HOMETOWN REALTY BLOG

How the Spring real estate market is shaping up

According to the Minneapolis Association of Realtors, the local housing market continues to mimic spring growth, as Twin Citizens emerge from their wintry cocoons just in time for the final days of the home buyer tax credit. For the week ending March 20, there were 2,277 new listings, up 28.8 percent from a year ago and marking the seventh consecutive week of strong year-over-year increases.

Pending sales dropped a bit from their high the previous week, but the 950 signed purchase agreements for the week were 10.2 percent ahead of where they were at this point last year.

Keep in mind that these numbers reflect the entire Regional Multiple Listing area. The housing market in Hutchinson, MN appears to be following the same trends.

As the tax credit’s April 30 deadline looms, expect a flurry of home sales activity. Time will tell what happens when the credit has expired, but the next few weeks should be extremely active.

How Green Are We?

Here are some interesting statistics recently published in “The Residential Specialist” magazine. (Their source for the information was Harris Interactive.) This magazine is available to all real estate agents who have earned their Certified Residential Specialist certification through the National Association of Realtors.

Several of Hometown Realty agents in Hutchinson, MN have earned this CRS designation.

What percentage of Americans participated in energy-saving activities within the past year?
Installed more energy efficient light bulbs: 63%
Purchased energy efficient appliances: 36%
Started paying bills online: 46%
Switched to paperless financial statements: 40%
Donated an electronic device for recycling: 41%
Swithed from bottle to tap water: 29%
Installed a low flow showerhead: 17%
Installed a low flow toilet: 16%
Made home improvements that provided government tax credits: 14%
Bought a more fuel efficent car: 13%
None of thes: 13%
So, how do you and your family compare?

Home Prices Show Strongest Sign of Stability Yet

Minneapolis, Minnesota (March 10, 2010) – For the second consecutive month, home prices in the Twin Cities 13-county metropolitan area showed a year-over-year increase. We haven’t seen back-to-back year-over-year increases since 2006.

The February median sales price of $159,000 was a 6.0 percent increase from last February’s mark of $150,000. That’s the strongest year-over-year increase since 2005. Part of the reason for the stronger upward movement is that fewer foreclosure homes are selling now than did during last February.

“The market share of traditional, non-foreclosure homes has really grown in the last year,” said Brad Fisher, President of the Minneapolis Area Association of REALTORS® (MAAR). “That’s tilting prices upward and stabilizing the market.”

The median sales price of traditional homes (excluding foreclosures and short sales) in February was $204,900, down only $100 from last February’s mark of $205,000.

Foreclosures posted a 0.8 percent increase to $120,000, while short sale properties posted a 6.7 percent decline to $145,000.

There were 3,527 signed purchase agreements in February, an increase of 6.4 percent from a year ago. As spring springs and we encroach upon the April 30 deadline for the federal home buyer tax credit, expect home sales to tick up as buyers move to take advantage of the incentive.

Due to the continuation of extremely low mortgage rates and the drop in prices seen in recent years, affordability is off-the-charts. The current Housing Affordability Index of 213 is the fourth-highest mark ever recorded. Along with the tax credit, conditions are attractive for home buyers.

Buyer activity has brought inventory down, so there are far fewer homes for buyers to choose from. The March Supply-Demand Ratio of 5.39 means that there are 5.39 homes available per buyer in the month. In March 2008 the mark was 8.16.

“No one can predict what the market will look like six months from now,” said MAAR President-Elect, Pat Paulson. “But right now the combination of low rates, good affordability and the tax credit have set a nice table for buyers.”

Loan Modifications – The Good and The Bad

Many homeowners have been able to take advantage of the loan modifications that some of the lenders are doing on mortgages that either are in trouble or may soon be.

We at Hometown Realty here in Hutchinson, MN have clients who have been able to work out modifications with their lenders to lower their monthly payments by hundreds of dollars and now are able to stay in their homes.

Some of the modifications have required the homeowner to come up with some cash at the time of the modification, some of the loans have been extended to 35 and 40 years, while others have simply lowered interest rates to allow for lower monthly payments.

That’s all the good, now for the bad. These loan modifications will affect the homeowner’s credit scores negatively. This isn’t always explained clearly to the homeowners who become surprised down the road when they learn that their credit scores have dropped considerably.

So, if you are considering doing a loan modification, be sure you know all the ramifications before you proceed.

Attitudes are Improving

I just came from the Hutchinson Home Landscape and Garden  show that is being held at the McLeod County Fairgrounds here in Hutchinson, MN. The show ends at 4:00 p.m. on Sunday, February 21, 2010.

