The Skinny

Weekly Market Activity Report 12.29.08

The recent plunge downward in mortgage rates to a decades-low level is spurring Twin Cities home sales, despite shorter days and holiday interruptions. For the week ending December 20, there were 553 purchase agreements signed (pending sales), which is an increase of 20.0 percent from the same week last year. Since rates dropped three weeks ago there have been 368 more pending sales than there were during the same period in 2007, an increase of 27.5 percent. During this period, 57.6 percent of sales have been lender-mediated foreclosures and short sales and 45.8 percent are below $150,000.

Listing supply is relatively flat with last year at this time over the past few weeks, with an increasing share of new listings being lender-mediated. Traditionally, sellers often pull back at this time of year to wait out the holidays, but banks continue to list no matter what time of year.

Click here for the full Weekly Market Activity Report.

This Just In: Mortgage Rates Ridiculously Low

As if you didn't know. A few choice nuggets on the subject:

Reuters: Record Low Mortgage Rates Toss Housing a Lifeline

Fox9: Low Rates Lead Homeowners To Wonder If Refinancing is Right for Them

Star Tribune: Rates Hit New Low

All of this is certainly good news for potential buyers, as low rates, motivated sellers and soft prices are creating an unusually attractive affordability environment in the short-term. But we have to wonder if this isn't just going to partially re-inflate the price bubble we're still recovering from.

What happens when the $225,000 house you buy in 2008 with a 4.75 percent mortgage rate is back on the market 5 years from now and rates are in the 7s? Will it still sell for $225,000? There's a big difference in the actual cost carried by the consumer in that 2.25 point spread. Historically low loan costs are part of what created the bubble in the first place.

We'll cease with the pre-emptive worrying for now. Happy Holidays.

Weekly Market Activity Report 12.22.08

As the holidays loom, activity in the the Twin Cities housing market that isn't lender-mediated (i.e. foreclosures and short sales) is quieting down quickly, while the lender-mediated market is plugging along with no discernable effect from the usual seasonal ebbs and flows.

For the week ending December 13 there were 1,240 total new listings and 556 pending sales, which are up 2.2 percent and 36.3 percent, respectively, from the same week in 2007. Of these new listings, 48.0 percent of them are lender-mediated, while a hearty 60.0 percent of pending sales are. The market share comprised of these lender-mediated homes has been growing steadily every week for the last several months and should either hold steady or continue to grow through the rest of 2008. Traditional sellers always pull back this time of year—banks do not.

Click here for the full Weekly Market Activity Report.

The $95,000 Question

Over the past two years, lender-mediated foreclosure and short sale properties have seen massive declines in their sales prices as banks slash prices to spur demand and move these declining assets (or are they liabilities?) from their balance sheets.

Over the same time period, traditional home sellers haven't seen their property values decline at the same rate, despite a growing number of foreclosures.

The November median sales price for lender-mediated foreclosures and short sales was $130,881. This is a 20.2 percent decline from November 2007.

The November median sales price for traditional properties was $225,420. This is only a 2.0 percent decline from November 2007.

The difference between these two numbers is $94,539.

Assuming a 30-Year Fixed Rate Mortgage with a 5 percent down-payment at the prevailing 4.75% interest rate, the monthly payments on these two hypothetical properties look like this:

Traditional Property: $1,429 per month, $17,153 per year.
Lender-Mediated Property: $786 per month, $9,432 per year.

That $95,000 difference in sales price amounts to a pretty hefty difference in the cost burdens felt by the home buyer over the course of the 30-year loan. While we know that lender-mediated properties are more likely to need considerable repairs, have a far more complicated purchase process that sometimes leads to canceled sales, and can in general be a more tenuous purchase than traditional sales, $95,000 is still a big gap, all things considered.

So here's the $95,000 question: is this gap sustainable?

Are consumers willing to pay that much more for quality, "turnkey" properties that are ready to move in? Or will traditional sellers need to drop their prices further to compete with these bargain-priced foreclosures and short sales?

We earnestly want to hear from you on this. What do you think and why? Leave your thoughts in the comments section below.

December Monthly Skinny

The December Monthly Skinny Video is all up in your internets.

This month's edition is another quickfire update on the Twin Cities housing market, this time narrated by not one, but TWO, people—Kevin Knudsen, our 2008 President, and Steve Havig, our incoming 2009 President.

Click here to view in a separate window or just click below.

Weekly Market Activity Report 12.15.08

As fall turns into winter—and winter turns dark and cold—activity in the Twin Cities housing market has entered its annual hibernation. On a weekly basis, new listings, total inventory and sales are all declining as consumers batten down the hatches and prepare for the holidays. Relative to this time last year, however, activity is stronger. For the week ending December 6, there were 597 signed purchase agreements (pending sales), which is up 27.6 percent over the same week last year. Roughly half of these sales—54.7 percent—were lender-mediated foreclosures or short sales.

