Real Estate Snippets

The Cold Facts about Bank Owned Properties

No matter how much we protest or dislike the impact of the lender mediated real estate sales on the Saint Paul housing market, it is a fact of life.  Lender mediated real estate sales are any sale in which the bank or lender has input into the decision about accepting an offer for the sale of the house.  Prices in many neighborhoods have drastically decreased because of the number of homes on the market that are either bank owned (foreclosures) or are being sold for less than what is owed on the mortgage (short sale).  Often the lender mediated prices are less than the sales from traditional owners who are not in financial trouble (Often the condition is less satisfactory as well.). 

The following list ranks the Minneapolis/St. Paul Multiple Listing Service areas based on the percentage of lender mediated listings found in each metropolitan community during the 4th quarter of 2008.  St. Paul neighborhoods are scattered throughout the list with the highest being St. Paul Central at 59.1% followed closely by Phalen at 58.8% and Hilcrest/Hazel Park/Dayton's Bluff with 56.0%.  The lowest number of lender mediated listings was downtown Saint Paul at 10.8%.  Statistics are quoted from "Foreclosures and Short Sales in the Twin Cities Housing Market Q4 2008 Update".

363	Brooklyn Center	65.90%
305	Minneapolis: North	64.90%
742	St. Paul: Central	59.10%
714	St. Paul: Phalen	58.80%
754	Big Lake Township	56.80%
301	Minneapolis: Camden	56.30%
716	St. Paul: Hillcrest/Hazel Park/Dayton's Bluff	56.00%
771	Spring Lake Park	54.10%
308	Minneapolis: Powderhorn	53.90%
364	Brooklyn Park	52.70%
728	St. Paul: Riverview/Cherokee	50.00%
602	South St. Paul	49.70%
713	Bethel	49.60%
767	Coon Rapids	49.40%
600	West St. Paul	48.70%
720	Southeast St. Paul	48.00%
361	Crystal	48.00%
310	Minneapolis: University	46.70%
770	Hilltop/Columbia Heights	45.40%
738	St. Paul: Home Croft/West 7Th	42.90%
769	Anoka	42.20%
378	Richfield	41.50%
306	Minneapolis: Northeast	41.20%
303	Minneapolis: Longfellow	41.00%
640	Shakopee	40.40%
340	Buffalo	40.00%
366	Champlin	39.90%
760	Ramsey	39.70%
722	Newport/St. Paul Park/Cottage Grove	39.60%
758	Northwestern Anoka County	39.00%
307	Minneapolis: Phillips	38.90%
756	Elk River	36.10%
744	St. Paul: Como	35.90%
772	Lexington/Circle Pines	35.20%
746	St. Paul: St. Anthony/Midway	35.10%
608	Inver Grove Heights	34.60%
362	New Hope	34.50%
646	Jordan	34.20%
768	Fridley	34.20%
624	Farmington	34.10%
780	Sherburne County	34.00%
764	Blaine	34.00%
612	Burnsville	33.80%
304	Minneapolis: Nokomis	33.60%
711	Southern Chisago County	33.30%
712	Maplewood/North St. Paul	33.00%
386	Hopkins	33.00%
367	Hennepin-North	32.60%
341	Wright County	32.30%
707	Ham Lake	32.20%
379	Bloomington-East	32.20%
725	Pine Springs/Lake Elmo/Oakdale	31.90%
616	Rosemount	31.70%
762	Andover	31.50%
650	Belle Plaine	31.30%
644	Savage	30.90%
748	St. Paul: Town & Country/Merriam Park	30.20%
614	Apple Valley	29.70%
709	Forest Lake Area	29.40%
766	Moundsview/New Brighton/St.Anthony	28.90%
632	Rice County	28.40%
648	New Prague/New Market/Elko	28.10%
397	Chaska	27.20%
610	Eagan	26.50%
710	Northeast Anoka County	26.20%
360	Robbinsdale	25.20%
705	Lino Lakes/Hugo/Centerville	25.20%
617	Hastings	25.00%
752	St. Paul: Highland Area	25.00%
708	White Bear Area	23.90%
706	North Central Surburban	23.10%
642	Prior Lake	22.90%
626	Lakeville	22.40%
365	Maple Grove/Osseo	22.30%
765	Arden Hills/Shoreview	22.20%
368	Hennepin-Northwest	21.60%
726	Woodbury	21.30%
392	Eden Prairie	21.00%
373	Golden Valley	18.90%
394	Carver County	18.90%
721	Lakeland/Afton/Denmark	18.70%
380	Bloomington-West	17.90%
391	Saint Louis Park	17.30%
387	Minnetonka	17.30%
740	St. Paul: Crocus Hill	17.20%
309	Minneapolis: Southwest	17.10%
374	Plymouth	16.60%
750	St. Paul: Mac/Groveland/River Road	15.70%
381	Lake Minnetonka Area	14.90%
727	Stillwater/Bayport	14.70%
630	Northfield	14.50%
702	Falcon Heights/Lauderdale/Roseville	14.50%
604	Mendota/Lilydale/Mendota Heights	14.30%
660	Goodhue County	14.30%
396	Chanhassen	14.10%
398	Victoria	12.50%
300	Minneapolis: Calhoun-Isles	11.60%
741	St. Paul: Downtown	10.80%
302	Minneapolis: Central	7.90%
385	Edina	5.20%