It was encouraging to visit with all the people who came to the show this year. Almost everyone that I visited with seemed to be much more upbeat about our economy. This is completely different than it was a year ago at the same show.

In talking to many of the vendors who have booths there this year, almost all of them told me that they had done a lot more business this year than in the past.

All of these things are good signs that people are beginning to regain confidence in our economy.

At Hometown Realty our first two months of 2010 has shown good improvement over 2009 for the real estate market here in Hutchinson, MN.

All of this seems to tell me that things are getting better and let’s hope that this momentum will continue throughout 2010!

New FHA Guidelines

The new rules — which are temporary and take effect this summer — come after more than a year of stringent standards from lenders. Among them:

•Better Credit Score — New borrowers will have to have a minimum credit score of 580 to qualify for a 3.5 percent down payment. Previously, there was no minimum score. Those with lower scores will have to make at least a 10 percent down payment. The average credit score of FHA-insured borrowers is 693.

•Higher Insurance Premiums — Buyers who get an FHA-insured loan will soon have to pay a higher initial insurance premium. The new premium will be 2.25 percent of the value of total loan amount, up from 1.75 percent now. A $100,000 mortgage would require a payment of $2,250, or $500 more. But buyers can roll the added cost into the loan amount.

•Reduction in Seller Concessions — Starting this summer, sellers will not be able to offer as much help to buyers to pay their closing costs. The maximum amount of assistance will drop to 3 percent of the value of the property, from the current 6 percent.

2009 Profile of Home Buyers and Sellers

According to the National Association of Realtors “Profile of Home Buyers and Sellers 2009″, 90 percent of buyers used the Internet as an information source in their home search, up 30 percentage points during the past six years. First-time buyers were even more likely to use the internet.

Also reported was that 47% of recent buyers were first-time buyers, 21% of recent home buyers were single females, and 10% were single males.

The housing market in Hutchinson, MN would be in line with these findings.

Weekly Market Activity Report

The first full week of reporting for the 2010 Twin Cities housing market is in and while there are a few “green shoots,” it’s becoming apparent so far that the market won’t see the same spectacular growth in sales it saw at the beginning of 2009.

There were 520 pending sales for the week ending January 9, down 1.7 percent from the same week in 2009. That’s the seventh week of the last nine to see slightly fewer sales than the prior year, a time period that coincides closely with the initial expiration date of the first-time home buyer tax credit. However, we’re still 21.2 percent higher than the pace in 2008 for that period.

As you likely know, the credit’s been expanded to include a $6,500 incentive for buyers who have owned a home for five years of the last eight. Since we can safely assume that many of these buyers will need to sell their home first before buying a new one and receiving the credit, new listings numbers might shed light on how much effect the new credit is having. So far, it doesn’t appear to be much.

Over the last three months, the number of new listings has been 11.7 percent behind the same period one year prior. With many looking for continued “seedlings” of hope in the local housing market, this isn’t welcome news. As always, we’ll be keeping a close eye on the evolving market and reporting back what we see.

Be Cautious of Pre-Approval Letters

Recently one of our clients in Hutchinson, MN had an experience with one of the “big” mortgage companies that I want to share with you.

They decided to sell the home they currently live in and buy a larger home. They went to the mortgage company and made loan application based on them selling their current home (which they were selling on a contract for deed.) They were also putting 30% down on the purchase of the new home.

The pre-approval letter they got from the mortgage company said that one of the conditions was that the contract for deed be executed. They and their buyer signed the contract for deed and it was recorded at the courthouse.

One week before they were scheduled to close on their new home, the mortgage company’s underwriting department denied their mortgage application for the new house stating that they “wanted one year’s history of payments made on time with the contract for deed.” The original pre-approval said nothing about payment history on the contract for deed, just that it needed to be executed!

Fortunately for this client, they had other resources so they were still able to purchase their new home, but needless to say, they were not happy with the mortgage company.

So, even though you have a pre-approval in writing with certain stipulations, be cautious because they could change their mind.

The Early Spring Market

As we anticipated, the Spring Real Estate market seems to have arrived early this year here in Hutchinson, MN. Despite the extra cold weather, buyers and sellers are anxious to get moving.

We expected this based on the fact that both the First-Time Homebuyers’ Tax Credit and the other Homebuyers’ Tax Credit require that buyers have a signed and binding purchase agreement in place by April 30, 2010 and close by July 1, 2010.

Sellers don’t want to miss out on any of the market time between now and the end of April, so they are calling to get their homes put up for sale as soon as they can.

With the interest rates still staying low, buyers and sellers are smart to get a jump start on the housing market.