Real Estate mark downs expected in metro.
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posted by Bob at Wednesday, June 13, 2007
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Wednesday, June 13, 2007
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9 Comments:
Real estate agents expect a summer of markdowns in Twin Cities
While some experts say the sector may have hit bottom, they predict a slow recovery
BY JENNIFER BJORHUS
Pioneer Press
Article Last Updated: 06/12/2007 11:46:06 PM CDT
Slow housing sales are reflected in the "price reduced" signs appearing around the Twin Cities. (JOE ROSSI, Pioneer Press)The Twin Cities housing market continues to trudge through a serious correction, with would-be buyers largely shrugging as rising foreclosures add to record for-sale inventories. Tougher lending standards and rising mortgage interest rates threaten to dampen activity further.
With less than a month to July 4, the sluggish activity spells trouble for the summer dog days ahead. Conventional wisdom holds that spring offers the highest prices and that homes not sold by the holiday face an uphill battle as sales activity wanes until fall.
"It will be a summer of more markdowns," predicts Steve Shea, owner of Sunset Realty in Maplewood. "It's going to take this market a couple of years to clean out."
Buyers seem indifferent to the deals; sellers sweat out a market flooded with a record 33,898 active listings. Those listings do not include all of the 9,300 newly built homes (excluding condos) either already built and sitting empty or under construction, said Ryan Jones, who manages the Plymouth office of MetroStudy, a Houston-based company that researches residential construction.
The market is at the bottom of a "U-shaped" correction, awaiting the bounce back up, said Deb Greene, president of the Minneapolis Area Association of Realtors, or MAAR. Greene said she had no idea how long the market will remain in the bottom bowl of the "U."
"It's going to be a slow recovery," she said.
The National Association of Realtors last week cut its forecast. It's now calling for existing-home sales nationally to drop 4.6 percent in 2007 and the median sales price to decline 1.3 percent to $219,000 this year, the first such price decline since the national association started keeping the statistics in 1968.
MAAR, too, has pared its forecast for 2007. It previously called for the Twin Cities median sale price to rise as much as 1 percent this year. But the group now says it could slip as much as 1 percent.
An annual metrowide decline would be the first since the group started tracking the 13-county median or average sale price since the 1980s.
To be sure, homes have continued to sell in the Twin Cities. Closed sales, pending sales and the median sales price for May in the metro area were up from April. But they were all down year over year. And the area's prime spring selling season was flat-out disappointing.
The May snapshot:
4,298 closings, down 14.7 percent from May a year ago.
4,781 pending sales, down 16.8 percent from a year ago.
$227,495 median sales price, down 1.1 percent from a year ago.
33,898 total active single-family listings, up 12.3 percent from a year ago and a local record as far as MAAR knows.
Buyers simply didn't return to the market as hoped. Agents and brokers tick down lists of possible reasons. Some suspect would-be buyers simply feel squeezed financially and are skeptical of the economy in general - and of the housing market in particular because of negative media coverage of problems in the subprime mortgage industry. People may be shifting investments to stocks instead. Tightened lending standards since the subprime mortgage market caved are cutting off some buyers from financing.
Karen Wilson, broker for Buyer's Services Wilson Realty in St. Paul, said move-up buyers simply cannot sell their current houses given all the competition. First-time buyers now make up most of her business, Wilson said.
Whatever the exact reason,
New houses popped up last fall in Woodbury's Dancing Waters neighborhood. (Pioneer Press file photo)buyers lack urgency.
"They think they have all the time in the world," Greene said.
Greene said she hopes rising interest rates might motivate people holding back to strike. The national average interest rate on a 30-year fixed mortgage is about 6.33 percent, up from about 5.7 percent in March, according to Bankrate.com.
Sellers, of course, feel urgent. They organize condo crawls, online foreclosure auctions, progressive open houses that stage appetizers through desserts at different houses. E-flyers abound. Bloomfield, Mich.-based Pulte Homes Inc., a major home builder in the metro area, announced Tuesday that from June 22 to June 24, buyers using Pulte Mortgage will get 10 percent off all homes plus $10,000 toward closing costs.
Intrepid agents wave off the market's sour messages as so much noise.
