Real Estate. Economics. Business
Check out the latest from the Minneapolis Area Association of Realtors with regard to Foreclosures and Short Sales in the Twin Cities. The big take aways are that inventory is falling in all segments – traditional sellers, foreclosures, and short sales.
Here’s that term again regarding the epidemic of home foreclosures – liquidation of inventory. So far in 2011, banks and mortgage services are preferring to liquidate property via short sale rather than let the homes go to foreclosure and then sell them as an REO.
According to Housing Wire, short sale transactions now account for 25% of distressed property sales compared to 8% last year. I haven’t run the numbers yet, but my experience here in the Twin Cities tells me that the overall pool of distressed sales is down this year compared to last so the percentage increase is likely helped because of the smaller base. That said, there has been a push to try to do short sales rather than let the homeowner go through the full foreclosure.
Despite all the efforts and promotion to say that short sales are the new REOs (real estate owned – by the banks after a foreclosure), short sale transactions are still very, very difficult to complete.
Stewart Title is one of the largest title insurers in the country has a subsidiary called Stewart Lending Services which just purchased PMH Financial. PMH Financial had about $2.5 billion in REO (real estate owned…i.e. bank owned) property across the country.
I have made mention to others that REO is big business. There are a lot of people and a lot of companies making tons of money from foreclosures. It’s a very profitable business.
For example, Lennar, the nation’s largest home builder, has been active in the distressed property and loan market for a couple of years. They tend to purchased nonperforming loans and then either sell the homes for a profit or foreclose on the owner and then take over the property. 6 months ago Lennar raised $300 million for their Rialto Capital fund which purchases these distressed assets.
REO or banked owned property is expected to be a steady business for the next several years.
Search for Fannie Mae homes in Minnesota. These are REOs (real estate owned) by Fannie Mae, the pseudo government bank that owns half the mortgages in the country.
Search by county, city, price etc. As of this entry, there are 1,677 homes for sale in Minnesota owned by Fannie Mae. They are the biggest seller in the state.
Fannie Mae’s main web site is called HomePath…I find it kind of ironic given all that has gone on…HomePath. Interesting. I wonder what the consultants got paid to come up with that name? My guess is plenty!
There have been some very nice foreclosures and short sales that have been hitting the market in Plymouth as well as Maple Grove and Medina, MN. If you’d like the list, contact me. I can’t publish them here for your review sorry. It’s a Board of Realtors rule.
The news today is more of the same…Case-Shiller Index points toward double dip in housing. That might be so, I don’t know. Are prices soft. Yes. Is it difficult to sell a home today? It depends. Where is it located? What’s the price point? How updated is the home?
Here’s the challenge for the market concerning inventory particularly in some of the bigger, more populated western suburbs of Minneapolis:
So, what happens when you’re out showing property? We look first at the BANK OWNED homes as they generally represent the best deals in the market. We then very selectively choose some of the TRADITIONAL SELLERS to go see IF the home is priced decently and IF it appears to be nicely updated. The others sit. SHORT SALES…for the right buyer with a certain pain threshold and tolerance, we’ll go take a look…if only to have some fun just to see what it looks like. We then have to factor in the difficulty and likelihood of getting a deal done.
So all of that is the precursor to the article I saw in The Wall Street Journal today entitled, “Buyer’s Market? Stressed Sellers Say Not So Fast?“ Everyone thinks it’s a buyers market until they try to put an offer in on a house. Often times those homes are ending up in multiple offer situations today.
Here’s a quote that readily articulates the biggest challenge in today’s market:
Many sellers may be unable or unwilling to lower their home prices – mostly because they may be underwater on their mortgage – so buyers are increasingly finding lower offers than list price denied. Buyers, on the other hand, may be reluctant to agree to a deal if they don’t feel like they are getting it at a deep discount, industry insiders say.
If you are a TRADITIONAL SELLER and you do have the equity and financial wherewithall to sell, please don’t fool around with your asking price by pricing it over the market. You will hurt yourself in the end with a lower sales price. Price it right immediately. If you and your agent get it wrong (and you’ll know almost immediately with the exception of luxury properties), then adjust your price quickly. Your home is worth the most those first few days on the market. As days on market increase your value drops accordingly. Best to err on the side of being overly aggressive on your price – i.e. at or just below market.
For more on pricing your home properly, please see my video (albeit not high production quality) on pricing your home properly in today’s market. You’ll at least get the point I’m making.
I’ve just heard from a couple of sources now that Wells Fargo has reversed course on funding mortgages for buyers who are trying to buy short sales in the redemption period. There are certain stipulations that must occur in the title insurance, but those title companies will get that cleared up. This is good news.
The Minneapolis Area Association of Realtors just published its weekly report for the week of March 28, 2011.
Key highlights of this week’s report:
The Minneapolis Area Association of Realtors has a number of excellent reports available for agents as well as consumers.
If you’re looking to buy a bank owned home in Plymouth, MN, good luck. As of today, there are 31 bank owned homes for sale in Plymouth. There are 17 properties currently pending. That means that there is less than a 2 month supply of bank owned homes. That’s fairly consistent across much of the Twin Cities metro.
The killer right now is short sales. There are 49 short sales for sale in Plymouth right now. A good portion of those do appear to have contracts on them but only 3 are actually pending meaning the listing agents expect them to close.
Traditional sellers have 361 properties for sale and 89 are currently pending. That leaves just a 4 months supply of housing available in Plymouth. Normally that would be almost considered a sellers market, but given the ongoing challenges with buyers’ credit and the lengthy sales process for short sales, traditional sellers will likely continue to suffer.
Short sales are really hurting the market because they hang around forever. The for sale sign stays up for 8 or 9 months before they even hope to hang a sold sign. Meanwhile the price continues to drop or the market time continues to accumulate which hurts traditional sellers who are in a position to actually sell their homes.
