John Murphy’s MEDINA REAL ESTATE REPORT

Typically I don’t cover project on the other side of town, but this struck me as being worthwhile given the size and scope of the project.  The city of New Brighton is hopeful this 100 acre project will move forward with a mix of residential (rent and for sale residences) commercial and retail.  I had heard that Rottlund Homes pulled out last year putting the project in jeopardy.

According to this story in the Pioneer Press, it appears things will be back on track for this development.

The U.S. House and Senate have been working on bills to help bail out troubled home owners.  President Bush isn’t too keen on the proposal and it’s not yet clear whether or not he would sign this in to law.

The U.S. Senate is proposing creating a new fund that would purchase up to $300 billion worth of mortgages or parts of mortgages provided the banks selling them the mortgages write them down.  Essentially our elected officials have determined that it is better to have the U.S. taxpayer get involved to spread the risk of a million or two foreclosures and short sales rather than let the market work.

As soon as there are more details on the plan, I’ll post them.

BTW, what do you think the odds are that we will start to see a lot of news right near November that the housing market has “officially” bottomed and we are now in recovery.  Anyone want to take this bet?

The Minneapolis Area Association of Realtors released its latest weekly report just minutes ago and overall listing inventory across the Twin Cities metro is down for the second consecutive week. They are also reporting that pending sales activity trailed last year by only 5.3% for the week. If the pending sales trend continues along with the decline in over inventory for sale, this ship might well be on its way to improving.

Once the market turns, I am not expecting a rapid rise in pending sales but rather a slow steady climb out of the basement that has been 2008.  It seems very unlikely to show the kind of activity demonstrated in Southern California recently….see post below.

DataQuick is reporting that Southern California sales surged nearly 22% from February 2008 but were still down 19% compared to 2007.  This is very positive news coming out of SoCal as their sales had been running 40-50% behind.  Southern California, along with parts of Florida, were some of the hardest hit areas during this real estate downturn….it is a downturn here in Minnesota, but could be considered a crash is other places.

Many of the homes being purchased are bank owned properties or in some state of foreclosure.  This is great news to see because it shows that investors are out and they believe the time to strike is now.  It’s my opinion that despite the very difficult market in Southern California, they will likely turn around there sooner and faster than we will here in Minnesota.  It will be an important market to watch.  Trends happen first in California.

Incredible Manley Construction custom built luxury home in the country on a beautiful 5.5 acre lot just outside of Cokato, MN. This property is about 45 minutes west of the Twin Cities suburbs on Highway 12 and it’s 20 minutes from Hutchinson, MN.

With 4 bedrooms, 4 baths and 3748 total finished square feet, this is a wonderful family home! This home has a very functional open floor plan which is great for everyday living and entertaining! The gourmet kitchen, complete with center island, Cambria countertops, lighted hanging pot rack, 35 bottle built-in wine rack and beveled glass cabinets, overlooks the two story great room as well as the large kitchen nook. Access the screened porch as well with its plexi glass panels allowing it to be used for nearly nine months of the year.

The main floor has a wonderful office and large dining room. The pictures below detail some of the beautiful custom built-ins found in this home’s great room. Also inlcuded in the price of this home is over $30,000 worth of electronics and security systems generally found in $1 million dollar homes in the Twin Cities western suburbs.

The current owner had this home built in 2004 and they didn’t miss any details. Nearly every bedroom upstairs is it’s own suite. They are big bedooms and there are three bathrooms upstairs.

There is a beautiful mix of hardwoods and enameling throughout the home. The trim and doors are enameled and there is beautiful natural wood found in some of the cabinetry and hardwood floors.

For those really looking for a sense of country, the owners had a state of the art chicken coop built in the back of the lot It’s even wired for monitoring by video!

An asphalt driveway will be installed by July 1st and has been delayed due to road resistrictions with the late spring this year. A new roof was just installed one month ago. Click on this link - 6281 Rhoades Avenue SW, Cokato, MN Home Features and Specs for a four page PDF document that lists this homes features.

If you’re looking for quality and sophistication that is found in the best homes in the Twin Cities, but you’d like a country setting, this is a terrific option for your consideration. Please contact me for a private showing.

Don’t miss the Video Tour!

Google Map of 6281 Rhoades Avenue SW, Cokato, MN.

Here’s the listing on Edina Realty.

