Real Estate Information

The Mortgage Headache and Foreclosure Fallout

Thursday, January 10, 2008

by Scott Smith Real Estate Team

So how long with this last? Below I've included some exerpts from a report posted on www.Economy.com. The three most important words in real estate...Location, Location, Location! From a market trends angle, all real estate markets are local and what happens in one part of the city might not impact the real estate market across town. Example, a large employer builds a new office in the burbs. Now many of those employees might take a look at moving to that area. Interest rates, housing supply and housing demand along with the psyche of the buyers and sellers in the market place all have an impact on the real estate market activity.

Hopefully, our Twin Cities real estate market will weather the mortgage/foreclosure hangover sometime in mid 2008. Economists and weather men are one in the same! Enjoy...

http://www.economy.com/home/products/special%2Dstudy%2Dseries/2007/december/aftershock/

Forecast Summary

The current housing recession is expected to run through early 2009 and will ultimately be severe enough to be characterized as a housing crash. Home sales are exptedted to hit bottom in early 2008, declining by over 40% from their peak, housing starts will reach their nadir in mid-2008, falling by 55%, and house prices are expected to decline by 12% through early 2009. After accounting for the plethora of non-price discounts home sellers are offering to buyers, effective house-price declines peak to trough will total well over 15%.

Awash in Inventory

The housing market’s most fundamental problem is it is awash in unsold inventory. According to the Census Bureau, as of the third quarter of 2007 there was close to 2.1 million vacant unsold homes that were for sale, equal to 2.6% of the stock of owner-occupied homes. Even a well-functioning housing market has a substantial amount of inventory. But in the quarter-century between the early 1980s and mid-2000s, the vacancy rate was an unwavering near 1.7%. The difference between the current over 2.6% vacancy rate and the 1.7% rate that consistently prevailed prior to the recent boom provides a good estimate of the amount of excess inventory in the market—it currently totals nearly 750,000 homes (see Chart 1-4). This is far and away the highest level of excess inventory in the post-World War II period. 2

Subprime Financial Shock

Subprime financial shock. Inventories of unsold homes will rise substantially further in coming quarters as the ongoing subprime financial shock results in a collapse in home sales and surging mortgage loan defaults and foreclosures. The global financial turmoil ignited this past summer by the rising credit problems on U.S. residential mortgage loans has significantly disrupted the flows of credit into the mortgage market. The issuance of bonds backed by subprime, Alt-A, and jumbo loans has fallen dramatically in recent months. At the peak of activity between 2005 through the first half of 2007, issuance of these bonds totaled close to $1 trillion annualized. During the third quarter—the shock began in late July and August—issuance plummeted to only $300 billion (see Chart 1-5). 5 So far in the fourth quarter, issuance has not measurably revived.

Where's the Bottom

Where’s the bottom? The outlook for the housing market thus appears very daunting. The mountain of housing inventory will only clear sufficiently for the market to find a bottom if homebuilders significantly further curtail construction, and thus new supply, and for home sellers to slash their prices to restore affordability and stimulate housing demand. To gauge just how much lower construction and house prices must decline for this to occur, the Moody’s Economy.com macroeconometric model of the U.S. economy was simulated under a number of different assumptions. Under the baseline (most likely) set of assumptions, the economy avoids recession but experiences slow job growth, the entire Treasury yield curve remains well below 5%, and loan modification efforts soon gain momentum. In this scenario, the housing market finds a bottom by early 2009 with average annual housing starts of approximately one million units over the entire period and a peak-to-trough decline in national house prices of 12% (see Chart 1-12). Housing starts in September were running at a 1.2 million unit pace and house prices are down 5% so far.

Financial Threat

Financial threat. The risks to this disconcerting near-term housing outlook seem skewed decidedly to the downside. Of most concern is that sliding house prices and eroding mortgage quality will reignite another wave of global financial turmoil. The ramifications of this for the economy, and thus housing, would be overwhelming. Behind this worry is the financial system’s substantial exposure to hundreds of billions in mortgage losses that are set to come. While financial institutions have begun to recognize these losses, as is evident from the recent string of billion dollar writedowns, they have fallen well-short of what they ultimately will have to realize.

