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Mortgage Matters: Current State Of The Housing Market, Our Economy And The Case-Schiller Index

Thursday, September 3rd, 2009

With the passing of each week it becomes increasingly difficult to argue that housing isn’t in full-recovery mode. This week’s data makes it nearly impossible, considering that sales of new homes spiked 9.6%, in July, to an annual pace of 433,000 units. The “experts” had expected sales to post at only 390,000 units. The increase was the largest since February 2005, helping to force the inventory of new homes down to a 7.5-month supply, the lowest in 16 years.
Even more encouraging, the most recalcitrant housing bear is starting to turn bullish. Robert Shiller, co-creator of the S&P/Case-Shiller home-price index, told Bloomberg that “we might be seeing a turnaround.” Understated, to be sure, but that’s Shiller’s style. As for his index, 18 of the 20 cities tracked showed improvement in June, up from eight in May, four in April, and only one in March.
Detractors will counter that the recovery is concentrated in lower-priced homes. True, but that’s changing as well. Toll Brothers, a luxury homebuilder, stated that declining cancellations and firming prices has allowed the company to reduce incentives and raise prices in selected communities. To quote Toll Brothers Chairman and CEO Robert Toll, “We believe that customers are recognizing that now is the time to get into the market to take advantage of near-record affordability in what is still, for now, a buyer’s market.”
More optimism can be gleaned from the fact that housing isn’t the only big-ticket sector showing signs of recovery. Orders for durable goods – those meant to last several years – jumped 4.9% in July, posting the biggest increase in two years. Yes, the “cash-for-clunkers” program was a contributing factor, but even without this incentive, other durable goods orders moved ahead 0.8%.
The gross domestic product numbers also suggest that all, if not well, is getting better. On that front, the government says the economy shrank at an annual rate of 1% in the second quarter, a better-than-expected showing. The drop, while representing a record fourth consecutive decline, was far smaller than the previous two quarters. It also was stronger than the 1.4% decline that many economists had expected.
Finally, mortgage rates continue to hold steady, a sign that inflation remains a non-issue. The 30-year fixed-rate loan continues to hold at 5.5% while the 15-year fixed-rate and five-year adjustable-rate loans continue to hold at around 4.9%. Today’s housing market remains a buyer’s market, with low prices and low borrowing rates, but keep in mind Mr. Toll’s quote, “for now.”

With the passing of each week it becomes increasingly difficult to argue that housing isn’t in full-recovery mode. This week’s data makes it nearly impossible, considering that sales of new homes spiked 9.6%, in July, to an annual pace of 433,000 units. The “experts” had expected sales to post at only 390,000 units. The increase was the largest since February 2005, helping to force the inventory of new homes down to a 7.5-month supply, the lowest in 16 years.

Even more encouraging, the most recalcitrant housing bear is starting to turn bullish. Robert Shiller, co-creator of the S&P/Case-Shiller home-price index, told Bloomberg that “we might be seeing a turnaround.” Understated, to be sure, but that’s Shiller’s style. As for his index, 18 of the 20 cities tracked showed improvement in June, up from eight in May, four in April, and only one in March.

Detractors will counter that the recovery is concentrated in lower-priced homes. True, but that’s changing as well. Toll Brothers, a luxury homebuilder, stated that declining cancellations and firming prices has allowed the company to reduce incentives and raise prices in selected communities. To quote Toll Brothers Chairman and CEO Robert Toll, “We believe that customers are recognizing that now is the time to get into the market to take advantage of near-record affordability in what is still, for now, a buyer’s market.”

More optimism can be gleaned from the fact that housing isn’t the only big-ticket sector showing signs of recovery. Orders for durable goods – those meant to last several years – jumped 4.9% in July, posting the biggest increase in two years. Yes, the “cash-for-clunkers” program was a contributing factor, but even without this incentive, other durable goods orders moved ahead 0.8%.

The gross domestic product numbers also suggest that all, if not well, is getting better. On that front, the government says the economy shrank at an annual rate of 1% in the second quarter, a better-than-expected showing. The drop, while representing a record fourth consecutive decline, was far smaller than the previous two quarters. It also was stronger than the 1.4% decline that many economists had expected.

