Welcome to the June 1, 2009 edition of carnival of real estate.

A lot of people like reading Top 10 lists and I was intending to do a Top 10 list, however this week I didn’t feel like there were 10 submissions worth sharing with you all so here is my:

Top 9 Post Submissions

#1 - Reminding us that real estate is always local and showing us why
Tallahassee Real Estate presents Killearn Lakes Unit 1 Home Prices Holding posted at Tallahassee Real Estate Blog, saying, “A classic example of why most real estate reports are flawed. They lead you to believe that prices are going up or prices are going down, solely based upon the movement of the average sales price. This article shows why it is possible for the average home price to go up, while real home values are dropping.”

#2 - A variation on the same theme
Danilo Bogdnaovic presents Best Condo Investment Opportunities in Loudoun, Fairfax County posted at Loudoun Foreclosures, saying, “Though this post is hyper-local, the reasoning/logic behind it holds true throughout the US and should be considered by all agents and real estate investors (imho).”

#3 - Multiple offers are everywhere today (at least in my market) and we all need to bone up on our sales skills
Dan Melson presents I’m Competing Against Multiple Offers. How Do I Proceed? posted at Searchlight Crusade.

#4 - I too have many objections to Case-Shiller… check out my association’s data for some examples of better info: 1, 2, 3, 4, 5
Dan Green presents Why The March 2009 Case-Shiller Home Price Index Is Good News For Housing posted at The Mortgage Reports, saying, “To economists, the Case-Shiller Index is helpful. To homeowners, it’s almost worthless.”

#5 - Foreclosures impact many families… each house foreclosed means a family affected
Donna Johnston presents “Mommie are we going to have to move?” posted at Talk Charlotte Real Estate Blog, saying, “This hits me right in my heart.”

#6 - This is a little bit of a “duh” post but hey…
Jim Reppond presents What social networks are agents marketing on? posted at The Seattle Specialist, saying, “Internal Top Producer poll that suggests most agents are now using social media to promote their listings - especially Facebook.”

#7 - MI is deductible but sometimes there are better options
NetBiz presents How To Avoid Paying PMI (Private Mortgage Insurance) posted at Your Finish Rich Plan, saying, “List of ways you can void paying for PMI, thus lowering your monthly mortgage payments”

#8 - Green building is increasing in my market, how about yours?
Mark Donovan presents Definition Green Building Product posted at HomeAdditionPlus, saying, “Green home building is a phrase that is often overused and misunderstood. In this article Mark Donovan discusses the process of assessing whether or not a green home building product is truly green for your particular green custom home building project.”

#9 - There’s a sucker refinanced every minute…
nickel presents Beware the “No-Cost” Mortgage Refinance posted at fivecentnickel.com.

That concludes this edition. Submit your blog article to the next edition of carnival of real estate using our carnival submission form. Past posts and future hosts can be found on our blog carnival index page.

Technorati tags: carnival of real estate, blog carnival.

This story does not even scratch the surface on what both Bob and Edina Realty have done and are doing in the face of challenging times.  There are many stories I can tell you of both first-hand experiences and those of my fellow agents that demonstrate the character of our leadership.  Times are harder today but there are still so many opportunities too.  I bleed Edina Realty Red because both the company and its leaders continue to demonstrate strength and fortitude in the face of ever-changing challenges.

KARE-11 News provide two chances for worried homeowners to seek help this week.

This week, homeowners will have two opportunities to have their questions answered from the comfort and convenience of their home. On Tuesday, the Minnesota Home Ownership Center is offering the first of its 2009 series of telephone seminars. The following evening, KARE-11 will feature a phone bank of housing counselors during its 10pm newscast.

Telephone seminar offers homeowners chance to ask questions, find out what to do if worried about mortgage
Telephone seminars provide convenient, private access point to information for homeowners who are worried about their mortgage and are just beginning to ask questions about their situation as well as those facing foreclosure. The telephone seminar allows people to participate anonymously from the privacy of their home, work or car. The seminar format is similar to a radio call-in show, including informational segments and questions from callers.

The telephone seminar will take place on:
Tuesday, February 10 from 7:00 to 8:00 pm.
Call in number: (888) 886-6603

Those interested in participating can call in anytime between 7:00 and 8:00 pm.

Housing counselors available during KARE-11 news
On Wednesday, February 11, housing counselors will be taking calls during the 10 pm newscast of KARE-11. Phone lines will be open during the entire broadcast. The phone number will be announced throughout the newscast, which will also feature a segment about a homeowner who successfully averted foreclosure by working with one of the Minnesota Home Ownership Center’s counseling agencies.

For more information about the telephone seminar or KARE-11 segment, call (651) 659-9336 or visit www.hocmn.org.

http://hennepinmn.granicus.com/MediaPlayer.php?publish_id=12

Roseville, MN (January 12, 2009) – December permit statistics are a clear indication that regional builders were more than ready to close the books on 2008. Planned units dropped to just six more than the year’s monthly

low in February, and and down 60 percent compared to December 2007. Multi-family units made up just 36 percent of the month’s total, a drop from the 50 to 70 percent each month since July.

According to statistics compiled by the Keystone Report for the Builders Association of the Twin Cities (BATC), there were 223 units permitted during the month of December 2008, down from the 420 units permitted in November 2008. Housing activity ended the year 40 percent below 2007. A total of 5,397 units were permitted in 2008, compared to 8,961 units permitted last year.

The housing sector has borne the brunt of this economic downturn, losing an estimated three million jobs since the peak of housing expansion in 2005.

“Housing traditionally accounts for 15 cents of every dollar spent in the United States,” says BATC President Mike Swanson. “Therefore housing must be a centerpiece of any recovery plan.”

“The housing industry, spearheaded by the National Assocition of Home Builders’ Fix Housing First Coalition, is urging Congress to take action that includes ensuring below-market mortgage rates and expanded home buyer tax credits,” explains Swanson. “These measures will help to stablize home prices, prevent future foreclosures, restore consumer confidence and start creating jobs.”

Hudson, WI led the metro in building activity for the month with 29 units permitted in December. Woodbury followed with 19 units permitted, Maple Grove was next with 18 units permitted, followed by Blaine with 15 and Hugo at 12. 

The Builders Association of the Twin Cities has contracted with Keystone Report, a local research firm, to maintain a database with information about new residential construction permits around the metropolitan area. After a builder has picked up the permit from a city, Keystone Report compiles and updates weekly residential housing permits by city for 70 percent of the metropolitan- area municipalities in the greater 13-county region. Planned units are the total number of housing units planned to be built under the permits issued (one permits is issued per building which may include more than one housing unit). Permit value does not include the land/lot costs.

If you have interest, give me a call: 612-251-5599

A phenomenon that has also been picking up in the last few months is the usage of “not a foreclosure,” “not a short sale” and others. It seems that many agents and/or their sellers have come to feel that it is important to note that their properties that are not in a distressed sales situation. In a market where many foreclosures are in horrible condition and a short sale can take 2 weeks to 4 months to negotiate (and only maybe successfully) I would agree that in many cases it is good to distance your property from that market if there’s any chance of misperception. In this quarter’s report we’ve made sure to exclude properties that are listed with those terms.

Take a look at the report!

In addition, I’m seeing most loan officers quoting 5.75% - 6% today, which is down from 6.75% a couple days last week.  Rates around 6% have been the norm for the last few months but historically are still extremely low.

If you are a buyer who has been turned down for a loan or worries about qualifying, please give me a call and I will set you up with one of my loan officers to see if we can get you set up.  Not everyone can qualify, but the vast majority of buyers out there can still get loans.

To Our Customers,

The dramatic events taking place in the financial services industry and economy are historic in scope and proportion. You may be asking yourself, “What does this mean for me as a home buyer or home seller? When I want to obtain a mortgage, will there be funds available?” The answer is simple: at Edina Realty Mortgage, it’s business as usual. Yes, we continue to originate mortgages for home purchases and refinances. Our wide product range features FHA, VA, MHFA, Conventional, Jumbo, Relocation, Renovation, and Reverse Mortgages. We are committed to helping as many customers as possible enjoy the personal and financial benefits of homeownership. We provide competitive, fully disclosed, and responsible and fair pricing for all borrowers.

A Solid, Stable and Secure Lender

We want to assure you that we remain a solid, stable, and secure mortgage lender. We are a well-capitalized company, and we hold fast to our long-standing responsible lending principles. Edina Realty was one of the first real estate companies to offer integrated mortgage services more than twenty-five years ago. For over ten years, Edina Realty Mortgage has been a joint venture between Wells Fargo Home Mortgage (a division of Wells Fargo Bank, N.A.) and HomeServices of America, a Berkshire Hathaway Affiliate. Wells Fargo Bank, N.A., is the only bank in the United States, and one of only two banks worldwide, to have the highest credit rating from both Moody’s Investors Services “AAA,” and Standard & Poor’s Rating Services, “AAA.”

We Are Committed to Your Successful Closing

We stand by our word. Our exclusive On-time Closing Guarantee (1) ensures that you will close on time AND for the amount quoted on the Good Faith Estimate, or you will get money back. Are you already working with another lender? We will be happy to review your Good Faith Estimate and Truth-in-Lending Disclosure Statement. This no-obligation second opinion from us takes just few minutes, and we may be able to provide reductions in interest and/or closing costs. (2)

As a responsible lending leader, we work closely with our customers to help you reach your personal and financial goals through homeownership. Our team works hard to know you, understand your needs, and listen to you. We put you at the center of everything we do.

Thank you for trusting us with your business.

Todd Johnson
President and CEO
October 2008

1. Available on all qualified purchase transactions. Other terms and conditions apply. See a Home Mortgage Consultant for details.
2. If you have a current lock-in agreement with another lender, this is not an inducement to transfer your loan.

All first mortgage products are provided by Homeservices Lending, LLC Series A dba Edina Realty Mortgage. Edina Realty Mortgage may not be available in your area. Wells Fargo Home Mortgage is a division of Wells Fargo Bank, N.A. ©2008 Edina Realty Mortgage. All Rights Reserved.

