Federal Money For Foreclosed Homes

The state of Minnesota and several local city and county governments will receive nearly $58 million in federal funds to buy and redevelop foreclosed properties, Gov. Tim Pawlenty announced Friday.

The U.S. Department of Housing and Urban Development has awarded $38.8 million to the state, $5.6 million to the city of Minneapolis, $4.3 million to the city of St. Paul, $3.9 million to Hennepin County, $2.76 million to Dakota County and $2.37 million to Anoka County as part of its Neighborhood Stabilization Program.

The money comes from the Housing and Economic Recovery Act of 2008, which included $3.92 billion in funding for communities to buy foreclosed homes at discounted prices and rehabilitate or redevelop those properties in response to rising foreclosures and falling home values. HUD is awarding the funds based on the number and percent of foreclosures, subprime mortgages and mortgage defaults and delinquencies.

It's hoped that a portion of the funds will be used to purchase and demolish existing substandard homes in Minneapolis, with the expectation that new housing will be built in their place. Source Minneapolis Saint Paul Business Journal.

Mixed Messages In New Home Sales

New-home sales dived to the lowest level in 17 years during August and prices kept dropping, a Commerce department report said Thursday. However in the Midwest, new-home sales actually rose 7.2% Sales of single-family homes decreased nationally by 11.5% last month to a seasonally adjusted annual rate of 460,000. Economists had forecast an August sales rate of 508,000. The level of 460,000 was the lowest since 401,000 in January 1991.

Home sales have fallen four times in six months. New-home sales were 34.5% lower during the same time August 2007. Mortgage credit has tightened. High inventory of unsold homes are hurting the housing market – and the rest of the economy. The surplus is driving prices down. Falling prices, in turn, are keeping would-be buyers from signing on the dotted line as they wait for a better deal. Builders are breaking new ground at a declining rate, discouraged by excess supply and declining sales.

In a promising sign, inventories fell, down to an estimated 408,000 homes for sale at the end of August from July’s 427,000. The figure of 408,000 was the lowest since 405,000 in August 2004. But because sales fell so sharply, the ratio of new houses for sale to houses sold in August climbed, rising to 10.9 from 10.3. Builders suggest a figure of six months, or 6.0, indicates a healthy balance between supply and demand.

An estimated 39,000 homes were actually sold in August, down from 44,000 in July, based on figures not seasonally adjusted Source: The Wall Street Journal

No Light At The End Of The Tunnel

Pundits have long said that the financial sector isn't going to recover until housing does, but the recent carnage in the banking space is likely to make it much harder for a housing rebound to happen.

"As long as the economy founders, there can be no recovery in the housing market. This makes homebuilders a risky bet for banks," said Vicki Bryan, a senior yield analyst for corporate bond research firm, Gimme Credit. Bryan added that since banks aren't in a position to make risky bets, credit will be harder for homebuilders to obtain at a time when they need it most.

"What little credit that is available to the sector today will probably diminish further," Bryan said, forecasting that the amount homebuilders will be allowed to borrow will fall in relation to declining property and home values. In such an environment, the ability to generate cash is a key strength, Bryan said, singling out Lennar, Centex, Hovnanian Enterprises and Pulte Homes as companies she expects to outperform the beleaguered housing sector.

It's hard to see the light at the end of the tunnel for the U.S. housing market. In August, housing starts fell 6.2% to an annual rate of 895,000--the lowest since January 1991 and 33.1% lower than last year for the largest year-over-year drop since March. Despite government intervention, housing prices aren't stabilizing, forcing home builders to sell land at a loss and increase financial incentives on already-lowered home prices. Courtesy of Forbes with additional information provided by Reuters.

Uptown City Apartments Changes Hands

Despite a lagging market for commercial real estate, apartment buildings continue to be a valuable and sought after commodity among investors. Dallas-based Invesco Real Estate paid $30.1 million for Uptown City Apartments, a price that works out to nearly $185,000 per apartment unit. The seller was Farmington Hills, Mich.-based Village Green Companies and its partner Massachusetts Mutual Life Insurance Co. The deal closed on September 2.

