Going Down Down Down

Home prices posted another record decline in October, falling 18% compared with a year earlier, while the Twin Cities saw a drop of 16.3% according to a closely watched report released Tuesday.

The 20-city S&P Case-Shiller index has posted losses for a staggering 27 months in a row. In October, 14 of the 20 cities set fresh price decline records.

Sunbelt cities suffered the most, but most of the country is watching home values fall. In Phoenix prices have plunged 32.7% since October 2007, Las Vegas home values are down 31.7% year-over-year, while San Francisco prices fell 31%. Miami, Los Angeles and San Diego recorded year-over-year declines of 29%, 27.9% and 26.7%, respectively.

"As of October 2008, the 20-City Composite is down 23.4%," said Blitzer. "In October, we also saw three new markets enter the 'double-digit' club."

Atlanta, Seattle and Portland reported annual rates of decline of 10.5%, 10.2% and 10.1%, respectively.

Many of the factors affecting home prices turned strongly negative this fall, according to Blitzer.

"October was really the first month to feel the full brunt of the credit crunch," he said. "Up until the Lehman Brothers [bankruptcy filing on September 15], everyone felt relatively optimistic."

Plus, in many of the free-falling cities the majority of real estate sales consist of distressed properties such as foreclosed homes and short sales. These houses tend to sell at a steep discount to the rest of the market, and when they account for a large proportion of all sales, they can exaggerate the depth of price declines.

Of course, foreclosures continue to be a big problem as well. In October alone, nearly 85,000 people lost their homes to foreclosure, adding vacant inventory to an already overburdened market.

Home sellers should not expect prices to improve any time soon, according to Pat Newport, a real estate analyst for IHS Global Insight.

"I expect it's going to get quite a bit worse over the next couple of months," he said. "Existing home sales reports have really been bad."

Home sales fell 8.6% in November, much more than expected, to an annualized rate of 4.49 million units according to the National Association of Realtors.

And although interest rates are currently extremely low - the 30-year fixed-rate averaged 5.14% during the week of December 24, according to mortgage giant Freddie Mac - that's doing more to help people refinancing existing mortgages than it is to help new home buyers.

"Buyers still have to have a 20% down payment," said Newport, "and, in this environment, it can be hard to meet that criteria." Courtesy CNN.

When It's Time To Say Goodbye To Your Christmas Tree

Have you ever wondered where that Christmas tree goes when you put it out on the curb? Most likely in the metro area it goes to one of eleven locations of the company Resource Recovery Technology or RRT. You can also call them at 952-946-6999.

They receive the trees from the major waste disposal companies in town and then grind it up and mix it with mulch and make compost out of it.

Many private haulers may charge a fee for christmas tree disposal. In Minneapolis, there is no charge for tree disposal. Solid Waste & Recycling will pick up your tree with the garbage through the month of January. Just remember to cut the tree in half if it's over 6 feet tall and place it next to your garbage cart. And remember to have all lights, tinsel, ornaments and strands removed prior to disposal.

If you want to recycle at home, place the tree in the yard or garden for use by birds and other wildlife. The branches provide shelter from strong winds and cold. Food can be supplied by hanging fruit slices, seed cakes, or suet bags on its branches. You can also smear peanut butter and seeds in pine cones and hang them in the tree. Prune off the branches and place the boughs over perennials as winter mulch. Chip the tree and use as mulch around trees, shrubs, or in flower beds. Source Kare11 and City of Minneapolis website.

Glub Glub Glub

The number of existing homes sold during November plummeted 8.6% as prices plunged by record amounts, according to a report issued Tuesday.

The National Association of Realtors said that home sales dropped to an annualized rate of 4.49 million units. That was down from 4.98 in October and much less than the 4.93 million units projected by a consensus of industry analysts.

"The only region where we're seeing more sales are where bargain hunters are taking advantage of distressed sale prices," said Lawrence Yun, the Realtors' chief economist. "About 45% of transactions, nationally, were of distressed properties."
Yun blamed the financial market turmoil for the devastating report. For months, sales had hovered 4.9 million to 5.1 million.

"Today's figure reflects the stock market crash that began in October," he said.
The drop took place despite bargain prices as property values continued their decline. The median existing home sold for $181,300 in November, down 13.2% from a year ago when the median was $208,800.

Yun said that price drop was the largest the association had ever recorded and probably the worst decline since the Great Depression.

Meanwhile, the glut of unsold homes expanded to 4.2 million in November. That represents 11.2 months of supply, at the current rate of sales, up from 10.2 months in October. Bloated inventories have barely budged over the past 12 months; last November there were 4.27 million existing homes on the market.

Existing home sales are now the weakest they have been since July 1997, and price drops have wiped out all the previous gains back to February 2004, Larson said.

Sales of new homes fared little better. They totaled 407,000 in November, according to estimates released jointly Tuesday by the U.S. Census Bureau and the Department of Housing and Urban Development. That was down 2.9% from 419,000 sold in October and 3.1% below Briefing.com's projection of 420,000.

New home sales have dropped 35.3% from last November, when an estimated 629,000 were sold.

The median sale price of new homes sold in November was $220,400, a slight increase of 0.9% from $218,400 in October.

Merry Christmas!

Drop In Mortgage Rates No Help For Many Homeowners

With home mortgage rates at a 37 year low, many homeowners are considering refinancing their homes. But today, many home lenders are acting less like helpful allies and more like Ebenezer Scrooge.

The one-two punch that is knocking most homeowners out of the refinance ring are declining home values and tougher lending standards, In some cases, a refinance just won't make sense for homeowners, mortgage bankers say, because borrowers would have to pony up equity and pay mortgage insurance in order to qualify for the low rates.

Some of the old rules about refinance still apply, A refinance can make sense for a homeowner who can recover the upfront costs in two years. But the current economic realities clearly are making this refinance cycle unique, mortgage bankers say.

Currently, lenders want homeowners to have at least 5 percent equity in a home to refinance a conventional 30-year mortgage, or slightly less for loans backed by the Federal Housing Administration.

