MinnEcon Category Archive: Housing & mortgages

More confirmation of a spring housing rebound

Posted at 12:28 PM on July 31, 2012 by Bill Catlin
Filed under: Housing & mortgages, Twin Cities metro

The much-cited S&P/Case-Shiller Home Price Indices out Tuesday provided yet more confirmation of a firming housing market in Minnesota and nationally in the month of May.

(The Case Shiller numbers lag other housing metrics, no doubt because the methodology must require a lot of hunting. The index uses " data on properties that have sold at least twice, in order to capture the true appreciated value of each specific sales unit.")

According to the index, Twin Cities home prices rose 1.3 percent from April to May (that's on a seasonally adjusted basis), and almost 1 percent compared to May of 2011 (that's on a seasonally adjusted basis).

Those aren't necessarily big jumps, and prices remain far below their pre-recession highs.

Minnesota Public Radio's Jess Mador reports that S&P's Maureen Maitland is urging caution. "This may not be the recovery, but the last couple months of data have been more positive than negative, so there definitely is a glimmer of hope," Maitland said. "But you have to be patient and wait a few more months and see what the rest of 2012 is going to tell us."

Still, a positive trend is fairly evident, and the Twin Cities is improving faster and sooner than the composite index encompassing 20 major metropolitan regions.

The Bottom

The Twin Cities registered the lowest (seasonally adjusted) index reading in November of last year. The 20-City index bottomed in January.

Since hitting bottom, prices have risen 5 percent in the Twin Cities, 3 percent among the 20 composite cities.

The Rebound

The non-seasonally adjusted numbers show a similar pattern, when compared to the same month a year before.

The rate of annual decline in Twin Cities home prices started slowing in June of 2011, and prices notched gains starting in February of this year. The rate of increase has grown from 1 percent in February to 5 percent in May.

The Case/Shiller numbers are consistent with price data compiled by the Minneapolis Area Association of Realtors show.

MAAR reports the median sales price in the Twin Cities bottomed in February at $138,000, and rose to nearly $179,000 as of June.

So, while there's still a lot of hill to climb, the market appears to be gaining elevation after a long descent.

Accelerating strength in Twin Cities home construction

Posted at 2:32 PM on July 26, 2012 by Bill Catlin
Filed under: Housing & mortgages, Jobs & unemployment

The home construction industry is seeing persuasive indications of a rebound in Minneapolis/St. Paul, according to numbers compiled for the Builders Association of the Twin Cities (BATC).

So far this year the number of residential construction permits, units permitted, and the dollar value of the permits are all running well ahead of levels in past years.

The cumulative permit value of $788 million from January through July is 46 percent greater than during the same period in 2011. The 3,953 units permitted from January through July is a whopping 72 percent above last year's level.

"The market continues to strengthen," said BATC president Curt Christensen. He pointed out that the latest S&P/Case-Shiller Home Price Index showed an increase of 1.3 percent nationally in April, the first reading in positive territory in seven months. "At the same time mortgage rates have dropped to an all-time low and locally, we've seen several months of positive sales reports from the Minneapolis Area Association of Realtors," Christensen said.

The BATC says two large projects, one in Ramsey (230 units) and another in St. Louis Park (122 units) boosted the total number of housing units permitted in the month of July, "however single-family activity continued strong, with an almost 60 percent increase this July over July 2011."

The construction industry posted some of the biggest employment declines of the great recession. But the rebound in home-building appears to be helping employment in the industry. In the first half of this year, construction employment is 4 percent or roughly 3,500 jobs above year-ago levels.

S&P: Twin Cities home prices post first year-over-year gain since August 2010

Posted at 2:33 PM on April 24, 2012 by Annie Baxter
Filed under: Housing & mortgages

Twin Cities home prices notched an over-the-year increase in February for the first time in about a year and a half. Prices rose .4 percent, according to Standard & Poor's/Case-Schiller National Home Price Index.