Finally, mortgage rates continue to hold steady, a sign that inflation remains a non-issue. The 30-year fixed-rate loan continues to hold at 5.5% while the 15-year fixed-rate and five-year adjustable-rate loans continue to hold at around 4.9%. Today’s housing market remains a buyer’s market, with low prices and low borrowing rates, but keep in mind Mr. Toll’s quote, “for now.”

How Technology Helped Avert Disaster:

The economy was never going to get as bad as many had thought, and by many we mean the doomsayers predicting a replay of the 1930’s. Reason being, markets are too efficient and too knowledgeable today; many people are following all segments of the economy, thanks in large part to today’s information and communications technology.

A stock-market analogy is in order: Back in the 1930’s, Ben Graham, Warren Buffett’s mentor, discovered that buying stocks trading at dirt-cheap prices proved highly remunerative. Graham would parse financial statements for companies with a lot of cash and little debt – a tedious and time-consuming endeavor at the time. Graham’s modus was to buy companies for their current assets and get everything else – land, plant, and equipment – free. Graham’s strategy can’t be replicated today because information is so widely and cheaply disseminated that investors pounce before companies reach such levels.

Homes aren’t homogeneous like stocks, but there are many more information-savvy buyers vetting housing opportunities today than there were in the 1930’s, so prices – on the national level – are highly unlikely to collapse. (They can collapse in niche, depressed markets – inner-city Detroit, for example – but that’s always been the case.) Of course, there is always a risk of buying too soon, but buying too soon is still usually remunerative over the long run. The same can’t be said for buying too late.

*Disclaimer: This Newsletter is for informational purposes only. The information contained herein may not be applicable to every situation or jurisdiction and we urge you to consult your professional advisor prior to acting on information contained herein. The content, accuracy and opinions expressed herein are not verified or endorsed by the sponsor hereof.

Mortgage Matters is Courtesy of Lori Donnelly, Vice-President of Lending, M&I Bank, Minneapolis.
Direct: 612-904-8129
http://www.mibank.com/ldonnelly

Posted in Edina Homes, Edina Housing Market Update, Minneapolis Realtor, Mortgage, Lending, Refinance, Real Estate, Realtor Edina, Southwest Minneapolis Homes | No Comments »

National Association of Realtors: U.S. Home Sales for July the Highest Increase in 10 Years

Friday, August 21st, 2009

U.S. home sales posted the highest increase in 10 years, according to the National Association of Realtors (NAR) statistics. Worth noting, is that this is the 4th straight month of increased sales. Also worth noting from the other end of the spectrum, is that the median sales price is down 15% from the same month last year, from an average of $210,000, to $178,000. This is both good and bad: good in that housing affordability has improved greatly, bad in that so many individuals have lost equity (albeit, much of it ghost, or shadow equity).

The primary surge in home sales is being driven by first-time homebuyers.
Please click here to read this article.

Posted in Edina Homes, Edina Realtor, Great Minneapolis Neighborhoods, Minneapolis Realtor, Real Estate, Realtor Edina | No Comments »

Deutsche Bank Predicting Half of All Mortgages to be Underwater by 2011

Thursday, August 6th, 2009

Predictions on the condition of the mortgage market vary, sometimes greatly. In this article Deutsche Bank – one of the world’s leading powerhouse banking and investment institutions – is predicting that about half of all U.S. mortgages will be underwater (owing more than their home is worth) by the first quarter of 2011. This is to include ‘Prime’ loans as well, not just ‘subprime.’

Whereas I can see the  possibility of this in certainly markets, this would not be a universal, across the board mortgage crisis. Some metro areas are in much better shape than others. For example: the Detroit and Las Vegas areas will be offsetting the curve a great deal (in the negative), while other areas such as the Minneapolis area housing market, or the Dallas and Salt Lake City Housing markets are in much better shape.

It will be quite interetsting to see how this plays out, and I certainly hope Deutsche Bank is wrong in their prognostication for early 2011.

My advice if you are buying a home in the Minneapolis area housing market: if you can (depending on your price-point), buy your next home in Southwest Minneapolis, Edina and sometimes West Bloomington areas.