Uptown City Apartments is actually two separate buildings that stand a few blocks apart at 714 and 1220 West Lake Street, respectively, and offers a combined 163 apartments. Uptown City Apartments was 98 percent leased at the time the deal closed. The development includes 222 enclosed parking spaces and some retail space.

The Uptown City deal marks the second large local apartment deal to close within the last month, according to local property sales records.The Boston-based Intercontinental Real Estate Corp. bought the 353-unit International Village in Bloomington for $30.1 million, in a deal that closed in August. The property was 98 percent full The pricing on that deal works out to roughly $85,000 per unit. Earlier this year, Seattle-based Olympic Investors paid $24 million for The Cosmopolitan, a 255-unit building in the Lowertown area of downtown St. Paul. That deal closed in January.

Village Green still has interests in 6 local apartments. The company’s latest project, the 213-unit Eitel Building City Apartments, opened in January near Loring Park in Minneapolis. Village Green also plans to develop the 175-unit Mill District City Apartments in downtown Minneapolis along Washington Avenue near the Guthrie Theater on which another developer once planned condos. Construction is slated to start this winter. Courtesy Finance and Commerce.

The Falling Leaves

It's time again to don the warm fall jackets and rake the leaves. The following are some tips from the University of Minnesota Extension Service for managing leaves in your yard.

As leaves begin to fall, you can just mow them into the lawn, says Bob Mugaas, with the U of M. In other words, mowing can make short work of a light covering of leaves.

If you mow on a regular basis, chances are you won't exceed the amount of leaves you can mow into the lawn, Mugaas adds. "When you're done, your lawn should look as if it's been raked," he says. "If you can see shredded leaves on top of the grass, rake the excess up. Leaves covering the grass block sunlight to the grass plants."

Some trees dump all their leaves in a short period of time. You may need to put the bagger on the mower and collect the leaves at least once, Mugaas advises.

Shredded leaves decompose faster on the lawn than whole leaves. "We have found that some mulching lawnmowers do a good job of shredding leaves into small chips," says Tom Halbach from the U of M.. You can also shred leaves by making several passes with the mower

Fertilizing the lawn will help decompose leaves and give the grass a good start next spring. Halbach says your last fall fertilizer application should go down by about Oct. 27. Apply nitrogen at a rate of one pound per 1,000 square feet. A likely fertilizer ratio will be 4-0-3. If bare patches are taunting you, try dormant seeding in late October. Work the seed into the soil, water it well and hope the soil remains cold (and germination does not begin) until next spring. "It's a bit of a gamble," says Mugaas. "The window of opportunity stays open until early November. Good soil-to-seed contact is imperative. Just scattering seeds on bare ground won't work."

On dormant seeded areas, delay using any herbicide next spring until the lawn has been mowed three or four times. This particularly includes a pre-emergence herbicide for crabgrass. As long as the daytime temperatures remain in the 55- to 60-degree range this fall, there's still time to apply broadleaf weed control products. When daytime temperatures drop below 55 degrees, it's too late.

Sodding can be done thru mid- to late October. Water it in. Exposed sites, especially, should be watered frequently to keep the sod from drying out and to promote rooting. Source Univ. of MN / Internet

Home For The Holidays

Did you know that furniture retailers do a lot of their business in September? Why September? Summer is over, the kids are back in school and many homeowners are thinking Thanksgiving. That’s right, Thanksgiving!

With substantial lead times in the furniture industry, you just may have to order your furniture today to ensure delivery by the holidays.

Real estate is much the same way. If you want to ensure you are settled into a home by the holidays, the time is NOW to buy. But why now when the holidays seem to be months away?

Typically you may take 30 or more days to find a home wait up to 60 days until closing. This doesn’t even take into account moving, decorating and of course, buying new furniture. Time marches on!

Thinking of moving before the holidays? Thinking of calling me? The time is NOW!