• Home Depot will take Lowe’s coupons.  I’ve used a couple “$10 off a purchase of $50+” in the last couple weeks with no problems.  I like some of what HD has better than Lowe’s so this is great.
• Behr paint is drastically cheaper in the 5 gallon pail.  If you are using more than about 3 gallons of paint you might as well buy the 5 gallon and have extra for touch-ups, more rooms, 2nd coats, etc.
• In partnership with Xcel Energy, Home Depot has reduced the price on a lot of their fluorescent bulbs by $1-$4 per package.  This means 60 watt bulbs are now under $1 each… a bargain considering that each bulb can save $30 or more over its lifetime.  If you use a bulb 2 hours a day and your electricity is $.08/kw, then you save $.22/bulb/month in electricity costs.  This means in a little under 5 months the bulb is paid for and you’re saving real money.  Multiply $.22/bulb by replacing your 20 most commonly used bulbs and suddenly you are saving $50/yr!

We’re far from through this crisis, but it seems like every few weeks there is a new data point that shows we’re finding fundamental levels and once we know where are boundaries are, I believe we’ll all feel more comfortable with the future of the housing markt.

In short:

Edina Realty is the Best

Click here to search for Twin Cities Foreclosures

The foreclosure process in Minnesota is a long one… often consuming an entire year from when the borrower first misses a payment until the time that the bank assumes control of the home. The Minnesota Home Ownership Center has put together a great flyer on the process and an average timeline.

Right now the Minnesota Legislature is considering a bill to “defer” the foreclosure process for up to an additional year if the borrower of an owner-occupied home makes partial payments (65% of principal and interest amount due). If this bill is signed by Governor Pawlenty, Minnesota could potentially have a 24 month disposition window for some foreclosures.

Problem

A lot can happen to a home in the 12 months from the date the borrower stops making payments. In many cases, the homes fall into disrepair as the borrower knows that any investment of time or money on the property will ultimately be lost when the bank assumes possession. Property taxes and municipal bills are also often neglected… I have seen delinquent water & sewer bills for a foreclosed property above $1000 and delinquent property taxes above $5000. These are all bills that will have to be assumed/paid for by the mortgage company. Also, often times there is a significant amount of trash/debris left by the borrower… it is not uncommon to see a large dumpster in front of these properties full to the brim. Add to all of that the year of non-payment of the loan and the legal expenses to the lender to complete the foreclosure process and it is likely that a lender already has a $10,000 - $20,000+ loss at the time they repossess it.

In Minnesota, we have 5 months of average low temperatures below freezing. If a home in foreclosure is vacated during these months, often the utilities are shut off before the bank secures the property and the home’s plumbing ends up freezing and pipes burst. In good circumstances the water was shut off at the meter or the street (sometimes done by the city from non-payment of the water bill) so that only the pipes need to be repaired, which could cost as little as a few hundred dollars or climb to several thousand, depending on the location and extent of pipe damage. In bad circumstances the water can literally fill the house and cause near complete destruction of the interior of the homes, which then become great incubators for mold when they thaw in the spring. In a house profiled by the Star Tribune, one house once worth nearly $700,000 was resold at auction for only $280,000… a loss of over $400,000… about 60% of the value of the home.

Once the bank has possession of the property, the previous owner has vacated, and any debris has been removed from the property, the bank can go about listing the home for sale. Based on a sample of homes sold in Plymouth and Maple Grove in the last 10 months, when the bank resells the property they will lose 23.4% from the value at the previous sale. All told, banks lose $10’s of thousands of dollars on the average property… and on some, $100’s of thousands!

Current Actions

While the banks are already overloaded with the huge numbers of foreclosures they have been taking on and are even more buried in their short-sale departments, where responses to offers can take months, the more proactive a bank can be with their defaulted borrowers, the more likely it is that they can recover a larger share of their investment.

Regulatory and industry efforts to create work-out agreements between lenders and borrowers has met limited success and while without these programs foreclosures would be higher, the number of foreclosures today and in the near future are still substantial.

The mortgage lenders are trying to ramp-up staffing for their short sale and foreclosure departments, but these efforts are not proactive, but rather reactive.

While it is in the banks’ best interests to work with their borrowers to modify the loan terms and keep the borrower in the home, there are many circumstances where no reasonable workout can be made. Instead of the banks letting these homes go through the foreclosure process, they should attempt to work with the borrower to get the home sold directly from the borrower to a new buyer, with the bank accepting a sales price that only returns a portion of what they lent back to them, which is called a “short sale.”

The approval of a short sale is a long and difficult process that can take a lender 60-90 days to approve once an offer has been submitted. The largest problem with short sales is that many buyers simply do not have the time nor the patience to wait 2-3 months for a response. Further, the process is not the most appealing for sellers either, since they receive no monetary gain from the sale, many borrowers see little value in the enterprise. These short sales are seller-initiated and more than 1/2 of the listings never close.

A New Way to Handle Foreclosures

Lenders can be more proactive with their defaulted borrowers by initiating a short sale process when the probability of foreclosure is high and the likelihood that a lender-negotiated loan modification that will allow the borrower to become current on their mortgage is low.

Based upon my analysis of sales in Maple Grove and Plymouth in the last 10 months, bank owned properties on average sold for 23.4% less than their previous sale but short sale properties sold for only 16.4% less than their previous sale. Taking into account many of the other costs I mentioned earlier in this article, the savings to lenders could easily be in the 10’s of thousands of dollars vs. letting the home go through the standard foreclosure process.

Here’s the overview of the concept:

• For loans in default where the borrow and lender are unable to provide a viable loan modification program, the lender refers the loan to their short sale department.
• The short sale department immediately initiates the approval process for a short sale, including reviewing the borrower’s financials (which they have updated copies due to the failed loan modification program), get BPO’s (Broker Price Opinions) of the property, and send a letter to the borrower detailing this new option.
• The borrower is presented the option to basically do nothing and let the home eventually go through foreclosure or work with the lender to get the home sold via a short sale.
• If the home is successfully sold via a short sale and the foreclosure process is averted, the lender would offer the borrower monetary compensation for their participation and their assurance to maintain the property and leave it in good condition when they vacate.
• If the borrower agrees to the terms, the lender sends out one of their pre-approved real estate agents for a more in-depth valuation, lists the home for sale and actively markets the property.
• There is no cost to the in-default borrower for participation in the program… all costs are borne by the lender.
• When an offer comes in, review and negotiation of the offer can occur quickly since the lender has been working on the file for some time already and can better rely on the advice of the listing agent as it is someone whom they have an existing relationship with and knows their processes.
• The home is sold directly from the in-default borrower to the buyer, giving the defaulted borrower some money to walk away and the lender with substantially fewer expenses, return of more of the original investment, and substantially less risk of damage to the property in the meantime.

Caveats

To discuss a new way to handle foreclosures is not helpful if it ignores the realities in the market. Here are the biggest hurdles (as I see them) that could make such a plan difficult to implement:

• Banks can’t sell real estate
• 80/20 loans where the 20% 2nd lien is not held by the same bank… much harder to coordinate but quite often the 2nd lien holder gets NOTHING from a foreclosure so it is in their best interests to cooperate.
• Mortgage insurance companies that don’t want to get with the program
• Investors/CDOs/etc that add so much complexity and/or bureaucracy that makes it a logistical nightmare
• Already overburdened Short Sale Departments that simply cannot handle more files
• Simple inertia: with so much of this problem centered in large banks, it is likely that only smaller, more nimble banks could
• As Minnesota has one of the longest (if not the longest) timeframes from default to end of redemption, banks may not understand the true consequences of a 12 month process.
• No one to champion the cause. Someone would have to step up and try this as a “guinea pig” before it is likely any other banks would adopt it.

Conclusion

Until these properties cycle through the system and are resold to new buyers they cast a negative effect on neighborhoods, other homes for sale, and other foreclosures too. Waiting for defaulted borrowers to complete the foreclosure cycle when it is all but a sure-thing earlier on in the process is not the best way to protect the investment but rather employing a proactive approach is something can benefit all parties involved and the housing market in general.

Welcome to the 91st edition of The Carnival of Real Estate. This is my 2nd time hosting the carnival and I think there’s some good articles in this week’s carnival but I couldn’t pick one that stood out from the others… I suggest you browse them all.

From 20+ posts I’ve whittled it down to 9 that I think are worth your time.  To be honest, the spam posts were much higher this year over last… it is a shame that such a great tool is taken advantage of by so many. Maybe we should figure out a way to block repeat junk posters?  There was also some submissions that were so location-specific or minuscule in subject that they just did not make good candidates for a national blog carnival.

Trevor Mauch presents Marketing To Pre-Foreclosures - Why Most People See ZERO Results? posted at Real Estate Investing Brain. This article explains how mailing to pre-foreclosures is a numbers game… you have to be in front of them not once, but many times to get the point across… not unlike farming a neighborhood.

TerryT2 presents Negotiation Tactics and Tricks posted at Actual Real Estate Profits. A good list of tricks to employ or defend yourself against.

Sagar Satapathy presents The Foreclosure Investor’s Cheat Sheet: 100 Useful Web Resources posted at International Listings Blog. A good list of web sites for reference… several of which I bookmarked.

Ken Haedrich presents The Whole World is Waiting for Ourselves posted at Annapolis Home Digest. I have to agree Ken… I feel you on this 100%.

MoneyNing presents Right Time to Buy a House? posted at Money Ning. I get this question a lot too and if you look at the comments, they run the gamut of responses.

Debt Freedom Fighter presents Home Equity Loans: Why They Don’t Make Sense as Part of Debt Reduction Plans posted at Discover Debt Freedom!. Seems obvious to me, but I know a lot of people who get trapped by this.

Dan Melson presents A Good Listing Agent’s Most Important Responsibility posted at Searchlight Crusade. Yep, Dan’s right on the money with this.

Tim Soper presents “Walk Away” Foreclosures Sign Of Times? posted at Will & Grundy County IL Real Estate Report. I see this trend too… it’s disgusting. Maybe we need teacher unions that invested heavily in CDO’s to do a course on “responsible borrowing” and teach little Johnny & Jill to go home and tell their parents to own up to their responsibilities….

Joe Manausa presents Short Sale Advice posted at Tallahassee Real Estate Blog. Some good tips from Joe on how to be prepared for a short sale and what to expect.

