REAL ESTATE TODAY

(May 7, 2008) - The long and short of short sale and foreclosure properties:  This week in Real Estate Today we will look at the two newest types of real estate currently on the market.

All of us in the residential real estate market have been given not the latest and greatest lesson in two new types, foreclosures and short sales. I say "not the latest," all though it is the greatest growth in numbers in the last year. We are currently looking at 21.7% foreclosed/short sales up from 7.1% in the first quarter of 2007 and that was up from 2.9% in the first quarter of 2006.  These foreclosed/short sale properties are also called "lender mediated" properties and are not the latest and greatest for agents or buyers for a variety of reasons. 

A buyer may be happy with the price, but is purchasing usually with an "as-is" addendum, which means they must sign the papers and.....good luck!  If the plumbing was frozen, the buyer needs to replace and hope they find the cracked one in the wall before there is rot or mold.  The seller, may be bank or bank and current home owner in a short sale situation.  Bottom line, the bank is involved and has its rules, attorneys, forms and title company. 

Cavaet Emptor takes on a whole other dimension when we start using contracts not approved by the Minnesota Association of Realtors.  Most agents in Minnesota use forms that are constantly updated by a legal panel at the Minnesota Association of Realtors. These forms are pertinent, comprehensive and have an ultimate goal of clean communication between buyers, sellers, agents and brokers.  So far all the contracts I have seen from the banks take care of one party....the bank. The bottom line, foreclosed and short sale properties present a multitude of challenges to consumers and agents.  We do have to have them to clean up our neighborhoods and developments, but know what you, as a buyer, are getting into if you open that door.

The alternative to foreclosed and short sales is sweet and getting better, existing homes and new construction. We will explore the pros and cons and why, at the end of the tunnel, these will get better and better.

(April 28, 2008) - You are what you eat, you are what you read...perhaps better put, what you read into it. This is the second half of the response I promised regarding the long range implications of the Minneapolis Star Tribune's articles on real estate "Boom to Bust"....but, wait, I hear it coming from a long way off...Boom to Bust to, yes, Boom again! 

I was in some of the featured neighborhoods this weekend and saw some amazing things including sold signs on spec homes and people driving through the developments looking at homes.  Perhaps the irony here is the newspaper, which derives much of its revenue from advertising, could not have given a bigger "free" advertisement of where to find great real estate values in the northwest suburbs today.  Somehow I have a suspicion that in two years when you drive the neighborhoods it will be tough to find a foreclosed property and we will see all these green lawns flowing into one another and wonder where all the swing-sets came from.  This is in part because of some government master planning. 

The I.R.S. used to tax the former home owner for gain when they lost their foreclosed property.  We are currently in a three year window up until December 31, 2009, where the I.R.S. is not taxing the homeowner on their loss.  We also know, on a Federal level, the M-3 monetary supply is no longer disclosed.  This then gives Mr. Bernanke and associates freedom to financially stimulate the economy without showing their hand to the rest of the world.  In turn giving some protection to the U.S. dollar, which of course affects trade deficits produced by manufacturing of United States goods.  Thus, keeping an eye on our jobs, which creates our state and national income tax base.

In the short term (1 year), the local and state governments will struggle to help get these developments cleaned up. They are in a triple whammy with needing to try and prevent further deterioration of neighborhoods due to theft and vandalism; having declining property tax revenues to maintain the current government operations; and third, increased costs, as these new developments needed new roads, larger schools, more fire/police protection, all what we call an expanded government infrastructure.  In the intermediate to long term it is the federal governments master plan, which will help us get through this mess. 

By the way, these are the same local government offices that had the vision to create the next ring of suburbia, the ability to create beautiful places to live in Rogers, Elk River, Otsego and Monticello. All of those cities have given us parks, new schools, an abundance of shopping amenities, new theaters, yet all have a quiet peaceful feel with a rural touch including fresh air!  You see, Wright and Sherburne Counties with its diverse cities of Buffalo, Big Lake, St. Michael and Zimmerman were a great place to live five years ago, are great places to move to today, and in hind-sight, five years from now will have been a wonderful place to have invested in a new home. 

We will all muddle through this time and perhaps be able to look back on some new lessons learned in the journey of life.  

(April 23, 2008)- The glass is half full and half empty.  Someone will buy and someone will sell a home today.  "So what's it all about today in our real estate community?" is the question I am asked 7 days a week.   This really became more charged with the Minneapolis "Star Tribune's" three part series of articles on foreclosures in Wright County, Minnesota, mentioning the cities of Albertville, St. Michael and Buffalo.  This created inquires from as far as Denver, Colorado and as close as financial advisers living in the Otsego area, part of Wright County.  The majority of the article is correct in that we have a large wave of foreclosed homes, both new and existing.  This is undesirable and what I want to share with you is the short and intermediate implications and how we will muddle through this time.  Please note, in Japan it took 10 years to get through the recession (depression) depending on how you define it.

In the short term, we know that statistics show for every foreclosed home in a neighborhood there is a 1% decline in property values.  Ten homes equals 10%, however 20 homes do not equal 20%, but it still  hurts a heck of a lot more.  We will continue to see increased foreclosure rates for 2008 due to the adjustable rate mortgages resetting higher.  The small and middle size builders may not be able to weather this storm.  We, the consumers, are the big losers here because we may never again see quality, affordable, custom-built homes.  The banks, next in the financial food chain, are refusing to carry the developers and builders any longer.  We do know a couple of banks with their backs against the wall and see the ripple effects from our small communities of Albertville, St. Michael and Monticello all the way to the former Bear Stearns of Wall Street. 

So foreclosures are going up and those evil investors are coming to buy the homes along with some wise, great value, first-time home-buyers.  Note, it isn't for me to judge all investors, however we, as homeowners, need help with this mess. People still need shelter and there are many hard working folks looking for a home that cannot risk buying during the recession.  The investor can create a win/win situation, easing inventory, creating a shortening of absorption rates and providing a home for those unable to qualify at this time.

The intermediate to longer term implications of real estate today deals with government, finance, elections and many more lots and future land developments.  Please check back, as this I will discuss in a future article here on my website. 

 

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