John Murphy Reports

I’m receiving a number of hits to my blog with people searching for information about the possible Bridgewater foreclosure.  At this point that home is not on the market from what I can see.

The Case-Shiller Index was released yesterday and the Twin Cities once again reported a 20% decline in home prices.  The report this week was for the  month of February 2009.

The headline for the Case-Shiller release this week was as follows, “The Pace of the Decline in Residential Real Estate Prices Slowed in February According to the S&P/Case-Shiller Home Prices Indices.”

Below are the key graphs from the Case-Shiller release.

Percentage Declines in the 10 and 20 city composite indices.

Relative price increases and decreases:

Case-Shiller Index data table through the month of February 2009:

Graphical view of the 20 Cities for the past 13 months:

Twin Cities versus 20 City Composite:

I didn’t publish last month’s report.  If you’re looking for that press release from Case-Shiller, you can find it here.

The Minneapolis Area Association of Realtors just published data through March 2009 that shows our overall metro average and median home prices are down about 22.5% year over year.

The cities of Minneapolis and St. Paul are trying to go on the offensive and encourage buyers to come back to the cities and buy up all the foreclosures for sale.  I know investors who are working in both cities.  Many of these homes are not suitable for a traditional buyer.  You have to have quite a stomach for some ugly housing.  That said, I’m sure there are some great deals and the cities are willing to cough up some money and other assistance to help you purchase a home in Minneapolis and St. Paul.

The web site, www.LiveMSP.com is very slick.  I wish them luck selling these properties, but this looks like a classic, PR/political move and what comes to mind is putting “lipstick on a pig.”  If the houses looked as good as the web site, they’d be gone in 30 days.

The StarTribune published a story earlier this week on the launch of the new initiative by Mayors Rybak (Minneapolis) and Coleman (St. Paul).

If you think it’s difficult to sell an existing home, try selling the idea of building a new home in the country.  Northwest Hennepin County includes the cities of Medina, Corcoran, Independence, Greenfield and Rockford.  There are 117 lots for sale on the MLS.  Only 1 is pending and only 3 have sold this year.  At the sales pace of 1 per month, there is a 10 year supply of lots in Northwest Hennepin County.

I don’t expect this to remain a 10 year supply for very long.  We do probably have a year or two before this part of the market starts to turn, but that supply number could be cut in half very quickly once the market turns.  It’s also not quite as easy to compare land and lot sales to existing housing sales.  Many land owners had carved up farmland that was already paid for and they are trying to increase the value of their farmland by ten fold by turning it in to a lot for a house.  However, if you’re a developer who has poured a significant amount of money in to developing some land, these kinds of numbers become very, very intimidating.

And yet…the odd thing is that lot prices don’t seem to have come down much.  One would expect that they would given the lack of sales activity.  So far the landowners and developers have tried to hold their price.

While pending sales seem to be rocketing every week, homes over $400,000 continue to have difficulty selling.   I specifically wanted to look at half million dollar homes and higher for the City of Plymouth, MN.  You can see in the table below that sales dropped significantly for Q109 compared to Q108 – a drop from 20 home sales to 13.  While that doesn’t sound like a lot, it is a large percentage drop and if you’re one of the 102 property owners whose home is $500,000+ who still has a house to sell in this market.

• Plymouth, MN Residential property sales of homes, townhomes and condos – sales price of $500,000 or more
• Time frame – Q1 2005 through Q1 2009
• Source: RMLS 13 County Metro
• Search performed by John Murphy, RE/MAX Results and publisher of “John Murphy’s Medina Real Estate Report.”

(Click on the picture to enlarge in a new window)

The Minneapolis Area Association of Realtors released its weekly report tonight and the Twin Cities housing market is continuing to show signs of strength.  Key highlights include:

• Pending Sales – up 20% compared to one year ago and the market has now produced three consecutive weeks of 1000 or more pending sales.  The last time we saw that was in 2006.
• Active listing inventory is down 18% from one year ago.
• Days on Market Until Sale have dropped slightly to 150 days
• Percent of Original List Price Received at Sale improved slightly to 90.5%…not much of an improvement, but at least it moved in the right direction

Click here to get access to the full report in pdf format.

