Plymouth Distress Sales 2008 - 14.5% of All Home Sales
There is lots of news about distress sales in the media lately. In some parts of the country distress sales are currently representing 30-40% of the transaction activity.
In Plymouth, MN for 2008, distress sales have represented 14.5% of all closed residential transactions - 76 out of 525 total as of August 24, 2008 and based upon my methodology below. (I run a custom search in the “Agent Remarks” field in order to pick up various terms. It’s by no means perfect, but it’s quite good. Once in a while I pick up what we call in the business, a “normal” seller).
*short sale*,*shortsale*,*bank*,*REO*,*corporate own*,*corp own*,*corp. own*,*3rd party*,*approval*,*foreclosure*,*forclosure*,*pre foreclosure*,*preforeclosure*,*pre-foreclosure*,*as is*,*as-is*,*subject*,*HUD*,*redemption*
This search allows my buyers immediate access to some of the best deals in the market when they subscribe to this service.
Are We Witnessing the Bottom in the Twin Cities Housing Market?
Are we at the bottom of the housing downturn in the Twin Cities? Based upon the stats published moments ago from the Minneapolis Area Association of Realtors, it may well be upon us. (Disclaimer…I sell real estate and as a sales person, I am often too optimistic…glass is half full).
Here is what the association just reported:
If you’re looking for some insight into just how sluggish the second half of 2007’s home sales were, look no further then the year-over-year comparisons with the sales from this year. For the week ending August 16, 2008, there were a whopping 33.0 percent more pending sales than the same week last year—an increase of more than 200 units. This extremely strong showing is due to a combination of legitimately robust current demand and the uncharacteristically steep downward dive sales took last year after the credit markets began to constrict in August 2007. This week’s figures are more in line with the equivalent (pre-credit crunch) time period in 2006—just 2.5 percent off that pace.
As for housing supply, the number of new listings on the market receded by 18.4 percent for the same time period comparison, and the total number of active properties for sale is currently 7.1 percent lower than at the same point last year.
It’s my opinion we’ll need to see continued and consistent improvement in the pending sales activity before the market will have truly turned. We’re in the early stages of consistent year over year improvement. Please note that home prices will likely be a lagging indicator. Sales activity will pick up for some time before prices rebound.
Fannie Mae and Freddie Mac Crash - Again
More worries that the U.S. Government (i.e. you and me the tax payers) will have to pony up billions to keep Fannie Mae and Freddie Mac alive drove the stocks of these companies down 22% and 25%, respectively yesterday.
Last week Fannie Mae and Freddie Mac came out and said they would try to preserve capital by not buying as many mortgages. Well, that goes against the charter they have by the U.S. Government pseudo public/private charter.
For more insights as to what may happen, the Wall Street Journal has published its lead editorial on the matter today.
Builder Confidence at Record Low - August 2008
The National Association of Home Builders surveys its membership each month and publishes a sentiment index. Needless to say, it has been in free fall for a couple of years.
Calculated Risk has an excellent graphic of this index.
U.S. Housing Starts Lowest Since 1991
In a sign that builders continue to cut production of new homes, this report came out this morning showing housing starts at their lowest level in 17 years.
Twin Cities Pending Sales Surge 21% - Week of August 18, 2008
The Twin Cities Area Association of Realtors just published this week’s report. The biggest news is pending sales activity is up 21% compared to the same week last year. As Jeff Allen notes below, one week doesn’t make a trend, but we are clearly running above last year’s numbers and with listing inventory trending lower by 5-10% each week, we are finally starting to see some of the inventory overhang diminish.
Here’s Jeff’s note:
Pending sales for the week ending August 9 were a startling 21.0 percent higher than one year ago, posting 900 sales as compared to 744 a year ago. While one week of such robust increase doesn’t justify the opening of stored champagne bottles, it is another welcome sign of reviving buyer demand. While a highly productive number in its own right, the year-over-year increase is somewhat amplified by just how slow August of last year was, as that is the specific month in which tightening lending standards began to take root.
New listings declined by 11.3 percent for the same time period comparison, and the total number of active properties for sale is currently 6.4 percent lower than it was one year ago. With foreclosure and short sale activity increasing, the declining supply underscores just how many traditional sellers are waiting this market out by not placing their homes up for sale.
