The Skinny

New Numbers: Twin Cities Pre-Foreclosures Rising, More Foreclosures Coming

We've noted before that the number of new foreclosures and short sales coming on the market for sale slowed in recent months. A major reason for this slowdown was likely the temporary foreclosure moratoriums that some major financial institutions instituted, as opposed to some sort of wholesale improvement in the financial situations of Twin Cities homeowners.

Now that many of those moratoriums have expired we've been waiting for some signs of whether or not foreclosures will resume their robust pace. It looks like we've got it now, unfortunately.

The Minnesota Home Ownership Center (MNHOC) keeps tabs on some very valuable pre-foreclosure data in the Twin Cities. When notice of pre-foreclosure is posted, MNHOC tracks it. They posted a blog recently highlighting a nasty trend in the data from recent months. Take a look:

 

Youch.

2,814 pre-foreclosure notices in January up to 4,368 in May.

And we can't blame this on typical seasonal changes as foreclosure cycles are fairly unaffected by the shifts between winter and spring.

Considering the significant job losses we've seen in the last 12 months, stagnant wages and the still-not-yet-totally-finished-resetting ARMs this isn't necessarily surprising. But it certainly isn't welcome news. Expect foreclosures and short sales to be a significant part of the Twin Cities housing market for the next 18-24 months, and likely longer.

Hat-tip to Aaron Dickinson.

What's Happening in the Townhouse and Condo Markets?

The following is from a recent article that Mark Allen, our CEO, wrote for the CIC Midwest Quarterly newsletter publication on the current state of the townhouse-condo market in the Twin Cities. All the data comes from our Housing Supply Outlook. Take it away, Mark:

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The Twin Cities condo and townhouse segments are still very much buyer’s markets. As of June, townhomes have 9.1 months of supply available for sale, while condos have 12.5 months of supply. By comparison, the supply of detached homes has fallen to 6.9 months. A 4–6 month supply indicates a balanced market. Current months supply in blue, a year ago in red:

Over the past 12 months, the number of unit sales has increased very slightly by 3.7 percent for townhomes but decreased by 11.3 percent for condos. During this same period, detached home sales have improved 16.4 percent. Home sales from the last twelve months in blue, the prior twelve months in red:

New construction remains the hardest hit segment; sales are down 33.4 percent year-over-year for townhomes and 44.6 percent for condos. Upper bracket home sales are also particularly challenged, with condo and townhouse sales falling at the same rate as detached homes in this price segment.

Surprising to many, lender-mediated (bank-owned, in-foreclosure and short-sale) activity in the condo market is comparatively light. Only 13 percent of condos for sale are lender-mediated as opposed to 29 percent or more in the detached and townhome segments. It is important to note that the historical norm for lender-mediated activity in all three property types is 1–2 percent.

 

Average price per square foot has fallen across all property types, with detached down 20.4 percent, townhomes down 17.1 percent and condos down 15.6 percent over the past year. The condo category has suffered less due to the lower percentage of lender-mediated activity.

Weekly Market Activity Report

The number of homes for sale in the Twin Cities metro area continues to decline relative to a year ago. As of Monday morning this week, there were 26,674 homes for sale in the region, down 20.9 percent from a year ago. In other words, we've lost 1 in 5 homes in our inventory in the last year.
 
Sales are a different story. For the week ending June 20, there were 1,156 signed purchase agreements, up 32.1 percent from the same week in 2008. That's the 12th week of the last 13 to feature a year-over-year increase in sales activity exceeding 20 percent.
 
We must bear in mind, however, that sales are only up in certain categories and price ranges. Year to date, traditional home sales (excluding foreclosures and short sales) are still down 17.8 percent from last year. New construction sales are down 21.7 percent from last year. And sales of homes priced above $350,000 are down 26.8 percent from a year ago. The lion's share of market activity is taking place in the lower price ranges this year.

Click here for the full Weekly Market Activity Report.

Department of Duh: Real Estate is Local

I subscribe to and read an email newsletter from Laurie Karnes, a local appraiser from Land For Sale, Inc. She chimes in on interesting market-related issues from time to time and she wrote something last week that nicely underscored a point we try to make all the time around here: all real estate is local.