Additional posts about short sales can be found here:
Short Sale Woes
Short Sale Purchases
Short Sale Cautions
Queen of Short Sales

It's Time to Buy a St. Paul House

Of course, real estate professionals are biased because encouraging people to buy maintains their livelihood, but this You Tube video from the Minneapolis Area Association of REALTORS®, makes buying a house in St. Paul and Minneapolis look pretty attractive.

Read the Media Carefully

The MN REALTOR® Resource Update distributed by e-mail today to subscribed REALTORS® had a great article by Chris Galler, MN REALTORS® Senior Vice President.  Chris' conservative reputation and outspoken opinions have become legend among Minnesota REALTORS®.  Never afraid to forecast doom and gloom, Chris was shouting warnings of a market turn before it ever happened. 

Today, Chris published an article geared to help Minnesota REALTORS® understand the current economic turbulence.  Excellent in its entirety, the article gave a basic explanation of the current situation without inflammatory and hair raising scare tactics.  It helped me to understand another aspect of what is happening in the market today without panicking.

Quotes from Chris' article include the following:

• "The vast majority of people are not in trouble. About 3% of total households are behind on mortgage payments (33% of households have no mortgage) and about 1% eventually go through foreclosure.
  
• Most homes are not mortgaged over their true value. The national number is that home owners have a 71% LTV mortgage on the property (2006).
  
• The foreclosure level of today is very similar to the foreclosure level in 1986 from a national perspective. MN did better that time around."

Doesn't that sound reassuring?

Ah, well, never fear.  Panic can be restored by the third article in the same publication.  Don Smith, Esq., legal counsel for Minnesota REALTORS®, introduced an article on short sale strategies with this sentence:

"The growth of short sales (i.e. circumstance where mortgage debt exceeds the fair market value of the house and necessitates the lender discounting the mortgage to effectuate a sale) has reached epidemic portions [sic] in Minnesota and throughout the country."  (Bold emphasis is mine.)

Here I was feeling a bit relieved reading from Chris Galler that only 1% of mortgages will default, and since only 2/3 of the population even have mortgages, our nation might survive, only to have that hope poppped with Don Smith's frightening words aligning short sales with THE PLAGUE!

Our  words are so powerful and can be so loaded with emotional meaning.  No wonder published works have so much impact!

The Market Shadow

Like the proverbial groundhog, the financial market has become afraid of its own shadow.  Day by day this last week, new announcements were made of well know and respected financial companies filing bankruptcy, being acquired for pennies on the dollar, being controlled by other entities, or being bailed out by the government.  The list includes big names that those outside of Wall Street recognize.  Names like Merrill Lynch, Lehman Brothers, and AIG are known in many households that don't dabble in the market.

From my perspective there is no denying a recession.  The person on the street is feeling the pinch financially.  Gas price increases have permeated our very lives.  Goods and services of all kinds have been hit with increases as fall out from the gas prices.  As people attempt to survive their pocketbook depletion, service and travel industries are losing business.  The shadow of doom grows larger as the general populace worries about their jobs and pure survival.