But in many cases, falling values shrunk the homeowner's equity to the point that they would have been required to buy mortgage insurance with a refinance. In the short term, those insurance costs would have eliminated the financial benefit from the lower rates. Courtesy TwinCities.com

Foreclosures In Twin Cities Leveling Off - For Now

Foreclosures in the Twin Cities and across Minnesota keep piling up in record numbers, but the rate of increase this year has leveled off a bit, according to a report released Friday.

There were 13,334 foreclosures in the Twin Cities during the first three quarters of 2008, compared with 12,974 during all of 2007, according to the report from HousingLink, a Minneapolis nonprofit. The statewide total for the first three quarters was 20,098, the report found, compared with 20,404 last year throughout Minnesota.

Based on HousingLink's projections, foreclosures in the Twin Cities will be up 39 percent from 2007 to 2008. The rate of change in the metro area from 2006 to 2007 was much greater at 84 percent.

The finding supports the idea that Minnesota already has experienced what Prentiss Cox, a University of Minnesota law professor who studies the housing market, argues is the first wave of the foreclosure crisis. That wave, he said, has been tied to the "inevitable" failure of homeowners to make payments on subprime mortgages.

Such foreclosures crested in Minnesota this summer, Cox believes, and likely will continue to decline, since subprime lending largely came to a halt in mid-2007.

But there's still a second wave of foreclosures on the horizon, Cox said — homeowners failing to stay current on payments for so-called "Alt-A" adjustable-rate mortgages.

"Alt-A" is the slice of the mortgage loan market that ranks just above subprime in creditworthiness.

Those loans were made primarily from late 2003 to 2006, and typically start resetting after five years, Cox said.

Whether those homeowners will be able to stay out of foreclosure will have a lot to do with the general health of the economy, he said.

"The second wave could be substantially less — we could see a moderation and a downturn in foreclosures," Cox said. "Or, it could make the first wave look bad but not remotely as bad as the second wave."

Subprime loans generally are targeted to borrowers with tarnished credit histories and little savings available for down payments, according to researchers at the Federal Reserve.

Borrowers with Alt-A mortgages have less serious credit-quality issues, Fed researchers say, or are unable or unwilling to provide full documentation of assets or income. Some of these borrowers are investing in real estate rather than occupying the properties they purchase.

A report earlier this year from the Minneapolis Fed found that six of 10 Alt-A mortgages in Minnesota are scheduled to have their rates reset at some point after Jan. 1.

This week, the Federal Reserve Bank of Atlanta issued a report that noted, among other things, that the rate of foreclosures linked to subprime loans generally has declined in most Fed regions, while foreclosure rates are on the rise for prime and near-prime borrowers, including those with Alt-A and adjustable-rate loans.

Despite the concern about a possible second wave of foreclosures, a report Friday from Edina Realty provided a more upbeat view of the housing market, citing figures from a national report that found more than 60 percent of all foreclosure activity in the U.S. during the third quarter of 2008 was concentrated in six states: California, Florida, Arizona, Ohio, Michigan and Nevada. Courtesy Saint Paul Dispatch.

Fannie Mae To Halt Evicting Renters Of Foreclosed Homes

Fannie Mae is finalizing a national policy that will allow tenants to remain in their homes even if their landlord goes into foreclosure.

The policy will be in effect Jan. 9th and reflects growing pressure on the mortgage company from a legal-aid group that threatened to sue over recent evictions. The company said it will also ensure its current holiday moratorium on new evictions is being followed until the new policy takes effect.

In late November Fannie Mae and Freddie Mac said they would suspend tenant evictions temporarily during the year-end holidays. But despite the pledge, Fannie Mae was proceeding with more than a dozen new eviction cases in Connecticut.

Freddie Mac hasn't announced a similar policy reversal, though a spokesperson said they are "currently evaluating additional actions."

The decision by Fannie and Freddie represents just a slice of the market and excludes many properties purchased with riskier loans that are now falling into foreclosure. Fannie Mae and Freddie Mac, however, are uniquely structured to be able to address the issue, which effectively now has them acting as a type of landlord or property-management company to administer month-to-month leases to renters of their foreclosed properties.

Ted Meyer, a spokesman for Deutsche Bank, one of the biggest trustees of mortgage-backed securities, said Deutsche Bank has no capacity to intervene, saying "the whole issue comes down to ownership" of the foreclosed properties. A given property "is held in trust by us but it is effectively owned by the hundreds or thousands of people that own a tiny sliver of mortgages in any one pool," Mr. Meyer said.

It might fall to the local servicers of the mortgages to decide to halt evictions, he added, because they are responsible for steps such as hiring real-estate agents to put foreclosed properties on the market. It isn't clear how much power -- or will -- a servicing company has to effect a moratorium on tenant evictions.

A New York University study found at least 15,000 renter households in New York City were affected by foreclosure last year. Since then, the number likely has increased Courtesy WSJ.

Oh Christmas Tree!

Many U.S. families will go out this weekend to buy and put up their Christmas tree.

While the use of evergreen trees to celebrate the winter season occurred even before the birth of Jesus of Nazareth, the first printed reference to a decorated tree was in Germany in 1531.

Almost half of U.S. households now use an artificial tree, a third still put up and decorate a real tree, and the remaining 20 percent do not include a tree in their holiday observances.

Christmas trees are grown in all 50 states and each year's crop is worth nearly half a billion dollars. North Carolina is the leading producer, followed by Oregon. China is the leading producer of artificial trees. Courtesy U.S. Census Bureau.

Modified Loans Too Often Still Leading To Foreclosure

Most troubled homeowners whose mortgages were modified are again falling behind on payments, a top banking regulator said on Monday, raising questions about whether policy makers and lenders can successfully help them stay in their homes.

Data from banks show that more than half of loans modified during the first three months of the year were delinquent by 30 days just six months after the terms of the loans were changed, John C. Dugan, the comptroller of the currency, said at a conference in Washington. After eight months, 58 percent were delinquent again.

The rate at which borrowers fall behind payments again — called the re-default rate — appears to be much higher than what previous studies have found. In October, a Credit Suisse study showed that about 30 percent of loans modified at the end of last year were delinquent by 60 days within eight months of the change.

