December, 2011

*************************

Historical Housing Inventory 

Levels

“Supply of available homes in the metro hits six-year low” read the StarTribune Sunday headline.  That is good news if you are selling and not-so-good news if you are buying. Sellers like the idea of fewer competitors vying for the attention of the buyers. Buyers are frustrated with the “limited selection” (compared to the peak of the market) from which to choose. In certain price ranges – particularly lower cost investment properties – multiple offers are quite common. Seasonally, we are typically low on inventory as the year comes to a close. But, in just one year’s time, there are dramatic changes. The number of homes for sale in November of ’10 in Apple Valley was 341 versus 249 in ’11. Lakeville was 400 in the same month last year and 306 this year.  Inventory drops of 24% to 27% are significant to say the least. Unfortunately, prices continue to drop as demand across all price points has yet to prove its strength.

Many economists see indications the Twin Cities real estate market is “healing.” Experts speculate the much anticipated swell of foreclosures expected to hit in 2012 won’t be as dramatic here as it will be in other hard-hit sun-belt and rust-belt markets.

There is no doubt on the Dave Oswald Homes Team, as we experienced a 23.7% sales increase in 2011 over our previous record-high 2010, the ultra-low interest rates drove buyers. Some of our clients were downright giddy with excitement over the rates they secured.

We need three things as I see it: continued decreases in supply as people return to work and find ways to pay their mortgages, increases in demand across all price points as ownership trumps rentership and interest rates that continue to hover below (or, as today, way below) 5.5%. We will know more as 2012’s Spring turns to Summer!

Five Real Estate Tips from

Warren Buffett,

“The Oracle of Omaha”

“The Basic Premise Of Home Ownership – That Homes Increase In Value Over Time – IsSound”

Buffett says the premise “over time” is sound but that doesn’t mean values will always go up, year after year. That irrational thinking coupled with what he calls “liar’s loans” led to the housing crash.

“Buy Low” 

He points to record-high affordability. The median income household can afford the median priced home.

“Don’t Wait Too Long” 

Economic markets are volatile and impossible to conclusively predict. Waiting could prove costly. Buffett warns “if you wait for the robins, Spring will be over.”

“The Smart Way To Own A Home Has Three Elements” 

Fixed mortgage, affordable payments and long-term hold. A fixed, monthly payment within a sensible percentage of income held for a long time makes sense. Buffett still lives in the same home he bought 52 years ago for $31,500.

“Buying Your ‘Dream Home’ May Lead To Nightmares” 

Having a “whatever it takes” approach to financing to compensate for an imbalance between purchase price and monthly income creates an unsustainable situation and a living nightmare. He says “Our country’s goal should not be to put families into the house of their dreams, but rather to put them into a house they can afford.”

Market Update Report

Housing Market Taking Positive Steps Sans Stimulus

Without any government stimulus, the Twin Cities housing market continued to take small yet noticeable strides toward recovery in September. Sellers listed 5,562 new homes on the market, down 16.8 percent from last year. Buyers entered into 3,752 purchase agreements, up 37.4 percent over September 2010 levels. That's the fifth consecutive month of double-digit, year-over-year gains in buyer demand—primarily driven by slowed activity at this time in 2010.

With less product entering the market and relatively strong sales, inventory levels dropped 20.7 percent to 22,476 active listings. That marks the largest inventory decline in more than seven years. A leaner inventory count combined with stronger purchase demand has moved the market toward balance. There are now 6.8 months supply of inventory, just outside of the ideal five- to six-month range, down from 8.7 months last September and the lowest September figure since 2005. The median sales price was down 6.9 percent from September 2010 to $155,500. Traditional prices fell 12.0 percent to $188,000; foreclosure prices dropped 8.2 percent to $102,825; short sale prices were down 7.5 percent to $129,500.

Sellers are starting to see more of their asking price for the second consecutive month – up to 91.1 percent. On the foreclosure front, 39.7 percent of all closings were either foreclosures or short sales while 32.8 percent of new listings fell into the distressed category.

Top 6 Reasons Mortgage Applications Are Rejected

Mortgage lenders have become increasingly restrictive in terms of their lending guidelines since the housing market crash. Here are the top six reasons mortgage lenders reject applications.

