirements that they remain above $1 per share.

Minnesota’s Top Realtors selected

Posted By Joe on June 19th, 2010
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Joe and Cindy Welu were Selected as “Super Real Estate Agents” for 2010 by Minneapolis St. Paul Magazine and Twin Cities Business Journal.    Deborah Hopp, Publisher, and Jay Novak Publisher and Editor wrote in a letter dated 6/10/2010 -

“Unlike other distinctions, this one is not based on sales volume; it celebrates great service to clients (surveys are mailed to consumers directly)  To ensure a fair and rigorous research method, we contracted with an independent research company, Crescendo Business Services, to administer the Super Real Estate Agents selection process.   More than 120,000 recent homebuyers, mortgage or title company officials, and subscribers to our magazine were asked to cast ballots.”

The list will be published in the November issue of both publications.

North Central Region Consults top agents

Posted By Joe on June 11th, 2010
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The Remax North Central Region comprised of several thousand agents released their seasonal report and cites Joe Welu as one of the local experts.  View the article at:  SummerTrendReport[1]

Twin Cities median home price increases

Posted By Joe on May 14th, 2010
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The Star Tribune reported today that the median single family home price is $169,800, up 11% from April of 2009.   The local associations released these figures on Wednesday of this week.  What does this actually mean to people looking to buy and sell in the Twin Cities market?   The simple answer:  It depends.    This is obviously positive news but should be taken in context.    The reduced numbers of foreclosures in the market this year has significantly helped the cause.   Many industry insiders feel this is a strong sign the market is stabilizing.

“This sustained pattern of median price growth is reassuring and may indicate stability in the market,” said Brad Fisher, president of the Minneapolis Area Association of Realtors. But given that the federal tax credit of up to $8,000 for new and repeat home buyers expired at the end of April, Fisher was reluctant to declare any long-term victories. “The jury is still out on how the market will look several months after the credit has expired,” he said.

Clearly the success of the market the rest of the year will be dictated by the supply of new foreclosures.   Without a doubt there are large volumes of mortgage defaults still happening everyday.  The differences in this year over last is how the defaults are being managed.   The banks and government have made continuous efforts to refine programs to help the foreclosure crisis.   The other obvious development has been how homeowners are handling default.   Early on many of the defaults ended in a full blown foreclosure as troubled borrowers decided to simply walk away and not deal with the situation.   Today we are seeing more homeowners realize that they need to be considering how that impacts their future over the next 10 years and as a result you are seeing more people decide to go for a short sale which has a far less impact on them long term.  The net benefit is usually the property will end up selling for more than a traditional bank owned sale which lessens the blow to other sellers in the neighborhood and surrounding area.

The most important thing to remember is that each neighborhood, suburb, and price range is seeing different things and you should examine the data at a micro level when deciding whether to buy or sell this year.

New Minnesota Foreclosure News

Posted By Joe on May 7th, 2010
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Here are the latest statistics on foreclosures in Minnesota.   Some mixed signals overall.   Most notably the west metro and Lake Minnetonka area have seen significant increases in lender mediated activity over the past several months.   The hardest hid areas of the Twin Cities early on have seen significant improvement in overall numbers.   Watch for increased short sales and foreclosures in the upper bracket as supply has continued to be extremely high in most areas of the metro.   Although much of the data is not favorable we are in much better shape according to most metrics than areas in other parts of the country.  Our diverse economy in the Minneapolis/St. Paul metro has kept us much stronger in regard to jobs and business expansion.  Click on the link to view the data.

http://www.mplsrealtor.com/downloads/market/Lender-Mediated/Main.htm