Lead-Paint Regulation Rewrite?

March 15, 2012 By Leave a Comment

The lead-based paint regulations that came down about a year or so ago really are ridiculous, but what would you expect coming from the EPA?  I would bet that at 80-90% of the work sites in the Twin Cities that an inspector or regulator could find something wrong with the way the contractors are doing their work and fine them $37,000 per incident, per time, per day.  All the while, no ones lives are being made safer given the EPA’s Lead Renovation, Repair and Painting (LRRP) rule.

According to the BATC blog, Plumb. Level, & Square, there is an effort by the U.S. Senate to revise some of the rules that they have implemented.  It’s nice to see that someone has some common sense. Senator Inhofe (R-Okla) doesn’t go far enough in my opinion, but it’s a move in the right direction from the extreme nature of the rules.  The proposed bill is called, Lead Exposure Reduction Amendments Act of 2012 (S. 2148).

I remember reading the EPA documents and arguments why they needed to do this.  One of the things they said was it would add only $27 of costs to the average remodeling or painting project.  Contractors I’ve talked with say put two more zeros on there and it might be more accurate.

If you own home built before 1978, expect to pay significantly more for your remodeling work because of the lead-based paint rules.

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Rochester New Construction for Both Residential and Commercial Shows Improvement

March 13, 2012 By Leave a Comment

Rochester Minnesota, home to the world renowned Mayo Clinic, has been showing signs of improvement for new construction.  Commercial construction is up 14% (2011 vs. 2010) but according to the Post Bulletin story about Rochester construction, the permit numbers don’t tell the whole story because some of those commercial projects are very large.

According to the Post Bulletin, there are new Mayo medical facilities to be built as well as a new Lourdes high school.  Home remodeling is also showing signs of strength in Rochester much like it is across the U.S.

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Picture of the Day – Home with Urinal

March 12, 2012 By Leave a Comment

I just had to post this.  We were out looking at homes this weekend and found this gem.  Sorry I’m reverting back to my college days by posting something like this, but how cool would it be to have a urinal especially with a house full of boys or young men?  Are you envious?

Home with urinal

Home with urinal

 

 

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Here We Go Again – Freddie Mac Cuts Commissions to REALTORS

March 11, 2012 By 6 Comments

Most people don’t know how Realtors get paid.  Generally we get paid a certain percentage on every deal.  The government requires that we state that commissions are negotiable…frankly, just like everything else in life, no?  I’m not sure that I am allowed to talk about how Realtors make money in an open forum or not.  This is not to create a conspiracy or collusion…all I can tell you is my experience.  Generally the deals are done with 6 apples.  With bank owned property it’s usually 3 apples goes to the listing broker and 3 apples go to the selling broker, or the buyer’s agent.  In traditional sales, it’s usually a 3.3 apples/2.7 apples split.

I’m working on a deal right now where the listing shows 2.5 apples.  I asked the listing broker if Freddie Mac changed it’s compensation and the response was yes there has been a change.  I’m going to be in touch with Freddie Mac to see if indeed this is a corporate decision or not.

I realize many of you may not have any sympathy or appreciation for this inside baseball post, but that’s approximately a 17% reduction in the overall amount of apples the buyers agents get paid for their involvement in the transaction.  Just curious to know how many of you would feel, whether or not you are an employee or a self-employed entrepreneur if you’d appreciate a 17% cut in pay.

Fannie Mae, HUD, Bank of America, Citi, Wells Fargo, JP Morgan etc., etc., etc. make sure to compensate the buyers agents fairly and are paying 3 apples for those transactions.  Once in a while there might even be an additional $1,000 – $2,500 selling bonus for those agents.  The fact of the matter is a bank owned deal, whether it’s HUD, Fannie Mae, Freddie Mac or one of the big banks, takes a lot more work for the buyers agent than it does for traditional transactions.

It’s not a great idea to short change the sales people who are really doing a lot of work to keep a transaction together and yet that’s what Freddie Mac appears to be doing.  If that’s the direction they are going, perhaps they can just keep going and cut the buyers agents out completely.  Good luck with that one buyers.  You can deal directly with the listing agent.  If you do that, you are best to make sure you understand “The New Agency Laws in Real Estate – Understanding Agency, Dual Agency and Representation as a Home Buyer or Home Seller.”

I will do a follow up if I hear from someone directly from Freddie Mac who can officially confirm this commission change.  Sometimes there are asset management companies that try to step in between the investor owner (like Freddie Mac) and the listing broker.  I’ve seen where those guys take a referral fee or  percentage of the 6 or 7 apples which of course leaves the agents with less.

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St. Louis Park Median Home Price Chart: 2005 – 2012

March 10, 2012 By Leave a Comment

This isn’t a pretty way to start out a Saturday morning, but I had to do some analysis on St. Louis Park, MN and I thought I’d share the very graphic destruction in home price values in “The Park.”

Median home prices peaked at around $235,000 in St. Louis Park during the top of the market and they are now around $182,500.  That’s a decline of 22.3% in home values during the past 4-5 years.

St Louis Park Median Home Prices 2005-2012

Chart: 10kresearch.com

Check out our new St. Louis Park home search as well as the most additional home price data on St. Louis Park provided by the Minneapolis Area Association of Realtors.

 

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10 Best Places to Retire in the U.S.

March 9, 2012 By Leave a Comment

Yahoo Finance via CBS Marketwatch has published a list of the 10 best places to retire to in the U.S.  These lists are fun because they always are cause for good conversation amongst people…and of course for the cities named, it gives them bragging rights.

The 10 best places to retire in the U.S. are:

1) Austin, Texas

2) Clearwater, Florida

3) Fort Collins, Colorado

4) Marquette, Michigan

5) Pittsburgh, Pennsylvania

6) Portland, Oregon

7) Santa Fe, New Mexico

8) Walnut Creek, California

9) Washington D.C.

