John Murphy Reports

The Minneapolis Area Association of Realtors continues to do a phenomenal job of analyzing the trends in the distressed property market.   They have just compiled the latest report for the 3rd quarter 2008.   It is must reading.

What I thought was interesting was to see the percentage of overall inventory that was considered “lender-mediated” or bank owned (i.e. Distressed Sales).  Here’s a snapshot by some cities and areas:

Hennepin Northwest (Medina falls in to this): 11.9%

Plymouth: 11.4%

Maple Grove/Osseo: 20.9%

Lake Minnetonka area (includes Orono): 10.8%

Minnetonka: 15.2%

Edina: 5.8%

St. Louis Park: 13.8%

Golden Valley: 15.8%

Hopkins: 28.3%
Eden Prairie: 15.7%

MPLS Camden: 63.0%

MPLS North: 69.0%

MPLS Powderhorn: 51.8%

Wright County (exc. Buffalo): 29.2%

The number of distress sales continues to creep up in Plymouth with 79 properties in Plymouth, MN.  There are 531 properties for sale so nearly 15% of the properties for sale are distress sales – i.e. bank foreclosures, short sales, corporate owned, as-is sales etc.

Prices range from $60,000 to $700,000.
If you’d like the list of properties, please call or e-mail me.

 

If you’d like to stay up to date with the latest listing activity in Wild Meadows, Medina’s finest and possibly the nicest luxury development in the Western Suburbs of the Twin Cities, then sign up for the new service I’m launching at www.WildMeadowsHomeInfo.com

You will have access to what I have access to as an agent.  You’ll be able to see not only what’s for sale, but also all the sold information for the past several years.

Additionally, if you want to keep track and be alerted immediately once a new property is listed or if a price reduction occurs, you can get it at www.WildMeadowsHomeInfo.com.

Here’s this week’s report from the Minneapolis Area Association of Realtors.  The association’s commentary is below:

Weekly Market Activity Report

Home sales in the Twin Cities housing market continue to post healthy increases over last year, though the upward movement isn’t as powerful as it was during September. For the week ending October 18, there were 618 signed purchase agreements (pending sales)—an increase of 9.6 percent over the same week last year and the 16th consecutive week of year-over-year upward movement. Foreclosures and short sales continue to comprise a sizable chunk of the market.

New listings for the same time period comparison were 18.1 percent lower, which represents the 30th week of the last 33 to have downward movement in new listing supply. The total inventory of homes for sale sits at 30,343, which is about 3,000 less than at this same time in 2007. Inventory should continue to fall through the remainder of the year but won’t fall as far as previous years given the higher number of foreclosures and short sales, which tend to stay on the market irregardless of snow depth and subzero temperatures.

Key points:

Listing inventory is down 10% compared to last year

Pending sales activity has now been consistently running 10-20% higher than last year lately.

Prices remain lower by 10-15% creating value and bargains for buyers

Money remains available for buyers with good credit – interest rates still around 6% for a 30 year mortgage

The Commerce Department released the latest figures on new homes sales today.   Much to the surprise of many, new home sales rose by 2.7% in September after dropping 12.3% in August.  The reason I believe sales are up is prices are down significantly creating enough bargains to get buyers off the sidelines.

Here’s the story from the FT.

Alan Ruskin of RBS Global Banking & Markets in Greenwich, Connecticut is quoted as saying: “There is a sense that home sales may have started September stronger but ended weaker and continued much softer in the current month.”   However, we know that here in the Twin Cities, despite the Wall Street problems, transactions are continuing at a rigorous pace and have not shown a corresponding slowing.

Note: the S&P/Case-Shiller Index will be released tomorrow morning.  I will try to get the charts updated before noon.

While Wall Street continues to thrash around and the news reports about the nation’s housing market continue to provide a dismal outlook, underneath the storm, and on the street, there appears to be slight signs of improvement, but you have to look at the details to see this.

