We Tell it Like It Is

After our meeting with Mark Allen, CEO of the Minneapolis Area Association of Realtors, I'd like to share further information regarding our current state in the housing market.

The answer is "yes", we have hit rock bottom and we are beginning to see signs of a plateau & gradual increase. The first sign: in 2006, the Twin Cities had a record 108,000 new listings on the market. This peak in new listings is what killed us. Way too much inventory for the amount of demand we had. This number HAS to go down in order for a correction to take place. In 2007, it decreased to 105,000 and its projected to be down to 80,000 by the end of this year. Today, there has been an average of 21.7% new listings and 27.6% closed sales. This is good. These numbers need to continue to grow apart!

In the world of foreclosures, 20% of homes that are newly listed for sale are either foreclosures or pre-foreclosures (short sales) and 30% of the purchases right now are also in that category.  Foreclosures and pre-foreclosures will continue to be prevalent for the next 2-3 years as many ARMs are still projected to readjust within the next year and home owners will find themselves in trouble.

How does 2009 look? Likely the same as 2008. It won't get any worse, but there will still be no reprieve for home sellers. Buyers will still likely have one more good year to buy.

How does the current national economy affect the housing market? If you are a solid buyer w/good credit and money for a downpayment, you will be fine, I am told.

In the spirit of this week's spooky holiday, I thought I'd share my favorite Halloween story with all of you. For those of you that know me well, (I may have mentioned this before) for much of my life, I have been incredibly susceptible to extraordinary occurrences and prone to embarrassing moments. I have no shame and find enjoyment out of sharing these experiences as it reminds us all of how human we are. Warning: if you think of me as a poised, proper, & professional person and would like to keep it that way, please stop reading at this point.

Halloween 1999. Pete & I were crazy 24 year olds anticipating a big costume bash at our friend Erik's house. For some reason, I was hellbent on dressing up as Super Girl that year. Apparently, so was the rest of the female population in the Twin Cities, because every store seemed to be sold out of Super Girl costumes. I was determined and I probably visited a dozen stores until I finally came across one. However, I soon realized my good fortune wasn't really that good. It was a child's costume. A body suit fit for a 4 foot tall Super Girl. The creative & saavy gal that I am, I purchased it anyhow; thinking I could do something with it. And did I ever!

Halloween night arrived and I must say, I was very proud of my cutting & sewing capabilities. I turned the one-piece into a 2-piece but had to purchase a separate nylon leotard to wear in order to complete the look (and to keep the wholesome appearance the original Super Girl is known for). The only minor problem I faced was when it would be time to use the bathroom, which would consist of me having to slip my arms out of the leotard sleeves and wiggle the entire thing down to my knees; leaving my upper body temporarily uncovered. A bit time-consuming, but I could deal with it. Side note: At 33 yrs old, that costume would've been in the trash before I'd deal with a "minor problem" like that. Aging = a bit smarter.

We arrived at the party ready to roll. I hadn't had time to eat prior to the party because of final adjustments to my wonderful costume, so I headed for the food table. Similar to many other parties during that time period, the host was not offering bottled water or pop...just the important things like "punch" and a keg. I didn't want to start the party off on the wrong foot and drink on an empty stomach, so I searched the kitchen for something nonalcoholic I could wash all that good food down with. Score! I found a lone can of Mellow Yellow in the back of the fridge. I gulped down the fizzy, sugar-laden liquid and moved on my merry way.

The party was just getting started, and I decided to push it along by breaking out some hot dance moves. I was feeling it; the group was feeling it; as the music pulsated throughout the house. Then, all of a sudden, I was REALLY feeling it. Feeling a gurgle & rumble through my GI tract. And you know what I'm talking about. To the point where my dance moves went from the running man to just swaying back & forth to the beat. Alrighty then. This will pass in just a few minutes, I thought. A few minutes later, I decided I'd better visit the bathroom. I puckered up and made my way to the best bathroom in the house...located in the basement away from the party. I annoyingly removed my costume & did my duty. Glad it hit me early on so I could get it over and done with and party the night away.