From the newsletter, reprinted with her permission:

I recently completed an appraisal of a large multi-product townhome development in a second ring suburb that 's doing OK. In the traditional 2 story townhome product there were a lot of sales, especially at the under $200,000 price point. But then the market for the $500,000+ rambler townhome empty nester product was dead. In fact, I had to go to a neighboring city to find any sales at all and those sales were around $350,000.

Based on this appraisal in this one community I came to these conclusions about the empty nester buyer:

*During the earlier part of the decade both their home equity and stock funds soared.     So they could sell their big 2 story and make a lateral or downward price move and upgrade on amenities.

*With declining home and stock values, the empty nesters choosing to move are no longer wanting to pay for the high amenity homes.

*$350,000 is the  cut off point because that is where the jumbo mortgages kicks in at higher rates.

My hypothesis was that the $350,000+ townhome market would be a declining market share relative to the  $250,000-$350,000 townhome market. Data proved me wrong on this one when I studied the whole region. The total number of sales of new construction $250,000+ townhome market is shrinking. However, the percentage of the $350,000+  units relative to the the total $250,000+  market has stayed steady from the year 2006 till today at around 34%.

This quick study also proves in important point: real estate is extremely local. My conclusion from the one community did not hold true for the Twin Cities region. Conversely, if I had done the regional study first and applied it to my appraisal subject I would have drawn inaccurate conclusions.  I just hate those appraisals that start out with boiler plate data about “the region”-- statements like these are in insult to the trees that sacrificed their lives for those reports.

The price movements of a particular property or small group of properties is not ever going to perfectly match the movements of the region as a whole. Just like we rail against using national housing statistics as a barometer of your house's worth, we should caution against using metrowide numbers OR city-level numbers like those found in "The 100+."

In the end, it really does take a close, hyper-detailed inspection of individual comparable properties to determine fair market value of a home. That's the kind of work that our stats can never truly provide. What we can offer is a snapshot of trends, but it still takes detective work from realtors and appraisers to get the true(st) answers.

Weekly Market Activity Report

As we near the halfway mark of 2009, the Twin Cities housing market continues to show a pattern of robust home sales and declining new listing activity. Setting aside fluctuations over the Memorial Day holiday, long-term market improvement can be seen when comparing 2009 to 2008.
 
There were 1,210 pending sales for the week ending June 13—a strong 33.8 percent increase from last year. There were 1,970 new homes added to the market during the same week, a decrease of 2.6 percent from the same week in 2008. That 2.6 percent decline in new listings is a much smaller drop than we have seen in recent months when there were typically year-over-year drops of 10 percent or stronger.

Click here for the full Weekly Market Activity Report.

 

Hey, do you use an iPhone?

Tell us one way or the other in this survey. We're trying to get a gauge from people who use our research tools.

Link to the simple one question survey.

June Monthly Skinny Video is Online

The June Monthly Skinny Video is live, all up in your internets. This month's version is another quickfire update on the Twin Cities housing market, this time narrated by our President-Elect, Brad Fisher.

Click here to view the video in a separate window or just check the embedded clip below.

Taking a Closer Look at the Million Dollar Market

Home sales are up in the Twin Cities, as you may have heard.

But here's the tricky part: sales are only up in certain price ranges. Specifically, sales are way up in the price points below $200,000 where foreclosures and short sales are more prevalent. Things look a little different the higher up the price ladder you go. So we thought it'd be advantageous to take a quick look at what's happened over the last few years at the market above $1 million.

Million Dollar Takeaway #1: The supply-demand balance is moving in the wrong direction. The Months Supply of Available Homes above $1 million currently sits at 33.5. In other words, if nothing else new comes on the market in this price range it will take almost three years to sell through the current crop of available homes. That's a growth of 26.5 percent from this time last year, and is the largest year-over-year increase of any of the price ranges we track in our Housing Supply Outlook.