For a little fun, this home comes with a State of the Art chicken coop. It was custom built with the exterior matching the house. The interior has an open storage area above with built-in ladder for access, an electric outlet inside, an electric outlet outside, two interior lights, one exterior light (which also has a switch in the mudroom), a potting bench/workbench, RJ-45 cable connected to the network (in case you want to install web cams to watch your chickens), nesting boxes for 16 chickens, small chicken run door to outside with rope-pull system, chicken roosting rack with rope-pull system for cleaning, all floor panels are green-treated wood, glass block on west side for natural lighting, matching window box under glass block, 4-way barn doors on front, standard insulated steel door on side, and it’s raised off the ground on steel rails. Chickens never had it so good…

Bill Fleckenstein wrote recently about the challenges facing banks with their HELOC portfolios.  HELOCs, otherwise know as home equity lines of credit, have been a very popular way for people to get the financing they need to purchase homes.  If this segment of the market starts to deteriorate rapidly, it will be yet another very challenging hurdle for us to work through to get this housing market back on proper footing.

Calculated Risk has more on the HELOC issue.

The National Association of Home Builders reported housing starts this week for the month of April 2008:

Single-family housing starts dropped 1.7 percent for the month to a seasonally adjusted annual rate of 692,000 units, the lowest monthly production rate since January 1991 and 42.2 percent below April 2007.

I remember seeing on Yahoo! the positive news story about housing starts being up, but when you look under the hood at the statistics and the details of the release from the NAHB, you see that the multi-family starts overly influenced the report. The fact is, across the country, demand for single family homes remains soft and the builders remain pessimistic about their futures - see graphical display below courtesy of Calculated Risk.

Locally here in the Twin Cities and particularly the western suburbs, while business is certainly softer than many builders would like to see, I am seeing some encouraging activity in new developments such as Prominence Woods (Maple Grove, MN - Wayzata Schools), Taryn Hills (Plymouth, MN - Wayzata Schools) and Bridgewater at Lake Medina (Medina, MN - Wayzata Schools). Several spec homes have recently gone pending meaning someone has purchased the home but it has not closed yet.

Today there is more difficult news for sellers of U.S. real estate as median sales prices are down 7.7% for the first quarter of ‘08 versus the same period in ‘07.  The more telling number is that prices are down 4.8% versus the last quarter of 2008.  Annualized, that would be a nearly 20% decline coming in 2008.  It’s hard to imagine that could happen here, but given the very difficult state of so many markets across the country, it’s possible that the overall number could see such a decline given what’s happening in big markets such as California, Florida, Arizona, Ohio and Michigan.

Lawrence Yun, Chief Economist for the National Association of Realtors said the following:

These are highly unusual results because there were very few jumbo loan originations in the latest quarter, so sales are much slower in high-cost areas, and at the same time foreclosures related to subprime mortgages rose.

Here is the Star Tribune’s article about the new real estate numbers.

It’s my opinion that we’ll continue to see this kind of continual bad news for some time; however, the market will have long turned before it starts showing up in the statistics.  If all you’re doing is watching the statistics like these published by the National Association of Realtors in order to pick the bottom, you won’t be able to do so.  You will miss it.

Paul Krugman made this short post today based upon The Oil Drum which covers energy topics in Australia and New Zealand.

Krugman speculates that the U.S. would look similarly if mapped based upon gasoline prices.  I can tell you that there’s no doubt this is coming in to play here in the Twin Cities.  People are starting to rethink how far out they want to live.  Everyone has their price right?

The higher gas prices are forcing people to give more thought to living closer in to the center cities or first and second ring suburbs.  Of course when they do that, they have to weigh out the pros and cons as the closer in suburbs will tend to have more issues relating to poorer schools, more crime and more congestion.

This is an incredible report that the Minneapolis Area Association of Realtors produces.  This Housing Supply Outlook has been updated for May 2008.  You can’t see individual cities, but it rolls up incredible detail across the Twin Cities metro from price ranges to types of housing to new construction versus existing housing.

Congratulations to Jeff Allen, Research Manager, for the Minneapolis Area Association of Realtors for putting together such a great report!

Here’s Jeff’s note that he put out to the Realtors:

For a full, detailed look at how changing supply-demand dynamics are affecting various price ranges and property types in our regional housing market, take a look at the May Housing Supply Outlook. You won’t find anything with this much detail on the Twin Cities housing market anywhere else. Highlights:

The entire housing market—in both supply and demand—is seeing a downward shift in activity towards the lower price ranges, likely a result of the increasing market share of foreclosures and short sales. Compared to this time last year, the supply of homes under $150,000 is up 87.2 percent and home sales in that price range are up 49.8 percent. There is far less happening in the middle and upper price brackets.

A much smaller share of condominiums are foreclosures or short sales than the townhouse and single-family detached markets. It’s not a coincidence then that the average sales price and price per square foot of condos is actually holding relatively steady and not seeing dramatic overall value declines.

New construction inventory is still down significantly—21.7 percent behind this time last year, to be exact. The months supply of new construction inventory is only up 2.8 percent in the last year to 11.4 months, compared to a 24.0 percent increase for the previously owned market.

Contact MAAR Research Manager, Jeff Allen, at jeffa@mplsrealtor.com or 952.988.3126 if you have questions or comments about this research tool.