A year ago, many real estate agents thought it was just real estate that was taking a hit.  The far reaching effect of careless mortgage loans had not yet fully been realized.  This year many are fearful.  We are experiencing the "biggest realignment of the financial system since the Great Depression"  according to the Associated Press. 

Was it the public fear and rush to withdraw their funds that finally caused the Crash?  Had depositors and stock holders just "stayed in" until the trouble subsided would they have been fine?  If one were to follow the stocks from the time of the Great Depression, some did survive and became strong in future years.

Not being an economist, the almost daily reports of financial stress this last week, have left me reeling!  Have I checked my IRA's or TLH's 401K?  No.  Whether I'm wrong or right, I really don't want to see that market shadow.  Time tends to heal many things and I think I'll wait for the market to heal itself.  The national decisions are out of my hands anyway, so worrying about it is not going to help the decision makers one iota!  In the interim, I think I'll practice my survival skills!  

Economic Ghosts of the Past

In 1929 Black Thursday came, followed by Black Monday and Black Tuesday sending the seemingly stable high prices of the stock market into an equally deep pit.  Like the market crash of 1929 and the subsequent depression, today's troublesome market news was preceded by speculation and excess with a belief that high prices were going to remain stable.  That was not the case in 1929, nor is it the case in today's market.

Bubble blogs preached doom and gloom about the housing market two years ago.  Some scoffed at their negativity.  Fiscal conservatives, however, questioned the inflating prices of goods and services as well as homes.  At some point, economists warned, a ceiling would be reached and the market would reverse itself.  Reverse itself, it did, but with a far wider scope than many expected.

• GMAC Financial closed all 200 of its retail offices with 60% of the cuts all being in the Residential Capital division, 7th largest mortgage lender in the nation.  Total loss $1.86 billion.
• Two months ago Indy Mac, the 2nd largest mortgage lender in the nation, went belly up to the tune of $9 billion.
• The government bailed out Bear Sterns in its merger with JP Morgan Chase with a $29 billion loan.
• Last week the government placed Fannie Mae and Freddie Mac, who jointly held 50% of the nation's $12 trillion worth of mortgages, in conservatorship.   The two companies reported a combined loss last year of $14 billion.
• Retail sales dropped .3 percent in August surprising economists who predicted an increase in retail sales of .4 percent.  It seems the stimulus expected from the refund checks was short lived.
• This weekend Merrill Lynch, the largest brokerage house in the world, sold to Bank of America for roughly $29 per share, down from $50 a share in May, and $80 a share a year ago.
• Today the 158 year old investment house, Lehman Brothers, filed chapter 11 bankruptcy claiming $613 billion in debt due to 100,000 creditors.  It's anticipated most of its business units will be liquidated.

Is it any wonder the Dow Jones fell 300 points today?  And yet Greenspan stated yesterday that there is less than a 50% chance the nation will come through this without a recession?   It sure feels like economic ghosts of our nation's past are visiting again.

To Buy or Not to Buy

The latest cattle call from the media about the St. Paul real estate market is that buyers are waiting for the bottom before they decide to buy.  That magic day when the true "bottom" is reached can't be predicted (by me, at least), but PMI Mortgage Insurance Co. released its Summer 2008 U.S. Market Risk Index on July 1.  This market risk study ranks the 50 largest metropolitan statistical areas (MSAs) by the probability that the home prices will be lower in two years. 

The Minneapolis, St. Paul, Bloomington MSA is ranked in the bottom segment with a probability of only 8.2% that houses will be lower in 2 years.  These risk factor figures were based on first quarter Office of Federal Housing Enterprise Oversight (OFHEO) data.  The Affordability Index score improved in 69.3 percent of the nation's 381 MSAs as well.  Because Minneapolis and St. Paul are in the lower rank in risk, the affordability index has improved in our area as well.  Both of these factors are good news for the Minneapolis and St. Paul real estate market.