S&P's Maureen Maitland says only five metro areas in the 20-city index, including the Twin Cities, inched into positive territory on an annual basis.

In general if you look at the nation, home prices are still bottoming out. Some markets are hitting new lows. So it's a good sign for Minneapolis.

Maitland says the Twin Cities month-to-month performance between January and February wasn't quite as positive. But she says the monthly number is less meaningful than the year-over-year price comparison.

The 20-city index was down both on a monthly and annual basis. However, the pace of annual decline slowed in February. February's 3.5 percent drop over the past year the smallest 12-month decline in a year.

Minnesota Economic Outlook: Better, Not Great

Posted at 3:51 PM on February 16, 2012 by Marty Moylan
Filed under: Housing & mortgages, Jobs & unemployment

Wells Fargo economists say there are signs of hope for the Minnesota housing market.

In a briefing today about the Minnesota economy, economist Scott Anderson said Minnesota's housing market seems to be on the mend.

He expects price declines will moderate to about three to four percent this year.

Anderson said the demand for homes is rising while the number of homes on the market is falling. He expects record low mortgage rates will drive up sales.

"Minnesota's housing fundamentals are improving," he said. "We're seeing visible increases in demand, record low mortgage rates certainly helping in that regard. And we do expect to see more signs of home price stability by the end of the year. We're starting to see the light at the end of the tunnel."

Meanwhile, Anderson forecasts about a one percent growth in employment in the state this year. That would translate to about 26,000 additional jobs.

But he says job growth could be weaker if economic woes in Europe lower overseas demand for Minnesota-made goods.

Anderson expects Minnesota's unemployment rate this year will be just under six percent, about where it is now.

Home prices still dropping in Twin Cities, but rate of decline improves

Posted at 10:24 AM on January 31, 2012 by Annie Baxter
Filed under: Housing & mortgages, Twin Cities metro

The annual rate of decline in Twin Cities home prices slowed somewhat in November. That's according to the latest report from Standard & Poor's Case-Shiller home price index. Prices fell 5 percent compared to November of 2010. That was better than the 6 percent drop reported for October.

And the Twin Cities' performance bucked a national trend. The annual rate of decline worsened in November for the Case-Shiller 20-city composite index. Of course, it's worth pointing out that the Twin Cities still had a steeper over-the-year drop than 20-city index, which fell 3.7 percent.

The picture in the Twin Cities is a bit murkier when you look at the monthly numbers. If you don't take seasonal factors into account (which are a big deal in a place with intense weather, like Minnesota), home prices fell 0.6 percent between October and November in the Twin Cities. But if you do take seasonal factors into account, prices rose a teensy bit: 0.1 percent.

Experts usually insist on using seasonally adjusted numbers. The folks at S&P's Case-Shiller used to recommend doing so as well. But then they switched and now seem to prefer the non-adjusted numbers. They say there's too much weirdness with various foreclosure moratoria and other lending issues that muck up their seasonal adjustment process.

But that can make for a confusing picture when you've got the seasonally adjusted numbers pointing one way and the non-seasonally adjusted numbers pointing another way, as in this November report. That's why we typically prefer to look at the year-over-year numbers, which are more solid.

S&P officials say nationally there are few if any signs that a turning point in the housing market is close.

Rate on 30-year mortgage down to record 3.91 pct.

Posted at 9:03 AM on January 5, 2012 by MPR News Staff
Filed under: Housing & mortgages

By DEREK KRAVITZ, AP Business Writer

WASHINGTON (AP) -- 2012 looks to be another year of opportunity for the few who can afford to buy or refinance a home.

Freddie Mac says the average rate on the 30-year fixed mortgage fell to 3.91 percent this week, matching the record low reached two weeks ago.

The average on the 15-year fixed mortgage ticked down to 3.23 percent from 3.24 percent. That's up from 3.21 percent two weeks, also a record low.