Bleak News From Commercial Real Estate

Sixty percent of U.S. commercial real estate executives surveyed said they believed the current credit crisis had eclipsed the Savings & Loan crisis of 1989-1991 as having the greatest impact on the state of the industry.

Nearly 80 percent said they did not believe the meltdown of financial powerhouses -- the bankruptcy of Lehman Brothers, Bank of America, the takeover of Merrill Lynch & Co and American International Group's bailout by the federal government -- signaled the end of the crisis, according to law firm DLA Piper's 2008 State of the Market Real Estate Survey released on Sunday.

The survey was conducted before U.S. Treasury Secretary Henry Paulson called on Friday for the government to spend hundreds of billions of dollars to rescue financial companies from defaulted mortgages and other toxic debt that have threatened to undermine the financial system.Still, the respondents were bleak, with 90 percent describing themselves as having a bleak outlook for the next 12 months for U.S. commercial real estate market, up from 68 percent from a year earlier, when the credit crisis began.

The commercial property market has come to a near halt since the credit markets became unhinged and sources of financing dried up. One of the cheapest and most often-used sources of debt that helped drive the commercial real estate boom was the commercial mortgage-backed securities (CMBS).Last year, the CMBS market accounted for $230.19 billion worth of securitized commercial mortgages. This year the total fell to $12.15 billion, and there have been no new issuances since June.

About 46 percent of the respondents said they did not believe securitized lending transactions financed by the CMBS market would return to prior levels until after 2010. About 33 percent said that it would return by 2010, and 16 percent said they did not think CMBS would ever return to its prior strength. Reuters News Service.

Dropping Like A Stone

Mortgage rates fell again this week, sending the rate on the 30-year fixed-rate mortgage down for a fifth straight week to its lowest level since February, Freddie Mac reported on Thursday.

The mortgage rate averaged 5.78% for the week ending Sept. 18, down from 5.93% last week and 6.34% a year ago, according to Freddie Mac's weekly survey. It hasn't been lower since the week ending Feb. 14 2008. The loan hit its low for the year on Jan. 24, at 5.48%.

The 15-year fixed-rate mortgage averaged 5.35%, down from 5.54% last week and 5.98% a year ago. The mortgage hasn't been lower since the week ending March 27, when it averaged 5.34%. To obtain the rates, the fixed-rate mortgages required payment of an average 0.6 point.

As a result, mortgage applications surged nearly 58% since Aug. 15, largely led by a 122% again in applications for refinancing, The total volume of mortgage applications filed, including both refinance and purchase loans, jumped 33.4% last week compared with the week before, according to the Mortgage Banker Association.

The government takeover of mortgage giants Fannie Mae and Freddie Mac, part of an ongoing series of trouble in the financial sector of the U.S. economy, has spurred a decline in mortgage rates that some analysts say could be long-lasting.

Meanwhile, the housing market remains mired in a deep slump. Single-family building permits reached a 26-year low, data showed this week. Courtesy Marketwatch.

Housing Starts Drop In Midwest

Construction of new homes and apartments fell to the weakest pace in 17 years in August, which was far more than expected. Housing construction dropped a surprising 6.2 percent last month, the Commerce Department reported Wednesday, far larger than the 1.6 percent decline analysts had been expecting.

It was the slowest building pace since January 1991, but the housing industry hopes that it will help clear out bloated inventories of unsold homes. Building activity is on track to slide below the 1 million-mark for the whole year, the first time that has happened in more than six decades. Supporting the view that construction will fall further, building permits, considered a good indicator of future activity, dropped 8.9 percent in August to an annual rate of 854,000 units.

Builders surveyed this month said they expected business conditions to improve slightly over the next six months, the National Association of Home Builders reported Tuesday. Builders are also optimistic that the new tax credit for first-time home buyers — included in the recently passed housing bill — will help bolster sales.

The two-year long housing downturn has pushed the country close to a recession, sent mortgage foreclosures to record highs and is now leveling some of the biggest names in finance because of soaring losses on their mortgage investments. In the past 10 days, the government has seized control of Fannie and Freddie and late Tuesday night the Federal Reserve announced it was providing an $85 billion emergency loan to the country's largest insurance company, American International Group Inc., which has also suffered major losses from bad mortgage investments.