Circumspect Consumers

Another negative risk to the outlook is posed by the intensifying negative housing wealth effects resulting from the severe and persistent decline in house prices and homeowners’ equity. As consumers turn more cautious in response to their eroding wealth, the economic expansion will surely waver, but if it falters significantly it will ignite a further devolution of the already reeling housing market. The wealth effect postulates that changes in household wealth measurably impact household spending. If household wealth is rising (falling), then households will spend more (less) out of their current income, and thus save less (more). The idea behind the wealth effect is simply that as households become wealthier they do not need to save as much today to be prepared for their future financial needs. It is no longer as necessary to save for such things as their children’s college education or their own retirement.

Engaged Policymakers

The most significant upside risk to the housing outlook is that policymakers appear fully engaged in stanching the financial turmoil and ensuring that the economy avoids recession. The Federal Reserve has aggressively lowered interest rates in recent weeks and Congress and the administration are working to aid the hard-pressed mortgage market. More help will be needed, but policymakers appear ready to provide whatever is necessary.

Minneapolis St. Paul Oakdale Maplewood Vadnais Heights Woodbury Stillwater ramsey county washington county Mortgage foreclosure housing market trends buyer seller

Oakdale Home For Sale - New Listing

Friday, January 04, 2008

by Scott Smith Real Estate Team

Offered at $269,900

Large five bedroom split level in quiet Oakdale neighborhood. Three bedrooms on main level including master with private 3/4 bath. Finished lower level with knotty pine family room, two additional bedrooms, and storage room. Great backyard with mature trees and huge patio.

Real Estate Oakdale home for sale five bedroom 5 bedroom new listing 3 bath Oakdale Minnesota Minneapolis Real Estate St. Paul real estate

New Year's Resolutions

Monday, December 31, 2007

by Scott Smith Real Estate Team

As we say good-bye to 2007 and welcome 2008, many of us will write out goals and resolutions for the new year. Here are some tips for helping to make them stick!

1) Think Small (doable) Smaller goals give you a greater chance at success. If resolving to lose 50 pounds is overwhelming, commit to a "no snacking after dinner" policy.

2) Begin in December. (guess I was a little late) Get started now! A new year is always a fresh start and an attractive time to change. Don't wait until 2008!

3) Have a strategy. What will it take to achieve your goal? Set up a plan and break down a bigger goal in to monthly, weekly and daily baby steps.

4) List the Pros and Cons. Refer back to this list when you're losing your focus and motivation. How will you feel after you lose 25 pounds? How will you use the extra money in savings or retirement?

5) Don't be shy. Tell your friends and family members about your goals for 2008. Accountabilty with others will help keep you on track. Especially when they ask to meet at the Asian buffett for lunch!

6) Be nice to yourself. If you fall off track don't abandon your 2008 goal. Remember why you set the goal and what you'll feel like when you've accomplished your goal!

Tidbits:

* 63% of people are faithful to their resolutions.

* 67% of people make 3-4 resolutions

* The top four resolutions are

-Increase exercise

-Work harder at school/work

-Adopt better eating habits

-Stop drinking/smoking

* It's easier to start a new habit than break an old one.

Happy New Year!

New Years Resolutions

First Home Buyer Funding Programs -

Monday, December 17, 2007

by Scott Smith Real Estate Team

WOW - eventhough this was published in 2005, most of the programs are still around.

http://www.mplsrealtor.com/segments/Realtors/HOC_May05_Complete_Matrix.pdf

A large portion of our Smith Team business is a result of working with first-time homebuyers. We are the exclusive partners in hosting first-time buyer seminars with the Wells Fargo Roseville, MN branch. To register for one of our seminars click www.1stHomeWorkshop.com

Have a great Holiday!

The Smiths

Minneapolis St. Paul Oakdale Maplewood First-time homebuyer funding mortgage roseville ramsey county washington county 55113 shoreview

First-Time Home Buyer Money

Monday, December 10, 2007

by Scott Smith Real Estate Team

Attention First-Time Buyers!!!

Below are a couple of links to county websites that offer first-time buyer assistance, great resource for those that qualify.

http://www.co.washington.mn.us/info_for_residents/your_home/firsthome_buyer_assistance/

http://www.co.ramsey.mn.us/cp/ced/homebuyer.htm

Ten Winter Weatherization Tips

Thursday, November 29, 2007

by Scott Smith Real Estate Team

The cold hard reality of frigid winter air is here! As single digit temps with sub zero wind chills arrive heating bills will inevitably go up. Below are some tips on how to make your home more energy efficient and keep more money in your pocket.