I returned to my spot on the makeshift dance floor only to have the feeling reappear minutes later. Are you kidding me? I waited again for the feeling to pass, however, people around me started to question the beads of sweat under my nose and the pasty white complexion. I began to shake. Another visit to the bathroom was inevitable. I ran back to my safe haven downstairs only to find to my horrific dismay that there was a LINE. A line! I frantically ran back upstairs and gained sight of my last resort: the bathroom right in the middle of the party. It would smell and it could be noisy and everyone will know its me. But, the room was empty and the gurgling was boiling over. I  quickly went in and closed the door. I peeled the leotard off my clammy body and sat for 10 minutes wondering what the hell was in that dip I ate earlier. 10 minutes didn't seem to make a difference. I knew the job wasn't done and I suspected a line was forming outside of my bathroom now too. And, of course, somebody knocked on the door. Good grief, what could I do? I needed to get out of there...but really out of there. Like I needed to finish this job someplace else. In the comfort of my own home. Ok, I needed to just make a fast move. I got up and tried to get my leotard back on. Note to everyone: nylon + sweaty body = no go. Couldn't get the darn thing pulled up; and shaking like a leaf didn't help it any. In desperation, I wrapped my red cape around myself and took a quick look in the mirror. Blue eye shadow mixed with perspiration dripped down my face. I held my breath and got ready to make the run. I grabbed the door knob, turned it and pulled. And pulled. And pulled. Seriously. And pulled. "Get me out of here!" I yelled like an absolute psycho. The door had jammed.

After slamming his body against the door about 5 times, I met a vampire cowboy on the other side... but all he saw was a streak of blue & red disappear out the door and into the night...a red cape blowing in the wind with a not-so-fresh trail behind her. Faster than a speeding bullet, I was on my way home; leaving my husband confused as he stood in his Globetrotters uniform and black afro wig.

By Brett Arends, The Wall Street Journal

A BRIEF HISTORY OF CRASHES

Anyone who did the same following the gigantic crash of 1907, when J.P. Morgan Sr. stepped in to rescue the financial system, made a 700% return. After the 1987 crash, the figure was 900%.
Even someone who invested after the crash of 1929 and held on for 20 years eventually doubled his money, despite the disasters of the Great Depression and World War II. (Thanks to Global Financial Data for the historical calculations.)

10. Anyone with shattered nerves could do worse than spending $20 on Fred Schwed's hilarious investment classic "Where Are The Customers' Yachts?" It was written in 1940, and it's still right on the money.
"When there is a stock-market boom, and everyone is scrambling for common stocks, take all your common stocks and sell them," he wrote. "Take the proceeds and buy conservative bonds."
If shares keep rising, don't worry: Just wait for the market to crash. It will. When that happens, and "the panic … becomes a national catastrophe, sell out the bonds (perhaps at a loss) and buy back the stocks."
Hold them until the next boom. "Continue to repeat this operation as long as you live, and you'll have the pleasure of dying rich."
No, it's not quite as simple as that. But as Mr. Schwed knew, you're better off buying stocks when nobody wants them and their prices are cheap than when everybody wants them and the prices are dear.
Or, in a nutshell: Never get too bullish -- and never get too bearish.

From the Minneapolis Area Association of Realtors:

Home sales continued their recent upward streak for the week ending October 11, with pending sales posting a 21.1 percent increase over the same week in 2007. While this doesn't keep pace with the extreme increases seen throughout September, it remains a positive indicator of recent buyer demand. Almost half of the properties bought during the week in question were lender-mediated foreclosures or short sales—47.3 percent, to be exact.

On the supply side, things look decidedly different. New listings declined by 10.0 percent for the same time period comparison and are down 11.5 percent over the last three months. The total supply of active homes for sale sits at 30,495, which is 9.4 percent below this time last year. Inventory should decline through the remainder of the year as traditional home sellers take their homes off the market with greater frequency during the fall and winter months, waiting for the inherent optimism and renewed spirit of spring's thaw.

I found this article today on MSN.com and its right on the money. Please read:

By Steve McLinden, Bankrate.com

Here are my picks for 10 mistakes to avoid:

1. Not understanding the length of the buying/selling process. You know what happens when you make decisions based on optimism, time-on-the-market averages and generous promises from agents -- ye old Murphy's Law kicks in. The home-selling process is often more extensive than you think, from the early planning stages to protracted negotiations to oft-delayed closings. Sellers can take months before they formally accept a buyer's offer. Financing can get held up, buyers may have a tough time selling their old house, rough edges discovered in the final walk-through must be smoothed, etc. Give yourself a couple extra months to complete the deal. 

Mark Allen, CEO of the Minneapolis Area Association of Realtors, met with a group of us from TheMLSonline this morning. I'd like to share with you what the final word is on how the United States got into this housing market slump, according to the experts (relayed to us from Mr. Allen and interpreted by yours truly for your reading pleasure).

In the 1980's, the United States experienced a similar dismal housing market slump as we are infamously experiencing now. That somber situation gradually disappeared and the market begin its ascend in the early 1990's. Soon, however, a phenomenon occurred. Mortgage interest rates plunged to a record low and people realized it was time to take advantage of it. To the mortgage lenders' delight, an influx of people began applying for mortgages and soon, they were being given out like candy on Halloween. Lenders began to fight each other for business; tempting buyers with loans requiring no down payments, lower interest rates, and not many guidelines or stipulations when it came to income and credit.

Suddenly, the roughly 65,000 homes that were for sale each year in the late 1990's were disappearing within hours after going on the market. Home sellers would sit back and watch in shock as buyers battled each other for their property; eventually bidding & selling for well over the asking price. Sellers found themselves in the driver's seat with the buyers at their mercy; the normal 3% appreciation in home values were up to 5% and climbing.

By 2000, home values had increased to as high as 12% appreciation, as the demand far exceeded the supply. Soon, builders began building more inventory to appease the eager buyers and home owners decided to jump on the bandwagon, realizing they were sitting on a gold mine--putting their homes on the market solely to make a profit. In 2000-06, buyers were paying top dollar for homes that would normally sell for thousands less.

By the end of 2003, the normal 65,000 new listings per year shot up to 86,000. In 2006, that number increased to a record 108,000...everyone wanted a piece of the pie. However, the overzealous nature of sellers and builders would come back to haunt them sooner rather than later.

In 2005, there were 3 homes for every 1 buyer, but as the inventory increased, the amount of buyers began to decrease and by January of 2008, there were 10 homes for every 1 buyer. The tables turned and the demand eventually died down, leaving an obnoxious amount of supply. Home values dropped and today, many have decreased in value since they were purchased for an inflated amount a couple of years ago.

So, here we are. After roughly 13 years of a crazy buying & selling frenzy, what goes up must come down. Home owners who have to sell today--they paid $299,900 for their home and now have it listed for $265,000 and it still isn't selling. 10,000 licensed real estate agents in MSP have dropped down to 8,000--who are earnestly sweeping up the broken pieces and attending their weekly therapy sessions. And those lenders and buyers exchanging mortgages like candy...well, we now know how those situations ended up.

Both a mortgage person and a Realtor should be willing to do everything they can do for you...I mean, within reason. Side novel: I will bend over backwards for my clients, however, in the past, I've had people take advantage of that. I've had people call me unexpectedly on a Friday at 6:00 pm and ask me to make appts. to show them 4 houses to see within the hour. And when I explain to them that I have another activity I'm already involved in or explain how difficult it is to get 4 appts. in that short amt of time (this means trying to get a hold of 4 families and then asking them to drop everything and quick leave their house so we can see it in 15 minutes), they have gotten upset at me and say they feel like I'm not doing everything I can to help them. Whew; now that I got that off my chest.

Anyhow, don't settle on a mortgage person who does not return your calls within a few hours and doesn't seem to want to get things done for you. Many mortgage people will issue you a pre-approval letter and not take the time to find out who you are and what you need. A good mortgage person will want to find out everything about you so that they can serve you better. He/she will be willing to find loan programs that are right for you and have some options for you to choose from. A good mortgage person will seem eager for your business and will keep in regular contact with you.

Use a mortgage person that was recommended to you by someone you trust had an A+ experience with him/her.

With the wrong mortgage person, stuff like this has happened to clients:

--postponed closings; buyers' purchase is postponed up to 3 wks because of poor decisions/lack of actions on loan officer's behalf

--mortgage person turns out to be psychotic and goes postal via email; buyers fear he will show up to the closing threatening violence (I'm not kidding; this really happened to us)

--home purchase doesn't go through because buyers' mortgage company was not legitimate or goes under

--no one can get a hold of the mortgage person and buyers worry themselves sick that their home purchase will fall through

--loan officer leads buyers astray and results in financial issues later

Who you choose to get your mortgage from can make buying a home easier or more difficult believe it or not. Please please please understand that its not all about the advertised low rates and discounted fees. If someone advertises these great features, they'll charge you in other ways. They will not take less money than the next guy; they just find different ways of getting cash from you. Here are some very important tips when you are shopping around for a mortgage person:

1a) DO NOT use an automated online pre-approval system. Sure, its fast and easy. But, my clients & I have had some very bad experiences. One client recently had the online system calculate $3,000 as their closing costs. However, after looking it over for them, I found that the system left out some charges and the costs should be more like $7-8,000. Ok, that's a big difference. 2 other clients of mine had some issues that needed immediate attention and we did not have a live person to talk to. We had to call a main phone number and talk to someone out of state that was not familiar with the account and could not help us. We were connected over and over again until we finally got to someone that could help. When we called that person back the next day with another question, they were gone and someone else was assigned to the account and we had to start all over again.

1b) DO use a real, local person. Someone you can meet with face to face if you want to. The same person assigned to you throughout the whole transaction that you can call anytime at the same number. Someone that will even attend the closing with you to make sure everything goes status quo.

Stay tuned for tip #2.