Mortgage rates are lower because they tend to track the yield on the 10-year Treasury note, which fell below 2 percent this week.

Still, cheap mortgage rates have done little too boost the depressed housing market. Many Americans either can't take advantage of the rates or have already done so.


(Copyright 2012 by The Associated Press. All Rights Reserved.)

Twin Cities median home price falls while inventories stabilize

Posted at 11:03 AM on December 12, 2011 by Annie Baxter
Filed under: Housing & mortgages

The median Twin Cities home price fell to about $149,000 in November-- down 10 percent on an over-the-year basis, according to a report today from the Minneapolis Area Association of Realtors. Foreclosures and short sale activity helped to drive that median price down. Those distressed properties, which tend to sell at steep discounts, accounted for 44 percent of completed sales last month.

Meanwhile, traditional, non-distressed home prices dropped about 9 percent to around $187,000.

Sales numbers delivered some good news. Pending sales, based on signed purchase agreements, jumped 30 percent between November 2010 and last month. Completed sales were also up.

And in another positive sign, the glut of homes for sale continues to diminish. Inventory levels plunged 24 percent from last year. The realtors association of says that's the lowest November inventory in seven years, leaving 5.7 months supply of inventory. The trade group says that falls within a range reflective of a balanced market.

But those positive signs aren't giving Twin Cities housing the boost one might expect. "Despite the dramatic drop in inventory, prices are still bound by distressed activity, budget-conscious consumers and a general sense of economic uncertainty," said Brad Fisher, the trade group's president.

Wells Fargo sees tepid economic growth for Minn.

Posted at 1:44 PM on December 9, 2011 by Annie Baxter
Filed under: Housing & mortgages, Jobs & unemployment

Wells Fargo economists are projecting tepid job growth for Minnesota in 2012.

Over the year ending in October, payrolls in the state grew slower than the relatively weak U.S. growth rate of 1.2 percent over the same period.

Scott Anderson, a Wells Fargo economist, said he expects jobs in Minnesota to pick up by only 0.8 percent next year.

He notes that job losses in September and October in Minnesota could give a hint of trouble spots ahead.

"The fact that we had two consecutive months of job loss is somewhat concerning. But more concerning is where those jobs are being lost. It's in wholesale trade, transportation, and manufacturing," he said.

Anderson said those sectors had been leading the recovery in Minnesota. He thinks they may now be reflecting the trouble in Europe that some economists say will trigger a global slowdown.

He said that will mean Minnesota's export market, which had been a bright spot, will likely take a hit.

The Wells Fargo report also forecasts some improvement in Minnesota's housing market. Anderson noted that Twin Cities home prices are still down significantly compared to last year but seemed to pick up slightly over the summer.

In addition, inventories of homes for sale are decreasing, which could push prices higher.

That's all giving him reason for measured optimism.

"We think housing is maybe on an upturn swing here for 2012 in Minnesota, but because of the declining outlook on the economy overall it's going to be a long slog ahead," he said.

Anderson notes that while residential building permits are stilll at low levels, he expects new home construction will hit bottom and begin to pick up sometime in 2012.

Fewer Minnesota homes headed into foreclosure pipeline

Posted at 3:05 PM on November 18, 2011 by Annie Baxter
Filed under: Housing & mortgages

Minnesota continues to see fewer homes heading into the foreclosure pipeline.

The delinquency rate in Minnesota, which is based on loans that are at least one payment in arrears, fell in the third quarter ending in September.

The Mortgage Bankers Association says residential mortgage delinquency rates in Minnesota dropped to 5.4 percent in the third quarter, down from 6.3 percent during the same period last year.

That third quarter performance was a lot better than then nation's rate of 7.99 percent. Minnesota's rate put it in 45th place out of the 50 states and Washington D.C.

Mississippi had the unfortunate distinction of ranking first, with the highest delinquency rate.