That concludes this edition. Submit your blog article to the next edition of carnival of real estate using our carnival submission form. Past posts and future hosts can be found on our blog carnival index page.  Thanks for stopping by!

Technorati tags: carnival of real estate, blog carnival.

Since many times the eventual response from the bank is a no or “you need to bring your offer up x%” or the buyer gets outbid by a later offer, these properties could be tying up significant numbers of buyers who would otherwise be purchasing (and closing!) on another property.  This weekend I was told there were 4 offers on a short sale I was showing to my buyer.  That means 4 houses with ready, willing and able sellers (”traditional sellers”) are stuck waiting for the bank to reject 3 or all 4 offers sometime in the next 30 - 75 days before they’ll get their chance at those buyers.

Traditional sellers have not been listing homes on the MLS nearly as much this year as they did last year and new construction has backed off as well.  Once we eliminate many of these foreclosures from the market and we see fewer of them come on the market, then we are likely to see a draw down in active listings.

While falling inventory for sale isn’t a sign that our market has hit bottom, it is a sign that the market is closer to finding an equilibrium.

If you need something, do not hesitate to call or email me.

Nerd & Model:

Biker & Mom:

Grandma & HipHop:

Hunter & Yoga Gal:

Nerd & Model Outtake 1:

Nerd & Model Outtake 2:

My esteemed colleague believes that since foreclosures and short sales are sold under “distressed” situations, they are not good comparables for other homes for sale.  My counter is that many foreclosures and short sale properties are not in bad condition and so they should sell at a fair market price regardless of their “distressed” situation.

When it comes down to it, foreclosure and short sale listings most often do sell at a discount to regular listings and should have that taken into consideration, but even in a slow market houses priced appropriately are selling quickly, so those are market prices.

What we do find is a substantial disparity on how much of an impact those foreclosures have on the houses around them.  In areas with low numbers of foreclosure and short sale properties, we find that those properties have little effect on the market as a whole.  Where there are a high number of these properties in a single area, we find the the impact is more like an exponential impact: the higher the number, the more substantial the impact each additional listing has.

There are many, many things that my association does well but this is a prime example of a ridiculous message at a horrible time.  I don’t know if there is a single consumer out there today that expects that a house they buy today will double in the next 10 years… and I think most understand that the housing market is not going to move higher for several years.

This ad simply promotes the misconception that REALTORS do not understand what is actually happening in the real estate market today, or that we simply will not accept it.  When sales are down 30%+ from two years ago (and consequently commissions) and we’re seeing more empty desks and less people in the office, I can assure you that we as agents understand that this is a different market with different needs.

Instead of trying to sell promises of sunshine in the middle of a hurricane, the National Association of REALTORS would be much better off to admit that this market isn’t perfect for everyone, but that there are good opportunities out there for certain people in certain situations.

NAR: Please either promote a more realistic message or shut up entirely… I don’t need the kind of help you’re giving me right now.

While it certainly seems inviting for buyers to go to these model homes on their own, doing so means they miss their opportunity to get fair and impartial information from an agent representing their best interests.  Some homes on the Parade are a good value, some are not.  Each builder, location, and style/model of home has its good and its bad, and a knowledgeable agent can provide great advice on the available options.

Many buyers think that they can go see the houses on their own and then bring an agent back to help them with the one they want to purchase.  While that is true, what the buyer probably doesn’t know is that their agent may or may not be compensated by the builder for the sale because of Procuring Cause.

Simply put, buyers that want to have an agent represent them in a transaction should coordinate all their showing activities through that agent.

I personally see this as a positive as the current capitulation in the market will hopefully mean a quicker trek to the bottom and should help drive buyers waiting on the sidelines back into this market.  I also feel like these stats finally show what I think many people have felt out in the market for quite some time…

With the HAI hitting 149 & a historical average in the mid-150’s (RREAR Page 2 and January Monthly Indicators Page 12), we’re getting awfully close to historical affordability levels.

Due to our seasonal nature in Minnesota real estate I still think we won’t see a bottom until Q4 2008 but the acceleration downward makes it seem more possible that this market will find its bottom in 2008 and not limp slowly down the hill for years to come.  Add to that the plan the 6 banks are putting forward to renegotiate loans already in default and I sense that this market is finally starting to make steps that will lead to a definite bottom in the future.

It’s impossible to time the market bottom and with interest rates still near all-time lows it isn’t a bad time to make a move up to a more expensive home or to buy a first home.  Prices may fall further but if interest rates move higher on inflation fears, any additional decrease in sales prices may be erased by equivalent or greater increases in interest rates.

If you’re wondering if now is a good time to buy for your situation, feel free to call or email me to discuss your situation.

Pretty cool information… thanks Lisa & Jason!

Based upon MAAR’s Top 100 report for Minneapolis for December 2007, I was able to construct the following chart of average sales prices in Minneapolis communities:

I wish this chart was wrong, I wish it didn’t show such a disparity amongst neighborhoods, and I wish I didn’t have to talk about it.  Alas, not talking about it will not solve the problem and this is an issue I simply could not be silent on any longer.

I have been working on some figures showing the number of homes for sale in these communities that are either in a short sale or foreclosure situation but the data isn’t complete yet and I want to make sure it’s right before I release it.  What I can tell you though is that these communities have been hit hard by the rise in short sales and foreclosures, as can be seen by anybody showing houses in these neighborhoods.

While there are still many homes for sale that are owner-occupied and in great condition, the sheer number of distressed properties for sale have a hugely negative effect on the market for the following reasons:

1. Competition - Simply having so many homes for sale increases buyer’s options, which puts pricing pressure on sellers.
2. Impression - Some homes in a short sale situation and a majority of bank owned properties have been neglected or even boarded up… having a few in a neighborhood brings down the perceived character of the neighborhood.
3. Comparables - Eventually these distressed properties sell and then become comparables for appraisers and future buyers.  Though the condition may be terrible, that isn’t readily apparent in most MLS reports and therefore the appraiser or buyer may believe the home was in better condition that it actually was, thus pulling down the value of homes it is compared against.

As we are still in the middle of the subprime and ARM mortgage fallout, the high inventory and pricing pressure in theses neighborhoods is not likely to moderate for quite some time, which could lead to further price erosion this year.

While this is terrible news for the current homeowners in these neighborhoods, there is supposed to be a “silver lining” to this market downturn: housing affordability in these neighborhoods has headed substantially higher in the last year to the point that many people who could not afford to buy a home years ago can get into a home today.

I just recently closed on a deal with a 1st time buyer who purchased a 3 bedroom, 1 bathroom home with 1 car attached garage just a few blocks off the Parkway in North Minneapolis.  This home had quite a few cosmetic issues to fix but had a new furnace and newer roof and some great built-ins and woodwork.  Her total payment is under what she was paying in rent and her home has a lot more space for her family!

While she was successful, it was a big struggle to get her into the home, mainly because of the catch-22 on the only loan we were able to get for her:

• Like most 1st time buyers, she had little cash upfront.
• 100% financing is almost completely gone, so the next best thing is FHA financing, with a 3% downpayment requirement and upfront Mortgage Insurance Premium.
• This buyer was able to secure some downpayment assistance money and we had the seller pay the closing costs, so her total out of pocket cash to close was approximately $1000.
• To meet FHA guidelines, the home had to be livable at closing.  This means the plumbing, electrical and heating all had to be in working condition and operating for the appraiser’s inspection.
• Like a large number of homes that are bank-owned, the utilities were off when we saw it, but we were able to get the seller(bank) to agree to dewinterize and turn on the heating and water.
• There were items that needed repairs to get it to pass the FHA appraisal and most banks do not permit a buyer to complete any work on the property prior to close, but we were able to secure permission from the listing broker to make minor repairs.
• When the water was turned on we found out that that the water heater was broken and we had to have a plumber install a new one, which was an unexpected expense.
• There was exterior paint on the foundation that was peeling (an FHA issue) but since it was too cold to fix it the money had to be set aside at closing for the repairs.

While this buyer was able to get into this home, most other first time buyers will not be as lucky.  As I said above, most banks will not let anyone do anything to repair the home prior to closing and so if the home is out of FHA compliance for almost anything, the buyer will not be able to purchase that home.  Homes that are in a short-sale position are typically in better condition and sellers would work with a buyer on repairs but if it is anything costly no one will have any money to fix it!

The other issue is the 3% downpayment… many buyers simply do not have that saved, but are more than capable of making the monthly payments.  There are some downpayment assistance programs available but they are a small share of the total market and many loan officers are either unaware of them or in the case of government-sponsored programs, are not approved to use them.  This will put many of the rest of the homes that are in good condition still out of reach.

If a 1st time buyer does have cash, they can go with a Conventional loan & eliminate most of the lender required repairs but most of those loans need a minimum of 5% down payment and if the appraiser or Fannie Mae or Freddie Mac describe the neighborhood as a “declining market,” then the down payment requirement would jump from 5% to 10% for most and the zero down payment loans would go to 5%.

What this all means is that only a limited number of 1st time buyers will be able to take advantage of this “silver lining.”  The rest of this inventory will need to be acquired by buyers who have significant cash: typically rehabbers and landlords.  Rehabbers are likely to remain on the sidelines for a while longer simply because the fundamentals of the market in these areas are still softening and that makes it risky to go in and try to fix it up and sell it for a profit.

That really leaves us with landlords.  As with my buyer, these landlords can come in and buy these homes for less than their rental value and make great cash flow off them.  While that will mean the neglected exteriors of many of these houses will likely get some attention, it could take largely owner-occupied neighborhoods to largely rental neighborhoods and I believe that most people would agree that strong neighborhoods are those that have a good balance between owner-occupied and rental.

This situation needs immediate attention by the community.  In the best of circumstances, a public-private partnership would be formed to help assist more 1st time buyers in acquiring these affordable homes and try to help keep these communities occupied and maintain the balance between owner-occupied and rental.  This assistance could be in the form of additional downpayment assistance or nonprofit rehabbers turning around and selling it to eligible buyers.  Either way this takes money that doesn’t appear to be just sitting around, so this will take a considerable effort to achieve.

What it Is
Earnest Money is effectively a deposit by the Buyer that is offered at the time of the offer. 

