Real Estate Snippets

Happy Halloween

I used to love Halloween.  "Back in the day" my friends and I spent weeks planning and creating our costumes.  We remade old fancy dresses into princess outfits or created hobos out of Dad's discarded blue jeans.  We planned how to hide our jackets and what make-up to use.  We always had masks to cover only our eyes.  The rubbery life-like masks of today were beyond our budget as were the fakey packaged costumes.  Pillows were tied around our middles.  Balloons stuffed dress tops.  Homemade or borrowed wigs completed the picture.

We knew which houses had the best treats.  The little old lady on 4th St. gave out  homemade caramel apples and the couple on First Avenue always made orange popcorn balls from the best recipe.  A couple houses gave out quarters, and since a quarter could buy a whole quarter pound Baby Ruth bar, we hit those houses first!  Not to be forgotten were the pumpkin shaped cookies lovingly frosted the day before and the hand wrapped rice krispie bars.  We never had enough treats to fill a pillow case.  In fact, we never dared take a pillow case.  Pillow cases seemed greedy.  We ran unchaperoned from house to house quickly canvassing our side of Main Street. 

Sixth grade was the last year we dared roam the streets on Halloween night unless we were lucky enough to have a younger sibling.  Once we graduated from 6th grade, Halloween parties had to replace the trick or treats.  If we dared push the age envelope, adults often greeted us with, "You're too old to be trick or treating!"   We had to "grow up" and create a different kind of Halloween fun.

All this contrasts to tonight's goblins and gremlins.  I'm not allowed, nor would I dare, to make homemade treats, but nostalgia tempts me.  Wouldn't it be fun if . . .  Fear of liability if someone got sick (I would wash my hands and do keep a clean kitchen!) and the knowledge that my homemade caramel apple would be cut to shreds or thrown away because some sickos thought it would be fun to harm a small child with hidden razor blades and drugs, takes my fun away. 

Instead, I hand out boring candy to ungrateful un-costumed children and teens.  Children who say they didn't get any candy when I know I put the bars in their bag. . . or who turn around after being declined a second set of treats and join another pack of kids thus getting the second batch and shout gleefully, "I gotcha! " in my face . . . or who have the audacity to tell me they don't like that kind of candy (one bar each of three different kinds and they don't like any of them?) and they want the orange ones instead. . .   The crabby ogre in me wants to reach in the pillow case and snatch back the three bars already bestowed and send the little ungrateful urchins on their way.  Instead, I bite my tongue and politely decline the 4th piece!

My Halloween is over and I didn't even carve a pumpkin this year.  I guess the holiday has lost its lustre.  Or maybe my age has jaded my perception.  I'm sure it has nothing to do with the change in children and the subsequent loss of manners.  Could it be that I've had to scrape one smashed pumpkin too many off of my front walk or out of the street?  No, couldn't be.  It's just that I'm getting a bit witchy in my old age!

So, hopefully, all of your pumpkins are still on the porch and not in the road, and you've had a happier Halloween than this old crone!  (In case anyone cares, I want the pumpkin with all the bumpy roads on it!)

Too Many Choices

One has to find humor in the St. Paul real estate market or go nuts in the process.  Three different times on the same listing buyers appeared to be "going to write".  Three different times!  That's a lot of interest for one home. 

One case was an unrepresented buyer.  They even asked where they could get blank purchase agreement forms!  In two cases the buyer's agent called with several questions and then called back again and again.  Each time there was another set of questions requiring more answers.  Each time the seller answered to the best of their knowledge.  Both agents left me with the words, "Let us know if there's any interest from another party."  In a different market those words would have been the precursor to an offer being written within the week.  In this market, it's just plain nerve wracking. 

I feel like I'm plucking petals from a daisy:  "Will they write; won't they write?  Will they write; won't they write?"  Eventually, someone will take the plunge.  The St. Paul absorption rate is close to 9 months so sometime before next summer someone should make an offer.

In the meantime, we'll keep plucking petals from that daisy!