Nationally, the early delinquency rate, which is based on mortgage payments 30 days past due, hit its lowest level in at least four years.

It's also worth noting that the percentage of homes on which the foreclosure process was started in Minnesota improved in the third quarter on an over-the-year basis.

Will state budget deal force up rents?

Posted at 3:02 PM on October 10, 2011 by Paul Tosto (2 Comments)
Filed under: Housing & mortgages, Jobs & unemployment

If you rent an apartment somewhere in Minnesota, odds are you didn't pay much attention to the debate in the Legislature over the Market Value Homestead Tax Credit for houses. You should have. It may be about to push your rent up 10 percent or more.

Looking to break the budget impasse that had shut down Minnesota state government for weeks, lawmakers in July agreed to end that credit, which essentially used state money to pay a portion of local homeowner property taxes to cities and towns.

To close the state budget hole, lawmakers ended the credit. In the past couple weeks, the potential effects that decision have come to light as city and county officials prepare next year's tax plan.

My MPR News colleague Dave Peters has been following the issue closely. On Friday, he wrote the burden of the tax changes in St. Paul could fall heavily on commercial property owners and apartment owners. Talking to Chris Samuel in Ramsey County's property tax division, Peters wrote:

The hardest hit? Small commercial properties, like ma and pa stores with a residence on the second floor, and larger apartment buildings, which are actually seeing their values increase, Samuel said. They could be seeing tax increases in the 16 or 17 percent range, he said.

The problem is that without the credit, local officials must spread the tax burden onto business and other properties to make up the lost state money, or else chop their budgets.

"The new system will shift taxes among properties within each community, especially to commercial, industrial, apartment, and other properties that will not receive the benefit of the homestead market value exclusion," says the League of Minnesota Cities.

The question then becomes how do apartment owners react if that happens? It's a decent guess that much of that will get passed on to renters.

The residential rental market is incredibly tight and vacancies have plummeted the past few years.

Here's a Minnesota Housing Partnership chart on the Twin Cities.

MHP recently wrote that rental vacancies fell to 2.4 percent, a 10-year low, noting a five percent rate is typically considered "balanced."

One other thing: Lawmakers also balanced the budget by cutting the state's renter's credit, intended to help low and moderate income renters. The non-profit Minnesota Budget Project writes:

The Renters' Credit will be cut by $26 million in FY 2013, or 13 percent, starting with refunds filed in 2012. An estimated 297,000 Minnesota households will lose an average of $87 because of this cut. About 7,300 Minnesota households will lose their entire credit.

Even without the legislative changes, renters were likely facing an increase because of the tight supply. Now, a budget deal focused on homeowners and property taxes may end up pushing up costs for apartments by double digits.

Easier path to mortgage modification?

Posted at 12:15 PM on April 27, 2011 by Paul Tosto
Filed under: Housing & mortgages

We wrote on Tuesday about the federal Home Affordable Modification Program, asking aloud whether the benefits were worth the hassle and aggravation of working out a modification.

Today, the Minnesota Home Ownership Center unveiled a new effort with mortgage giant Fannie Mae to make the process less intimidating.

The center, a non-profit that works to keep struggling homeowners in their homes, says a new partnership will speed the response time for Minnesota families struggling with mortgages owned by Fannie Mae.

Homeowners will be able to work directly with local Fannie Mae staff to get help and advice on keeping their homes and avoiding foreclosure.

Maybe the best news is the sanity of streamlined paperwork.

No longer will homeowners have to submit (and re-submit) different versions of the same documents. This all happens ONCE - on the front end and with the assistance of a Foreclosure Counselor, and is then submitted electronically to Fannie Mae staff right here in Minnesota.

It's a free service, one that Fannie Mae is providing in other cities across the country.

You can find Minnesota information here.

We're also definitely interested in hearing from people who've dealt with modifications -- from both sides of the lending desk. If you're a homeowner, lender, servicer or counselor, drop us a line and tell us what's worked and what hasn't when it comes to mortgage modification.