1.  Income issues. Most failed applications simply have income too low for the mortgage amount they are seeking. The challenges in the U.S. the job market are also causing this issue, as people who have changed their line of work or have changed from salaried employee to freelancer over the last couple of years can also have their home loan applications rejected based on income.

2. Too much debt – not enough salary. If the mortgage for which you're applying plus your monthly payments on credit card, car and student loan debts will comprise more than 45 percent of your total income, you could have problems qualifying for a home loan. You might also run into problems if you rely too heavily on bonuses, overtime, cash wages or rental income - banks want a “sure thing.”

3. Credit issues. Today, the mortgage-qualifying FICO score cutoff falls somewhere between 620 and 660, depending on which lender and which loan type you seek. It’s estimated more than one-third of Americans have credit scores too low to qualify for a home loan. Even if your credit score is over 660, any late mortgage payments, a short sale, a foreclosure or a bankruptcy in the last two years, could make loan qualifying difficult to impossible.

4. Property didn't appraise. Appraisal guidelines have tightened up -- some would say, even more than overall mortgage guidelines. So, it is increasingly common to have the property appraise for a price lower than the sale price negotiated between the buyer and seller.

5. Condition problems. With all the distressed properties on the market, and with most non-distressed sellers barely breaking even, more home-sale transactions than ever are falling apart due to condition problems with the property. Many lenders (especially FHA & DVA) will not extend financing on homes where the appraiser points out problems like cracked or broken windows, missing kitchen appliances, electrical problems, or wood rot.

6. Technical difficulties with application. The days when lenders just took your word for it are long, long gone.

Applications with incomplete or unverifiable information are doomed. If you are facing any of these challenges, it's critical that you contact me and I’ll engage one of our mortgage professionals to help you determine what course of action to take.

Real Estate Quote of the Month

“The sooner that vacant home that’s in foreclosure is purchased and capital is back into the marketplace, the sooner you start seeing a housing recovery,” Realogy’s CEO Richard Smith bemoaning the fed’s pressuring of mortgage bankers to hold back their inventory of foreclosures.

The Dave Oswald Homes Team was recognized by Coldwell Banker Burnet as achieving the coveted “President’s Club” award for 2010. Placed in the Top 50 of approximately 2000 Coldwell Banker Burnet agents, we realize success comes with responsibility. We’ve asked those friends, family, clients and associates attending our Annual Pig-Nic on Sunday, September 25th to bring an un-expired canned or boxed food item for our local food shelves. Giving back to the community from which our success comes is a good thing! Missed the invitation we sent you? Call Jeannette at 952-435-4265 for details.  We’d love to see you there!

The State of the Housing Market

Richard Smith, president and CEO of Realogy (the largest owner and operator of realty companies in the United States including Coldwell Banker Burnet), testified on the state of the housing market before a Subcommittee of the U.S. Senate Committee on Banking, Housing and Urban Affairs on September 14, 2011.

Prior to the hearing, Mr. Smith stated:

"I am honored to have this opportunity to address the Senate Subcommittee on Housing, Transportation and Community Development on the important issues facing our country in the housing market. Given the housing sector’s substantial influence on all aspects of the U.S. economy, we would like to see a more cohesive national plan to address a recovery in the housing market. Current government policies and programs may be well intentioned, but they are suppressing a recovery, the Dodd-Frank Act as an example. The end result is an environment that has constrained everyone from homebuyers and sellers to lenders and mortgage servicers alike. Unfortunately, there are no silver bullets. We believe the immediate issues that must be addressed are high unemployment, the persistent overhang of foreclosed properties, low consumer confidence and failed government intervention programs."

We are often asked “when will the real estate market turnaround?” The last sentence of the quote above holds the answer: When those four issues make positive headway, we’ll begin to see a turnaround.

Top Ten Tips for Staging Your Home

1. Grab them from the curb.
Make potential buyers fall in love with your home from the street by adding potted plants and flowers, power-washing patios and walkways, weeding the garden and mowing the lawn. It's your first chance to make a good impression, so you've got to make it count.

2. Make it sparkle.
Think hotel clean. Mop, dust, vacuum, wash windows, baseboards — even the cat. People will look in your cupboards, under your sinks and in your closets. Also, pay particular attention to odors. You might even consider consulting a neutral nose by having a friend come by for a smell test.