Fall Images

A beautiful shot of the woods near Stillwater, Minnesota, taken by my son on October 20, 2007.  Usually by this time the leaves have completely fallen except for the oaks, but the summer drought in the St. Paul area followed by our 18+ inches of rainfall since August 1 brought out some brilliant color and an extended fall.  It doesn't get much better than this.

Saved from Extinction

The Diggin' Dinos have been saved from extinction.  A couple small herds (pods, families, gaggles, packs, flocks, or whatever dinosaurs traveled in) have been sighted this week.  One group was found in front of the Minnesota Science Museum.  Macasaurus was there nibbling away on the beautiful fall berries.  Another group was found on County Road E just east of the 35E entrance.  Four of the beasties including Fruitasaurus, at right, were gathered in front of an old State Farm office building on the north side of the road.  There may be others that have managed to escape extinction.  Keep your eyes open!

The Pregnant Pause

It happens frequently.  Something meaningful is said, and then a pause ensues.   It's a pregnant pause.  The comment leaves one waiting for something to be born.  It's pregnant and full of anticipation.

Pregnant pauses happen in many environments.  A probation officer might ask a question and wait in silence for the answer.  The interrogator presses an issue and waits in silence.  The negotiator sighs and says, "My client will only do . . . " and waits in silence.  Attorneys question a witness and wait in silence.  Silence from a blogger makes the readers anxious.

Silence is difficult.  It makes us uncomfortable.  We all want to fill the silence.  It's solitary confinement while free.  Discomfort with silence makes the waiting person weak.  The waiting person's discomfort gives power to the one who issued the last statement; the one who chooses silence.  The pregnant pause has been launched.

In real estate, the pregnant pause is a negotiating technique.  Some use it easily.  Some have to learn its use. 

When the other party to the transaction refutes every reason a client has for an action, a pregnant pause may be the most judicious move.  Instead of fighting over terminology or fighting over what is a priority, the agent may need to sigh and say, "My client will only do . . . " and shut up.

My View of the Market

I don't do statistics.  Well, I do do them when I'm pressed, and when I do, I find them very helpful, but statistics are not my first love.  What I do do is experience!

My experience in the St. Paul real estate market this year:

• The number of transactions did experience a little increase starting midyear.  Sellers started to get more realistic in their pricing, and buyers surfaced as they realized the mortgage rates were still low and they could get a good price on a home.  But, when the total average income for St. Paul REALTORS® has taken a nose dive, you know the market has changed!
• Every purchase or sale in my experience this year was less than the comparable sales in the neighborhood.  Maybe it's my extraordinary negotiating ability?  (That's a joke for those who don't know me.)  No, I think not.  It's more likely that sellers began to take the lower offers rather than not be able to sell at all.
• Comments from the listing agents reflect an overall sense of the market.  When the first offer is 19% of the original list price (that's significant) and the agent sarcastically remarked, "You gotta love this market!", but still presented the offer and the seller countered instead of being insulted, it reflects a change in the market.
• When buyers think they can ask for major concessions the week of closing and the seller makes the concessions, you know the market has changed.
• When work colleagues commiserate about their listed houses not getting anymore showings and want to know how on earth did you sell your house, you know the market has changed.
• When sellers bring cash to the closing table in order to sell their homes, you know the market has changed.
• When a foreclosure auction is held in Minneapolis and the New York Times covers it, you know the market has changed.
• When St. Paul real estate agents are working harder (showing more houses without the buyers purchasing and spending more time marketing without the home selling) for lower annual income, you know the market has changed.
• When real estate agents don't want to take listings, you know the market has changed.

My take on the market tends to agree with Doug Duncan.  Stabilization is probably another year off.  Despite that knowledge, buyers are still buying and real estate is still my first love.  Sellers can't cry over the money they might have made on their home IF they had sold a couple years ago.  Reality is the St. Paul market is different than two years ago.  We've had our seven fat years and we're now moving into our more lean years.  We'll all eventually adjust and things will stabilize again.  It's all part of the 15 year cycles that real estate seems to go through.  I'm back in the same market I was in when I started real estate . . . only with more experience.  I made it the first time, and the buyers and sellers will make it through this time.  With time, we'll all adjust.