Posted in Edina Homes, Edina Housing Market Update, Edina Realtor, Edina Realty, Homes for sale Minneapolis, Minneapolis Homes, Minneapolis Market Update Links, Minneapolis Realtor, Mortgage, Lending, Refinance, Real Estate, Realtor Edina, Southwest Minneapolis Homes, Uncategorized | No Comments »

Minneapolis and Edina Housing Market Continues to See Improvement

Wednesday, August 5th, 2009

While the Southwest Minneapolis and Edina housing market have been fairly stable markets throughout the past 3 years, many other surrounding Minneapolis-area housing markets have been in a continual, declining-mode for the past 3 years. However, as I’ve been noting on this blog, statistics over the past few months have shown continued stabilization thoughout the Southwest Minneapolis metro area.

Key areas of stabilzation are: fewer listings, higher closed-sales activity, less days on the market for active listings, better affordabiltiy (indexes), and still low lending rates.  Of course the upper-bracket listings in the entire Minneap0lis-area is a different story, especially at $1 million dollars-plus, but stabilization does not start at the top. At this point, stabilization will have to start at the lower-levels through the middle, and eventually work its way upward, as more sellers are freed up from their homes, and can then make their next move to upsize.

We still need the banks to work on a better jumbo-mortgage product, in order to help stabilize the upper-bracket.

Overall though, we are seeing legitimate, good news. Let’s hope we do not see any further shoes drop in the economic sector. For this to happen, we need less government spending, lower taxes, and stabilization in employment sectors. Of course this is not happening, and this is the current forseeable trouble on the horizon.

Posted in Edina Homes, Edina Housing Market Update, Edina Realtor, Edina Realty, HGTV, Homes for sale Minneapolis, Lakes Area Minneapolis, Minneapolis Homes, Minneapolis Realtor, Real Estate, Realtor Edina, Southwest Minneapolis Homes | No Comments »

First-Time Homebuyer Tax Credit to Expire: Buyer’s Must Close By November 30th

Thursday, July 30th, 2009

First-time homebuyers that have been putting off purchasing a home until the last minute will really need to start moving at this point. Considering that they will need to close by Novermber 30th, and that most lenders need 21-45 days to properly underwrite a loan, and for the buyer to have at least 3-7 business days to negotiate an offer and go through the inspection process, this puts the final date you’ll want to submit an offer somewhere between October 12th-November 5th. After that, it will be a very tight squeeze. Also, many loans have been snagging at the last minute, and closings have to go a second round, potentially pushing back the closing date even further (which is why it is very important to work with a reputable lender…I’ve suggested this, ad-nauseum and ad-infinitum).

This means that if you should be targeting and seeing homes with your realtor now, as the final target date (best-case, last-minute scenario) is only about 70 days from now, if you would like the free, $8000.00 from the fed, just for buying a home. This would be a sad tax credit (actual cash in pocket, not a deduction) to miss out on, if you have been seriously thinking of purchasing a home.

How would you like 8 of these $1,000.00 notes?1000-dollar-bill

Posted in Edina Homes, Edina Housing Market Update, Edina Realty, Great Edina Neighborhoods, Great Minneapolis Neighborhoods, Homes for sale Minneapolis, Lakes Area Minneapolis, Minneapolis Homes, Mortgage, Lending, Refinance, Real Estate, Southwest Minneapolis Homes, Uncategorized | No Comments »

Money Magazine Best Places to Live: Minnesota Has 4 of the Top 100

Monday, July 20th, 2009

The August 2009 issue of Money Magazine is out with their annual ranking of ‘Best Places to Live’ in the United States. 4 Minnesota cities have been included in this list. The midwest has a high share, with Minnesota and Wisconsin cites alone taking up almost 10% of the entire list.

These cities are; #2) Chanhassan, MN, #20) Chasaka, MN #36) Lino Lakes, MN., #97) Owatonna, MN.

With the exception of Owatonna, the remaining 3 representing Minnesota, are all suburbs of the Minneapolis/St. Paul metropolitan area (2nd and 3rd tier).

Other nearby cities on the list are; #4) Middleton, WI., #34) New Berlin, WI., #42) Urbandale, IA., #61) Pewaukee, WI., #62) Ankeny, IA., #76) Germantown, WI., #78) Waunakee, WI., #80) Bettendorf, IA., #81) West Fargo, N.D., (yes, Fargo does have a suburb, and as I am quite familiar with West Fargo, I can say that West Fargo has come a long, long way in the past 25 years).  Yes, Wisconsin has 5 on the list.

I also saw that Nebraska scored 3 on the list as well – Papillion, Columbus (I lived here when I was 4 and 5 years old) and Norfolk.