3. Pay attention to color and light.
A neutral home appears larger and has less chance of offending someone. Also, open up blinds and draperies to make sure there's abundant natural light throughout the home.

4. Depersonalize.
Few things deter buyers more than a cluttered home. They need to see your home, not your stuff. Taking yourself out of the picture makes it easier for buyers to imagine themselves, and their stuff, in your space.

5. Consider replacing furnishings.
Think about removing or replacing worn or outdated furnishings and get rid of extra pieces. Consider consulting with a professional staging company.

6. Invest in new artwork.
Displaying new artwork is a great way to breathe new life into a room. Photography can be used to contemporize a room and add a splash of color as well.

7. Make repairs.
Make your home a high-maintenance zone. Repair squeaky doors, chipped or smudged paint as well as broken fixtures and fittings that you've neglected.

8. Apply a fresh coat of paint.
It's the best bang for your buck that will quickly refresh a dull, dated room. Use beige or taupe for living spaces and a neutral green or blue for bathrooms.

9. Don't forget the floors.
Get rid of worn carpets, and consider refinishing shabby hardwood floors. An inexpensive new area rug is a quick fix and can improve the look of old floors.

10. Spring for new light fixtures.
Renew the look of the room by replacing old or dated light fixtures, door hardware, light switches and outlets. If it's tacky and older than you, get it out of there!

Real Estate Quote of the Month

"A man builds a fine house; and now he has a master, and a task for life; he is to furnish, watch, show it, and keep it in repair, the rest of his days." Ralph Waldo Emerson (1803 - 1882)

Dave Oswald Homes Team QR Code

Scan this “quick response” code with your android or smart phone for quick and easy access for details, pictures, and videos of all of our listings!  Access our website and retrieve contact information for the team!

The Dave Oswald Homes Team's Real Estate signs now show off our new QR (for quick response) Code. You’ll be seeing more of these in our marketing and advertising materials! The QR Code is a form of a barcode that allows people with “Smart” Phones such as the iPhone or the Android to take a picture or scan of the code and, within seconds, be linked via their phone to pictures, video and other information about the house or about the Dave Oswald Homes Team. Our link offers six “buttons” upon arrival: video of the property, property information, a link to our website, contact info for each of our team members, links to our social media and a link to our newsletter. This robust application is customized for our Team and includes a “geo-locator” feature. Because Smart Phones are equipped with GPS, it can tell which of our listings the interested person with the phone is standing in front of or driving by. Therefore, we only need one code for all our listings. One sign fits all!

 Just another flash-in-the-pan marketing gizmo? Hardly. This technology is sweeping across the world with a myriad of marketing and manufacturing applications. It is all about increasing the speed with which we get needed information in front of buyers. Home buyers want information fast and our job is to help them get it!

Strategic Pricing!

Without question, we are in a “Buyer’s Market.” Therefore, we – you & I - must be strategic in pricing your home. When supply exceeds demand, a “competitive” price isn’t enough to capture an offer. A “compelling” price, also known as a “worry” price, will attract offers. A “worry” price is one that, once a prospective buyer has been through your house, they worry someone else will buy your home before they can!

 Here are some common myths & misunderstandings often embraced by Sellers:

• If we lower our price, we are “giving our house away”
• We need room to negotiate
• Buyers always offer less than List Price (except in multiple simultaneous offers)
• Our neighbors think our house is worth more
• We don’t want to hurt our neighbors’ home values
• Our appraisal from two years ago was much higher than you are suggesting
• Let’s try the higher end of the range
• We can always come down but we can’t go up
• We have plenty of time to sell – we’re not in a hurry
• Realtors just want a low price for a quick sale
• We don’t want to leave money on the table
• The days of multiple offers are over!

The Dave Oswald Homes Team philosophy on pricing is simply this:

• List just below the mid-point of the price range for your home
• Be prepared to lower the price or increase the value of your home if we don’t get an offer in 30 days
• Price your home so the market chases us versus we chase the market
• Interest in your home wanes the longer it remains unsold
• Comparable sales lose pricing relevance with age
• Most buyers finance their purchases – your home must appraise!
• Realtors have a financial incentive to get the most $$$ for your home

Let’s price your home to SELL for the most money!!!

Real Estate Quote of the Month

“Ninety percent of all millionaires became so through owning real estate.”