Mr. Dugan said it was unclear why the re-default rates were so high after modifications made by the 14 banks that provided data to his office. He acknowledged that “we have to be careful as we look at this data.” One explanation for the high re-default rate might be that banks were not significantly changing the terms of the loans they modified.

Analysts at Credit Suisse have found that modifications that do not lower borrowers’ monthly payments were more than twice as likely to become delinquent again than changes that reduced payments. Banks like Chase, Citigroup and Bank of America have only recently put more emphasis on lowering monthly payments.

Some loans may also be so poorly underwritten that no modification could help the borrowers stay in homes that they can no longer afford, Mr. Dugan said. That would confirm other studies that show homeowners who become delinquent are much more likely to lose their homes today than in the past.

The Mortgage Bankers Association said last week that 30 percent of homeowners who miss one payment end up in foreclosure a few months later. Historically, only 12 percent to 15 percent fell that far behind and most borrowers were able to catch up, sell their home or strike a better deal with their lender. In California, however, 75 percent of homeowners who miss one payment end up in foreclosure; in Florida, 65 percent who miss a payment do.

A sharp drop in home prices has made it much harder for homeowners to sell their properties for as much as they owe and rising unemployment is putting more borrowers in financial distress. Source New York Times.

How Low Can Interest Rates Go?

Builders and Realtors are applauding the news that Treasury officials are considering a proposal to lower interest rates for new home purchases. But some financial analysts and brokers are less sanguine about the proposal.

For one, they say that news that interest rates could fall lower has iced potential sales, which already received a big boost last week when the Federal Reserve said it would buy up $500 billion in mortgage-backed securities. Refinancing applications tripled on the news, the Mortgage Bankers Association said.

Lawrence Yun, chief economist for the National Association of Realtors, says that reports of subsidized mortgage rates could lure many more potential buyers than the handful of serious buyers who may decide to hold out for lower rates. But he concedes that, in the short term, the news that interest rates may continue to fall “could hold back some consumers” who were serious about buying immediately.

A spokesman for Bank of America says that customers should make decisions based on where mortgage rates currently stand, not on where they might go. “It is as difficult to time rates in the mortgage market as it is to time the stock market. If a borrower determines the current rate makes sense and provides them with an advantage in their situation, that’s a good time to consider taking action,” says Rick Simon, a Bank of America spokesman.

Others worry about the unintended consequences and bottlenecks that could stem from a new surge in lending. “When you combine the Fed plan with the prospects of this new Treasury plan, that’s a lot in a very short period of time,” says Greg McBride, senior financial analyst at Bankrate.com. “Anytime you get that much action in a short period of time, you have to worry… are we inflating the next bubble?”

Builders are pushing their own proposal to lower rates to 3% next year, but some say that 4.5% is too generous. Interest rates, at 5.5%, are near a nearly 50-year low of 5.375% set in June 2003.

Builders say the proposal could help stop a slide in home prices, clear existing inventory and create more jobs.

Lowering interest rates, currently to 4.5% would substantially increase consumers’ buying power. Someone looking at a $200,000 mortgage would be able to consider a $230,000 loan without paying more in interest rates. But any stimulus faces several challenges, including tightening credit, buyers who may not have much savings for a down payment, and weak consumer confidence. Courtesy Wall St. Journal

One In Ten Americans Can No Longer Afford Their Homes

A record one in 10 American homeowners with a mortgage were either at least a month behind on their payments or in foreclosure at the end of September as the source of housing market pressure shifted to the crumbling U.S. economy.

The Mortgage Bankers Association said Friday the percentage of loans at least a month overdue or in foreclosure was up from 9.2 percent in the April-June quarter, and up from 7.3 percent a year earlier.

Distress in the home loan market started about two years ago as increasing numbers of adjustable-rate loans reset to higher interest rates. But the latest wave of delinquencies is coming from the surge in unemployment.

Employers slashed 533,000 jobs in November, the most in 34 years, catapulting the unemployment rate to 6.7 percent, the Labor Department said Friday.

"Now it's a case of job losses hitting more across the board," Jay Brinkmann, chief economist of the Mortgage Bankers Association.

The U.S. tipped into recession last December, a panel of experts declared earlier this week. Since the start of the recession, the economy has lost 1.9 million jobs.

Job losses are already having an impact in rising delinquency rates for traditional 30-year fixed rate loans made to borrowers with strong credit. Total delinquencies on those loans rose to 3.35 percent in September from 3.07 percent at the end of June, the Mortgage Bankers Association said.

There were some modest signs of stabilization. The number of loans that entered the foreclosure process totaled 1.07 percent of all loans in the third quarter, flat from the second quarter.

Though that number likely reflects changes in state laws that delay or extend the foreclosure process and efforts to work out or modify loans that could still fall back into foreclosure.

The Holidays At The Governors Mansion

A nice holiday outing might include a visit to the Governor's Mansion on Summit Avenue in St. Paul, which is now decorated for the holidays and will be open for public tours on three Thursday afternoons in December.

Many governors have lived in the mansion with their families, but Gov. Pawlenty's family spends most nights at their Eagan home. The governor and first lady Mary Pawlenty use the Summit Avenue mansion for many state events.

Horace Hills Irvine, then president of the Weyerhaeuser Timber Co., built the large Tudor home in 1911. His daughter Olivia Irvine Dodge grew up there and donated it to the state in the 1960s, after her mother died. Dodge is well-known as the patron of the Dodge Nature Center in West St. Paul.

The mansion is at 1006 Summit Ave., and the free public tours with live music will be from 1 to 3 p.m. Dec. 4, 11 and 18.Courtesy Minnpost.com

Fannie & Freddie Freeze Foreclosures

Fannie Mae and Freddie Mac, the two biggest home loan finance companies, on Thursday said they would suspend foreclosures of occupied homes until early 2009, one of the biggest moves to date by the government to stem the tide of evictions and home losses.