The NAR Market Forecast

Does anyone have a clue what's going on in real estate today?  Yesterday I posted a summary of Doug Duncan's real estate forecast which he presented at the Mortgage Bankers Association 94th Annual Conference.  Today, I'm going to summarize what the National Association of REALTORS® forecasts for the next year in the real estate market.  The difference in what each "expert" has to say makes me wonder what the definition of expert is!  Not being an economist, I know I have no right to cast a judgment, but wouldn't it be easier if everyone agreed?

One disclaimer before the summary.  Real estate is local, very local.  Sometimes it can vary from neighborhood to neighborhood in the same city.  If you want to know what's happening in St. Paul real estate , call a St. Paul real estate agent . . . not one from another state!  And remember that these forecasts are based on national predictions, not local ones.

On to the summary from the National Association of REALTORS®, most of which is given by Lawrence Yun, NAR's senior economist:

• Conditions are improving in the mortgage market for consumers which will bring buyers to the market early in 2008.
• The increase in credit availability will help turn around home sales next year.
• Jumbo loan mortgage pricing has steadily improved since the August, 2007, credit crunch.
• Conforming mortgage loans are abundantly available at historically favorable rates.
• FHA loans are replacing conventional sub-prime loans.
• 2007 will be the 5th highest year on record for existing homes sales.
• Speculative sales have been removed from the market and home sales are returning to healthy levels while prices remain near record highs, the result of good mortgage rates and job gains.
• 2006 existing homes sales were 6.48 million.  2007 sales are expected to be 5.78 million.  2008 sales are expected to be 6.12 million.
• New homes sales in 2006 were 1.05 million.  Sales are expected to be 804,000 this year and 752,000 in 2008.
• New home sales will recover in spring of 2008.
• The cut back in new home starts lowers the real estate inventory and stabilizes home prices.
• New home starts which include multi-family homes were 1.8 million in 2006; are expected to be 1.37 million in 2007; and 1.24 million in 2008.
• The median price for existing homes will slip 1.3% to $219,000 in 2007, but rise 1.3% in 2008 to $221,800.  New home median prices will decrease 2.1% to $241,400 this year and increase 1% in 2008 to $243.900.

Comparing the two experts' predictions makes me think Doug Duncan sees the glass as half empty and Lawrence Yun thinks the glass is full!

Doom and Gloom Will End Someday

The 94th Annual Convention of the Mortgage Bankers Association passed without a notice from most people, but some important forecasts were made by the mucky-mucks who attended.  In particular, Doug Duncan, chief economist for the MBA made some gloomy short term  predictions for the mortgage and real estate industry but predicts an end is in sight come 2009.  Some highlights from Duncan's forecast (these are national predictions) presented last Wednesday include:

• Total mortgages written are expected to decline nearly 15% this year (2007), 18% next year (2008), and only 6% in 2009.
• In 2008, mortgage originations will drop below the $2 trillion mark for the first time since 2000.
• The mortgage industry has already lost 60-70,000 jobs which may increase to as much as 110,000 job losses which decreases the total mortgage industry employees from 505,000 to 400,000 or less.
• Home sales will decline 12% this year and 10% next year in which the bottom will be hit in the third quarter.  Duncan then predicts an increase in sales in 2009 by 5%.
• Home prices will decline 2% both this year and next and finally prices will flatten in 2009.  Adjusting for inflation could make the real cost of housing fall 7-8% both years (The Case-Schiller Home Price Index for the Minneapolis area already shows a 3.4% decrease over last year as of July, 2007.).
• "Any significant increase in homebuilding is probably years off" because of the current excess inventory in houses for sale.
• Housing starts (new construction) will fall to 1.16 million next year which is 35.5% less than 2006 and trend back up in 2009 to about 1.27 million.
• Housing is "clearly in a deep recession" although other economic indicators remain sound.