Andrew Carnegie, 1919

The May market statistics look pretty dire but remember these numbers include ALL transactions. If we broke out traditional or non-bank mediated sales from shorts and foreclosures, we’d see significantly higher median and average sale figures for the traditional sales. Nonetheless, the numbers are what they are and we have to live with them. Over these next 18 months or so, we should see the last of the 5 and 7 year ARM mortgages reset and that will likely signal the end of the foreclosure flood. It won’t be the end of short sales and foreclosures (we’ve always had and always will have them) but the waters will recede to normal levels. Remember…these figures are impacted by the flurry of activity we had in the first four months of 2010 because of the first time home buyer federal tax credit incentive. These year-to-date figures through May are largely impacted (negatively) by the anomaly of last year’s incentive. One of the best bits of data above is the year-to-date closed sales. Only a marginal 1.9% drop in closed sales! Sans a tax incentive, the market is actually (thanks to low interest rates) pretty active.

Real Estate Quote of the Month

“Don’t wait to buy real estate. Buy real estate and wait.”

                                    Author Unknown

RE Investor’s Corner — Tip of the Month

What is a 1031 Tax Deferred Exchange?

A tax deferred exchange allows you to sell a piece of investment property, buy a new investment property with the profit from the sale and not owe taxes on the “gain” of the sale immediately. If you eventually sell the new piece of property, you would owe taxes at that time. Generally, all gains and losses on sales of real estate are taxable, but an exception lies where the property sold is traded or exchanged for "like-kind" property. The new property is seen as a continuation of the original investment, so taxes are not due at the time of the sale. The process has timing parameters for how long you can wait to identify your exchange property and how long you have to close on its purchase. No extensions are possible. While the rules on how you can qualify for an exchange are a bit tricky, the tax savings can make it all worthwhile. Always check with your tax professional.

When you get ready to do a tax-deferred exchange, you will need the services of a qualified 1031 service provider. Coldwell Banker Burnet’s parent company, NRT, has a division providing such services and I’m happy to provide you their contact information.

Bad News Bears – Traditional Media Bums Me OUT!

Negative. Negative. Negative. Traditional media continues to hammer their readers/listeners/viewers with negative news about the real estate market. They seem bent on the "glass half empty" approach. Falling values, rising foreclosures, blah, blah, blah. When any market tumbles from inflated highs, its a bummer for those who bought at, approaching or just past the market peak. We get it already!

The stock markets, commodities markets, precious metals markets all suffer similar gains and losses over time and are accordingly reported. But, it seems, unlike the real estate market, the media always seems to report a silver lining to those clouds. C'mon guys! Equal time with a positive slant would really be appreciated here! How about spending time reporting the positive effects of these historic, incredibly low interest rates that are making homes affordable for a whole segment of the population who otherwise could not possibly qualify for a payment on a house to meet their needs? Joyful news! Why not report on how many of our local custom home builders have cut their gross margins so much that the price of building a new home is at historic lows? Jubilation abounds! What could it hurt if the media would examine the tremendous depth and variety of inventory and report the fantastic selection from which buyers can choose. Jumpin' Jehosophat!

Okay, okay. I'll stop picking on traditional media. They can't help it. Disasters, crashes and crimes sell newspapers and get folks to tune in. But, next time you see or hear negative news about the local real estate market (and, as you may know, ALL real estate is local), remember there are plenty of positives, too!

RE Investor’s Corner — Tip of the Month

Some investors have the time, expertise and desire to manage their own properties. Others prefer to use a professional property management company just like they use a professional to manage other areas of their investment portfolio. Just what does a management company do?

• Advertise your rental
• Take calls from potential tenants and conduct showings
• Process rental applications with thorough background check
• Sign lease with tenants and collect security deposit
• Manage tenant move-in and move-out
• Collect monthly rent and pursue overdue payments
• File legal actions against tenant if needed and manage eviction process
• Take calls from tenant and arrange maintenance and repair work
• Provide monthly rent payments and financial statements to owner

Such firms typically charge a fee equal to the first month’s rent and $75 to $100 per month. With a high demand in the market for rental properties, consider calling us to find “cash-flow”properties and our recommendations for property management.