How Much
Earnest Money is often 1% of the sales price, but can be significantly more or less depending on the situation.  A quick closing may need less cash, a longer closing more.  This is also a great way to show strength in a low offer as it shows a strong financial position and confidence in the transaction.

Where it Goes
Upon acceptance of the offer, the money is deposited into the listing broker’s trust account where it is kept until closing or until cancellation of the Purchase Agreement.  At closing, the money is credited back to the Buyer on the HUD-1 Settlement Statement.

It’s Purpose
Earnest Money is used to assure the Seller that the Buyer is serious about consumating the transaction and gives them consideration in the event that the Buyer does not complete the transaction, assuming that they did not cancel for reasons permitted in the contract.

How a Buyer can Lose it
If a Buyer cancels the offer due to problems from their inspection or from failure to secure financing, they almost always have their Earnest Money returned.  In condos and townhomes, a Buyer has 10 days from the date they received the association documents to review them and cancel the offer and get their money back if they desire.  If a Buyer gets cold feet and wants to cancel well after completion of an inspection, they may lose their Earnest Money.

Below you will find slides from the Minneapolis Area Association of REALTORS December 2007 Housing Supply Outlook.

When you look at the numbers, the largest increase in inventory is at the lowest end of the pricing segment.  We see that in just 12 months we’ve over doubled the number of homes for sale under $120,000.  Even $120,000-$150,000 saw a 56% increase and $150,000-$190,000 saw a 24% increase.  When you hit $190,000-$250,000, inventory is only up 2.5% and from $250,000-$1,000,000 inventory has actually shrunk!  The 10.5% increase in $1,000,000+ homes is such a small number of units (74) that statistically I don’t think its too significant to the market as a whole.

This is a huge contrast!  The month of supply has also increased, but not nearly as dramatically, as seen below:

If you look closely at what’s happening in the above charts, you’ll find another trend that’s shown in this chart:

Sales in the last 12 months have grown strongly on the very low end of the market (under $150,000) and have fallen at all higher price points.  Metro-wide, sales are down 16%+ so any increase in sales shows a segment clearly bucking the trend.

What does all this mean?  Though the subprime market is supposed to have hurt the 1st-time buyer market, the sales from 2007 show that buyers in this range are more active than they were in 2006.  Does this mean the 1st time buyer is alive and well???  I’d love to hear comments from the peanut gallery.

One thing I’d love to see is a distribution of homes in foreclosure on this price graph… it would be very interesting to see which price points have the highest foreclosures… are you reading this Jeff Allen?

Taking 1/2% off the interest rate (which is what has happened in the last few weeks) on a $300,000 loan saves you $1500 per year in interest charges, which would be a savings of $125 per month or is like taking nearly $21,000 off the purchase price of the house, as compared to the higher interest rate.

With record high inventory and affordability at 3 year highs, this is a great time to be a buyer!

Here are a couple loan officers that I recommend if you are looking for information on what you can afford, how mortgages work, or want to get a pre-approval.  Please feel free to contact them or myself if there’s anything we can do for you!

Nicci Brown - Edina Realty Mortgage

Cheryl Stuntebeck - Bell Mortgage

No consideration has been received for these recommendations.

If the Agreement is contingent on financing, as a sales condition, Buyer must obtain a pre-approval letter from a branch office of Countrywide Home Loans, Inc. (“CHL”) for a mortgage loan in an amount and under terms sufficient for Buyer to perform its obligations under the Agreement, and such letter must accompany the Agreement.  The pre-approval shall include, but is not limited to, the pre-approval letter, a satisfactory credit report, and proof of funds sufficient to meet Buyer’s obligations under the Agreement. Buyer’s submission of proof of pre-approval is a condition precedent to Seller’s acceptance of Buyer’s offer. Seller may require Buyer to obtain, at no cost to Buyer, loan pre-approval as Seller may direct. Notwithstanding any Seller required pre-approval, Buyer is not required to obtain financing from CHL or Seller- Buyer may obtain financing from any source.  As an incentive for the Buyer to obtain financing from CHL, CHL will offer a free appraisal and a free credit report if the Buyer finances and closes the purchase of the Property through financing from CHL.

This is ludicrously stupid for the following reasons (not a complete list):

1. Most buyers are pre-approved early in the home search process and have already chosen a lender they are comfortable with and are ready to buy NOW.
2. Most buyers do not want to share private information with a stranger.
3. Most buyers have no intention of working with the Countrywide Loan Officer.
4. Countrywide pulls credit, meaning another inquiry on buyer’s credit report.
5. Countrywide’s lending capabilities (product options) have been dramatically reduced since they are doing mostly/only loans that Fannie Mae or Freddie Mac will buy.
6. Agents have existing relationships with loan officers that they know, trust, and can count on… they don’t like to have an ultimatium put to them any more than a buyer and don’t like interference in their client relationship.
7. Agents often have such a long list of potential homes to show that they need to find reasons to eliminate some… this is an obvious candidate for removal.
8. Countrywide doesn’t care who the approval is from or how solid the buyer is… if they are using financing, they HAVE TO get a pre-approval from Countrywide Retail. Period.
9. Offering to do a free appraisal on a home that they own is akin to having the fox guard the hen house simply because he’ll do it for free… where’s the buyer’s protection when the seller is the loan originator?
10. And finally- buyers are not stupid and they know when they’re being jerked around.  With so much inventory on the market, they can choose to tell Countrywide to keep their property and they’ll go find someone else who won’t treat them like a fool.

According to the Countrywide Foreclosure Blog, Countrywide had 14,442 REO homes listed on their site as of 12/5/07 at a total asking price of just over $3 Billion.  With so much inventory, so much competition, such a difficult buyer market, and tough times keeping Countrywide financially afloat, you would think that they would want to do everything they could to get their properties sold!

Recently I have seen several of Countrywide’s properties in the $200,000 range price reduced $30,000 and $40,000 all at once.  Such drastic price reductions have generated interest in the properties but also shows the motivation, and possibly desperation, of Countrywide to get these houses off their books.  If they eliminated their pre-approval requirement, they might see more interest from qualified buyers without having to so drastically reduce prices.

Some people suggest that Countrywide requiring a pre-approval is smart business, that it gives them an opportunity to pick up the buyer’s mortgage.  I would be surprised if they had more than a 20% capture rate on these leads (but I have no knowledgewhat their capture rate is), and the added holding costs for longer sale, disinterested buyers, and further price reductions make me think that this is a losing battle for them. 

Message to Countrywide: eliminate your CHL pre-approval requirement.  You’ll sell more houses, sell them faster, and likely at a higher price.

The article does bring up a good point… while saving buyers that are in danger of losing their homes is a good policy, going too far is not fair for everyone else and can potentially lead to more fraud in the market.  It’s amazing to see the differences in opinion and direction this market seems to be taking.

All I know is that they better come up with something… the foreclosure market continues to grow as a percentage of listings for sale on the MLS and that isn’t good for the long-term health of our housing market.

While this sounds like negative news, pricing is all relative.  The only people who suffer in a falling real estate market are the downsizing & downpricing homeowners.  For those who bought in the last few years that are trying to sell today will see red ink on the sell side but will see savings on the purchase of their new home.  Most of all, first time buyers and move-up buyers are definitely winning in this market.

While this is an improvement from much of 2006 and 2007, it is still substantially lower than the index’s record of 160, set in 2003.  The index’s low of 122 was set in 2006.

The Housing Affordability Index formula measures housing affordability for the Minneapolis/St. Paul market. An HAI of 138 means the median family income is 138% of the necessary income to qualify for the median priced home using a 20% down payment, 30-year fixed mortgage.

Offer Information

Closing Costs Discount Coupon

In the Twin Cities, as in many other large metro areas nationwide, we have seen a sharp increase in foreclosures over the last year.  This has been a boon to the business of agents that work with the banks carrying this inventory.  Unfortunately, some of these agents are either too busy or feel they are getting paid too little to take the effort to snap interior photos of the house and also often do not measure room dimensions.  Sometimes the house’s interior is in bad condition, sometimes it is in remarkably good condition.  Either way, consumers want to see layout and general condition before they make the trek out to see the home.

When we have record levels of inventory on the market and many investors waiting on the sidelines, the consumer looking for a home for owner-occupied use is still the best buyer for most homes.  Since these consumers have so many choices, they narrow down their options using the photos and other MLS information provided online.  Fewer buyers seeing the home means less potential to sell the home quickly and at a good price.

Until banks wake up and demand the agents selling their inventory to do more to market the home, they will find that they are not receiving the full benefits of the MLS and are missing many potential buyers.

This is a favorable trend for our market and shows that builders continue to scale back their building from the record levels of a few years ago.  While the new construction market is still weak, this dramatic reduction in new construction will help reduce inventory over the long run and sets the stage for a recovery in the future.

As it turns out, sometimes things just don’t work out right.  For me it is terribly frustrating when it happens.  I’ve had quite a few clients that decide not to buy or sell, but I’ve also had a few clients over the years that have fired me.  They either choose to cancel their contract early (which I always offer to all my clients if they are dissatisfied) or they choose not to renew upon contract expiration.  This has happened for both buyers and sellers.

Truth of the matter is that while this is just the cost of doing business and I typically have not given much thought to it after it happens, there are a few situations that have really bothered me:

• In one case the clients went and bought a FSBO without me and without giving me a chance to negotiate a commission with the seller.  It was after I had spent many hours showing them other homes and discussing the neighborhoods and market.
• In one case we wrote an offer, the deal went sour, and then the buyer decided that they didn’t like Dual Agency, even though it had been disclosed and discussed months before and the deal fell apart due to the seller and buyer not being able to negotiate out the inspection, not because of dual agency.  In that case I asked them to let me show them more houses and offered to walk away if they decided they wanted to buy another house listed by my broker (1 in 5 chance), but they refused.  Bye-bye 6 months of a client relationship.
• Most recently, I was working with a buyer for about a month.  We had made one offer that didn’t go through and were having conversations via email and SMS almost daily.  On Thursday we decided we needed to do another search for homes and I promised to email him some that night, but forgot.  I had a busy Friday and some personal and business activities over the weekend.  Monday morning comes and I get an SMS message saying: “Since you don’t seem to be interested in my business, I am going to find a different agent.”  Apparently the fact that he didn’t contact me to inquire about the email doesn’t seem to matter.