Although I don’t agree with 2 aspects of the criteria selected (one is ridiculously politically correct and quite unnecessary), the rest of the criteria is based upon size,  median income, quality of life, property taxes and unemployment rates etc.,  the rest of the criteria is general, and makes sense.

Of course Minnesota has a disproportionate share of homes in the top 100.

Very cool!

Posted in Edina Homes, Edina Realty, Great Edina Neighborhoods, Great Minneapolis Neighborhoods, Homes for sale Minneapolis, Minneapolis Homes, Minneapolis Market Update Links, Real Estate, Southwest Minneapolis Homes | No Comments »

Mortgage Matters Market Recap

Wednesday, July 15th, 2009

Many Americans extended their July 4 th holiday through last week, a precept reflected in the dearth of market data to hit the wires. But what did hit the wires was at least meaningful, if not insightful.
For instance, we’ve stated repeatedly in these missives that the real engine of change in the mortgage and housing market is the individual market participant (like us). Government can be a mitigating factor, to be sure, but nothing mitigates like the actions of individuals to get things moving in the right direction. Indeed, recent data from Clayton Holdings showed that recent government-supported foreclosure moratoriums had virtually no impact on stemming the foreclosure tide, which is much less of a tide today anyway.
Many pundits were predicting a second wave of foreclosures headed our way in the second half of the year, as banks tried to unload homes they can’t refinance. But for now, at least, the big wave of bank-owned properties appears to have crested. According to Foreclosures.com, foreclosures dropped 11% nationally in the second quarter of 2009 to 205,000 compared to 231,000 in the first quarter of 2009. Even more encouraging, June’s foreclosure numbers reached record lows for the year.
More good news on housing was dispensed by Clear Capital, which noted that for the first time since 2006, the nation posted positive quarter-over-quarter price returns in the second quarter of 2009, according to its July Home Data Index Report released last Thursday. Fueled by strong seasonal spring sales in the Midwest , which had a price increase of 5.3% over the first quarter of 2009, the overall U.S. price growth increased by 1.7%.
It’s obvious that people are buying more homes – foreclosures or otherwise. The Mortgage Bankers Association released its Weekly Mortgage Applications Survey for the week ending July 3, and new loan applications increased 10.9% from the previous week. Mortgage rates remain low, and are actually dropping. The benchmark 30-year, fixed-rate mortgage fell 11 basis points to average 5.59% last week, according to the Bankrate.com national survey of large lenders, while the benchmark 15-year, fixed-rate mortgage fell 14 basis points to average 4.93%. The drop should assuage concerns among many potential borrowers that they missed the boat.

The Truth of the Matter
An enlightening op-ed piece by Stan Liebowitz, University of Texas ( Dallas ) economics professor, appeared in the July 3 rd edition of the Wall Street Journal, vetting the mushrooming rate of mortgage foreclosures since 2007. What Liebowitz had to say supports the old adage that a lie can get half way around the world before the truth gets out of the gate.
In short, Liebowitz debunked the myth that subprime mortgage lenders fooled hapless borrowers into taking complex, low initial rate loans. He noted that the focus on subprimes ignores the widely available industry facts (reported by the Mortgage Bankers Association) that 51% of all foreclosed homes had prime loans, not subprime, and that the foreclosure rate for prime loans grew by 488% compared to a growth rate of 200% for subprime foreclosures.
Liebowitz also found that interest-rate resets did not measurably increase foreclosures until the reset was greater than four percentage points. Only 8% of foreclosures had an interest rate increase of that much. In a nutshell, the overall impact of upward interest rate resets was much smaller than the impact from reduction in homeowners’ equity.
The good news, according to Liebowitz, is the reduction in homeowners’ equity appears to be ending. He notes that housing prices are likely to stop falling soon (an opinion we’ve been forwarding the past few months), because current prices are approaching their long-term, inflation-adjusted pre-bubble level. In turn, a perceived, and very real, end to the drop in housing prices will only stimulate further activity.