On the supply side, new listings were relatively flat, up only 0.7 percent for the same time period comparison. The total supply of homes for sale currently sits at 27,035, down 8.2 percent compared to this time last year. Expect the decline in overall supply to continue into January; at the same time, expect the lender-mediated market share of that supply to increase.

Click here for the full Weekly Market Activity Report.

Home Prices Down, Property Tax Assessments Up

Despite slumping housing prices in pretty much every neighborhood of the Twin Cities, the assessed home value on homeowners' property tax statements aren't decreasing at the same rate and, quite commonly, are actually increasing.

So what gives? Is this just government greed? Or is there a legitimate reason for the increases? The answer, as usual, lies somewhere between the two.

From an MPR story from this morning:

"Assessors are working with a bit of a lag here," said Gordon Folkman.

Folkman directs the property tax division for the state's Revenue Department. He said the information that assessors used to determine home values for next year was actually collected in 2006 and 2007, before this year's economic meltdown.

Good, old-fashioned, inefficiency is partly to blame. Woefully outdated information from 2006 and 2007 is still being used to find comparable sales for assessment purposes, despite the fact that the housing market has shifted downward dramatically since then. Whether this questionable choice is due to a pre-mediated strategy or something less sinister like a simple lack of up-to-date sales information is unknown, at least to this author.

Regardless, the approach is showing much higher assessed values than actual market value, in some cases, and people ain't happy:

"I'm going to get really pissed in about 10 seconds if someone doesn't explain this to me."

Christopher Rocco of St. Paul is big enough to be a bodyguard. He's standing an inch from the county assessor, arguing that the valuation for his townhouse is too high.

According to the county, the value of Rocco's home is $120,000. But he says that can't be right. Seven of the 21 units in his complex are in foreclosure. "They're selling for $20,000 apiece. So if they're trying to tell me that they're going to tax me on a $120,000 home when everyone's property values is $20,000, I'm not going to stand for that."

This raises another question: do city or county assessors consider bargain-priced foreclosures, which are sometimes in distressed physical condition, to be useful comparative sales? In other words, will the $20,000 sales in Mr. Rocco's building be considered "market value" eventually? There doesn't seem to be a uniform policy on this question amongst the region's patchwork of assessors. With some areas seeing more than half their sales mediated by a lender through a foreclosure or short sale, one would have to think they can't be ignored for much longer.

Time will tell. For information on how to contest your tax assessment in the City of Minneapolis go here. For St. Paul, go here.

Tax Man:

Drop in mortgage rates leads to jump in affordability

A combination of substantial declines in mortgage rates and the continued downward movement of home prices is leading to an unusually attractive affordability environment. Rates declined well into the 5 percent range in the last month—the best rates of 2008 and the most attractive since 2003. Add November’s tantalizingly low median sales price of $175,000—down 19.2 percent from the same time last year and the lowest November showing since 2001—and you have extremely healthy affordability.

MAAR’s Housing Affordability Index (HAI) jumped 19 points in the last month, and currently sits at 180. This is up 27.7 percent from last December’s mark of 141 and is the highest recorded HAI since we began tracking the data in 1990.

Lender-mediated home sales, which accounted for 53.5 percent of pending sales and 47.3 percent of closed sales, posted a November median price of $130,881. This is a drop of $5,000 from last month and a decline of 20.7 percent from last year. Traditional properties, which exclude foreclosures and short sales, had a November median sales price of $225,420, a decrease of 2.0 percent from last year.

The stark differences in home prices between the lender-mediated market and the traditional sales market has led to two very different market segments, each comprising roughly half of total market activity. Foreclosure and short sale prices are falling fast as banks aggressively price their homes, while the traditional market is more effectively maintaining its value as buyers appear willing to pay a fair-market price for “turnkey” properties that are closer to move-in ready.

The one thing each market segment has in common is a large increase in affordability thanks to the recent drop in mortgage rates.

Weekly Market Activity Report 12.8.08

As we mentioned last week, the presence of Thanksgiving in our reporting dates is throwing off the weekly numbers considerably for last week and this week. After last week's numbers showed massive increases in listings and sales over last year, this week's numbers predictably show large decreases. For the week ending November 29, new listings fell by 45.2 percent compared to last year, while pending sales fell by 20.5 percent. Check back next week when we return to a more reliable year-over-year comparison.

This week's edition of the Weekly Market Activity Report features updated figures for some important metrics. The Housing Affordability Index shot up 19 points to 180 thanks to the recent healthy declines in mortgage interest rates and a continued softening in home prices; the HAI has not been this attractive since we began tracking data in 1990. Days on Market Until Sale grew to 149, nearly dead-even with last year, while Percent of Original List Price Received at Sale fell to 90.1 percent. The Months Supply of Inventory slipped to 8.5 months, and has dropped 19 percent since August's showing of 10.5 months. This is 8.6 percent lower than at this time last year.

Click here for the full Weekly Market Activity Report.