Fannie Mae and Freddie Mac said hiatus on foreclosures -- which will run from November 26 through January 9 -- will give mortgage servicers more to work out easier borrowing terms for troubled homeowners. Courtesy Reuters

Owners Find New Use For Condo - A Garbage Dump

A massive cleanup began on Monday at a condominium in Littleton, Colorado. About 200 bags of trash have already been filled and investigators say a few hundred more could be filled on Tuesday.

The trash is all coming from the 900-square foot home. "There is a foot deep of feces and it is unclear right now if it is animal feces or if it's human. And they said around the bathroom it's even worse," said Susan Hernandez, a neighbor.

A restoration team was set to come in on Tuesday to set up a chute from the third-floor balcony into a Dumpster to get all the garbage out. The conditions were discovered when there was a water leak that was flooding the lower levels.

Firefighters with the Littleton Fire Department came out and when they saw what was inside, they called the Jefferson County Sheriff's Department. The restoration company is expected to take a week to clean out the apartment. Courtesy KUSA Television

We're Not As Big A Loser As The Rest Of The Nation

According to the latest Zillow Real Estate Market Reports, home values in the Twin Cities decreased -8.92% in the third quarter of 2008, compared to the third quarter of 2007. Nationally, home values decreased -9.7% during this same period. Good news!

Mortgage Refinance Short Term Solution To Terminal Problem

The banking industry has proposed modifying millions of mortgages to prevent foreclosure. However, changing home loans doesn't always prevent problems and most often it only delays the inevitable foreclosure. This according to Lender Processing Services, a mortgage payment processor that also tracks 80 percent of the outstanding home loans in the market.

"Industry evidence indicates that in a majority of instances loan modifications simply delay the timeline from default to foreclosure but don't prevent them from taking place," according to analyists at Keefe, Bruyette and Woods, (KBW) a specialist in financial services. Their analysis of the current mortgage market was gleaned from information provided by Lender Processing Services. More startling, the report states that after mortgages are modified, roughly 25 percent go delinquent again after just one post-modification payment and more than half end up delinquinquent after multiple post-modification payments.

The internal models of Lender Processing Services suggest that the number of foreclosures will continue to rise through 2010 before peaking in 2011, according to the KBW analyists.Information courtesy KBW and Marketplace.com.

Talking Turkey: Now's The Time To Prepare For Thanksgiving

Fresh off of Halloween, let’s dive into Thanksgiving preparations. This is probably a good idea because there is so much going on during fall, the big feast can often sneak up on you. Here are some simple tips to add a special twist this year.

You don’t have to purchase new china or a tablecloth to update your color palette. Use an ivory or white tablecloth and bring color in with candles and napkins. It’s simple, inexpensive and very effective. The food is aromatic and beautiful and the true center of attention anyway.

Centerpieces do not have to be complicated. Scatter a variety of nuts or beans in your hurricane lamps or put out small floral arrangements. Avoid anything too big, you want to encourage cross-table conversation and have ample room for the food. Clean off your buffet table or set up a card table covered with a table cloth.

There is rarely enough room on the table for the all the food, so make sure you have room for the overflow ahead of time instead of scrambling once the hot food is ready to be served. Usually there are several desserts and not everyone is ready to indulge at the same time. Put the sweets out along with coffee and tea and allow people to enjoy them when they are ready.Courtesy RISMedia

Americans Seeing Value In 'Living Green"

A survey conducted at home shows in 15 cities across the country gauging consumer environmental practices suggests that many Americans are going green when it comes to their homes.

Despite “cost” being singled out by 36 percent of respondents as the greatest impediment to going green, half of those surveyed have paid more money for an energy efficient product in the past 12 months and one in three homeowners (30%) claim they would be willing to spend $5,000 or more on green improvements to increase a home’s appeal to potential buyers.

The findings are the result of the Better Homes and Gardens Real Estate Living Green Consumer Survey which looked at responses from over 2,300 consumers. The results were announced as a part of the Better Homes and Gardens and Green Works Living GreenTM Tour finale - the culmination of an eight-month, 15-city tour promoting healthy and environmentally friendly living.

Additional survey findings revealed that 82 percent of respondents believe they are informed when it comes to issues pertaining to the environment. Some of the other factors keeping survey respondents from being greener included convenience (22%), lack of knowledge on how to (18%) and lack of time (17%). However, many consumers reported engaging in “eco-friendly” or “green” acts in the past six months, including recycling (73%), replacing incandescent lights with CFLs (69%), conserving water (57%), adjusting the thermostat (51%) and purchasing energy efficient appliances (30%).

The Living Green Tour and Exhibit included stops in Hartford, Conn.; Greenville, S.C., San Francisco, San Diego, Las Vegas, Los Angeles, Phoenix, Houston, Miami, Nashville, Tenn., Boston, Washington, D.C., Jacksonville, Fla., Atlanta, and New York. Courtesy RISMedia

Minneapolis Enacts New Rules For MAC Soundproofed Homes

Roughly 10,000 airport-area homeowners in Minneapolis will soon be governed by tougher and more expensive sound-insulation standards if they build additions. The Minneapolis City Council on Friday approved the standards, effective Jan. 1. The standards apply to homes that have gotten or will get noise insulation from the Metropolitan Airports Commission.

The city was required to draft, but not necessarily to adopt, such an ordinance under last year's airport noise lawsuit settlement with the commission. That settlement is producing sound-dampening treatments for thousands more homes. Minneapolis officials adopted the ordinance with the reasoning that it made no sense for MAC to insulate a home, then for the owner to puncture that envelope with an unprotected addition. City officials estimate that the requirements could raise construction costs by up to 15 percent.

Richfield and Eagan are both considering proposals and are expected to decide on their versions by the end of the year.

The Minneapolis change requires that new homes or home additions in the noisiest areas be built with materials that reduce outside noise levels by a specified amount within the house, and install central air conditioning or whole-house venting. Homes in the rest of the settlement area, and apartments, would need only central air. The restrictions don't apply to remodeling projects.