For August, the drop in housing construction reflected a 1.9 percent decline in single-family construction which fell to an annual rate of 630,000 units. Construction of multi-family units fell by 15.1 percent to an annual rate of 265,000 units. Construction was down 13.6 percent in the Midwest. Source; Associated Press.

The ABCs on AIG

The U.S. Governments bailout of of insurance giant AIG along with the selloff of Merrill Lynch and the collapse of Shearson Lehman have been in the news this week. But what does it mean to us local folks?

Well, if you had stock in AIG there is a small chance that your stock will become next to worthless (perhaps 20 cents on the dollar). The bankruptcy of Shearson Lehman pretty much wipes out equity shareholders as well.

But what does it mean for folks buying homes?

Well, in the past when a homeowner took out a loan with ABC Bank and Trust, that loan stayed with ABC Bank and Trust until it was paid off, often after 30 years. But in recent years, banks had a habit of collecting up all these different loans and packaging them, then selling them to outside investors.

In the case of Wells Fargo, they got into the business of originating, packaging and then servicing the loans. Their risk was dropped substantially while they collected fees for accepting your payments.

Unfortunately, many of these packaged loans were either sold to or through large investment houses like Shearson Lehman and Merrill Lynch. And often insurance carriers like AIG would be the proud owners of vast quantities of commercial properties (think shopping malls). Much like residential properties, the commercial properties have also experienced massive value losses and the resulting foreclosures.

As early as a year ago, loan originators suddenly found themselves unable to sell their home loans to brokerage houses so they stopped making loans altogether. Because the loans were already made, many of the originators slipped into insolvency as they never had the money to make the loans in the first place!

So if your not a stockholder, do you care? You should! From now on and into the future it will be alot harder to obtain a mortgage, especially if your credit is bad. And folks who were counting on refinancing their ARM loans that were due this year might just be out of luck.

Stay tuned for wave 3 of the foreclosure game.

Happy Days Are Here Again (Sorta)

Pending sales of homes in the Twin Cities jumped 15 percent in August, according to reports released Wednesday.

There were 4,411 pending sales last month, up from 3,834 during the same period last year, according to data compiled by the Minneapolis and Saint Paul Area Associations of Realtors. The study covers the 13-county metro area.

Year-to-date, pending sales lagged last year’s level by more than 10 percent.

Closed home sales for August were down more than 4.3 percent to 3,992 compared to the same month last year, when there were 4,173.

The median sale price for a home sold in the metro area fell 13 percent in August to $200,000, down from $230,000 one year ago.

In August, there were 7,532 new listings, down from 9,278 during the same month last year.

The Next Tsunami; Commercial Mortgage Defaults Are Going Up

U.S. Bank said its bad loans might increase by nearly 30 percent this quarter.

At a conference in New York Tuesday, Minneapolis-based U.S. Bancorp (NYSE: USB) CEO Richard Davis told investors that the cost of bad loans could increase 25 percent to 28 percent from the previous quarter.

He also said that nonperforming assets (loans that aren’t meeting interest payments) may have increased as much as 32 percent.

Much of the default amount is tied to commercial real estate from California developers accounts for the bulk of the defaults, however, he added that the company’s conservative approach to lending should soften the blow. He also said that the company is still building reserves and should not need more capital.

Some real estate experts have commented that the default rates on commercial real estate loans might just eclipse the level of home mortgage defaults. Recently the Rand Tower in Minneapolis was sold for 1 million dollars LESS than the previous owner had bought it for just a few short years ago. Source: Minneapolis /St Paul Business Journal and internet sources.

Fallout From Freddie And Fannie

Just days after the announcement that the federal government would bail out Fannie Mae and Freddie Mac comes news from California, a state that has been hit hard in the foreclosure mess. Hopefully we will see a similar healing effect in Minnesota.