Why Am I So Busy If Real Estate Is Depressed

Bubbles, schmubbles.  If the St. Paul real estate bubble has burst, why am I so busy?  Maybe it's because there are more houses from which to choose so buyers are looking at more houses before buying.  Maybe it's because there are more places to advertise a listing now, so it takes more time to get the word out.  Maybe my age is slowing me down?  No, that couldn't be the reason!  Nope, we'll reject that one outright.  I know!  It's because I have a Webkinz friend whom I have to virtually visit every day!  Nope, that's not it either because reading took up as much time as the computer does today. 

The reality is buyers are buying in St. Paul.  The prices are great.  The sellers have figured out they have to be reasonable in order to sell.  Negotiation has become fun once again.  Enough real estate agents have dropped out of the business to give the remaining members a bigger piece of the market.  Lower prices mean lower commissions, but I prefer busy-ness any day compared to the lack of business in 2006!

Interpreting Real Estate Statistics

I love reading Bernice Ross on Inman News.  Bernice is a regular writer for Inman as well as a blogger in her own right.  What fascinates me is her insights into the market and her quick wit.  Today she has started a series on Inman about the real estate sky not falling as is so often published.  Like myself, Bernice realizes that statistics can be made to mean what the interpretor wants them to mean.  Her article today "Put a Gag on Chicken Little" points to a perfect example of statistical conflict!

According to Bernice, much of what is published in the media today regarding real estate has been gleaned from the S & P/Case Schiller Index.  This index has only been resourced by the media in the last couple years.  The S & P is full of doom and gloom regarding the real estate market, but conflicts with the figures published by the National Association of REALTORS® (NAR), the Office of Federal Housing Enterprise Oversight (OFHEO), and Realogy.  According to NAR, OFHEO, and Realogy the real estate market is stabilizing, some markets have shown signs of improvement, and prices have fallen less than 1% nationally. (New figures from OFHEO are published here.)  The S & P reports between a 12% and 13% decrease in prices.  The S & P includes jumbo loans and lends "weight" to certain factors before calculating its formulas.  The other three agencies do not.  As Bernice says, "weighing" factors is done by human judgment and human judgment is not necessarily unbiased!  Scientifically when data produces differing results, it is compared with other sources.  In the case of our real estate market, the S & P index is the odd man out producing results that drastically differ from the other three agencies that are reporting on our housing market.

Why is it that the media has picked up the negative story to publish instead of the more positive ones?  I'm told it's because bad news sells!  My question is whether this bad news can produce a Pygmalion effect on our market.

The Subprime Crisis Became Global

I'm sure it's an economic fact and known by people with much smarter brains than mine, but the concept of a Global Pool of Money is staggering.  The Global Pool of Money is a major player in how the sub-prime mortgage crisis has become an international credit crisis as explained in the Chicago radio program "This American Life" co-produced by Public Radio International and NPR News aired May 9, this year.

To understand more about the recent housing crisis which has become a global credit crisis in the last three years, the entire radio program can be heard by going to this website.   Hats off to Calculated Risk for a heads up to this program.

Foreclosures in St. Paul

After my post from yesterday that spreads encouragement about the St. Paul real estate market, let me throw a little cold water into the mix.  Once again how one views the market depends on whose shoes you are wearing.  My experience the last two weeks in showing houses in the $200,000 to $300,000 range has been an eye opener for my St. Paul buyers.  The stereotype of foreclosed homes is that only homes in the lower price ranges are lost to foreclosure.  In today's market, that is not the case.  Of 25 homes we viewed in that price range, only 4 were occupied.  Eighty-four percent of the homes we viewed were either foreclosed or the sellers had moved on without first selling their St. Paul area home.  That is a high percentage. 

The other impression my buyers had was that they can get a much larger home in their price range than they could have 4 years ago.  Since they are moving back from out of state, getting more home for the dollar is welcome news.

So, while the number of St. Paul and suburban sales is increasing, the prices are still remaining lower and there are still a lot of homes that are now "corporate owned" (real estate lingo for bank owned) on the market.   In St. Paul alone, without the surrounding suburbs, there are 409 properties listed with the words "corporate owned", "bank owned", or "short sale" in the MLS listing agent remarks.  The prices on those St. Paul foreclosures range from $15,000 to $415,000.  I guess if I was a mortgage lender with a high inventory of foreclosed houses to sell, I would think the real estate market was more than terrible!