Courtesy Star Tribune

Sink A Putt, Win A House

Dan Brasch and Jenna Fletcher are trying to lure buyers to their home at 2511 Countryside Court not with a free luxury car but by offering to pay off the buyer’s mortgage — provided that the buyer makes a hole-in-one at the seventh hole of Stillwater’s Applewood Hills Golf Course.

According to the St. Paul Pioneer Press, Brasch convinced an unnamed sports marketing firm to underwrite the promotion for a $250 premium. If the buyer makes the hole-in-one, the sports marketing company will pay off the mortgage. The house has been on the market since June, and the offer expires on November 22. Photo courtesy NorthstarMLS.com

Citibank Calls Off Foreclosures - For Now

Citigroup says it is imposing a moratorium on most foreclosures as part of a series of initiatives aimed at helping at-risk borrowers remain in their homes.Citi said late Monday it won't initiate a foreclosure or complete a foreclosure sale on any eligible borrower who seeks to stay in a home if it is the borrower's principal residence, the homeowner is working in good faith with Citi and has sufficient income to make affordable mortgage payments.

Citi said it is also working to expand the program to include mortgages the bank services but does not own.

Additionally, over the next six months, Citi plans to reach out to 500,000 homeowners who are not currently behind on their mortgage payments, but who are deemed as potentially needing assistance to keep current with their payments. This represents about one-third of all the mortgages that Citigroup owns, the bank said.

Citi plans to devote a team of 600 salespeople to assist the targeted borrowers by adjusting their rates, reducing principal, or increasing the term of the loan, steps known in the mortgage industry as a workout.

Citi is targeting homeowners in geographic areas with higher-than-average unemployment and foreclosure rates, primarily in Arizona, California, Florida, Michigan, Ohio and Indiana. The program is expected to affect about $20 billion in mortgages.

More than 4 million American homeowners with a mortgage were at least one payment behind on their loans at the end of June, and 500,000 had started the foreclosure process, according to the most recent data from the Mortgage Bankers Association.

Low Home Prices Causes Surge In First Time Home Buying

Low home prices and excess supply helped drive a rise in first-time U.S. home buyers and reduce excess inventory, according to a study released Saturday by The National Association of Realtors.

According to the survey the number of first-time buyers rose to 41 percent from 39 percent of all transactions in 2007. National Association of Realtors Chief Economist Lawrence Yun attributed the increase to low home prices, "plentiful" supply and affordable interest rates. Looking ahead, Yun expects further increases in first-time home buyers because of a temporary first-time buyer tax credit and improvements to the FHA loan program.

According to the study, the median age of first-time buyers was 30, down from 31 in 2007. The median income for a first-time buyer was $60,600 and typical first-time buyers bought homes costing $165,000. Of first-time buyers who made a down payment, 69 percent used savings and 26 percent used money from a friend or relative. Another 7 percent received a loan from a relative or friend, while 16 percent used funds from their investments. A fixed-rate mortgage was chosen by 92 percent of those surveyed. Looking at home sellers, the median age was 47 with income of $91,000. Three-quarters of respondents were married, lived in their home for six years and had their home on the market for eight weeks.

Results from the survey come from a questionnaire that NAR mailed to 133,000 home buyers and sellers nationwide who bought their homes between July 2007 and June 2008.

Oh The Tumblin' Tumbleweeds

In a scene reminiscent of a science fiction film, residents in Cheyenne, Wyoming woke up Thursday morning to find tumbleweeds piled up against their windows and doors by the northwest winds, the Wyoming Tribune Eagle reported.

Tumbleweeds blow into town every autumn, but a city official says this week's dump is noticeable because the winds of Wednesday and Thursday were the first extreme weather after a relatively calm fall season.

The National Weather Service reported sustained winds of 35-40 mph in the city with gusts up to 66 mph.

Tumbleweed, also known as Saltwort, Russian thistle or Salsola is native to Europe, Asia and Africa but is believed to have been brought to the US in a consignment of flax.

The plants break away from their roots in the autumn and are carried by the wind, spreading their seeds as they go.

FDIC, White House Just Can't Agree - While Folks Lose Their Homes

Disagreements over how to structure a federal foreclosure-prevention program are complicating and potentially delaying what is likely to be the Bush administration's last attempt to forestall sliding home prices.

The White House and the Federal Deposit Insurance Corp. are at odds over basic questions about the effort's size and breadth, several government officials said. The expectation that a new president could immediately redraw the design and scope of any plan has further delayed matters.

The FDIC has been developing a proposal, which some estimate could help between two and three million homeowners, designed to encourage banks to rework troubled loans by providing a partial federal guarantee for losses on modified mortgages that meet specific criteria, people briefed on the proposal said. Under the plan, the government would cover roughly half the loss on reworked loans that went into foreclosure.

The plan would use between $40 billion and $50 billion from the government's $700 billion financial-market rescue fund to create these loss-sharing agreements between banks and the government.

The White House is reviewing several ideas, including a new one that would further expand the role of the U.S. Department of Housing and Urban Development. Details of that proposal couldn't be learned, but it is expected to be different from that crafted by the FDIC.

The FDIC's plan was believed to be in advanced stages and some government officials felt it could have been unveiled last week. Several officials said the plan is strongly opposed by the White House, though officials there deny killing the idea.

Treasury Secretary Henry Paulson agrees with FDIC Chairman Sheila Bair that the administration needs to take additional steps to help homeowners, but has concerns with some aspects of Ms. Bair's proposal, according to people familiar with the matter. Among his concerns is that sharing eventual losses with the government could give lenders an incentive to push homeowners into foreclosure.

The FDIC's proposal has garnered support from multiple camps, as it is seen as the most aggressive in its effort to broadly modify loan terms. Still, because full details of the proposal haven't been released, it is unclear how it would prevent lenders from trying to take advantage of the new government guarantee.

Senate Democrats have called for the White House to support the FDIC's efforts in this area. Ms. Bair, a White House nominee who has sometimes been at odds with the administration over its response to the housing crisis, told a Senate panel two weeks ago that talks were continuing, but provided few details. Ms. Bair's term as FDIC chief extends until 2011.