Paige Hamernick, a Realtor at Counselor Realty's White Bear Lake office, knows she's up against a mountain of inventory. But business goes on. Hamernick stuck out a for-sale sign Tuesday in front of a two-bedroom town home in Shoreview she just listed for $199,900. There are some five other units in the "Cherrywood Hills" complex for sale, too, Hamernick said, so maybe she'll coordinate with the agents and do a cooperative open house.
"It's not like the bottom has dropped out," Hamernick said. "It is slow, but it has been picking up."
Jennifer Bjorhus can be reached at jbjorhus@pioneerpress.com or 651-228-2146.
What's next: Homeowners who received adjustable-rate mortgages a few years ago could face higher monthly payments in the coming months as their rates adjust upward. This could lead to a further increase in defaults and foreclosures. Meanwhile, rising interest rates might motivate buyers to jump in the market now.
This is old news by a year. Its a national trend that the metro area can't do much about.
The adjustable rate foreclosures are already happening. Just walk through some of the poorer and the richest neighborhoods and you'll see the for sale signs way more than the middle class and more stable neighborhoods.
Eric M.
Here is the problem Eric, these duplexs, triplexs and four plexs are all priced out of the market in such away they are not cost effective for an investor. So, the homes will remain emty unless some ignorant investor purchases.
Well Bobby, I am afraid you are right. These market prices don't come way down, we are going to be stuck with a whole bunch of vacant rental buildings.
Isn't the problem now that some bank in Atlanta or San Francisco actually owns the foreclosed property and will sit on it for years if they can as it really doesn't affect their bottom line?
Are we able to correct the market artificially or, do we have to just ride this out?
Eric M.
Vacant buildings in saint paul?!!!!! Really, well ya just scratch yer head and vonder what ta do next.
Wow, I get to agree with Bob! What has happened at the bottem end of the housing market and with many duplexes and triplexes is that they were purchased and spun, purchased and spun over and over again during the housing/mortgage boom by people who put little or nothing down and used the rents to make payments until they could sell the property at a profit.
Some of these buildings if you track them went up $50,000, $100,000 in 6 months to a year there were huge profits. What has happened now is that the bubble has burst. The market is no longer surging so there is not the oportunity for that kind of short term profit. So, instead you have to start looking at if the buildings will truly cash flow. Are the rents high enough to make those morgage payments and tax payments and up keep payments... things you didn't worry about if you thought the price would go up $50,000 in 6 months and you would be out of it.
So, now you have the guys who bought last, not able to make the payments with the rent levels on the properties and with no equity in the buildings they are letting them go back to the bank.
Chuck Repke
Eric is wrong as it does affect the bottom line of these banks when they hold vacant houses. It affects the bottom line to their benifet! Although there are no payments coming in, the payments are still accruing, but now the bank can change in interest rate when it adjusts, and because it is a higher risk, they are going to assign a high interest rate toit and now guess what happens Eric. Those payments with the huge interest rates that are not coming on any longer now turn into a tax write off for the wealthy bank to use to get out of paying their fair share, meaning more of the tax burden is shifted onto us the common people. The bank will eventually get all their money back in tax write offs, and then at some point when the markets stabilizes (wherever that may be) the bank will sell it at a huge loss, i.e. the selling price minus what they originally loaned on it, and then they'll take another big deduction for the amount they claim they lost in the sale. And that's not the end of it yet. I haven't even begun to mention the money that the private mortgage insurance dompany pays to the bank's real estate department to try and sell the place. These vacant homes are a financial windfall to the banks, most people just don't know how it works.
Well Chuck maybe the city would have been better off keeping all the landlords that wanted to keep their buildingds, but no they chased them out of town with phoney violations and expensive trumped up repairs in their "cost effective" way of dealing with behavior issues. I thought everyone would be happy, the landlords are gone, the renters are gone and things are pretty quite now. I know because I live in one of those neighborhoods. So what's the problem? I kind of like it. Being different than most people I don't care what the value of my property is as I want to live in it, not sell it or turn it into an ATM machine. I have no intentions of leaving the city and I am looking forward to putting in anappeal to the county to have my property taxes reduced because of the depressed values. Seems to me we got to have our cake and eat it to!
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