 

Million Dollar Takeaway #2: Home sales haven't reached bottom yet. When the Twin Cities market as a whole began to slow down in 2006 and 2007, the luxury market didn't slow at the same rate. 2006 saw only a 6.3 percent drop in sales and 2007 sales were basically flat during a period in which the overall market saw sales decline by 35 percent. Now the tables are turned with the high-end market suffering a projected 22.7 percent drop in 2009 as the overall market heats up.

 

Million Dollar Takeaway #3: A growing share of listings are new construction. In the year 2000 only 8.8 percent of the new listings above $1 million were new construction. That number has steadily grown to 24.1 percent of the new listings in 2008. Considering what we know about the lack of new construction projects currently in the pipeline, this is probably an indication that builders are still marketing high-end homes they built a few years ago but haven't sold yet.

 

Million Dollar Takeaway #4: Lender-mediated activity is growing, but is still relatively small. Only 2.6 percent of the properties sold above $1 million last year were lender-mediated foreclosures and short sales, which compared to the overall market number of 31.7 percent looks pretty good. We do have to note, though, that it's a considerable increase over the typical 0.2% seen in 2007.

Weekly Market Activity Report

New listings and pending sales both took a jump upward in the week ending June 6 as the annual post-Memorial Day surge in activity took place. There were 1,226 signed purchase agreements in the Twin Cities for the week, which represents a 33.4 percent increase over the same week last year. The 2,160 new listings were a 4.3 percent decline from a year ago but were a significant bump over the activity seen during the Memorial weekend respite.
 
The June Housing Affordability Index of 199 is down 20 points over the last two months due to recent rises in mortgage rates and seasonal increases in the region's median sales price. Combine that with a steadily declining Months Supply of Inventory (7.6 months) and falling Supply/Demand Ratio (5 homes per buyer), and it's clear that buying conditions are not quite as friendly as they were a couple of months ago, especially in the lower price ranges.
 
Regardless, there remains a hefty cadre of properties available for purchase. And with the $8,000 federal tax credit spurring first-time home buyer activity, this summer should be busy.

Click here for the full Weekly Market Activity Report.

Traditional sales increase market share

Monthly news release time. This is what we had to say today...

Traditional, non-lender-mediated homes increased their market share in May. The number of traditional home sales is growing. Only 43.0 percent of the pending sales in May were lender-mediated, compared to 59.4 percent in January.

This decrease in lender-mediated market share brought the overall median price up $12,000 from last month to $165,000 in May. Despite the month-over-month increase, that's still a 19.5 percent drop from May 2008. The median May sales price of traditional homes was $214,000, down 4.3 percent from a year ago. Lender-mediated homes posted a May figure of $122,000, down 20.8 percent from a year ago.

There were 5,183 signed purchase agreements in May, up 17.3 percent from this time last year, marking the 11th consecutive month of year-over-year increases.

The number of properties for sale at the end of May was 26,674, down 19.0 percent from this time last year. That amounts to 7.6 months of supply available, down 26.9 percent from this time last year and trending back towards a balanced market of 5 to 6 months of supply. However, there are 9.9 months of traditional supply and only 5.0 months of lender-mediated supply.

Reference: 3wievx6rzq

MAAR Offers Huge Discount to Inman Real Estate Connect in San Francisco!

Mark Allen, MAAR's CEO, will be a panelist at Real Estate Connect in San Francisco, Aug 5–7, 2009. Because of our involvement, MAAR has secured a 50% discount off the regular price of attending this unbelievable networking event.

Click here or on the image above to get started.

The special link from here and the code "MLPR" are key to receiving the discount, which is good through June 26, 2009.

What happens at Inman Real Estate Connect? Well, in addition to your being in one of the greatest cities in the world, you will be attending what may be the best real estate conference in the country. You WILL meet the most forward-thinking people in and out of the real estate industry.

These are the people that are changing the business. (Did I already mention that we'll be there?) Conference sessions and workshops are applicable to the "now" factor we're all experiencing. Visit the registration link above to learn more about the event.

Oh, and I hear that the after-hour parties are epic.

Special pricing is available for new registrations only. Inman cannot refund previously registered guests with this special price.