Foreclosures tend to worsen the spiral of falling house prices because they depress the values of neighboring properties. They are also a central source of the problems undermining the financial system and the broader economy.

White House officials are consulting with multiple industry and government groups, including Fannie Mae, Freddie Mac and HUD, people familiar with the matter said.

White House spokeswoman Dana Perino said the Bush administration would accept input from the winner of Tuesday's election and intends to move ahead quickly.

Negative And Positive News In The Home Front

Nearly 12 percent of mortgages in Minnesota are under water, meaning that the owners owe more than the property is worth, a new study released on Friday found.

The report, released by First American CoreLogic, found that out of 433,547 mortgages in Minnesota, 51,770 are mortgages where homeowners owe more than the value of their home. Another 71,616 are within 5 percent of becoming negative value. Despite the grim news Minnesota is better than the nationwide averge where 18 percent (7.5 million mortgages) of mortgages are for more than the home is worth and 5 percent (2.1 million mortgages) are within 5 percent of becoming negative value. Nevada had the highest percentage of negative equity mortgages, at 48 percent, followed by Michigan at 39 percent. New York and Hawaii had the lowest percentages, at 4.4 and 5.6 percent respectively.

First American said that the data include over 80 percent of all mortgages in the US, nearly 42 million properties that have a first and/or second mortgage. The data include mortgages up to September 30, 2008.

This kind of negative value was first seen several years ago in the auto industry when folks tried trading into new vehicles only to find they owed more on their old vehicle than it was worth. The trend was accelerated when high gas prices drove the value of SUV's and other large vehicles. The auto industry is paying the price today with sales dropping by up to a third in the new car market. While it's not anticipated that the same would happen in the housing market, it could cause a slowdown in the resale of exisiting homes and possibly cause an uptick in home foreclosures as homeowners walk away from homes that no longer reflect their original purchase price.

First American CoreLogic is a property information company in Santa Ana, Calif. Information courtesy Mpls Saint Paul Business Journal

Case-Shiller Is Not Our Friend

Home prices fell in August for the 25th consecutive month and prices in 10 major markets plunged a record 17.7% year over year, according to the Case-Shiiller Home Price Index, a key indicator of real estate values..

"It's Economics 101," said Jared Bernstein, senior economist with the Economic Policy Institute. "You have a huge speculative bubble leading to a severe inventory overhang. And now home prices will have to decline accordingly."

The indexes compare the sale prices of the same homes each year to determine price trends and are considered one of the most accurate home price gauges.

Minneapolis saw a decline of 13.8%, which is about in the middle of the pack. No city showed a price gain during the last 12 months.

Of course, the August indexes don't reflect the financial market meltdown that hit in September and severely restricted access to credit, according to Richard DeKaser, chief economist for National City Co. He believes the pace of price declines has picked up since then.

"There are two explanations for these steeper declines," he said, "neither of which are encouraging. One is that the difficulty in obtaining credit has further constricted demand. The second is that home sellers are finally capitulating on prices. They've been holding out for months, refusing to sell except at their prices. Now they're throwing in the towel."

That is reflected in existing home sales volume, which ramped up 5% in September as prices fell. Even new home sales went up slightly in September.

Much of that statistical trend is being driven by data from hard-hit western states like California. The California Association of Realtors reported last week that home sales volume jumped a whopping 97% in September compared with the same period a year ago. But the median price of an existing home has fallen 41%.

If that trend spreads to other states, price weakness could last for many more months, even as sales volume picks up. What happens after that largely depends on the confidence bolstering effect of the government economic stimulus packages, according to DeKaser.

"I'm optimistic," he said. "More credit will be available and housing inventories will be reduced. The deterioration will give way to a more balanced market."

But not everyone agrees that the stimulus packages, which are designed to loosen up tight credit, will prove helpful. Peter Schiff, president of broker-dealer Euro Pacific Capital, believes the impact will be decidedly negative.

"The goal of all these plans is to give consumers more money to spend. However, excess consumer spending is part of the problem, not part of the solution" he said. And easy credit means people will spend more on consumer goods and they'll have less to spend on housing. As a result, he expects home prices to fall a lot more.

"They'll surrender all the gains they made in the past 10 years," he said, "and be even lower than they were 10 years ago." Courtesy CNN

Foreclosures Up In State Down In Minneapolis

A recent report by RealtyTrac reveals that Minnesota foreclosures rose 42 percent in September compared to foreclosure filings during the same period in 2007. Overall there were 2,144 foreclosure filings in Minnesota during September, placing Minnesota 26th in the nation for foreclosure filings that month. Hennepin County made up more than half of all foreclosure filings in the state.

The good news? The Twin Cities actually fell in the nationwide rankings for foreclosure filings during the third quarter. Out of 100 metro-area foreclosures, Minneapolis-St. Paul ranks 61st. During that period the Twin Cities saw nearly 5,000 foreclosure filings, or about 0.38 percent of total households went into foreclosure.

Source Realtytrac and The Minnesota Independant

Realogy Launches Save The Dream (And Save The Listing) Initiative

In an effort to address the foreclosure crisis affecting hundreds of thousands of Americans, Realogy Franchise Group President and CEO, Alex Perriello, has issued a call to action to the more than 300,000 real estate agents affiliated with Realogy to reach out to families struggling against foreclosure.

Calling it the ‘Save the Dream” initiative, Perriello sent a letter to every broker and agent within the organization with a single goal defined: Find just one family in their local market facing foreclosure and help them reach out to their lender and hopefully negotiate a resolution.

While altruistic, the initiative has practical roots. Most likely some of those homeowners will be forced to sell, creating a new listing for the agent and Realogy.

Locally, Realogy licenses Coldwell Banker, Sothebys and Century 21 brands, which are franchised offices and not owned by Realogy. There has been some speculation that Realogy has been struggling more than their competitor Home Services of America (HSA) which is owned by financier Warren Buffett. Informaton courtesy Realtrac.

Zillow Employees Another Victim Of Real Estate Implosion

Count Zillow as yet another company impacted by the massive downturn in the real estate industry.