Doug Duncan's forecast is gloomier than the chief economist for the National Association of REALTORS®, but in some ways I'd rather have the worst case scenario.  If I prepare for the worst and it doesn't happen, then I will be pleasantly surprised to have good fortune smile on the real estate industry!  ☺

River Boat Grill

The River Boat Grill first entered my radar when we were cruising the Mississippi with our son.  There were no facilities on board his boat so we had to find a landing with public utilities.  Showboat Landing by Harriet Island was our dock of choice.  River rats are allowed to tie up there to use facilities in the park, to walk the grounds, or to have lunch at the River Boat Grill.  We didn't lunch that day, but the floating restaurant had captured my attention.

A year later on a rainy September day we clambered aboard to enjoy a windy meal by the river.  The view was spectacular and sweaters shielded from the chill.  It was a totally new view of downtown St. Paul.  From the river level it became very apparent how buildings that open on Kellogg Boulevard are built into the bluffs.  The majority of the floors are below the street level with fabulous views of the river.  Even the former jail had rooms with a view!

St. Paul's river bluffs and former jail in the red building.  The Wabasha Bridge is down stream.

Opportunistic ducks floated alongside hoping for handouts.  This poor specimen isn't quite a wood duck, but not a mallard either!

Barge traffic and more "bluff" buildings.

Real Estate Perception

It's all about perception.  Just like the Hindu fable of the blind men and the elephant, what one sees in the real estate transaction is not always real or complete.  Recently, this fact has become very apparent in my St. Paul sales.

1. The prospective buyer saw discoloration on the basement walls and assumed there had been leakage.  Because no leakage was disclosed on the seller's disclosure, the buyer assumed the seller was dishonest, became mistrusting, and moved on to other houses.
2. A patch in a wood floor was "discovered" in the buyer's final walk-through (their 4th time in the home).  It was assumed a chair was purposely placed over the patch to conceal a cosmetic defect.  The buyers' mistrust of the seller's honesty led to insistence that the floor be professionally patched and refinished.  The sellers were offended by the implication of deceit which caused unnecessary tension in the transaction.
3. The decorating in the St. Paul house was very dated even though the mechanicals were all less than 5 years old.  The buyer assumed that because the house was not "pretty" other things had been let go and moved on.
4. The basement reeked of a sewer gas like smell.  The buyers checked around the bathroom and laundry areas trying to find the source of the smell, but were unable to locate it.  The smell was overpowering and they assumed there was a major plumbing issue.  The buyers moved on.
5. The yard was not mowed and the flower gardens were filled with weeds.  The buyers assumed the house was a disaster inside and chose not to view the house.

The real truth in each of these cases:

1. The basement had never had water as evidenced by the stacks of cardboard boxes stored on that wall when the home was listed.  None of the boxes were on palettes nor showed any sign of water damage.  The seller had been over zealous in wanting to seal out possible water intrusion and applied a sealant to the mortar between the blocks causing the discoloration.
2. The chair had been purchased just 2 weeks prior for the sellers' new home so was not even in the home on the previous 3 times the buyers visited.  The sellers did not consider the patch a defect because that was the natural place to put a rug for doffing their shoes when entering the home.
3. Dated cosmetics in a mechanically sound home is not unusual of a pre-retirement seller.  Often the mechanicals have been meticulously maintained, but the cosmetics don't seem old because they have not malfunctioned.
4. This was an embarrassing situation.  The teen son had visited the bathroom just before our arrival and while he flushed, he did not put the exhaust fan on.  We were able to revisit the home at another time with no further sewer smell.
5. The house was great inside.  The seller had recently lost a family member and was unable to maintain both the interior and exterior upkeep alone.  A choice was made to keep a clean house to the detriment of the yard.

Jumping to conclusions about the motivation of the other parties in the transaction, or about the condition of the house, can negatively impact the real estate transaction or prevent finding a home that fits the buyer's criteria.  Asking questions without jumping to conclusions can make the transaction go more smoothly.