10) Winston-Salem, North Carolina

 

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Are Low Mortgage Rates Helping Housing? Mortgage Bankers Association Chart

March 5, 2012 By Leave a Comment

Check out this chart from the Mortgage Bankers Association published in Ned Davis Research letter…record low mortgage rates and of course we are at or near record low home purchases – at least going back to 1996 – so we can call it a modern low.

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More and More Homes for Sale are HUD Homes – FHA Foreclosures – The Next Wave Starts Now

March 4, 2012 By 1 Comment

HUD logoHUD Homes…what comes to mind when you think about HUD homes?  I suspect HUD has been preparing for this for some time as it was about a year and a half ago that they updated and changed their web site to a store – it’s now called HUD Home Store.  Perhaps it’s not unlike a large scale retailer where they need a web store.  As far as I know, the back end is not run by Amazon however.  You know this is going to be huge if HUD starts showing up with portable kiosks or small retail outlets in every mall in the country :)

If you’ve been in the business a while or if you are an investor, HUD homes often are some of the worst, least desirable properties in the marketplace.  But they are often dirt cheap.  Well get ready for the next wave of foreclosures as these former FHA homes come to market as HUD homes.  Now it’s possible that the federal government will come up with some program where these don’t all hit the market…perhaps they sell them off in bulk to investors who will agree to turn these in to rentals.  The truth is, many of these HUD homes will be turned in to rentals anyway.

I do not have any insider information on this.  All I am doing is reading the tea leaves and when the vast majority of purchase mortgages (and an increasing number of refinancings) have been FHA mortgages, and with near 10% of FHA loans in serious delinquency…well the number of potential HUD homes starts to get rather large.

HUD Home Mold Warning Sign

HUD Home Mold Warning Sign

At this point I am unable to find the statistics that show how many mortgages were underwritten last year.  However, I found this very cool FHA infographic that is a must see!  The source on this is HUD:

  • 1,271,211 total number of FHA mortgages underwritten in 2011
  • 61.2% were purchases
  • 33.1% were refinancing
  • 75% were first time home buyers
    • 61% non-minority home buyers
    • 32% were minority home buyers
  • Average credit score: 698

In our market in the Twin Cities, if a home in being purchased that is under $300,000 to $325,000 it’s my experience that 2 out of 3 times that is going to be an FHA loan.  FHA only requires a 3.5% down payment so there’s not much of an equity cushion if indeed prices continue to slip.  The fact is that there have been a few million FHA mortgages written in the past four years while at the same time, home prices have continued to slide in nearly every market in America.  They are all underwater.

Will this be as big as the tsunami that started to hit in 2008…no, but it will be noticeable and if you’re an investor, the timing of these wave is going to be fantastic!  Recall even BusinessWeek could see this coming when they published the article “FHA-Backed Laons: The New Subprime” and that was back in 2008!

I will soon publish more information about how to buy a HUD home and what you need to do and what you need to be aware of as both an owner occupant and an investor.  If you would like to try to buy a HUD home, I am registered and can help you with that process…and it is a process.

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Fannie Mae’s REO Inventory Declined by 27%

March 2, 2012 By 1 Comment

Fannie Mae REO inventory declined by 27% in 2011.  Fannie Mae is the government sponsored entity that buys mortgages on the secondary market.  REO stands for real estate owned and that term is specifically used for bank owned property that is taken back in a foreclosure.

27% decline is a massive drop in inventory.  Fannie’s current REO inventory stands at 118,500 properties.

According to the Housing Wire story:

For the first time since the collapse, Fannie sold more REO than it repossessed. In 2011, the government-sponsored enterprise acquired nearly 200,000 properties and sold more than 243,000, the most in the company’s history.

They also go on to note that the concentration of REO properties is in California and Florida:

More than 23% of the Fannie Mae REO inventory is located in California, the most of any other state at the end of last year. The next closest is Florida, at 11.5%.

Lastly, Fannie Mae continues to collect only about 55% of the unpaid principal balance that was left on the loan before it went to foreclosure:

Fannie vendors continued to sell REO for slightly more than half of the unpaid principal balance left on the loan before foreclosure. In 2011, REO net sales price equaled roughly 55% of the UPB on the loan, down from 57% the year before. In 2006, it was 83%.

While these numbers still tell a grim story about the housing market, the key information is that at least for now, the trend appears to have turned and is moving in the direction of a healing market for housing.

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Case-Shiller Index: Minneapolis Home Prices Decline by 4.9% Year over Year through December 2011

February 28, 2012 By 4 Comments

While the headline number does not appear great being that the Minneapolis area again printed a negative home price average in the latest Case-Shiller Index, this is showing signs of continual monthly improvement over the past 6-8 months.  If you are a regular reader, then you know that for a while in 2011, Minneapolis was consistently one of the worst performing markets in the country as we were down 9-12% year over year.  However, those kinds of year over year negative prints are likely history.

Case-Shiller published its latest findings today on home prices.  Across America, home prices overall declined again by about 4% year over year.  The data was published for the month of December.  Minneapolis continues to perform slightly worse than the overall indices.

Below are some charts to provide a visual to the data released today.  All the charts are from S&P/Case-Shiller and McGraw-Hill Financial.

(Click on chart to enlarge the image)

Case-Shiller Dec 2012 2-28-12 Home Price Chart back to 2002

 

 

 

 

 

 

 

 

Case-Shiller Dec 2011 Annual Returns Chart

 

 

 

 

 

 

 

 

Case-Shiller Dec 2011 Home Price Table 2-28-12

 

 

 

 

 

 

 

 

For additional commentary on the latest Case-Shiller Home Price Index you may want to read the post at Calculated Risk.

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