Last week Zillow founder and CEO Rich Barton announced via the company blogsite that they were laying off 25 percent of their staff, effective immediately.

Despite 5.4 million unique visitors to Zillow.com in September, a 42 percent increase from September 2007, "revenues do not yet cover our expenses" according to Barton. While Zillow has 'sizeable cash reserves', Bartonfound it necessary to reduce expenses. In a previous interview Barton had told a reporter for the New York Times that Zillow did not expect to turn a profit this year or even next year.

Barton attributes the increase of visitors to Zillow on 'fear, value-shopping and curiosity', and not actual home buyers, which are the ideal target of advertisers. Source Zillow.com and New York Times.

Mervyns Last Gasp Of Life

Mervyns LLC, the bankrupt California retail chain, plans to close its remaining 149 stores and shut down after nearly six decades in business.

The retailer will hold going-out-of-business sales during the holiday season to raise money for its creditors. The liquidation will be conducted under Chapter 11 bankruptcy law, Hayward, California-based Mervyns said today in a statement.

Mervyns, whose founder Mervin G. Morris opened his first store in 1949 in San Lorenzo, California, filed for bankruptcy protection in July, joining a dozen other retailers hurt by a slowdown in consumer spending. Mervyn's reported a $12.3 million loss in August and debt that included a $329 million credit line.

Morris expanded his original store 13 times before opening additional stores in 1964, according to the company's Web site. Mervyns went public in 1971, and in 1978 merged with Dayton Hudson Corp., now Target Corp. Mervyn's was sold to a private investment group in September 2004. The chain had 177 stores when it filed for bankruptcy. Bloomberg.com

New Housing Construction Off.....Way Off

Construction of new homes plunged by a bigger-than-expected amount in September as builders slashed production yet again, putting the country on track to build the fewest homes this year in more than six decades.

A barometer of future building also dropped, falling to the weakest level in more than 25 years. Analysts blamed the renewed swoon on the financial crisis which erupted with force this fall, raising new anxieties among potential home buyers and making it harder for builders to get construction loans.

The Commerce Department reported Friday that construction of new homes and apartments dropped by 6.3 percent last month, a much bigger decline than the 1.6 percent decrease that had been expected. It pushed total production to a seasonally adjusted annual rate of 817,000 units. That's the slowest pace since January 1991, when the U.S. was in a recession and going through a similar painful housing correction.

The Midwest saw a gain of 5.6 percent, although that came from strength in apartment construction as single-family building also hit a record low in that region.

Applications for building permits, considered a good sign for future activity, also fell sharply in September, dropping by 8.3 percent to an annual rate of 786,000 units, the weakest level since November 1981. Source AP and U.S. Commerce Department.

Neighborhood Spotlight: Morris Park

Morris Park makes up the southeastern border of Minneapolis. The neighborhood abuts the Twin Cities Air Force Reserve Base on the south, and 54th Street is its northern extent. Morris Park is also bordered by 34th Avenue on the west and 46th Avenue on the east, the latter of which serves as the city border.

The neighborhood took its name from Mary C. Morris, daughter of Franklin Steele. Steele was the first European-American settler of the city of St. Anthony (on the east bank of the Mississippi River, in what is now Minneapolis), and he donated land to the University of Minnesota.

A majority of the single-family homes were built from the 1920s through the 1960s. A large reason for the development in Morris Park during this time was the availability of streetcar routes and rail lines in this area that date back to 1865.

Today, Morris Park is part of the Nokomis community. Public and shopping amenities abound for Morris Park with parks, lakes, a post office, library and shops either in Morris Park or adjacent neighborhoods. Source City Of Minneapolis

Foreclosure Auctions Soaring But Prices Stay High

While the number of foreclosure auctions is soaring, many transactions aren’t taking place at asking prices because some lenders are demanding too much, brokers and investors say.

Many investors, who make up the bulk of active bidders at auctions, say the banks are asking too much for the homes, essentially outbidding them on the courthouse steps. So far this year, 748,381 homes—or 46% of the foreclosures—have gone into the possession of the banks as real-estate owned, or REOs, because no bidders were interested in them at auction.

With the banks’ inventory piling up as the properties fail to sell, the banks will likely have to discount their prices more in order to unload the homes, real estate experts predict. Such discounts could continue to drive the broader real estate market lower.

Few people placed bids at a recent auction run by the Sheriff’s office in New Jersey’s Bergen County. “If you want to go back a few years ago, it was standing room only,” said Don Pfleger, a real estate broker who said he has bought about a dozen properties at auction over the past several years. “Now it’s getting thinner as the weeks go on, as more and more properties are up for sale.” On this day at the end of September, only three of the 23 properties on the block went to a bidder. The remaining 20 went back to the banks.

In Minnesota, due to tough consumer protection laws, it's rare that anyone but the bank that holds the mortgage is bidding on homes at a sheriffs auction. Because defaulted homeowners have up to 6 months to reclaim their property, there is little incentive for investors to bid on homes in foreclosure auctions. Still, banks are asking premium prices for foreclosed homes they have acquired, rather than risk writing down huge losses. Unfortunately, this seems to be only a short term strategy for the bank, as most offers are going to come in for less than the banks asking price. Source WSJ and other information.

Deconstructing Your Old House

A recent episode of the popular home remodeling show This Old House on PBS introduced viewers to the concept of home deconstruction.

Deconstruction is construction in reverse; dismantling buildings by hand and saving the materials to be used again instead of send them to a landfill. Demolition creates waste, but deconstructions creates jobs, reusable materials and for homeowners- a tax deduction!

The ReUse Center in Minneapolis specializes in deconstruction of old homes. Some homes are torn down when the land is more valuable than the property, and the homeowner wants to build anew. Other opportunities for deconstruction happen when urban redevelopment projects take down multiple homes. This was the case when Childrens Hospital used the services of the Reuse Center in a major expansion program in South Minneapolis.

Deconstruction services was first envisioned as a way for the ReUse Center to secure a more stable supply of quality used materials. The ReUse center aims to reduce demolition waste, provide quality used materials to the public and create job opportunities.