Below is a graphical display of the key items noted above.

Pending sales – note the steepness of the curve on the current year.  It’s much sharper than in previous years which means there are a lot more transactions happening this year.  As noted in several posts before, much of the transaction activity is on the lower end of the market – under $150,000. (To enlarge, click on picture to open in a new window).

Active listings – notice the increasing delta between last years inventory and this years.  The market has clearly peaked for listing inventory. (To enlarge, click on picture to open in a new window).

Days on Market Until Sale  – (To enlarge, click on picture to open in a new window).  This adjusts lower every spring market so it will be interesting to see if this holds as we move in to the summer.  Days on Market Until Sale means when a home gets an accepted offer and the transaction has moved through the inspection period and the property gets pended.  150 days is not the amount of time from when a home is listed to when it’s closed.  You could probably add another 45 days on average until the property actually closes.

Percent of Original List Price Received at Sale – (To enlarge, click on picture to open in a new window).  This is showing a very slight improvement.  It’s not a game changer and it may well likely bounce around down here around 90% for a while.  What this means is that agents and sellers are still, in general, way too optimistic about the price they might achieve with the sale of their home.  Note, there are still listings selling quickly and for 95-100% of their original asking price, but they must be priced aggressively to reflect the market and they need to be in excellent condition.

Tomorrow the S&P/Case-Shiller Index will be released for the month of February 2009.   Last month’s report showed the Twin Cities down over 20.4%.

The Countrywide brand name officially died today.  The Countrywide name was synonymous with the boom times in real estate and of course they became the poster child of what went wrong during the crash.  The new name will be Bank of America Home Loans.
What will be interesting to see if if some of the Countrywide practices go away and the larger Bank of America culture fully takes over.

For a list of Countrywide REO properties for sale in Minnesota, click here.

I walked in to the office this morning and was talking with someone else in the office who manages the phones and she said that a lot of homes sold this weekend.  We were chatting about one of my listings and they were so glad to hear that it had sold.  She said it seemed like every other call on Friday was a showing request to see this particular listing.
The front desk knows if a lot of properties have sold because listing agents are required to let their appointment desk know if the home has a contract on it.  Once a home has a contract, we have to let the requesting showing agent know that the home is “sold subject to the inspection.”   Generally speaking it’s still okay to show those homes, but a lot of agents choose not to because they can’t sell the home again.  I don’t mind showing them because they are often used as a very good comp when you’re viewing several other homes in a few hours time.

Wow.  People often ask me what’s different about the marketplace today.  One of the things that has become very clear is that the market now is very unforgiving when it comes to sellers not preparing their home for sale.  Even if you have prepared your home for sale, the market is very, very tough on you.

What do I mean?  Of course this depends upon where your home is positioned in the market, but if you have worn carpet, poorly painted walls and exterior, old appliances, scratched up hardwood floors, poor maintenance – i.e. lack of caulking or grout issues in bathrooms, old light fixtures, brass hardware, old countertops, stained deck that hasn’t been cleaned and sealed in a few years, missing boards from a fence, dented garage doors, etc. etc. etc.

Buyers can afford to be extremely selective and I’m sure what must be seen by sellers, as overly picky.  But they can afford to be this way because there is so much for sale and the velocity of the business has slowed down so much.

I don’t recommend going out and spending $30,000 to get your home ready for sale, but if you’re in the upper bracket, you might have to spend $15,000 to perhaps $20,000.   If your in the entry level market, you may have expenses between $2,500 – $5,000.  If you spend nothing or really try to do short cuts, you will pay.  Your home may not sell and if it does, it’s likely to take a very long time and by the time you get an offer, they will tend to be low ball offers.

This is a very unfortunate and disturbing news story.  David Kellerman was a long time Freddie Mac employee who rose to the ranks of acting CFO.  This morning the police were called to the home early this morning and they are calling this an apparent suicide but they are not releasing details.

When the stock market crashed during the Great Depression, Wall Street bankers jumped out of buildings to their death.

We may never know what caused Mr. Kellerman to take his life, but it makes you wonder what’s going on at Freddie Mac?

May God have mercy on Mr. Kellerman’s soul and I pray for his wife and daughter. This is tragic.