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.

Foreclosures Slowing Down In Twin Cities

Housing authorities say foreclosures are slowing in Minneapolis, where more than 7,500 properties have been auctioned off during the last two years.

New foreclosures in the city dropped 10 percent from a year ago during August -- marking the second month of the last four in which the foreclosure rate dropped, The Minneapolis Star Tribune reported Saturday.

Neighboring St. Paul reported a 16 percent drop in August while foreclosure rates remain unchanged in the rest of Hennepin County said Natalie Fedie, a spokeswoman for the city of Minneapolis.

Foreclosures are slowing, in part, because the foreclosure epidemic started earlier in Minneapolis -- especially on the city's north side where poorer neighborhoods were the first targets of subprime lenders, said Brandon Nessen, executive director of Minnesota ACORN, which counsels people facing foreclosure.

"You look at some of these streets in north Minneapolis and 75 percent of the houses have been foreclosed, and there's only so many houses you can foreclose on," Nessen said.

No More Bag Days!

Fall is the traditional time of year for raking leaves, picking apples and visiting state fairs. Another tradition is the church rummage sale, which is often held before the holiday craft bazaars take over the church basement. The last day of the rummage sale is often called ‘bag day’. Whatever buyers can cram into a shopping bag can be yours for say $5.00.

Happily, there are no ‘bag days’ in real estate. While it’s true there may be end of season bargains to be had, most homeowners de-list their properties until spring, rather than risk losing thousands of dollars in home equity.

By winter, the selection of homes can resemble the waning hours of a farmers market. The good stuff is long gone, leaving baskets of squeezed tomatoes, bunches of overripe bananas and lots and lots of eggplant!

If you are thinking of buying, there is no “best” time to buy. The best time is when you find the home of your dreams at a price you can afford. If you are selling, the market is always hungry for the ‘cream of the crop’ homes. When is the best time to call me? How about today!

Bad News For Some Is Good News For Homeowners

Good news for homeowners who are considering fixing up their homes.

Home remodeling has slowed as pessimism about home values sets in. Activity remained sluggish in the second quarter, according to the National Association of Home Builders, and expectations for future activity were nearly flat. Spending on home improvements and maintenance is expected to dip this year by more than 4 percent to $216.3 billion from 2007, the NAHB estimates. The group doesn't expect spending to reach 2007 levels again until (at least) 2010.

The pain is most acute in markets where home values are sliding. Falling home values are eroding equity, shrinking a resource that Americans often tap for home improvements. Homeowners are less inclined to invest cash in a depreciating asset.

When homeowners do remodel, they are shopping around more, taking longer to make a decision and scaling back their projects.

The housing slump is also introducing new competition into the remodeling arena as smaller homebuilders snap up larger remodeling projects like additions, recreation rooms and porches, said Alan Hanbury Jr., treasurer of House of Hanbury Builders Inc. in Newington, Conn. Remodelers are tightening their wallets and courting business they wouldn't otherwise to survive the slowdown. This is good news for home owners who want to make renovations because they have more bargaining power and have more qualified remodelers to choose from.

The industry's recovery is expected to be slow and depends on a stable economy, looser lending standards by banks and easing up of product prices. A recovery in the housing market is also key to bolstering the remodeling industry. Source Associated Press.

Minneapolis Police, TV Reporter Sued Over House Raffle

Twin Cities builder Paul Stepnes is suing two Minneapolis police officers and WCCO television reporter Esme Murphy, claiming they violated his rights, smeared his name and derailed his attempt to raffle a $1.8 million home in hopes of avoiding foreclosure.

In the lawsuit filed in federal court Monday, Stepnes asks for at least $75,000 in damages to compensate for pain and suffering, and his inability to sell the home he bought and remodeled at 2857 Irving Av. S., which was in foreclosure.

His attorney, Jill Clark, says Stepnes organized a contest in May in which the person who guessed the number closest to the correct amount of nuts, bolts and screws in a wooden chest without going over the amount would win the house. Stepnes planned to use the proceeds to pay off debtors and donate the remainder to charity.

Two weeks later, Sgts. Peter Ritschel and Jane Moore with the city's licensing and investigation unit booked him into the Hennepin County jail on probable cause of illegal gambling. The home was also searched, but no formal charges were filed against Stepnes.

Stepnes maintained that his contest was legal and had been cleared with lawmakers and the executive director of the Minnesota Gambling Control Board.

His attorney claims that the officers "acted with deliberate indifference to his rights" in the arrest and search, while Murphy, who had a news story about the contest in July, "sided with police" and "showed Stepnes in a bad light." WCCO TV and the Minneapolis police department had no comment, citing future litigation.

According to the website 2857irving.com, the contest has come to a halt with contestants being offered refunds. The redemption period on the foreclosed home ended September 26th 2008 and the property is presumably now owned by Americana Community Bank of Chanhassen, MN. Source; Star Tribune and internet sources.