If you are interested in home deconstruction or need reclaimed building materials, call The ReUse Center at (612) 724-2608. Information courtesy The ReUse Center and PBS.

Kudos Given To Saint Paul's Summit Hill Neighborhood

Saint Paul's Summit Avenue has been designated the nations best street from the victorian era, according to the American Planning Association.

During the late 19th century, Summit Avenue was not considered the grandest of the country's Victorian-era residential boulevards, yet today this 4.5-mile-long boulevard stands alone as the country's best-preserved avenue from that period. Remarkably, more than 370 of the gilded-age mansions and other residences representing a dozen different architectural styles remain.

Complementing this architectural legacy, are the avenue's marvelous vistas, park-like qualities, and a decades-long history of planning measures, civic participation, and private stewardship that kept Summit's unique character intact.

The first house to be built on Summit, or the "bluff" as it was then known, was by Edward Duffield Neill in 1855. It was not until the 1880s that the first major wave of house building got under way. The most famous house built during this time was the Romanesque mansion in 1887 for Canadian-American railroad executive James J. Hill. Located at 240 Summit, the Hill House is one of the residences that helps give the easternmost section or Lower Summit its embassy row–like character.

About this same time the Summit Avenue Improvement Association was formed in order to encourage property owners along the western-most half of the avenue to donate enough land on each side of the street to widen the public right-of-way from 100 to 200 feet. This allowed creation of a center median, including a bridle path for horses. Planted with trees and shrubs, today this shaded canopy imparts the feeling of standing in a large, open-air ballroom.

Summit Avenue saw another period of opulent mansion construction during the Roaring Twenties, in such styles as Beaux Arts, Spanish Colonial, Twenties and Tudor Villa, Georgian Revival, and Rectilinear. With the Great Depression, however, new building stopped and many owners had to give up the homes altogether. Luckily, Hill's mansion and several other estates were bequeathed to the Roman Catholic Archdiocese of Saint Paul, which maintained them until the 1970s when a back-to-the-city movement began to attract a new group of owners.

The American Planning Association is a Washington D.C. based non profit that "provides leadership in the development of vital communities. We measure our success by the successes of our members and the communities they serve." Source APA website.

Surprising Good News In Pending Home Sales

A gauge of future home sales took a surprising jump in August, a positive sign amid the sluggish housing market, but perhaps coming too late in the current financial crisis.

The National Association of Realtors (NAR) reported Wednesday that pending sales of previously owned homes rose 7.4% over July 2008. Pending sales figures are based on contracts signed by homebuyers in August. The transactions typically close a month or two after signing.

Analysist note that the increase is most likely due to investors snapping up heavily discounted foreclosed homes.

The median price for an existing home nationwide is now $200,700. It was $218,900 in 2007, a drop of nearly 10 percent.

By region, pending sales in the Midwest rose an average of 3.6%. While it is a small increase, the NAR had earlier estimated a 3.2% decline. Source NAR and Wall Street Journal.

Architectural Gems: The Washburn-Fair Oaks District of Minneapolis

The Washburn-Fair Oaks Historic District contains a significant concentration of residences built at the turn of the century by prominent Minneapolis developers. These residences exemplify the fashionable stylistic modes of architecture during this period and were designed by important local architects, including William Channing Whitney and Ernest Kennedy. The designated area is defined by East Franklin Avenue on the north, Interstate 35W on the east, East 26th Street on the south and the alley between Nicollet Avenue and First Avenue South on the west, but it also reaches over to include the former Christian Scientist Church at the corner of Nicollet Avenue and East 24th Street. Washburn Fair Oaks Park, originally the site of Senator W. D. Washburn’s home “Fair Oaks,” gives the area its name and serves as an aesthetic core. The Minneapolis Institute of Arts (2400 Third Ave. S.), designed by McKim, Mead and White in 1912, operates as the area’s major landmark and activity center.

In the early years of Minneapolis’ history the most desirable and prestigious residential areas were located close to the hub of activity, the city’s central business district. As the population grew, however, prominent families began to move away from the once choice areas of town and build their large and elegant homes along the outer edges of the city. The pockets of fine residential structures along the 1866 city limits of Minneapolis testify to this trend, which began as early as the 1870s.

Although incorporated into the city in 1867, intensive settlement of the Washburn-Fair Oaks District did not begin until the early 1870s. Improved transportation furthered development of the area. In addition to elegant homes, single- and two-family houses and large apartments began to fill the vacant land. New settlement of the area continued until about 1930.

The Washburn-Fair Oaks District provides a varied platter of popular architectural styles that existed during the late 19th and early 20th centuries. Many of the structures have retained their original designs although their functions have changed. The Luther Farrington House (2100 Stevens Ave.) and both of the Crosby houses (2104 Stevens Ave. and 2105 First Ave.) represent examples of the Georgian Revival style. The two Pillsbury houses (100 and 116 E. 22nd St.) reflect characteristics of the Medieval Revival, while the Edward Gale House (2115 Stevens Ave.) is Renaissance Revival in conception. The E.A. Merrill Residence (2116 Second Ave.) represents the fanciful complexities of the late Victorian brownstone era. Courtesy city of Minneapolis

Twin Cities Number 2 On Dubious List Of Distinction

According to an article in Forbes magazine, Minneapolis / St Paul are expected to be the 2nd most expensive major cities in America when it comes to heating homes this winter. Only Boston ranks ahead of Minneapolis in the survey of 20 major cities.

Based on projected weather patterns and forecasts, Twin Cities residents are expected to use the most energy in any city measured to heat their homes during the winter. Fortunately, most Twin Citians use natural gas to heat homes (82%) which will keep heating costs low. Still, Forbes anticipates an average monthly heating cost: $1,643 (which is a good reason to sign up for budget helper programs).

Forbes’ figures are based on how much an average family of four with a 2,100 square foot house would spend each month to heat its home. Energy demand figures came from 10 years of National Weather Service data on what are called “heating degree days”. The index measures daily temperature and power demand and points to how much colder the outside temperature is than a room temperature of 65 degrees Fahrenheit. Courtesy Forbes magazine.