$1.7 Million Home Sells for $725,000 - Washington Mutual’s Loss Estimated at $1 Million
This home sold brand new for $1.7 million in December 2006. It has a current tax assessed value of $1,360,000 and an annual property tax bill of $16,098. Apparently it was part of some mortgage fraud that occurred in the Twin Cities. Washington Mutual Bank held the notes on this property.
Clients of mine just purchased this home for $725,000! It’s in a very desirable location in the Twin Cities by Gray’s Bay - Lake Minnetonka. At it’s peak, the home might have sold for $1.15 - $1.2 million if it had not been for the inflated price because of the mortgage fraud. The home will require some expenses and work by my clients, but it was in good condition. (Zillow’s Zestimate - for what it’s worth - has this home at $1,068,500).
It’s unknown whether or not the bank had insurance to cover the loss on this jumbo loan and smaller second loan. According to the Hennepin County Recorders Office, the first loan was for $1,190,000 and the second was $339,830 for a total of $1,529,830.
In Minnesota, it takes a year to fully go through the foreclosure process. The Sheriff’s sale took place November 1, 2007 and the redemption period ended May 1, 2008.
It’s likely there were a minimum of 15 months of no payments being made - 12 for the foreclosure and redemption periods and then another 3 months until the bank was able to get the property sold and closed. If the mortgage interest rate was 6% then the monthly P+I would have been $9,172 or $137,580 for 15 months. Now add some salt to the wound as the bank had to pay an additional $20,000 for property taxes during this period.
Loans: $1,529,830
No payments: $137,580
Taxes: $20,122
Total: $1,687,532
Sales Price: $725,000
Selling Expense: $47,125
Net to Bank: $677,875
Loss: $1,009,657
Note: these are my approximations to try to piece this information together. I do not have confirmation on these numbers from the bank or the listing broker. Whether it was the bank or a mortgage insurance company that was ultimately on the hook for this home, the combined losses were about $1,000,000 however you slice it.
The information is provided so people can see the extraordinary hits banks are taking because of some of the earlier fraud that took place. It also shows some of the unbelievable opportunities that exist in the market for savvy buyers who are willing to step up to the plate.
Greenspan Speaks on Housing…and Says Nothing as per Usual
This story cracked me up. It’s running on Yahoo! Finance courtesy of CNNMoney.com. I will copy the whole story for you below.
Of course the headline that CNNMoney had grabbed my attention:
“Greenspan sees housing prices bottoming out in 2009: report.” And the story follows:
Alan Greenspan, former chairman of the Federal Reserve, projects that housing prices could bottom out in 2009 - or maybe later - according to a news report.”Home prices in the U.S. are likely to start to stabilize or touch bottom sometime in the first half of 2009, ” said Greenspan to The Wall Street Journal.
But he also added that “prices could continue to drift lower through 2009 and beyond,” according to the newspaper.
He said the “excess supply” of housing units, some 800,000 units above normal, is running out.
Appointed by former President Ronald Reagan, Greenspan served as chairman from 1987 to 2006, when he was replaced by Ben Bernanke.
In other words, prices might bottom in the first half of 2009…or they might not. Typical Greenspan.
Foreclosures and Short Sales in The Twin Cities - Market Update Q2 2008
Jeff Allen, Minneapolis Area Association of Realtors and publisher of the blog, The Skinny, and Aaron Dickinson, Edina Reatly and publisher of the Twin Cities Real Estate Blog, have produced an excellent work entitled, “Foreclosures and Short Sales in the Twin Cities Housing Market - Q2 2008 Update.”
They have done a terrific job of breaking down the data by sales price as well as by various cities across the metro.
Their data shows that 1 out of 5 homes for sale in the Twin Cities metro is now what they call “lender mediated” meaning it’s a bank owned, pre-foreclosure, short sale type situation. There appears to be no shortage or end to these distress sales in the Twin Cities.
Time to Install Carbon Monoxide Detectors - It’s the Law!
The State of Minnesota just instituted a new law that will affect real estate transactions. Effective August 1, 2008 every home is supposed to have a carbon monoxide detector installed within 10 feet of a “sleeping room.” There has been some confusion about the word “installed” but I have been told by legal counsel that it doesn’t have to be hard-wired. A simple plug-in CO detector should do.