1. Install a setback thermostat to keep temps moderate when awake and cooler when away or asleep.

2. Close wood-burning fireplace dampers when not in use

3. Install lined drapes or dense window coverings to keep heat in and cold out.

4. Insulate cold and hot water lines.

5. Wrap your hot water heater with a special insulting blanket.

6. Install foam gaskets behind electrical outlet/switch plate covers.

7. Seal any gaps near plumbing and electrical holes.

8. Weather-strip windows and doors

9. Caulk around windows and doors

10. Added insulation around basement foundation.

Real Estate Minnesota Winter Weatherization tips energy efficient thermostat home improvement

Happy Thanksgiving!

Thursday, November 22, 2007

by Scott Smith Real Estate Team

It’s Thanksgiving evening. Today we hosted 39 of the Smith/Carlson/Gross family. From 10 days old to 95 years young we shared hugs and many thanks. We’ve had the traditional fair turkey (33lb plus 12lb), stuffing, mashed potatoes, and cranberries – all the fixings. We had enough food to feed an army and enough people to start an army! Right now I’m thankful for a couple of things; first, having a close family whose number one priority is to give thanks and break bread together. Second that they were all out of our house by 3:30 so I could take a nap!

A couple of Thanksgiving tidbits;

265 million turkeys were raised in US totaling approximately 7.2 billion pounds.

(Minnesota is the number one producer of turkey in the US)

664 million pounds of cranberries are produced annually in the US.

(Wisconsin is the number one producer of cranberries in the US)

The typical American consumes 13.4 pounds of turkey annually.

(Source www.usa.gov)

Minnesota Thanksgiving Turkey Family Smith

October Market Statistics

Tuesday, November 20, 2007

by Scott Smith Real Estate Team

So how's the real estate market? Are you alright? Are you going to make it? These are questions we get all the time. They are legitimate questions of concern from homeowners, buyers, sellers and concerned family and friends.

The reality; it is what it is. There is no 'good' or 'bad' market. They are just different. How you adapt (or fail to) is what impact the outcome. I was recently in Las Vegas for the National Association of Realtors (NAR) convention. I had the pleasure of listening to David Bach (www.FinishRich.com ) speak. Yes, THE David Bach you've seen on Oprah, CNBC, 20/20, New York Times best selling author etc. etc. A couple of items that he said really hit home

"Opportunity comes out of challenge. It's not about timing the market. It's about time spent in the market." Bach was talking about the 'speculators' losing their shirts from high stakes flips and exploding mortgages (ARMs) Real estate is a long-term investment. Bach commented that; "One good purchase over the next eighteen months could yield a fortune." This comment he's referring to the incredible opportunity to buy "on sale" real estate at record low interest rates. The age old stock strategy, "Buy Low, Sell High." holds true. Now is the time for when savvy buyers are making a killing.

The Mpls Association of Realtors recently released the October Market Statistics. Yes the sexy numbers reported in the media show everything is down, down down. However, take a look at the last few years where seasonally, the trends are the same.

http://www.mplsrealtor.com/Segments/Realtors/mhs_2007_10.pdf

Getting solid advice from an experience Realtor can stack the deck in your favor. Imagine the long-term financial impact of buying a home 'on sale' with a record low 15 year mortgage rather than a 30 year? Wow!

Minneapolis St. Paul Real Estate Oakdale Maplewood Vadnais Heights Woodbury Lake Elmo Stillwater Twin Cities Minnesota White Bear Lake Homes for Sale David Bach Oprah Winfrey NAR Las Vegas

A fresh start!

Friday, November 16, 2007

by Scott Smith Real Estate Team

We'll after a hiatus, we're blogging again! We're committed to providing regular updates about the local Twin Cities real estate market, strategies on personal finance along with community information.

There's too much mis-information from the media and national outlets. Real estate is a very local business affecting local buyers and sellers. The three most important words in real estate...Location, Location, Location! Evidenced this year by the Dakota county market. The release of first-time homebuyer funds impacted the number of units sold. (Dakota wasn't down nearly as much as other metro counties according to RMLS stats)

Yesterday, I returned from the National Association of Realtors (NAR) conference with a duffle bag full of outstanding ideas and insights on what successful Realtors are implementing to better serve their clients. If you're reading this, one of the best ideas is already working!

Combat the mis-information with a local real estate professional prespective!

Your real estate professional!

Scott