Market Update Report

November, 2011

October 2011 Quick Facts

 

 


There's the numbers, then there’s the story behind them. For months, declining inventory has been the national tale to tell. This suggests a changing narrative with different voices. A buyer might tell you that record low mortgage rates and affordable prices made homeownership more attractive than renting. A seller may say that less competition allowed them to receive more of their asking price. The moral of the story? Real estate is local both in terms of geography and personal circumstance.

New Listings in the Twin Cities region decreased 16.3 percent to 4,921. Pending Sales were up 34.6 percent to 3,492. Inventory levels shrank 22.5 percent to 21,145 units, a trend that could indicate a changing landscape.

Prices gave back some ground. The Median Sales Price decreased 9.4 percent to $155,000. Days on Market decreased 0.3 percent to 135 days. Absorption rates improved as Months Supply of Inventory was down 28.6 percent to 6.2 months.

Recent reports from the broader economy have dispelled the story of a double-dip recession. An early reading of gross domestic product (GDP) showed 2.5 percent growth. Meanwhile, national job growth, a major driver of housing demand and price support, has recently strengthened. An increasingly impatient White House has rolled out phase two of the Home Affordable Refinance Program (HARP) for Fannie- and Freddie-backed mortgages. This should help a number of Consumers as they write the next chapter.

Real Estate Quote of the Month

 "It's something of a fallacy to call this a buyer's market," said Brad Fisher, President of the Minneapolis Area Association of REALTORS®. "Good quality homes that are priced right are in short supply. Buyer demand exists, but we need more sellers in the game."

 
Pulse of Foreclosures

Foreclosures will be with us for awhile yet.  Fortunately, Minnesota didn’t make the top ten foreclosure states. (We remain near the middle of the pack.) According to the Mortgage Bankers Association (MBA), the 10 states with the highest percentage of mortgages in some stage of the foreclosure process were Florida (14.49 percent), New Jersey (8.08 percent), Nevada (7.89 percent). Illinois (7.29 percent), Maine (5.67 percent), New York (5.67 percent), Ohio (4.92 percent), Indiana (4.86 percent), Connecticut (4.81 percent) and Hawaii (4.71 percent).

The MBA's National Delinquency Survey tracks about 43.5 million mortgages on one- to four-unit residential properties, or about 88 percent of the 49.4 million U.S. homes with mortgages.

Extrapolating the survey's findings to all mortgages suggests that there were 2.19 million homes at some stage of the foreclosure process nationwide during the third quarter. Another 3.95 million mortgages were delinquent, including 1.73 million homes whose owners were behind on their payments by 90 days or more but not yet in foreclosure. So, all combined, nearly one out of every eight homes in the U.S. are either delinquent or in foreclosure. 

Investor Corner

 

Q: Is “flipping” illegal? A: No!

What we're talking about here is capitalism - the free market exchange of goods and services for valuable consideration. Our economy depends on it and it's a normal way of life for all of us. Businesses "flip" goods and services to us that we, in turn, pay them for. The profit they receive is not unethical. So what about the real estate "flipping" scandals we hear so much about in the media?

To put it simply, real estate flipping becomes illegal when loan fraud is involved. Typically this is because the resale relies on inflated appraisals, fake documents, sales to "straw" buyers who represent original sellers, or "phantom" second loans. Lenders have instituted safeguards to thwart such activity.

There is absolutely nothing wrong with buying a home, investing in it and selling the same real estate for whatever larger value someone is willing to pay. At that point, it is sold at “fair market value.” Fair market value is what a knowledgeable, willing, and unpressured buyer would probably pay to a knowledgeable, willing, and unpressured seller in the market.