Note: For a specific city or a county other than Dakota,
send your request to dcoswald@cbburnet.com

The latest numbers for Dakota County show a drop in the rate of new listings coming on the market. 2010 averaged 773 new listings per month while January 2011 was only 647. That’s not bad news given the market’s currently bloated inventory levels. (We’ll see what impact the newest wave of foreclosures will have.) Median sale prices, which were steady in 2010, were down in January and days on market were up. However, there is a glimmer of hope in the housing market! Employment numbers are slowly improving, interest rates remain low and the CPI—minus food and fuel—rose a meager 1% in 2010. Once we churn through some excess inventory, we should see pricing stabilize. Look at the chart below. The Purchase Only Index is an indicator of home affordability.

The FHFA defines Implied Market Balance as when the median income household can afford the median priced house. Look at the disparity in affordability that began to widen around 1999 and widened further and further into the mid-decade. Chris Galler, CEO of the Minnesota Association of REALTORS, spoke at our recent sales meeting and was encouraged by this trend. “As more Minnesotans return to work, more households will return to enjoying a median household income and more will buy homes” Galler said. Assuming interest rates remain low and these trends continue, slowly but surely, we’ll see a real estate recovery.

Quote of the Month
“40% of the homes on the market today are either short sales,
in foreclosure or foreclosed properties.”
Chris Galler, CEO of the Minnesota Association of Realtors

Download PDF of this Market Update!

Like a rare astronomical event, America is experiencing a conjunction between very affordable home prices and historically low mortgage rates that hasn’t been seen for half a century. Since nobody knows how long this will last, today’s market is a rare buying opportunity for working families with stable incomes and good credit.

Whatever you do, do NOT walk away from your home and let it go into foreclosure without speaking to me first!

http://www.youtube.com/watch?v=xRMng-fFKI0

1. Consider loan modification first. If you are thinking of selling your home because of financial difficulties and you anticipate a short sale, first contact your lender to see if it has any programs to help you stay in your home. Your lender may agree to a modification such as:

·          Refinancing your loan at a lower interest rate

·          Providing a different payment plan to help you get caught up

·          Providing a forbearance period if your situation is temporary

When a loan modification still isn’t enough to relieve your financial problems, a short sale could be your best option if

·          Your property is worth less than the total mortgage you owe on it.

·          You have a financial hardship, such as a job loss or major medical bills.

·          You have contacted your lender and it is willing to entertain a short sale.

2. Hire a qualified team. The first step to a short sale is to hire me, Dave Oswald, and a real estate attorney who specializes in short sales. Short sales have proliferated only in the last few years, so it may be challenging to find attorneys who have handled a lot of short sales. You want to work with those who demonstrate a thorough working knowledge of the short-sale process and who won't try to take advantage of your situation or pressure you to do something that isn't in your best interest.

I can:

·          Provide you with a comparative market analysis (CMA) or broker price opinion (BPO).

·          Help you set an appropriate listing price for your home, market the home, and get it sold.

·          Put special language in the MLS that indicates your home is a short sale and that lender approval is needed (all MLSs permit, and some now require, that the short-sale status be disclosed to potential buyers).

·          Ease the process of working with your lender or lenders.

·          Negotiate the contract with the buyers.

·          Help you put together the short-sale package to send to your lender (or lenders, if you have more than one mortgage) for approval. You can’t sell your home without your lender and any other lien holders agreeing to the sale and releasing the lien so that the buyers can get clear title.

3. Begin gathering documentation before any offers come in. Your lender will give you a list of documents it requires to consider a short sale. The short-sale “package” that accompanies any offer typically must include

·          A hardship letter detailing your financial situation and why you need the short sale

·          A copy of the purchase contract and listing agreement

·          Proof of your income and assets

·          Copies of your federal income tax returns for the past two years

4. Prepare buyers for a lengthy waiting period. Even if you're well organized and have all the documents in place, be prepared for a long process. Waiting for your lender’s review of the short-sale package can take several weeks to months. Some experts say:

·          If you have only one mortgage, the review can take about two months.

·          With a first and second mortgage with the same lender, the review can take about three months.

·          With two or more mortgages with different lenders, it can take four months or longer.

When the bank does respond, it can approve the short sale, make a counteroffer, or deny the short sale. The last two actions can lengthen the process or put you back at square one. (Your real estate attorney and I, with your authorization, can work with your lender’s loss mitigation department on your behalf to prepare the proper documentation and speed the process along.)