- Courtesy of Lori Donnnelly, V.P. Mortgage Lending, M&I Bank, Minneapolis:

http://www.mibank.com/ldonnelly

Posted in Edina Homes, Edina Housing Market Update, Edina Realty, Homes for sale Minneapolis, Minneapolis Homes, Mortgage, Lending, Refinance, Real Estate, Southwest Minneapolis Homes, Uncategorized | No Comments »

Edina Realty Bringing Buyers and Sellers Together Even More Than Before

Friday, June 26th, 2009

The two primary reasons I chose Edina Realty as the brokerage under which to hang my Realtor hat was that I was impressed with the technology Edina Realty offered to agents, and thus to our clients, and also the size and effectiveness of the Realtor-to-Realtor networking of our seller’s homes and buyer’s needs, within Edina Realty.

The technology: www.edinarealty.com has been (by far) the single, most used real estate website in the entire twin cities metro-market. According to statistics, www.edinarealty.com gets about an 80%-85% market share for home searches. Anybody who has used our home search tools, open house tools, sold data tools, and other items offered at www.edinarealty.com realizes that all other websites are well behind in user-friendliness and effectiveness. Many of my friends with other brokerages openly admit that they point their clients to our website to search for homes in the Minneapolis area housing market. I continually  hear feedback from clients that they love our site, even from relocation, out-of-town buyers who found our site while searching for homes in the twin-cities.

This same forward-thinking is applied to the agent technology tools available to us, in our behind-the-scenes marketing technology. From brochures and mailers to direct marketing to people who are registered on www.edinarealty.com to internal networking sites and a whole lot more, the entire marketing package really impressed me from the get-go.

Most impressive however, was the ability to network my sellers and buyers – through our internal network, called ‘Network One’  - homes and buyer needs, well before they go to market. We have been selling about 20%-25% of our homes internally. Network One has been the single greatest tool in market a client’s home pre-MLS (before it shows up on the public MLS sites). On the flip side, I have access to viewing up-coming listings for my buyers, and actually getting my buyers into the best listings, even before they go on the market.

This is why I chose the largest and most effective brokerage in the area, with the best marketing technology for my clients listings, in order to best serve my sellers and buyers.

These very real advantages are for you!

Posted in Edina Homes, Edina Housing Market Update, Edina Realty, Homes for sale Minneapolis, Minneapolis Homes, Real Estate | No Comments »

Homes For Sale Minneapolis, Market Update

Friday, June 26th, 2009

According to the Minneapolis Area Association of Realtors (MAAR) for week ending 06/26/2009, we have further positive data that our market – in many areas – has positive news. Inventory continues to decline (a total of 33,435 in our metro area, down 19.7% from this same point, last year), pending sales continues to rise (up 33% over this same point, last year), the decline of the percent of the original list price received at sale seems to be stabilizing (-1.2% from last year, for a total of 91.5% of original list price)  the housing affordability index continues to trend toward better affordability, total days on market until a sale is down 7.3% (to 147, from 159 at this point last year), supply-to-demand ratio is down from last year, from 7.57, to 5.04 houses per buyer and the months of inventory is down to 7.6 from 10.4.

Of course, this is all in the general sense. Some area are actually stabilizing and some areas will continue to see further depreciation (some 2nd and 3rd tier suburbs), however, these are all continued, encouraging signs of general stabilization in the Minneapolis housing market.

Posted in Edina Homes, Great Minneapolis Neighborhoods, Homes for sale Minneapolis, Minneapolis Market Update Links, Real Estate | No Comments »

Homes in Minneapolis: Update on Home Sales Activity

Friday, June 12th, 2009

More good news on the housing market front for the Minneapolis housing market: New listings are continually declining in our market, which is one of the keys to recovery. While there are many other factors, a glut of homes on the market is always detrimental. We are finally down in new listings for the entire year, after a continual increase during the previous 7 years. 1,566 homes went on the market last week, vs. 1,752 during this same week, last year. Our peak week this year was week ending 05/09, with 2,058 (the comparable peak week the year prior was 2,380 new listings). So we are down -10.6% in new listings this week over last year. As our Minneapolis/St. Paul housing market has seen this trend for the entire year, I believe this is encouraging news. 

Our supply vs. demand ratio for 06/09  has also come down to 5.04 homes for every active home-buyer, compared with 1 year ago in June 2008, when we had 7.57 homes for every active home-buyer.

Let’s hope this trend continues.

Posted in Edina Homes, Edina Housing Market Update, Minneapolis Market Update Links, Mortgage, Lending, Refinance, Real Estate | No Comments »

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