While there is a significant cost to that lost business… probably $15,000 in total… it is more a personal frustration than a financial one.  In all of these situations I felt that I had established a good client relationship with these people and that they would be loyal because they knew I was working hard for their best interests.  So that’s a total of three times in five years that I felt personally hurt… given the number of customers I’ve worked with, that is extremely low!  The problem is that even one is hard to handle, because I always want 100% customer satisfaction!

This is definitely a business, but it is a people business.  When you spend so much time with a client that you get to know them, breaking up is hard to do!

In this slowing market, where inventory is at record levels, Buyers have almost too many choices to make and Sellers have so much competition for each of those buyers, make the same choice that nearly 1 in 5 customers in the Twin Cities make, work with an Edina Realty agent.  Since 1955, Edina Realty has helped Buyers and Sellers through both good and bad markets.

Edina Realty - Now, more than ever.

Aaron Dickinson + Edina Realty = Even Better! 

While this may sound good to sellers, it isn’t.  Inventory is falling but this time of year buyer demand falls faster than your competition.  What this means for buyers is that there is less and less choice this time of year but the homeowners that are on the market may be more willing to negotiate with you.

Coupon for $500 off closing costs

One of my roles as a Realtor is to negotiate for my client’s best interest… and 99% of the time my client gets what they wanted.  Here are professional politicians, a.k.a. negotiators of everything, and they can’t come to any sort agreement on one of the biggest issues we’ll have in this state.

Write your representatives, force the issue, be heard before we lose any more time!

For the period of January - August 2007, there have been 28,739 closed sales, down 14.9% over last year and down 27% over two years ago.

It’s a slowing market… which is great for 1st time buyers and move-up buyers but not great for downsizing households.  Houses can sell quickly though… just sold one of my listings in 3 days!

Some of the standout loan products today are geared to 1st time and/or lower income borrowers.  Via government-sponsored programs there is still 100% financing with market rates and no mortgage insurance.  No private loan program can beat that!

The loan products that we had 5 years ago worked just fine for consumers… we had great sales activity and low defaults in those years… and will serve us yet again.  While lending has tightened, it isn’t like we’ve gone back to 1980’s style loans… there’s still a lot of great options in this market and I’m quite confident that qualified buyers will still be able to buy a home in this changed landscape.

Personally I love this idea.  If the road/interechange was already going to be built but just years (or a decade) later, then it is just a question of timing.  If it can be built sooner with the upfront cost paid by the developer, then that sounds pretty good to me.  I do have a few thoughts though:

• If the state/city have to repay the cost of the project, do they also pay the developer interest on that cost?  If so, how is this different than bonding?
• Should we ask for the developer to permanently fund part of the project?  If they are unlocking property vaules years ahead of time, the time value of money suggests it is worth something to them.
• If the new project ruins traffic on other parts of the infrastructure, it isn’t a good idea.  Case in point: the Best Buy headquarters and Penn Ave bridge are awesome expamples of development, but totally screwed all the other traffic along 494… which is now a parking lot from 4-6pm.

On Monday August 27th a listing east of Lake Harriet came on the market for $470,000.  On Tuesday afternoon my clients and I went to see the house.  In the less than 36 hours it had been on the market there were a total of 8 business cards left in the house.  When we arrived there was another agent showing it and while we were there another group came through as well.  I call the agent back that evening to let him know we have interest and he informs me that the house sold that afternoon before we even showed the house!  This home was in top-notch condition in an in-demand neighborhood and was priced to drive significant numbers of buyers through the home… it worked!

Morals of the story:
1. No matter how bad it may be, it isn’t as bad of a market in most areas as people think.
2. A house with the right price, right condition, and right location still sells quickly.
3. Buyers need to be ready to jump on a property if the right one comes along…

 Conventional  
 15 Year Fixed 5.875-6.125% 
 30 Year Fixed 6.25-6.50% 
 40 Year Fixed 6.50-6.75% 
 7/1 ARM 6.625-7.00% 
   
 CDMP - 100%, No MI   
 30 Year Fixed 6.750% 
   
 FHA/VA  
 30 Year Fixed 6.375-6.750% 
 3/1 ARM 5.875-6.375% 
   
 Jumbo  
 15 Year Fixed 6.50-7.00% 
 30 Year Fixed 7.00-7.625% 
 40 Year Fixed 7.250-7.875% 
 10/1 ARM 7.125-7.500% 
 5/1 ARM 6.750-7.375% 

Also available: No Closing Costs & Rate Buydowns      
For More Information Contact:      
 Cheryl Stuntebeck   
 Home Mortgage Consultant   
 763-551-6706   

It is worthwhile to check in with the buyer’s loan officer every week or two till closing to verify that there’s still money there when you close!

• Windows are an area to be watched carefully.  It doesn’t matter what type of windows you have, you should be inspecting the caulking around the windows, the drip cap, the weep holes, and any seams in the window.  Caulk is your friend… don’t forget him!
• Flashing around roof lines, bay windows, chimneys, etc will eventually need to be replaced… if you are replacing the roof you should look at the flashing as well.
• Trees should be trimmed away from the house.  If a tree is rubbing up against a wall or roof, it can damage the home.  Also, without a “gap” between the house and trees, it is difficult for air to circulate around the home and keep it dry.
• When repairing/remodeling/rebuilding decks, make sure that you have the flashing installed correctly.  Incorrectly installed flashing may actually encourage more water penetration.
• Look at the bottom of exposed studs & sheetrock for water damage.  If there’s been water on the floor, it is usually quite easy to find signs of it on the walls.
• Gutters are good.  Getting water further away from a home is always a good idea, so I always recommend gutters.  6′ downspouts are great.
• Poorly maintained gutters are bad.  If gutters are left without maintenance, they will clog with leaves and start coming apart.  The only thing worse than no gutters are gutters that dump an entire roof’s rainfall on little spot against your foundation.
• “Settling cracks” can be a sign of more problems.  If the house has cracks running between, or worse yet through, bricks or concrete blocks, it could be a sign of excessive settling.  Many times this is an issue with gutters.
• Humidifiers should be used SPARINGLY.  I saw a house that had significant moisture staining on every single window in the house.  It was so bad in fact that some parts of some windows were replaced due to rot.  These were 20-year-old double-paned wood casement windows… which are very energy efficient… and should not have seen even 1/2 that damage.  If water is condensing on your windows, it is also condensing on your drywall, studs, sheathing, etc.  It’s a great way to ruin your windows and encourage mold growth in the wall cavity.  If you do use a humidifier, keep it set low and lower it even further when the weather gets extremely cold.  Also, keep your blinds partially open to allow air circulation.

Morals of the story:

• Always get inspections!  I’ve seen how many houses and still missed something big!
• If you’ve got something wrong (or had something wrong) in your house, disclose it!

The homes I had been looking at were primarily ramblers (or ranch, or one story, depending on your area).  Actually, I had a pretty detailed set of criteria:

• One story
• 3/4 master bath or better (full highly preferred)
• Big master bedroom (15 x 12 minimum)
• 1980’s and newer
• 1500+ sq ft on the main floor (bigger room sizes)
• 4+ bedrooms (for roommates, office, guest bedroom)
• Walkout basement
• Big 2 car garage
• .4 acre lot or bigger
• Privacy off back yard
• Inside the 94/694/100/394/494 NW quadrant
• Under $375k

Needless to say I didn’t find much for sale!

What I’ve always hated about a traditional two story home (I call it a center stair two story) is the formal living room.  See, I don’t have a piano, don’t read books (Google is my library), and don’t know why you would sit in a room without a TV/DVD/stereo/computer/etc. so I see it as space that I have to fill with nice looking crap that won’t get used!  I LOVE modified two story homes and those with stairs on one side of the house or the other because it eliminates that room but keeps all the other goodies that a two story offers:

• Separation of bedrooms from living areas
• Big master suites
• Most/all bedrooms on one level
• Bigger room sizes, since foundation size isn’t the issue
• Dramatic curb appeal (when done right!)

Due to the area I was looking, there aren’t really any two story homes with the floorplan I liked, so consequently I was looking at ramblers.  You have to get pretty big on the foundation size for ramblers before you get those bigger rooms and layout.  So, I made an offer on one in a short sale and several months later found out that we were $40,000 off in price and they didn’t want to budge.  So, bye-bye offer!

I went around and looked at some other ramblers, but none of them really caught my eye.  I was very disappointed and had decided that things were not going to work out right now when one of my coworkers suggested a property she had seen.  She said: “Aaron, I know it is priced higher than you wanted to go and it’s a two story, but it is a really nice house and you should take a look at it.”

I got the address, pulled it up online and decided to take a look.  Long story short, she was right… it was a great house!  Went back with another coworker who thought it was solid too, had him write an offer (more on that in a future post) and some back-and-forth with the seller and now I’ve got a new home!

I’m still doing inspections and whatnot so I don’t want to get into details but needless to say I have a lot of things I’d like to tell you.  Stay tuned for updates!

75 days.  That is how long a buyer and I have been waiting for a response from the banks on an offer we submitted for a property in the process of foreclosure, but still owned by the seller.  To get this offer to work, both banks have to agree to a “short pay” or “short sale” since the seller has no cash and our offer is less than what is owed to the banks after selling expenses.  In this case it is two banks (1st mortgage and 2nd mortgage) that we need to agree to the short sale.  By the way- we’re still waiting today…

30 days.  That is how long this same buyer and I waited for a response from another bank on a short sale situation on a different property before we found out they rejected the offer.  I’ve had this happen several times this year with different houses & clients.

1-2 weeks max.  That is how long I’ve waited for an acceptance or rejection on offers I’ve submitted on bank owned properties.  While this is still a frustratingly long time for a buyer, it is at least dramatically less than my experience with short sales.

If you’re willing to wait a(for) month(s) for an answer, short sale properties may be an interesting option.  If you want to move into a house yet this year, maybe stick with bank owned properties or an owner occupied residence.  I’m only half kidding about moving this year…

This was a quote from one of my buyers today… and he’s right on the money.  My buyer came in from Germany (the country not the town), flying 1/2 way around the world to look at houses for 5 days.  We had already narrowed down a list of houses to see before he came and quickly found one that met his needs.  Unfortunately the inspection went poorly and we had to walk away.