5. Don't expect a short sale to solve your financial problems. Even if your lender does approve the short sale, it may not be the end of all your financial woes. Here are some things to keep in mind:

·          You may be asked by your lender to sign a promissory note agreeing to pay back the amount of your loan not paid off by the short sale. If your financial hardship is permanent and you can’t pay back the balance, talk with your real estate attorney about your options.

·          Any amount of your mortgage that is forgiven by your lender is typically considered income, and you may have to pay taxes on that amount. Under a temporary measure passed in 2007, the Mortgage Forgiveness Debt Relief Act and Debt Cancellation Act, homeowners can exclude debt forgiveness on their federal tax returns from income for loans discharged in calendar years 2007 through 2012. Be sure to consult your real estate attorney and your accountant to see whether you qualify.

·          Having a portion of your debt forgiven may have an adverse effect on your credit score. However, a short sale will impact your credit score less than foreclosure and bankruptcy.

Note: This blog article provides general information only. Information is not provided as advice for a specific matter. Laws vary from state to state. For advice on a specific matter, consult your attorney or CPA. 

• A first time home buyer is defined as someone who has never owned a principal residence or has not owned one in the last three years. If married, both parties must qualify under this rule.
• Available to single taxpayers with annual incomes up to $75,000 ($150,000 on a joint return)
• Partial credit available for taxpayers with annual incomes from $75,001 to $95,000 ($170,000 on a joint return)
• Available ONLY for the purchase of a single family home, townhome, condo or new construction that will be used as a principal residence (investment properties or vacation homes are not eligible)
• The tax credit does not have to be repaid if you stay in your home for 3 years or longer. If sold before the 3 years are up, the first time home buyer (now the seller) must pay the IRS the entire amount of the tax credit at closing.

This is such a sweet deal for those who qualify! Imagine this scenario: Junior meets all the qualifying criteria but he lacks cash. He (or she) asks Mom & Dad for $8000 so he can make the 3.5% FHA required minimum down payment on that $228,500 home that his Realtor, Dave Oswald, helped him find. The sellers of the home are paying his closing costs and they'll close before December 1, 2009. Junior promises to pay his folks back the eight grand as soon as his federal tax refund comes in after he files his return for 2009. He gets the tax credit and turns it right over to Mom & Dad. They get repaid and launch Junior out of their house (finally!) and he can live his own life out from under the microscope (finally!) Everybody wins and the U.S. economy gets another stimulating shot in the arm!

You should consult your tax advisor for a detailed assessment of your personal income tax situation and to verify your qualifications for the First Time Home Buyer Tax Credit. Then, you should call me if you or anyone you know is looking to buy or sell real estate. Thank You!

Did you know???? Historically, the peak of the home selling season occurs between January 15 and May 15th. Most people assume the peak is in the summer months but, that's not the case. Approximately 60% of all MLS listed, previously-owned properties sell during that 120 day period. (Builders will typically sign 75-80% of their home building contracts for the entire year during this period.) That also means the sales of the other 40% of previously-owned homes are spread over the slower, remaining eight months. So, if you are thinking of selling and can be ready for the market soon, now is the best time while there are three times as many of those coveted buyers out there shopping! Also, if you've had your eye on a particular property, now is the time to act so you can beat out the other buyers! Interest rates are terrific today and prices are lower than they've been in years!

Selling or Buying or Both? Call me today on my cell phone at 612-801-2224.

My own business is on the increase and I am delighted as properties are selling. Yes, prices are still sliding a bit and yes, it will take some time to work through the current inventory levels but we are headed in the right direction! Over the last two weeks, I have seen several of my listings go under contract. Some have been on the market for over 8 months! And, we're beginning to see some activity in new home construction with our builder, Mittelstaedt Brothers Construction.

What a great time to buy! Prices are low, interest rates are low and selection is outstanding! It's a trifecta!! First time buyers and investors are jumping with joy. Families wanting more space or a different layout are moving up. By accepting the reality they are taking less than they'd like on their current home, they are able to more than offset their lower equity with the savings they achieve on their "move-up" house.

Call me if you want to get in on these tremendous opportunities. 612-801-2224. If now isn't the time for you but you know of someone looking to buy, I am ready to show them some fabulous deals in new and previously owned houses, townhouses and condos. I also have lots ready for your builder or mine!