Have a home to sell in the Twin Cities or thinking of buying a home in the Twin Cities this year? Then you want to know this information now.
The 10 in 2010 from Sweet Home MN Crew
If there was a recurring theme, it could be summed up by this quote from Scott Wollmering:
Just like the villain in those Scooby Doo mysteries… We will finally meet the shadow!
We’ve talked about the Shadow Market quite a bit over the past couple of weeks, the Shadow Market is all the homes that banks currently own, but aren’t currently listed for sale. Estimates are that 5-10,000 of these homes exist in the Twin Cities. This means there is an additional 25-50% of homes to sell compared to what is currently on the market. If you consider all the homes the banks could have foreclosed on but have not, that number might be even double of that total.
Scott found a statistic that helps show what we’re talking about:
The number of homes in the foreclosure process compared to a year ago at this time is up 54%. That changes the widely used inventory of depletion number from 7.8 months to 11.1 months.
Top 10 For 2010
1. The Amount of Homes for Sale will be jumping—soon. This will push prices/values down, mostly in the upper bracket homes.
• Alec thinks we’ll get back to 2008 levels by June, which would mean about 5,000 more homes for sale at any given time compared to 2009.
• Scott sees a bigger impact, with us jumping from 20,000 currently to about 32,000 by March—and with 65% of all sold property being bank mediated (foreclosures and short sales).
• This Inventory increase caused by all the bank owned homes means bad news for “retail” or regular home sellers, as they will cause prices to drop. Scott says values will drop 5% for homes with tax values over $500k and 10% for homes over $750k.
• Investors will buy “bulk purchases” of 100s of homes at a time from banks for steep discounts. What they do with those purchase could crash the market further. But, we think they won’t dump them right back on the market for a small, quick profit which will actually help stabilize prices on the lower range.
2. (Matt Barker) With the shadow market coming soon this will be another year of the First Time Home Buyer. I think it is unlikely that the lower end price ranges will be damaged by these upcoming foreclosures (seeing it is a sellers market in most FTHB price ranges) and it makes sense for them to buy now. The sellers that we are meeting with continue to be underwater and the shadow market will worsen their situation. In the end some will be able to cover the loss and many will not be able to.
3. (Brandon) If any of your New Year resolutions involve the possibility of purchasing a new home, you need to start NOW!
• The real estate market free-fall is over and in many areas of the Twin Cities, the bottom of the market is long gone. Does that mean that there won’t be any rocky times ahead? NO, but if you wait until we have hard data that “guarantees” the bottom of the market is behind us, you will have missed out on the buying opportunities while the market was at the bottom.
• Don’t shoot yourself in the foot…take the time to meet with an experience buyer agent right now to determine if it is the right time to buy in the areas you are considering moving to.
• Plus, there is a Federal home buyer tax credit that might put an additional $6500 – $8000 in your pocket!
• (Scott) I think we will have a huge race for the first time home buyer before the tax credit ends and it will end (No more extension).
• (Alec)Despite this race, First Time Buyers will look to avoid risk (unless they receive a big price break) to purchase REO, short sale, HOA, or places with Utility issues and/or in poor condition.
• Really savvy buyers will look to buy and redo these risky homes with the special loans, tax credits and rebates
4. (Brandon) In the move up buyer price ranges, $400,000+, the deals are REALLY good right now! This market was late to decline and is finally settling at or very near the bottom. If you are thinking about moving up, it might be a good time to take the 20% hit on your $200,000 home ($40,000) and buy “UP” into the $400,000 range. Those homes have come down nearly 30% in some cases so that $400,000 home was worth $575,000 a couple of years ago. Therefore, it’s a great time to forgo your $40,000 loss and take advantage of some else’s $175,000 loss!
5. (Alec) Short Sales will get streamlined—as web based processing systems come online the timeframes to get an answer on an offer will speed up. Good news if you are a seller in a short sale, bad news if you are competing against short sales.
6. Mortgages: (Scott) Rates will go to 6.25% by the end of 2010. We’ve covered the why before—Government support ending and financial markets changing. Alec thinks 6% by end of June. So refi now!
7. Mortgages: (Scott) I believe we will see pressure to increase the Jumbo mortgage (raising the limits higher before your need a Jumbo loan) or that ARMs will become popular by midsummer. This is to make it easier for buyers to soak up the influx in inventory for sale for $500,000 or more.
8. (Alec) The push for Loan Modifications will collapse spurring more foreclosures. By the end of 2010 Banks and the Government will finally agree that it is too close to impossible to redo enough mortgages in a meaningful way to help enough people save their homes.
9. For Current Home Owners Not Looking to Sell: Government will increase or create Tax Credits and Rebates to encourage sellers fix up homes. This can create jobs for unemployed construction workers and Energy Efficiency repairs will increase as the Tax credits will be targeted at this so we can all be more Green. So, the importance of getting Thermal Energy scans on your home will increase so the money spent on repairs goes to where it is needed most.
10. (Alec) Many Condo and town home associations will collapse financially.
• As more home owners go into foreclosures, there are less people to pay the monthly Home Owners Association Dues. The banks will not make these monthly payments, preferring to settle up when they finally sell the place. The existing home owners can’t afford to cover the gap. So, if a big storm rolls through or some other financial problem hits they won’t have the cash needed to survive.
• Condos/town homes will drop another 10-20% in value. This will happen because of the fears fueled by the financial risks mentioned in the first bullet point, but also because these properties will continue to flood into the market. The owners of these properties are probably more “under water” than anyone else.
• Sellers of Condos/Town Homes will have a hard time finding buyers who can qualify to purchase their homes. FHA and VA mortgages rules for buying these types of properties have recently become harder to navigate for lenders. Also, almost all mortgage loans require a certain percentage of the homes to be “owner occupied” and all the foreclosures will drop the numbers below the requirements—and there are also requirements limiting the number of units that can be behind in paying their Association dues.
• The spread in prices between condos/town homes and Single Family Homes will grow greater. Why? See the first 3—too much risk even for the buyers who are attracted to Association living. They will require steep discounts to buy.
Bonus Stock Tip for fun: At first Home Depot, Lowes, Menards, etc. will not benefit much from all the home repairs money because they will not be Do-It-Yourself projects, but will be required to go through a contractor to qualify for the tax credit. But, once the tax credit and rebate money flows back to home owners, they will spend it in bucket-load at these places.
What do you think? Leave us a comment.
Here is the clip from when co-host Alec Grebis was interviewed by Scott Goldberg on KARE 11 TV on 9/3/2010 talking about Minnesota Housing and the special loans for to help first time home buyers afford better homes without increasing their monthly payments.
Great job by Brandon Hedges for his first time on the air!