When we walked away that only left us with 1/2 of a day to find another home.  We requested 4 short notice showings (showings within 2 hours) and were only approved for 1!  Two said they needed 24 hours notice (though no mention of that was listed on the MLS) and the third never answered any of the requests for the showing.  When it was all said and done, my buyer and I had to concede that we were not going to find something for him before he had to leave.

When we were parting ways he gave me that line and it made us both think how crazy it is to be a seller trying to sell a home in this more competitive and slower market when you won’t let a ready, willing, eager and able buyer into see your home!  Something tells me they won’t see a SOLD sign anytime soon.

Moral of the story: You can’t always say “yes” to all showings, but you better make the best effort to say it to every showing you can!

If you are a buyer looking at houses online, what is your first impression about a home for sale in June that still has snow in the main photo?  My guess is that it’s not a good impression… feel free to leave your specific thoughts below.

Market shift: What is the culprit?
by Jeff Allen, MAAR staff

As the Twin Cities residential real estate market enters the busy spring season, it’s becoming apparent that buyer activity will not rebound from its post-boom recess as quickly as many of us had projected and nearly everyone had hoped.

No one should assume that a return to boom-level activity will be quick and easy. After all, we’re fresh on the heels of several consecutive years of unmitigated market expansion. But indicators of buyer demand have begun to noticeably decline again after a brief relative uptick this past winter, with newly signed purchase agreements (pending sales) in March 2007 falling 18.9 percent behind March of last year, and weekly April sales figures reflecting the same decline.

What is the culprit for this sluggish buyer showing? Let’s start by defining what the culprit is not.

Not affordability. After reaching a decades-low point in the middle of 2006, the affordability of our region’s homes has made dramatic improvements due to stubbornly low interest rates and slight declines in home prices. Our market, like the rest of the country, does face some remaining price-to-income disparity issues and will into the foreseeable future. But the simple truth is that homes in the Twin Cities have not been this affordable in two years.

Not interest rates. The popular media has been quick to highlight increases in interest rates, but they are slower on the draw when rates are on the decline. The cost of borrowing money to buy a home remains low—holding steady at 6.1 percent in April.

Not a lack of choice. At the end of March, there were 19,776 single-family detached homes, 5,703 townhouses, 3,281 condos and 540 twin homes on the market for buyers to choose from. While the growth of inventory appears to be slowing as builders and consumers adapt to a changed demand landscape, it’s still setting monthly records.

Those looking for a simple answer to the question of why buyers remain on the sidelines despite an environment that sits so firmly in their favor should look elsewhere. There is no silver bullet, no single or definitive cause. There are many interdependent factors at work. But two such factors are having the largest effects upon our discernibly muted spring home sales season, and likely will into at least the summer.

Consumer confidence. The public’s perception of the housing market is anything but certain right now. Housing is on the tip of everyone’s tongues, but the conversations aren’t usually positive. With overwrought analysis in the popular media, it’s hard to blame them. While affordability is improving and choice is excellent, housing market psychology is immersed in a contrary perspective for now due to a barrage of stories on bursting bubbles, foreclosures, mortgage fraud and subprime lending.

A return to tighter lending standards. New uncertainties in the lending industry brought upon by excessive exuberance in the subprime mortgage market have created a renewed sense of caution to the mortgage community and a new round of hyperactive government legislation. “Riskier” loan applicants are facing a tougher road to financing their home purchases. The net results are a decline in qualified buyers and undue caution from those who are qualified.

It is important to keep perspective and recognize the diamond in the rough. Much like declining home prices leading to improved affordability, a market-wide recalibration period will cause some uncomfortable months ahead but will ultimately benefit our market in the future as consumers, lenders and REALTORS® have their expectations realigned.

Time will tell how prolonged the correctional pause will be, but regardless, be assured that it will not be as severe as market declines seen in decades past that were fueled by recession. The long-term health of the Twin Cities housing market is being strengthened as we speak by the current market experience that some find disconcerting.

• You have to be the best price and best condition.
• Talk to your agent.  If you’ve got questions or concerns, ask them!
• If you’re not getting any showings, check your marketing, check your competition, check your photos, then drop your price.
• Agents can’t make your home sell if you’re overpriced… price is still the #1 determination on saleability.
• Market times are averaging 80-90 days right now… if you’re at that you need to sit down and go over things like you did before you listed.
• If you want to talk to other Realtors that’s fine, but you cannot sign a new listing agreement until your current one is cancelled or expired.  Post-dating the contract doesn’t make a difference… it cannot be signed at all until you are clear of your current contract.  This is a state rule.
• Agents cannot openly solicit you for a listing if you are currently under contract, but can respond to any inquiries you make.

#1 - Combination lock boxes.  Agents are securing a home with a $30 manual lockbox that can be opened by anybody with the code and leaves no trace of accesses?  Some of the homes we saw were very nicely furnished… I’d hate to hear that a home was burgularized and then be a suspect simply because at some point I had shown the home.

#2 - Master bathtubs that face the front of the house.  Honestly - there was a house that had a 1/2 acre back yard looking out onto open fields and they put the master bath in the front of the house looking over the rest of the neighborhood and the street.  That’s just a bad decision.

#3 - Skimping on kitchen storage.  Few of these homes have dedicated pantry space, which seems odd given that these kitchen often have $50k+ into them.  What good is it all without enough storage?

#4 - A picture window in the main floor bath overlooking the front entry.  This is true as well - a full-size window, right next to the toilet, which overlooks the front entry to the home.  Don’t know about you but I don’t think that rooms should be designed with windows that always need to have their blinds down!

#5 - Small master bedrooms.  One of the houses we saw had a master bedroom space that couldn’t have been more than about 13′ x 12′, while the bath and closet were at least that size.  Today’s bedroom furniture is typically oversized and consequently the room should be sized appropriately.

I applaud this as a great step towards improving a situation that is still worsening… large numbers of home in Minneapolis are vacant/foreclosed homes… but more help is needed, and fast.

According to the article, in just the first 3 months of this year Minneapolis had 678 foreclosed homes sell at sheriff’s auction.  70 homes is barely 10% of that figure… while a very good start, it will take a larger effort to make a significant difference in this market.

Over the last few months I’ve been selling my inventory rather quickly and with my most recent sale last week I’m down to only 1.5 listings (the “.5″ is a co-list with my good friend, Lisa Dunn).  I’m always trying to keep 3-4 listings active at a time so that means I’m looking for approximately 2 new sellers looking to make a move.

I’ve got some awesome tools for advertising my listings online to get the broadest exposure possible, I have about $600 in camera equipment for great photos, and my full color market brochures really make your house stand out… if you’re thinking about selling, give me a call and I’ll be happy to meet with you to demonstrate how I can sell your home quickly too.

Give me a call. 612-251-5599

Update: Sellers came out of the woodwork in May and early June… I’ve got lots of good inventory now… make sure to check my home page for my current listings.

In March, MAAR issued the 2006 Residential Real Estate Activity Report.  This is available from their web site directly, but I’ve also seen some agents telling web site visitors that they’ll email them the report only after giving the agent their contact information.  This is a free and publicly available report… you don’t need to give up anything to read it.

This new report tool shows some cities that are seeing dramatic additional slowing of sales activity as compared to last year while some communities have quite a bit more sales activity as compared to last year.

These reports will be updated every month and are a great resource for consumers and agents alike.  You can view the reports here.

There isn’t a certain number of homes you need to see before you buy… it all depends on what is comfortable for you.  One of my recent clients came in from out of town, say 8 condos, and made an offer on one that night.  Many of my clients will look at 15-20 before making a decision.  What’s most important is that at each showing you and your REALTOR discuss what you like and dislike about each home, the area, etc. so that you can better narrow the growing list of homes for sale into a manageable list for you to see.  It may also help to take notes on each home and to rank the homes you’ve seen at each outing so that you can quickly eliminate anything that isn’t in your top 3.

Well, normally this is all done well before we get to closing however in this case the bank waited till two weeks before closing to get title work ordered, which means I got to learn a new term and my buyers and I got to worry about whether we would close on time or not.

Houses priced right and in the right condition are selling quickly again… some in as few as 3-4 days in certain areas of the Twin Cities.  This doesn’t mean an end to the housing slump, but it does suggest we’ve turned the corner.

I’ve been to this event in previous years and so I’ve come to expect that parts of the day would be slow and that I wouldn’t agree with all that was said in the room, but that in general we are all aligned with the same common goals.   Unfortunately my association embarassed and disappointed me a little this year…

As in previous years, we invite members of the governor’s administration as well as elected representatives from the capitol to come to discuss their views on housing issues and to open up a Q&A section.  This year we were skunked by the governor again but did get the director of the Minnesota Housing Finance Agency (MHFA), several other members of the administration and several elected officials from both sides of the aisle to come in and speak to us.  The speeches were great and the Q&A’s for the most part were done well too.

So how did I get embarassed and disappointed?  Well this year my state association decided it would be really neat to make big signs and put them on sticks and have REALTORS hold them up while their guests were speaking.  The signs had to do with “living within our means” i.e. don’t raise taxes on the state deed tax or expand the sales tax to include services… both of which are on the table. 

These signs seemed to be a pretty tacky way to reinterate to our guests a position they are already well aware of, as we have a kick-ass team of lobbyists on the capitol.  This was a conference, not a two-bit rally, and to hold these signs up when our guests were speaking seems inconsiderate and unprofessional.  To make matters worse, several of the signs had the same message misspelled!  There was a sign at each table and someone at my table held ours up, much to my disdain.

This alone was enough to get me a little miffed that I paid $50 to be a part of this spectacle, but it got a little more annoying when Chris Galler, Senior VP of MNAR and a great guy, was going over the results of a survey that the association had commissioned regarding taxes.  They asked citizens how they felt about their state government and their current tax burden and then put the results into some great pie and bar charts.

I thought, “hey, this is great to get some feedback.”  Then Chris continued and explained what some of the questions were.  This is one that was asked: “do you think you pay too much , just about right, or too few taxes?”  Can you guess how people responded?  Yep, most said too much or just about right.  Another question asked “State and local government costs you about $.16 out of every dollar you make, do you think this is enough?”  What do you think they said here?  Again, the clear majority said it was enough.  Well crap, the association could have given me the $10k-$20k they paid to get those answers!