BONUS: Listen to MPR's Dan Olson report on the new effort.

Mortgage modification: What's the legacy?

Posted at 4:05 PM on April 26, 2011 by Paul Tosto (1 Comments)
Filed under: Housing & mortgages

The federal Home Affordable Modification Program (HAMP) seemed like a big deal in 2009, a way to pull homeowners back from the brink by working out short term deals to cut monthly payments.

The hope was it would cut people the slack they needed to keep their homes during the worst recession in decades.

Two years later, though, there's a wide gap between what the government says has been accomplished and the practical stories we hear about the program failing to live up to expectations.

Count Missi Casey as one of those who say the pain of loan modification wasn't worth the help it provided.

Casey, a Minnesotan in MPR's Public Insight Network, emailed us last summer that she'd gone through HAMP to stave off a possible foreclosure on the Twin Cities house she grew up in and had owned the past three years.

Her view: "It was awful." She wrote us:

We had a baby in April 2009 and I had to cut back on my hours at work so it made our mortgage payment nearly impossible. We were advised to do the loan modification rather than a traditional refinance... The process took about 15 months to complete and was so stressful that it probably took 10 years off my life.

We had never missed a payment on our mortgage, but due to
the banks system, we began receiving foreclosure notices about 6 months into the modification process.

Our credit scores also dropped significantly during this time and credit cards began lowering our credit limits. The payment we were told our mortgage would be modified to was originally very manageable for us but near the end of the process they raised it - I'm still not sure how or why they did that.

In two years, slightly more than 10,000 Minnesota home loans were permanently modified via HAMP. But you'd be hard pressed to find evidence that it buoyed the market.

Minnesota saw some 25,673 foreclosure sales in 2010, up 11 percent from 2009 and close to the peak in 2008, according to data collected by the Minnesota Home Ownership Center (click on the chart for a larger view).

Also, more than one in five Minnesota houses with a mortgage is underwater ( debt owed on the house is greater than the house's current value) or near underwater, according to data compiled by the research firm CoreLogic, a stat that's changed little in the past nine months.

So if you're looking for evidence that HAMP helped turn things around, it's not there.

We came back to Casey recently to see if her perspective had changed. It had not.

"The biggest problem since the modification is that it severely affected our credit," she told us.

It temporarily brought our credit scores down, which prompted our credit card companies to lower our credit limits, even though we never missed any payments...

Because they lowered our limits, it looks like we've maxed them all out, which is now causing us problems when we go to apply for new lines of credit.

We are also still paying more than what we can afford for our mortgage, but I'm sure we will be unable to refinance any time soon due to our credit issues.

"I think we were wrongly advised to do the modification and would only recommend it to someone who is actually in foreclosure," she added. "I'm sure some people may really benefit from the modification option, unfortunately just not us!"

We asked Ed Nelson with the Minnesota Home Ownership Center if Casey's experience was unusual. The center is a non-profit group that's been busy the past few years trying to help people keep their homes.

"We're constantly hearing similar stories from our counseling network," he said.

Some homeowners fly through the process with only minor speed bumps, for others the modification process can be long, extremely frustrating, and sadly, may not have been the best answer for them in the first place.

That's why we always recommend that someone sit down with a non-profit foreclosure prevention counselor. The counselor can help set expectations, help with paperwork, mediate with servicers (in some cases) and even talk about the advisability of choosing one option over another.

Nationwide, HAMP is expected to cost the Treasury $22 billion when finished. That's a lot less that was initially expected. But how do we judge if it was a success?
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Underwater gloom

Posted at 2:09 PM on March 10, 2011 by Paul Tosto (1 Comments)
Filed under: Housing & mortgages

Minnesota isn't Nevada. Or Florida. But if you're wondering when the housing markets will return to normal here, new data on homeowners who are underwater on their mortgages won't make you feel good about 2011.

