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May 12, 2010



Minneapolis home prices are still artificially inflated (infamous bubble let's not forget about) and nowhere close in line with income and affordability with stable 30 year fixed loans. That's why people are still defaulting at alarming rates (please do not deny). There's still a glut of "Shadow Inventory" from the Subprime wave. Just wait until the trillion plus worth of Alt-A and Option ARM's play out in 2010 through mid 2012. Many more defaults/short sales/forclosures on the horizon. Also, most people bought into what are deemed "affordable loans" which are the "most" they could qualify for with interest only and negative amortizing minimal payment loans leaving no room for resets and recasts. Not to mention stagnating wages and high unemployment concerns. Add into the equation the inevitable increase in interest rates (yes, good ol' Greenspan who kept interest rates way low for way too long which was THE huge mistake) and you should reasonably expect a much needed deflation in home prices that will offset the artificial prices still intact from the (ouch) infamous bubble. Go back to 1999 where homes listed on the MLS for $325,000 today sold for $120,000 and then take it year by year forward. Still not in line! We are still way off the mark for fair home prices. Let's keep reality on the table! Enough of the weekly soft shoe sales lingo!

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