When I’m talking to sellers and we’re discussing the commission rates that are available to them, I don’t say to them: “Mr. and Mrs. Seller, I can charge you 6%, or I could charge you more if you’d like… what would you prefer?”  That’s a question alright, but it doesn’t educate them as to why a higher commission brings additional benefits that may have significant value to them.  Without knowing the added benefits, I find it hard to believe that anyone would want to be charged more “just because.”

I sit more in the middle of the road politically, vote Democrat on most issues, and do think that sometimes increased taxes can be justified.  It would have been great to see a report that really probed constituents on their beliefs about taxation for things like affordable housing, healthcare, transportation, etc.  Instead all I got to see was a report that catered to the 80% +/- of my peers that are Republican.

I want my $50 back…

When I got this I immediately realized this was a solicitation that was fired off because my credit was pulled by my loan officer and therefore shows that I’m in the market for a home loan.  While she had warned me about this months before, it was still a little surprising and made me feel a little violated too.   I don’t want people to solicit me when I make an inquiry with someone else… it’s none of their business.  Further, I would never do business with someone like this, or with someone who spams me.  Just won’t do it.

If you don’t want to receive similar offers, contact the credit bureaus and ask to be removed from their “prescreened offers” list.

• Bank Owned
  • The bank has aquired title (ownership) to the property.  The bank is the seller.
• REO or “Real Estate Owned”
  • Can be read simply as “bank owned”
• Corporate Owned
  • Many times this is just another way to say “bank owned”
•  Foreclosure
  • This is the process by which a lien holder aquires the property through court procedures.  Each state operates a little differently, but this process can typically take several months once started and typically does not start until the owner is 60-90 days behind.
• Pre-Foreclosure
  • This is commonly referred to as the time during the foreclosure process but before the sheriff’s sale.  In this time period you are still negotiating with the seller but the bank may have to be consulted in cases where a short sale is needed.
• Short Sale
  • When a seller is in a distressed situation and the offer that is submitted does not cover the expenses to sell the home and pay off the lender, the seller may ask the bank to take a “short payoff” on the loan, meaning to accept less than what was owed.  Banks will sometimes do this because they do not want to own homes, they want to make loans.  Each circumstance is different and the bank is not required to accept any short payoff.
• Sherriff’s Sale
  • In Minnesota, the foreclosure process finishes with a “sherrif’s sale” of the home.  The county sherriff holds an auction where all interested parties make a bid for the home.  Most often a representative of the bank is the only bidder for the home.
• Redemption Period
  • In Minnesota, this is a 6 month window from the date of the sheriff’s sale that the property owner can still occupy the home and if they can get the cash or funding, they can pay off the entity that bought it at the auction (most often the bank) and keep the home.

While everyone would agree that it is a boon for buyers, almost all of those people would also say it is a detriment to the seller.  While the competition is high, that also means that it should be much easier to determine at what price a seller’s townhouse or condo will sell for, given its current condition, view/location, and updates.

In this market sellers that try to argue that their’s is worth more than the one next door because of XYZ will struggle but those that look at the competition and the comparable solds and price accordingly will find that the sales process isn’t as bad as they thought.  Buyers can choose the house in the best condition AND with the best price.  If you’ve got that, you’re home free.

In the days when houses sold in days, if not hours, and there was a huge undersupply of housing, buyers had to act quickly to make an offer on the house the liked the most.  In today’s market there’s no urgency and no scarcity, so the buyer has no outside encouragement to make an offer quickly.  In the last year I’ve worked with two different buyers that have looked at over 50 homes without making an offer.

Buyers need to keep in mind that while choice is nice, it can also cause you to lose focus on what you’re really looking for.  It is important to have a list of your “must-have features” and to really understand what price point you’re comfortable with and stick with both of them.

The buyer interviewed several lenders of his own choosing and settled on one that had appeared competent and had the lowest fees/interest rate and was supposed to close at 1pm on Wednesday.  At 3:45pm on Tuesday, I got an email from my buyer saying that the loan officer could not get the loan closed because of further documentation he needed to provide that was never asked for up until now.  This documentation would have taken approximately 2 weeks to procure.  His email was one of desperation… he thought he was dead in the water!  He said to me: “Aaron, can Edina Realty Mortgage help?”

Cheryl Stuntebeck and I conferenced in with him and they got to working on an application for him, with Cheryl working late into the night on Tuesday.  Wednesday morning came and we find out the original loan officer was refusing to reassign the appraisal, had instructed the appraiser not to assist my buyer, and had cancelled the 2nd mortgage as well.  She told me that she wouldn’t let this file go and that she was going to do everything she could to keep him, though she couldn’t get him closed for approximately two weeks!

Throughout the day Cheryl worked with the underwriter, loan processor, closer, operations manager, site manager and appraiser to see that my client got through the whole process quickly.  Our original closing was scheduled for 1pm on Wednesday… we closed at 5pm that day… barely 24 hours after all of this drama had started.

While I very regularly work with Cheryl on my clients’ purchases, I’ve also had great success with other loan officers that the buyer has selected or that I have recommended.  What has been driven home for me here though is that the relationship with the loan officer (and closer too!) is critical.  In the future if my buyers do not have a previous relationship with a loan officer, I am going to more ardently encourage them to consult one of the loan officers that I have worked with.

The steps to buying a home involves many people throughout the process, any one of whom can either make your purchase a success, drive you nuts during the process, or outright ruin it for you.  I am very happy to have a team that was able to swoop in and save the day with such amazing results.

Radon is a cancer-causing, radioactive gas. You can’t see radon. And you can’t smell it or taste it. But it may be a problem in your home.

Radon is estimated to cause many thousands of deaths each year. That’s because when you breathe air containing radon, you can get lung cancer. In fact, the Surgeon General has warned that radon is the second leading cause of lung cancer in the United States today. Only smoking causes more lung cancer deaths. If you smoke and your home has high radon levels, your risk of lung cancer is especially high.

I was recently working with a buyer who during the inspection process also requested a radon test because he was planning to put an office in the basement and consequently would be spending a lot of time there.  When we received the results back from the test we found out that the levels were significantly above the EPA action level of 4.0.

At first I thought: “damn, this could be really expensive to mitigate.”  After speaking to my colleagues and to a couple of mitigation contractors, we found out that the process is relatively easy and not very expensive at all.

The process typically involves digging a hole in the foundation about the size of a 5 gallon pail and then installing solid PVC piping from the hole up through the roof line, with something similar in size to a bath fan installed in the piping in the attic.  This fan exhausts the radon gas up and out the roof where it dissipates quickly.  In houses that have a drain tile system installed the installation can typically get the radon levels below 1.0 because of the efficiency of the drain tile at getting a broad suction around the foundation.

Once the system is installed the contractor will run a second test to confirm that the radon levels have been brought down within safe limits.  If the level is still elevated, a larger fan typically resolves the problem.

Depending on the contractor chosen and the difficulty of the work to be done, most projects are in the $1000 - $1800 range and can be completed in a day!

The contractor we used for my client’s home was Brad Nyberg from Quality Radon, 612-521-3580.  He did a great job and has nearly two decades of experience installing these systems and has been training others for many years as well.

These clauses apparently state that if a borrow defaults early in the repayment period or if the loan had underwriting defects, such as bad appraisals, that the originator must buy back the loan.  Needless to say that this allows the big banks to keep the good loans and kick back a large portion of the bad loans back to the people that shouldn’t have lended the money in the first place.

While this process will prevent the big banks from hemmoraging too much profit margin, it will put some (or possibly a large number) of the subprime lenders/originators out of business.  Many of these lenders/originators have limited assets and use corporate lines of credit to finance the loans they close until they can resell them to the bigger banks. 

When these banks send these loans back (for failure to pay), this means that the subprime originator has to borrow against their line of credit, reducing their ability to make new loans.  If enough of these loans get sent back, the mortgage originator may consume all their credit line with these bad loans and may not be able to fund closings on their new ones.

Enter the headache for buyers and sellers: Imagine sitting at the closing table waiting for a wire transfer of the buyer’s funds and come to find out that the buyer has no funds because the originator has no money! This scenario will come true, it is just a question of how many originators will have the problem.

In the last few years lenders really softened up their lending requirements, allowing a lot of low credit score borrows to go “stated income” or “no doc” loans which basically paired up risky borrowers with risky loans.  In the rush to make as much money as possible, some mortgage brokers/originators went one step further and either omitted or falsified information on the applications to get buyers approved that shouldn’t have.

Because we are still in a rising interest rate market and we haven’t exited the housing slowdown, there’s still a long time for these loans to go into default and come to the attention of the big banks that bought them.  As more of these loans come under scrutiny, I think we’re going to see much larger problem than many expect.

If you’re buying or selling a home, it is eminently important that you know where the money is coming from and that the lender will still be in business at closing!

Today I now average more than 200 visitors per day to my web site, but alas, I’m lucky if I get one inquiry per day that comes through it.  Then I thought about it… a standard web site is like an Open House in that I’m inviting people to come in to see what I have to offer them (commentary, community information, for sale homes, and sold home search) but it’s an Open House where no one is home.

I’m currently implementing a click-to-chat feature on my site that allows my visitors to quickly ask me a question if I’m sitting on the computer while they’re visiting my site.  I’ve had a couple people use the tool so far and I’m hoping that more of you will take advantage of this feature in the future.

Word of warning to bloggers: several of the submissions I received had unresponsive servers or incorrect URLs…. I tried what I could to find the articles but PLEASE check your blogs for availability and double-check your URLs before you submit them.

This week’s best post prize goes to Kris Berg’s post on Bloodhound Blog for her article: “The Plastic Pig (and How to Pick Your Agent).”  I too am very frustrated with some agent’s inability to service their clients properly and/or their inability to do their job impacting the ability to do yours.

The runners-up include:

Bad Credit Advisor’s contrarian view on the recovering real estate market: “The housing bubble - why I think the real estate bubble is here and going to get uglier”  While I disagree on the conclusions that are offered, it is a good review of the many challenges in our market.