The federal government's takeover of Fannie Mae and Freddie Mac sent mortgage rates tumbling in California, raising hopes that the state's severely ailing housing market will get a boost.

After the federal action Sunday, consumers with outstanding credit Monday were offered rates as low as 5.375 percent on 30-year fixed mortgages, which is down nearly a full percentage point .

However, some experts cautioned that the long-term implications of the government's action remain uncertain and that it could take months, if not years, for housing prices to recover.

Edward Leamer, an economist and director of the University of California-Los Angeles Anderson Forecast said the takeover was not a silver-bullet solution. He said the overall drop in mortgage rates will probably be modest and not enough to jolt the housing market awake anytime soon. Nonetheless, if the federal government hadn't stepped in to rescue the mortgage finance giants, the housing mess would have worsened, Leamer added.

That view is widely shared by economists, who say the housing market is proving difficult to stimulate because of a combination of factors.

Banks, burdened by the mortgage crisis, have been reluctant to lend money to prospective home buyers, causing home prices to drop precipitously. At the same time, financially strapped homeowners whose property values have dropped have been unable to refinance their fast-rising, adjustable-rate mortgages at more affordable rates.

Many homeowners have been forced into foreclosure, causing a financial loss for their lenders and making banks even more skittish about offering housing loans.

Fannie Mae and Freddie Mac support the housing market by either buying mortgages directly from lenders, or guaranteeing their repayment, which helps increase the amount of money available for home loans. Courtesy Mercurynews.com

Spotlight On The Nicollet island Neighborhood Of Minneapolis

The Nicollet Island/East Bank neighborhood comprises Nicollet Island on the Mississippi River just east of downtown and the portion of the eastern riverbank located between Central Avenue and the Burlington Northern Santa Fe Railroad line.

The neighborhood is at the geographical and historical center of Minneapolis. The island is named for Joseph Nicollet, a scientist, geographer and mathematician born in Savoy, France. He led three expeditions through Minnesota, and authored the influential book Map of the Hydrographical Basin of the Upper Mississippi. Source.

Hennepin Avenue East and First Avenue Northeast are two of the main roads that connect the island to the rest of Minneapolis. The island spans 47 acres, and all but two of the houses on the island date from 1864 to 1898. Source; City of Minneapolis

Foreclosures Across America

Foreclosure rates in New York City reached a three-year high in August, while rates in Los Angeles, Miami and Seattle fell slightly from July, according to a monthly foreclosure report by real estate website PropertyShark.com.

In the one month period, Los Angeles improved the most with a decrease of 18% to 4,907 foreclosures. Miami’s rate declined 10% to 994 foreclosures, while Seattle’s declined 8% to 175.

Rates for all four cities were up from August 2007. In Los Angeles, the foreclosure rate went up 159% over August 2007. Miami’s rate went up 72%, while New York City’s and Seattle’s rates increased by 53% and 27%, respectively. Locally, Twin Cities foreclosure rates are up nearly 50% from 2007.

Paint 101: A New Coat For Fall

Fall is the best time of the year to complete those much needed exterior painting projects. Cooler daytime temperatures allow paint to dry evenly and properly. Here are some handy tips on exterior painting, courtesy of Home Depot.

First, check to make sure there's no rain in the weather forecast. You'll need to apply primer to any bare siding. For best results, allow the primer to dry according to the manufacturer's recommendation. A sprayer or roller will speed up the process.

Masonry surfaces always should be primed, especially if water stains are present or if glossy paint is to be top-coated. Cedar and redwood contain resins that bleed through water-based paints, so use an oil-based primer on bare wood.

Paint the roof trim and soffits before the walls if they will be different colors. This will keep the trim paint from dripping onto the newly painted walls.Paint the inside corners and around the trim. A corner roller or trim brush is a great help when cutting in these areas.

On clapboard or shingle siding, paint the bottom edges of the siding before painting the face. That way, you'll make sure you don't miss any spots. A trim roller works great for this job.

Do the walls with a roller or a brush, starting at the top. If you're up on a ladder, work carefully and don't overextend your arm - it could throw you off balance. Try to finish strokes directly in front of you so you can make sure there are no drips. And paint one defined "block" at a time.