Weekly Market Activity Report

Let's start this freshly soaked week with June's Months Supply of Inventory of 7.6 months, a healthy 26.9 percent behind last June, when we were at 10.4 months of supply. The drop in supply has been brought about by weak new listings and strong home sales. New listings continue to underperform vs. 2008, with 1,566 for the week ending May 30, down 10.6 percent from this time last year. Pending sales remain strong despite a Memorial Day dip, with the 917 sales for the most recent reporting week representing a 14.9 percent increase over 2008.
 
The June Housing Affordability Index of 199 dropped 20 points from last month due to a recent rise in mortgage rates and an uptick in May's median sales price brought about by an increase in traditional (non-lender-mediated) sales activity. Only 41.3 percent of the pending sales from the past two weeks have been lender-mediated foreclosures and short sales; the first several months of 2009 saw 45 to 60 percent lender-mediated sales activity.

Click here for the full Weekly Market Activity Report.

June Housing Supply Outlook

The June Housing Supply Outlook just hit the internetz. As usual, here are some takeaways to make your time with this dense report as valuable as possible:

Takeaway #1: The number of townhome sales in the Twin Cities metro area has increased over the last year by 0.4 percent after several consecutive years of declines in unit sales. Can you guess the price point where townhouse sales increased the heaviest in the past year? Under $120,000, where sales have more than tripled. Of the 1,898 townhouse sales in that segment, 1,557 were lender-mediated foreclosures and short sales.

Takeaway #2: There are currently 7.6 months of supply available, down 28.6 percent from last year at this time when the mark was 10.4 months. The biggest drops in supply have been seen in the single-family detached and townhouse markets—the months supply of condominiums still sits at 12.5 months.

Takeaway #3: Sales are up overall, but in the higher price ranges sales are still down over 20 percent year-over-year. In the $1,000,000 and higher segment there is almost 3 years of supply available.

Click here for the full Housing Supply Outlook.

Housing Market Roundtable

Our incoming 2010 President Brad Fisher participated in a great roundtable discussion on TPT's "Almanac" last Friday along with Law professor Prentiss Cox from the University of Minnesota and Jeanne Boeh, an Economics professor at Augsburg. Good stuff, and up now in the internetz.

Click here to watch.

Case-Shiller Kookyness

Last week the March 2009 Case-Shiller Index was released and the folks at Standard and Poor's made a point to illustrate in their press release that the Minneapolis-Saint Paul had experienced the largest month-over-month decline in prices that they'd ever measured.

As we've stated before, we are not anti-Case Shiller. Its a good index that gets a bad rap. But this unnecessary dust-up with calling the Twin Cities out for being the worst ever is just bad form for two reasons:

1) They're talking about a month-over-month change, not a year-over-year. Real estate is highly seasonal and median sales prices go up and down from month to month with regularity. There's too much statistical noise in that kind of monthly comparison to get bent out of shape over a 6.1 percent drop.

2) At the risk of sounding like the proverbial broken record, it's not that shocking when you consider that almost half of the homes selling are foreclosures and short sales. Department of Duh.

Unfortunately, the announcement set off a relative local maelstrom of press coverage. MAAR staff and leadership were handling media requests for about 48 consecutive hours from reporters trying to understand why the drop was so severe. Here's a quick round up of the stories out there:

• New York Times: Home Prices Continued Their Decline in March. Yes, THAT New York Times.
• Star Tribune: Twin Cities-area home price drop was nation's largest.
• MinnPost: Case-Shiller drop reflects glut of distressed sales. MAAR CEO Mark Allen drops science.
• Finance and Commerce: The big Twin Cities foreclosure flood.
• Pioneer Press: Home prices dive — with an asterisk.

Phew. I'm getting tired just embedding all these URLs.

Takeaway #1: Yes, Twin Cities home prices are down, but this is due in large part to heavy sales of discounted lender-mediated properties.

Takeaway #2: The local media is actually doing a pretty good of job of getting to the bottom of real estate stories lately. We were impressed with the level of detail that each story provided to allow the reader to move beyond the hyped-up hysterics of the hellacious headlines.