Teresa Boardman, a fellow Twin Cities REALTOR who I have never met but have read many of her articles, presents Keeping Local Real Estate, Well… Local posted at Real Estate Tomato.  You take St. Paul and the East Side, I’ll take Minneapolis and West.  Together we will rule the Twin Cities Blogosphere (muhhahahaaha)

Toby Boyce presents Dear Ms. Seller: Why Would You Sign a Six-Month Contract? posted at Sadie’s Take on Delaware Ohio.  This is a great reminder for agents: the goal is not to get a seller under contract until the end of time, the goal is to sell their home.  If you do everything you can and are truly striving to sell their home, if you can’t do it in 90 days you should be able to establish their trust to get a renewal at that point.  If you can’t do you really want to work with a pissed off seller anyway?

Michael Price presents Mike’s Corner Web 2.0 For Real Estate Pros: How Podcasting Impacts Local Search Relevancy posted at Mike’s Corner Web 2.0 For Real Estate Pros.  Podcasting is a growing force, Mike explains how to work it to your advantage.

Sagar Satapathy presents No Easy Answers To Florida’s Pains posted at Homeowners Insurance Lowdown.  Up here in Minnesota, we have cold and an occasional tornado that may affect 100-200 homeowners a time but we do not have earthquakes or hurricanes… regional insurance issues should be solved regionally… don’t make me pay for your beachfront property!

Athol Kay presents We Can Always Reduce the Price Later posted at The Real Estate Guide. Price it right the first time, every time!

Erik Hersman presents Online Video in the Real Estate Industry posted at Realty Thoughts.  Video can convey more than pictures or text… when it’s done right.  Erik reviews a few different options for agents.

Drew Meyers from Zillow has a review on another new consumer-focused web site on house price analysis, HouseMath 2.0 in the article: “How Much Does Purchasing a House Really Cost?”

Cliff Jacobson presents A Letter From Real Estate 3.0: AmaZoogleBayMart posted at WebHomeUSABlog.  This is a futuristic and what many agents would call “Doomsday” scenario.  Interesting read.

Melanie Narducci presents A Picture’s worth a thousand words, but it’s all in how we say it posted at Condocontessa San Francisco Real Estate.  Yes, some developer sites are way too flashy and miss the point of view of the consumer completely.  Argh.

While the number of listings in the market will rise dramatically, this is also the time when we see the largest increase in buyer activity as well.  Last year from January to May we saw supply increase in lock-step with demand such that the ratio of buyers to sellers remained relatively flat until summer.  If trends remain the same this year we should see the same pattern which means more choice for buyers but also quicker turnover of what is listed for sale.

Here’s a few of the cities that have released the interactive map:
Golden Valley
St. Louis Park
Plymouth
Minnetonka
New Hope
Crystal
Maple Grove
Richfield
Robbinsdale

At its low in July 2006, the index was at 125.  For December 2006 this number had risen all the way to 140.  An HAI of 140 means the median family income is 140% of the necessary income to qualify for the median priced home using a 20% downpayment, 30-year fixed rate mortgage.

Since MAAR began tracking housing affordability in 2003, the record high HAI was 156 set in April 2004.  While we’re still nearly 20% down from peak affordability seen in 2004, we’re also 12% more affordable than we were at the recent local market lows in July 2006.

In December 2006 housing supply remained quite high, at a total of 7 months supply, up nearly 48% from December 2005.  While this inventory is still at record highs, New Listings in the last week in December 2006 were only 2% ahead of the same week in 2005, and Pending Sales were only 1% behind the year-ago number as well.  These figures show that the number of new sellers and the number of new buyers are regaining balance, which may lead to a slightly tightening in the housing supply for 2007 if the trend continues.

While we’re not expecting any dramatic or immediate changes to the Twin Cities housing market in 2007, the consensus from many active agents I’ve spoken to is that the tone of the market has been improving in recent months and there’s great optimism that the very worst of this market correction may be behind us.

To search for homes that have sold in the last two years, click here.

Beginning today the RMLS is now permitting agents and brokers to display basic information about listings that have sold in the last two years on their web sites.  Up until this point consumers were only permitted to view listings that were currently for sale and consequently did not know what they sold for until the county posted the sales price… in many cases months later.  Now Edina Realty’s new tool pulls in new sold information in almost real-time.

As a real estate agent you may think that I would be concerned about giving up what’s been considered the holy grail of information: comparable sold properties.  Far from it, I’m actually quite excited to see our company and local MLS board progressing forward.

The information that we’re publishing is by and large already published by other sources, most notably the county in which the home resides.  Zillow and others currently use this tax data on their web sites.  The big problems with tax data are that it usually takes several months or more to get the sales information posted and the other information the counties have (beds, baths, garages) is often inaccurate.

Enter the REALTOR.  If the information already publicly exists, why not make it easier for the consumer to get timely & accurate information from us directly?  Some agents look at it as we are giving away the farm; I look at it as a way to increase dialog between buyers, sellers and REALTORS.

Information in today’s society is fluid and many times free, but information is worthless without an ability to analyze and interpret that information.  Just as many people use WebMD to look up their physical ailments and self-diagnose, buyers and sellers now do a basic “diagnosis” of the housing market and get a feel for valuation.  But just like doctors, when it’s time to bring out the scapel, or in this case sell or buy a home, consumers still look to a professional to see that the job is done right.

This time of year, most sellers have been on the market for several months (or much longer!) and are growing weary from showings (or lack of them) and are frustrated with the slower tempo of the market.  This time of year weekly Pending Sales are about half of what they are in March, April and May.  As a buyer, this gives you a great opportunity to be a hero to a seller by bringing them an offer that would end their struggle to sell their home before the New Year.  The reward for your heroism is likely to be a lower sales price than you would have received earlier this year or what you may receive next year.

While not all sellers are motivated enough to significantly drop their price, there are good bargains in this market as many of the houses for sale are already priced well.  Very recently I was in a negotiation with a buyer on his first home.  We looked at everything in his price range and this home was far superior to the rest.  We made an offer about $10,000 under its $220,000 asking price but ended up settling on the seller’s counter of $3500 under asking.  We both looked at each other and said “you know, this house is priced right and in excellent condition… it’s worth every penny of $220,000.”  Had the house been greatly overpriced, more aggressive negotiations would have been needed.  My buyer is thrilled with the outcome and closes in January.

If you’ve been sitting on the fence about buying or been thinking that you’ll wait to January to get serious, you may be missing out on the best values in the market!

Why am I so elated with what appears to be bad news?  While this does signal a significant slowdown for builders, this slowdown in activity will help moderate the increasing inventory in our market.

I’ve included a page from a recently published MAAR report which shows the months of housing supply currently on the market in the $250,001-$350,000 price range.  In all but the condominium market, new construction supply is dramatically higher than existing homes.  This exacerbates the stress of lower buyer activity, creating more pricing pressure on both the existing and new construction markets.

With the diminishing numbers of new housing starts, new construction inventory should slowly reduce over the next 6-9 months, which should bring supply down to more manageable levels.  This in turn will help stabilize pricing and bring back consumer confidence in the housing market.

Cheryl Stuntebeck, Edina Realty Mortgage, had this to say about the mortgage market:
“While interest rates are .75% higher than they were at their lows in 2005, the current 6.1875% rate on a 30 year  fixed mortgage is still about 1% lower than the 10 year average.  Many industry analysts speculate that rates will slowly climb higher in 2007, making it prudent to lock in a purchase now.”

She also posed the following comparison:
“If a buyer purchases an average-priced home today, $285,000, with 20% down payment their total monthly payment would be around $1700.  If that same buyer buys the same home when rates are .5% higher, their monthly payment would be  around $1800, an increase of $100 per month.  To put it another way, if rates were to climb .5% that buyer would have approximately $16,000 less buying power at the same monthly payment.”

Earlier this year many sellers were not willing to accept that the marketplace dynamics had changed and that it had become a buyer’s market.  Fast forward a few months and many of those sellers still have their homes for sale today.   Most of them have had to reduce their price one, two or even three times.

Today most sellers understand that we’re in a buyer’s market and are pricing their homes more appropriately; understanding that they need to be willing to make some concessions to the buyer to get their home sold.  This can be  simply taking an offer under asking price or paying the buyer’s closing costs, or can get more creative with the seller paying down the interest rate on their mortgage, prepaying townhome/condo association dues, escrowing money for  new carpet, etc.

So Buyers: by taking advantage of the market today, you can save both on the purchase price and the interest rate while also taking advantage of the largest selection of homes ever available.

80       Average days on market

43%    More listing on the market than 1 year ago totaling 60663.

41%    Of the inventory that has sold in last 30 days has had a price adjustment

5.3    Months Absorption Rate=the time it would take for all the listings to sell if no more homes were put on the market

8      For every sale that takes place, there are 6 more homes that haven’t sold 
 
18     Showings for every home that sells (From Edina Realty appt center statistics)

Here’s this week’s report:
MAAR Weekly Statistics - August 21, 2006

While these numbers are great, it can also be helpful to look at the market as a whole in summary:

AUGUST 2006 CURRENT RMLS STATISTICS MARKET UPDATE

69       Average days on market

45%    More listing on the market than 1 year ago totaling 60663.

35%    Of the inventory that has sold in last 30 days has had a price adjustment

5.3    Months Absorption Rate=the time it would take for all the listings to sell if no more homes were put on the market

6      For every sale that takes place, there are 6 more homes that haven’t sold 
 
36     Showings for every home that sells (From Edina Realty appt center statistics)

In recent years we have seen a large runup in Average Sales Price during the spring and summer months.  This year was marked by much smaller gains, which has lead to us “catching up” with last year’s price.  While this means that sellers cannot expect any appreciation in their home over last year, it also means for sellers that are moving up that their future home will not cost as much as they expected.

This is not a sign of a bursting bubble, this is only a continued ease in the housing market that is bringing more historically common market times and appreciation back into the market.  We’ve been cooling off for several years now and this has sharply reduce the chances for a dramatic price drop.

While this rate drop is a pleasant surprise, buyers should not expect it to continue to drop or to stay this low for very long.  Most professionals in the industry expect rates to resume their slowly upward climb and reach 7% near the end of the year.  Think of this as a great reason to get out and buy a house this week!