Start each stroke by feathering the brush or roller. Feathering means placing the surface of the brush or roller against the siding gradually, instead of abruptly. This eliminates a definite start line and makes it easier to blend the next block of strokes into the present block.

Blend the strokes together by working quickly. It's important to blend the new stroke into the completed stroke while the paint is still wet so you can avoid lap marks. Never stop in the middle of a section. Paint to the corner of the house so the paint color is consistent.

Move the ladder so you can just reach the completed block of siding. To eliminate lap marks, rewet the feathered edges of the previously painted block with your brush or roller just before you start each stroke. Repeat the process until the top area is completed, then move on to the lower sections.

Making A Case For Case-Shiller

A closely watched gauge of U.S. home prices, the S&P/Case-Shiller home-price indexes, again hit record lows in June, but the declines are moderating.

For the second quarter, the S&P/Case-Shiller U.S. National Home Price Index posted a record 15.4% decline in home prices over the second quarter of last year, worse than the 14.2% drop posted in the first quarter.

The monthly numbers issued showed home prices in 10 major metropolitan areas fell a record 17% in June from the prior year and 0.6% from May, according to the indexes. The month-to-month drop improved from 1% in May over April.

And in 20 major metropolitan areas, home prices dropped a record 15.9% from a year earlier, and just 0.5% from the prior month. That’s better than the 0.9% drop recorded in May over April.

Nine of the 20 regions were able to avoid price declines in June over May, led by a 1.5% rise in Denver and 1.2% growth in Boston. Both months have had three straight months of increases, while Charlotte and Dallas have topped them by being the only areas to have four consecutive months of month-to-month growth. Decliners were led by Phoenix’s 2.6% slide in June.

And for the third straight month, no region was able to avoid a price decline year-over-year. Las Vegas and Miami were again leading the pack with drops in excess of 28%.

S&P’s report comes a day after the National Association of Realtors said U.S. sales of previously owned homes rose a healthy 3.1% in July from the prior month, but growing inventories of unsold homes and rising mortgage interest rates continue to thwart a full housing-market recovery. At the current sales pace, there are 11.2 months’ supply of homes for sale, the realtors’ group said, nearly double the inventory that occurs in more normal times.

Spotlight On The Bottineau Neighborhood Of Minneapolis

Bottineau neighborhood is located in northeast Minneapolis. It is bordered by the Mississippi River on the west and University Avenue to the east. Lowry Avenue NE is the northern extent of the neighborhood, which runs to 16th/17th avenues NE in the south.

This small neighborhood is named after the legendary pioneer, explorer and leader Pierre Bottineau who bought land here in 1845. Bottineau neighborhood has a rich history with the large number of ethnic groups that have settled in this area over the years.

Beer drinkers might remember the neighborhood as the home to the Grain Belt brewery complex with its collection of castle like buildings.

Today the community has a population of 1,254 people and is a destination for many artists to live and work. Bottineau has a nice mix of amenities including a large park, a library, and its close proximity to downtown. Northeast Minneapolis continues to be the best value in homes, considering the available amenities, low crime rate and the vast availability of homes. Source: City Of Minneapolis.

Day Twelve Of The Minnesota State Fair

Monday, Sept. 1 • Kids & Last Chance Day

Today’s Deals: Kids (5–12) admitted for just $5. As always, children (under 5) are admitted for free. All-day discounts are offered on Mighty Midway and Kidway rides, games and concessions. Merchandise and food vendors offer Last Chance bargains all day. Pick up a Last Chance brochure available at all information booths.

In Carousel Park: The Minnesota Sesquicentennial Commission presents Minnesota’s five Honorary State Capitals for the 150th anniversary of statehood. Bemidji, Thief River Falls, Detroit Lakes, New Ulm and Winona will provide music and presentations on their regional character and culture. Exhibits and entertainment go from 9 a.m. to 5:30 p.m., including birthday cake and poster giveaways at 11:45 a.m