John Murphy’s MEDINA REAL ESTATE REPORT

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.

Sorry, but I can’t resist at least making some comment about this. With the rapid rise in energy costs, organic food sales have been hit significantly. For a proxy of the environmentally thoughtful food consumer, check out Whole Foods - stock symbol WFMI.

Will Americans pay a premium for a “green-friendly” home right now? Green costs more. A lot more. Yes, you’ll get the sale pitch that they will somehow save more on energy costs and that you’ll feel better knowing that your purchased something that was “good” for the environment. I’ve got an idea for the national home builders. Forget the “green” stuff and just figure out how to make your new homes incredibly energy efficient and then sell that.

“Green” is nothing but another marketing gimmick promoted by corporate America. The builders should give it up and sell energy efficiency and savings.

Twin Cities building continue to scale back their building projects.  According to this Star Tribune story:

During July, 255 permits were issued to build 650 units. That’s a 42 percent decline in the number of permits and a 33 percent decline in the number of new units. So far this year, the number of permits and planned units were down nearly 50 percent.

Even this numbers overstate the number of new residential structures being built as the article goes on to point out that:

More than a third of the planned units last month were to build two large multi-unit buildings in Bloomington, which hasn’t made an appearance on the top-five list all summer.

It would be nice to see if the builders basically mothballed virtually every development for one more year as the marketplace makes an attempt at burning off the existing inventory.

Calculated Risk has done an excellent job on the June New Homes Sales data that was released last week.  New construction remains down significantly and the inventory of unsold new homes is dropping rapidly.  That’s the good news.  The bad news is there is still a 10 month supply of spec homes.

The latest existing homes sales reports a 2% increase in sales for May 2008 compared to April 2008.  Median prices continue their decline down 6.3% from a year ago.

Inventory is slowly being worked off the market:

The inventory of unsold homes dropped by 1.4 percent to 4.49 million units, which represents a 10.8-month supply at the May sales pace, down from a 11.2-month supply in April. That’s still about double the inventory level that existed during the five-year housing boom.

This report comes on the heels of the Census Bureau’s new home sales report earlier this week that showed continued anemic activity new construction across the country.  Calculated Risk has some excellent commentary on the subject.  They also published excellent graphs depicting the decline in new construction inventory.

The key things that I see are:

1) New construction inventory is finally falling

2) Pending sales activity is up

3) Listing inventory is starting to decline

4) Still have between 10-11 months of inventory nationwide.  This doesn’t need to come back to 5 months, but the market would feel very different if this inventory level made it’s way back towards 7 months.  Perhaps we’ll see that by next spring.

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.

In case you missed this headline stories for four days running in the Star Tribune, here is the 4 part series on the problems facing many in Wright County in the Twin Cities.

It’s just more bad news from the Star Tribune.  Any chance you think they take some delight in the problems in the suburbs?

2930 Parkview Drive, Medina, MN is the featured home to be auctioned at the Twin Cities new construction auction scheduled for January 26-27th.

They say the home as a value of $2.5 million.  I’ve been it in.  It’s a nice home with about 4,700 total finished square feet.   It’s located directly across from Baker Park in Medina.  It’s beautiful county out there.  The views are awesome of the sunset and sunrise as this home sits on a hill.  It also has views of School Lake in Medina.  The lot is 6.5 acres.  There is an additional 24 acre, buildable lot that someone could purchase as well.

There’s another big real estate auction coming to the Twin Cities. Apparently these are all new construction properties. Most of them are in the outlying areas in the Twin Cities. From what I’ve heard, these are all financed by Countrywide.

If you’re interested in going, make sure you preview the properties you’re interested in first. Homes will be open this coming weekend from 12pm - 4pm both Saturday and Sunday.

Here’s the initial web site with some information. The web site design is awful and it’s difficult to actually find out which homes are for sale. Also note that every home I saw online has a reserve associated with it. That means that in order for it to sell, the bidder must achieve some kind of minimum bid. I did not see any absolute auction houses.

If you want to see the specific homes for sale, you can view them here.

For some reason I never posted this story written by BusinessWeek that ran in 2006, but it’s worth a read today especially given the National Association of Realtors study of what home buyers are looking for in 2007…oversized garages was at the top of that list! See my earlier post about the trend toward larger garages.

If you’re looking for a home in Medina that has one of these super garages, you have to consider my listing at 4085 Shorewood Trail in Foxberry Farms. It’s listed for $1,070,000. This home has a spectacular 5 car garage which includes:

• Insulated and heated
• Room for 5 cars
• Oversized garage doors
• Hot water
• Cable TV
• Telephone
• Epoxy floors
• Stairs to the lower level utility room
• 1400 square feet in the garage
• 10′ ceiling height

If you’re looking for a home to go along with the garage, this would be it. It has 5500 finished square feet with 5 bedrooms, 4 baths and is located in a cul-de-sac in Foxberry Farms.