First of all, I would recommend that if you’re at all interested in real estate, that you pay some attention to California.  While all real estate is local, trends start there and work their way toward the Midwest.  It just happens that California, for better or worse, experiences much greater highs and lows when it comes to trends.  Additionally, what happens in California (and the east coast – particularly Florida and soon NYC as they are hit from the Wall Street fallout) tends to drive the national media news stories.  While bad news in California and Florida shouldn’t affect the Twin Cities real estate market, it does have a dampening effect.  The constant drumbeat of bad news makes buyers cautious.

That said, watch California.  Sales activity in September shot up 65% as prices have come down about 30% and the banks are unloading foreclosures as fast as they can.  With prices down, buyers are starting to step back in to the market in a big way.  According to DataQuick, half the transactions in September involved bank owned properties.  The market must absorb the bank owned properties before it returns to a more normal market.  From what I hear from fellow agents working in California, the trend now is for banks to put a very low price on the homes immediately with the hopes of generating multiple offers.  It appears to be working.

So how does this affect us in Minnesota?

Last week, the Minneapolis Area Association of Realtors reported that for the 3rd quarter this year, 28% of all transactions  involved “lender-mediated” sales…i.e. bank owned properties and short sales.  (Click here for the article).  The challenge is that only about 1/3rd of all “lender-mediated” or distress sales are readily identifiable on the MLS or big brokerage sites.  For example on EdinaRealty.com there are 21 foreclosure properties for sale in Plymouth.  However, I just ran my specialized search and found 71 distress sales in Plyouth.  That means if you are looking for a great deal, as everyone is these days, you may be missing out on 2/3rds of the best opportunities in the marketplace.

If you are considering a purchase of a home for your primary residence or as an investment property, you have to see these distress sales first!  And once the banks start mimicking the listing strategy used in California, you’ll want to know immediately when these properties become available.  I’ve created one of the best services in the Twin Cities to track these properties and it’s free.  Click here to sign up.

So are there signs of improvement in the Twin Cities?

While Wall Street has suffered greatly the past 4-5 weeks, I half expected that pended sales activity would slow significantly given the incredibly negative financial news.  However, upon a detailed review of pending sales activity for Hennepin County, transaction activity has continued to strengthen.  In fact, activity accelerated for the two week period from Oct. 1- 15 and is on the same pace Oct. 16-22.  So while the mainstream media is reporting the collapse of our financial system, buyers and sellers are continuing to go through with transactions at a pace we haven’t seen in a long time.  (Click here for the graph).

Stay tuned as next week the S&P/Case-Shiller Index will provide another monthly update on Twin Cities home prices along with 19 other metropolitan areas.  As many of you know already, last month the report showed a slight improvement for the Twin Cities with home prices down 13.1% but the Twin Cities had demonstrated 3 consecutive months of price improvement.

There are now 71 distress properties for sale in Plymouth this morning.  A distress property is a bank foreclosure, short sale, as-is sale, etc.   This is a slight increase from what we have typically been seeing.   There are 521 properties for sale so the distress sale percentage is 13.6%.  If you’d like to see the list, please call or e-mail me.

Prices range from $59,900 to $699,900.

Calculated Risk has an excellent post complete with pretty charts showing national housing starts along with the builders’ confidence levels which have collapsed.

We are much closer to a bottom than we have been in 3 years.

BTW, in Hennepin County, there are 36 brand new homes, townhomes, condos for sale in the MLS that are distress sales.  It does seem like the builders here in the Twin Cities have worked very hard to get their inventory down so that they aren’t in a distress sale situation.  If you’d like the list, send me an e-mail.

Nearly 1/3 of all real estate transactions in the 3rd quarter were distress sales.  The Minneapolis Area Association of Realtors calls these lender mediated sales.

The challenge for many buyers today is that about 2/3rds of all distress sales are not easily identifiable when reviewing properties online.  The best way to get access to these properties is to subscribe to a customized service like the one I offer.  (Click here to subscribe).

Alex Stenback publishes an excellent blog on the mortgage and real estate industries.  While lending has become tighter, it’s not as tight as many in the media and housing consumers believe.  Be sure to read his excellent post on the matter.