Turkey:

Turkey:

December Housing Supply Outlook

One of the starkest pictures found in today's Twin Cities housing market is the difference in sales activity by property type. Over the last twelve months, single-family detached homes have increased over the same period a year prior by 7.1 percent. On the other hand, townhome sales have declined by 11.4 percent and condominium sales have declined by 24.3 percent.

The culprit for this huge difference between single-family homes and attached living arrangements is foreclosures and short sales. Consumer demand to purchase these lender-mediated properties is growing, and our research indicates that the single-family detached market has been affected more dramatically by this trend than other property types.

On a related note, single-family detached homes are seeing the largest declines in sales price and price per square foot for the same reason.

Click Here for Full December Housing Supply Outlook

Web 2.Whatever

Hi, I'm going first-person today. I'm Greg Sax, Communications Manager here at MAAR. You may recognize my voice from our weekly enotes or printed newsletter. I also do a weekly blog post over at the St. Paul Real Estate Blog every Wednesday. Usually I'm talking about things like the Naugahyde booths at Mancini's or the off-leash dog park at Arlington-Arkwright, but today's contribution might actually fit better over here at The Skinny, where it also applies. So let's co-opt some content for wider readership...

There is a fair chance that this blog will be obsolete by next year at this time.

Isn't that something? Today's blogs are tomorrow's shoezoos, or whatever the Next Big Thing will be. That's how fast things move now. If you're in the real estate business, you'd better get used to it. If you're in any business, you'd better get used to it. If you're a consumer of things, you already seem to be used to it, because you've proven to be a resilient lot, and all this recession hoo-hah will do nothing to thwart you from the opportunities inherent in advancement.

People of Earth, this is my advice: Don't kid yourself on this fast-forward world. In the lifetime of the youngest generation that could possibly be reading this post, big-time, 100-year sorts of things are happening. Things that match oil and steel and electricity. Things that were once inconceivable to any of us over the age of 30.

Microwaves are magic. Halo 3 is born from Atari 2600. LPs, tapes, and CDs take up too much space; LimeWire and iTunes rule the coop. The Internet...uh-duh.

I was convinced in 1992 that the Internet was going to be the be-all. I was a supercool early adopter of things Internet because I was lucky enough to work a couple of buildings away from where "gopher" dug its first holes at the University of Minnesota. I knew what was coming. And I invested. And I became unbelievably rich. Okay, that's not at all true. But I can at least claim that I knew the world was forever changed.

The power of the Internet will continue to expand. What I was once only able to do from a slow-booting desktop computer on the third-floor of a secure building...is now done from the comfort of a recliner in my living room on an always-on laptop without wires...will be done one day from the comfort of deep slumber without keystrokes or any other sort of physical contact with my LittleNemo G12 astralputer.

Blogs are weak like flat HTML pages were weak three years ago. Were weak like Flash-enabled, slow-loading intro pages were two years ago. Were weak like 360-degree tours and green screen, walk-onto-the-page video was last year. Were weak like Twitter is this year.

I rip on blogs as my blogging activity is increasing. I say this as I write for a blog we just created this year. I say this as I'm spending two months overhauling a personal blog. I say this because I know I will inevitably have to learn some other form of communication. Blogs may soon be obsolete, but "soon" can mean a lot of things and I still think it's a logical step toward whatever's next.

The choice is fold or fight. I'm taping my fists and skipping extra rope.

To get to the point. (Really? You have a point?) I don't normally make a habit of promoting other websites and other consultant-types, because ultimately I think MAAR has the ultimate consultant-types and you should contact me or Jeff Allen or Mark Allen for public engagements and we will motivate and amaze you. But the folks at 1000Watt Consulting are thinking as brightly as their wattage indicates, and they should be further encouraged. The Real Estate Map for Web 2.0 is quite good.

So REALTORS®...will you survive Web 2.Whatever? Will you REALTORS® even be involved in what's next? Or will consumers be using Realtorocity, Realpedia, or...?

Weekly Market Activity Report 12.1.08

Comparing weekly activity for the next two weeks will be mostly worthless for one simple reason. Thanksgiving occurred a week earlier in 2007 than it did in 2008, and the expected downward swoon which takes place during the turkey holiday makes year-over-year comparisons difficult. For instance, our numbers this week state that new listings and pending sales for the week ending November 22, 2008 are up 36.5 percent and 74.5 percent over the same week last year, respectively.
 
Yowzers! This isn't indicative of an actual huge upswing in activity but rather the vagaries of where Thanksgiving lies in any given year. Expect next week's report to show a ludicrously massive downward decline relative to last year for the same reason.
 
For perspective, comparing the week before Thanksgiving in 2007 to the week before Thanksgiving this year shows a trend very similar to what we've been experiencing in recent weeks.
 
This week's edition of the MAAR Weekly Market Activity features an updated Supply-Demand Ratio (SDR) for December 2008 of 12.06, which means there will be approximately 12.06 homes for sale for every buyer in December. This is down 16.1 percent from December 2007.

Click here for the full Weekly Market Activity Report.

Turkey:

 

Turkey: