We Tell it Like It Is

Taken from the Minneapolis Area Association for Realtors newsletter:

New listings continue to trail year-over-year numbers in our local housing market, coming in at 1,628 for the week ending February 28, which is 19.2 percent behind this week last year. Total active listings are roughly 5,000 below this time in 2008. In an oversupplied market, this is cause for celebration. Continued growth in home sales adds to the festive spirit, with pending sales showing a healthy 12.1 percent increase over the doldrumish numbers of last February.

There are several important monthly indicators to look at in this week's report. Days on Market Until Sale in February stood at 157 days, down 4.8 percent from last February. This is the third consecutive month of downward year-over-year movement. The Housing Affordability Index (HAI) continues its yearlong improvement with a March 2009 HAI of 206—31.2 percent ahead of its March 2008 mark of 157. Months Supply of Inventory is holding relatively steady at 7.8 months, down 15.2 percent from the mark of 9.2 months we saw a year ago.

According to John Tucillo, one of the foremost real estate economists in the U.S. and former Chief Economist for NAR, there are three necessary phases that must occur for the housing recovery to launch:

1) a decline in new listing activity
2) a decline in days on market
3) an increase in sale price to list price ratio

The first phase came about last summer and the second phase began in the fourth quarter of 2008. Hopefully the third phase will occur sometime this year. Strong affordability, improving chances for a housing recovery and a federal tax credit for first-time buyers equates to a welcome home-buying environment—a little Irish luck for real estate.

FHA is a loan commonly used by first-time homebuyers. It requires the least amount of down payment (3.5% of the home price), which is the primary perk, and that makes FHA awesome.

HOWEVER...its a government-insured loan versus a privately-insured loan...the money comes from the government versus a private lender/bank. The government has a lot more requirements than private lenders have when it comes to giving out money for homes that are in need of some work.

FHA buyers have been experiencing a lot of frustration out there lately because a lot of inexpensive homes on the market (primarily foreclosures) are in halfway decent shape (well, a matter of opinion) but are not FHA fundable. FHA requires certain things to be in nearly flawless shape (again, in my opinion) before they will grant a buyer a loan or even consider accepting an offer w/an FHA loan.

Some of the things that FHA will see as issues in a home and either make a buyer fix or flat-out turn them down for a loan:

--Windows that are original to the home (if the home is older).

--Windows that are broken, have rotting wood, or chipping paint around them. Windows that have broken seals and are drafty or have condensation.

--Peeling/chipping paint anywhere

--any plumbing issues

--Electrical wiring that is exposed

--Snow on a roof

--loose stairs, decks, railings

--deteriorating doors, garage doors

I am sure my colleagues will whole-heartedly agree...parents just don't understand.

In case some of my current clients are reading this, your parents don't apply to this blog...the recent ones I've met are really cool and I enjoy having them tag along on showings. This applies to former parents I've dealt with, future parents I'll deal with, and parents of my co-workers' clients.

Dear Parents of Home Buyers and Sellers:

#1: Buying or selling one house in the past 30 years does not make you an expert in real estate.

#2: Your kids are buying a home for THEMSELVES. They might not LOVE the same things you do, so don't question their opinions.

#3: Home prices have actually gone up since 1980. So stop telling your kids everything they are looking at has been "over-priced" by the Realtor.

#4: Dad's tinkering around the house does not make him a professional home inspector. Please do not argue w/your kids when they want to hire someone.

#5: Please do not assume the Realtor is trying to take advantage of your kids and you are on a mission to bust them and prove your parental prowess to the world.

#6: There are thousands of homes on the market right now, so I have no idea what the story is on the home owners in every single house we look at.

#7: Putting in an offer on a home consists of more than picking up the phone and yelling out an address & price into the mouthpiece.

#8: Its not a good idea to have your realtor friend Milton ressurect himself from retirement to do you a favor and sell your kid's house. He may have been a heavy hitter back in the day, but it takes some skill of a different kind to sell in today's market.

#9: Yes, a 33 year old seems young to you. But they are still capable of being a good real estate agent even if they don't have 30 years of experience.

Pending sales continue to outperform last year, posting 869 for the week ending March 7—good for a 24.7 percent increase. Of these signed purchase agreements, 56.6 percent were for lender-mediated foreclosures and short sales.

New listings for the same time period comparison dropped by 12.6 percent, continuing a months-long trend of fewer home sellers. Increased sales has combined with decreased new listings to draw down the total inventory of homes for sale. The number of active listings for sale is down 14.9 percent from this time last year to 25,901.

Home sales below $150,000 are extremely hot, more than doubling over the last 12 months due to the effect of foreclosures and short sales.

There are now 7.8 months of supply, which is 15.2 percent lower than the rate of 9.2 months seen at this time last year. The biggest drop-off in months supply has been in the single-family property type, as sales have risen and inventory has dropped. Months supply of condominiums has actually risen 11.9 percent to 12.2 months.

Paradoxically, the average price of a condo has grown 5.7 percent in the last 12 months. However, the price per square foot has declined by 5.2 percent to $172 per square foot. This is an indication that larger condos have been selling but have been selling at a relative discount when we control for square footage.

My head is filled w/images of unknown substances splattered on walls, unidentifiable muliti-colored stains embedded in tacky 1980's carpet, torn/peeling floral wallpaper, and lots of dead bugs. My ears hear the echos of chirping smoke detectors w/dying batteries; my nose still smells the mold, the dog urine, and the horrific cinnamon Glad Plug-Ins attempting to mask it all. Ah, the current real estate market...foreclosures foreclosures foreclosures. I love coming home everyday feeling like I need to soak in a bath tub full of Clorox.

I gotta say though...bank-owned properties have been pleasant when it comes to submitting offers. I've been hearing back from the bank within 24 hours of submitting offers lately. They have been pretty stingy though w/price. If they are covering your closing costs, they won't stray too far off from the asking price. But, the asking price is still a good deal. I have clients closing at the end of this month on a 1992 home that they are buying for about $216,000 that should appraise in the $240's I'm guessing. Will be worth over $300,000 once they do some work on it!

Homes under $150k are still selling like mad. Multiple offers on these homes w/buyers competing for a good deal and a chance to get that $8,000 tax credit. I love it but also feel bad for my people that keep losing out to better offers :(  Keep the faith guys; it'll happen soon. There are more listings to come!

Holy buckets you guys. A change is occurring! So, the new gov't stimulus plan includes this $8,000 tax credit to first time homebuyers that is now free money if you live in the house for 3 or more years. Things have gone bananas in recent weeks and its gotta be because of that.

I've got a handful of buyers looking under $160,000 right now and its been CRAZY. I think they are just some of the hundreds out there right now looking in that same price range. I found a great house listed today for like $70,000 and when I called to make an appt. to see it w/my buyers, it had already sold after 1/2 day! And it seems like every time I'm calling to make an appt. to show a listing all I keep hearing is "It sold. No more showings." I have buyers that are now waiting for new listings to come up so we can run out to the house and be ready to write an offer ASAP.

There are bidding wars out there!

The market is waking up and its possible we're going to get a lot of these foreclosures off the market this year. Have no fear though, buyers. There are more foreclosures to come, so you'll still have a lot to choose from and a chance at something soon. Those poor people w/adjustable rates are going to see those rates reset this spring and those poor people getting laid off and not being able to make mortgage payments. It makes me sad but hopefully there will be buyers waiting to get the houses off their hands.

P.S. For those of you that enjoyed our first video (thanks for all the great feedback, btw), just wait. There's more to come and it gets better. TRUST ME.