Nearly 16 percent of Minnesota houses with a mortgage are under water, meaning the debt owed on the house is greater than the house's current value.

More than one in five Minnesota houses with a mortgage is underwater or near underwater, a stat that's changed little in the past nine months.

The data comes from the research firm CoreLogic. Minnesota's still better than the U.S. average, although that's skewed heavily by Nevada and other basket-case states. Our state's right at the median.

Here's the CoreLogic data in graphic form, from the Calculated Risk blog (click on the graph for a larger view).

It's no secret the housing markets have been a mess in the recession. The parlor game is guessing when "normal" returns. The CoreLogic data tell us that many problems remain just below the surface.

This sizable "negative equity" is a problem for the entire market. Being underwater starts many on the road to foreclosure, which creates layers of new problems.

"Negative equity holds millions of borrowers captive in their homes, unable to move or sell their properties," Mark Fleming, chief economist with CoreLogic, said in a prepared statement. "Until the high level of negative equity begins to recede, the housing and mortgage finance markets will remain very sluggish."

Here's the state-by-state breakdown from CoreLogic.

King cash: 1 in 4 Twin Cities homes bought with cash in January

Posted at 7:52 PM on February 11, 2011 by Paul Tosto
Filed under: Housing & mortgages

Realtor Aaron Dickinson, a source in MPR's Public Insight Network who crunches lots of data for his Twin Cities real estate blog, has been tracking the leap in cash deals during the recession.

Today he posted data showing that 27 percent of home sales closed in the Twin Cities last month went for cash.

That's extraordinary. Cash buyers, he notes, made up only four to five percent of sales in 2006 and 2007.

There's no doubt cash moves houses and that's generally good in markets where houses for sale are stacking up. Local data show overall median home sale prices falling and average days on the market rising.

"Cash buyers are helping soak up our extra home inventory and their significant activity in this market suggests that the smart money people with deep pockets consider this housing market a good investment," Dickinson writes.

But who's buying and why? Will the cash dealing bring stability or more turmoil to Twin Cities neighborhoods? Those are the questions we've asked for months.

There's been concern that investors flush with cash and in no need of a mortgage are muscling out traditional home buyers and that the trend will hurt neighborhoods and communities.

Competition with cash-laden investors makes it difficult to get foreclosed properties into the hands of homeowners," Thomas Streitz, director of housing policy and development for Minneapolis, told a U.S. House subcommittee almost exactly a year ago.

The city was trying to prevent the turnover of single family homes to rentals but sellers were taking lower cash offers over the higher offers of developers working with the city's Neighborhood Stabilization Program. "A homeowner with a FHA approved mortgage with a 30 day approval time does not compete with cash-in-hand private investors," he wrote.

We're going to try and follow up with Streitz next week to see if anything's changed. But the competition from cash has only increased.

Nationally, the cash-for-homes trend is easy to see.

The group recently reported investors accounting for 20 percent of transactions in December, up from 15 percent a year earlier.

Cash deals across the U.S. hit 29 percent in December, up from 22 percent in December 2009. "All-cash sales have been consistently high at about 30 percent of the market over the past six months," NAR said.

There are two basic ways to look at this.

This is how markets work. People with cash are taking advantage of great deals, snapping up properties and, at the same time, buoying the market.

We're turning a generation of young would-be homeowners into renters. Odds are most of the properties bought for cash used to hold homeowners and eventually will hold renters.

In the worst case, we're watching the regression back to a renting underclass. We can't get out of our heads the comments of one anonymous Realtor from the NAR's March Confidence Index:

Serious challenges in getting owner occupants into foreclosed properties due to issues with repairs and financing. The result is most foreclosures will sell low to cash investors many out of state who become slum lords.

The thing is we don't know the intentions of the folks with cash. Are they landlords? Renovators who plan to fix and flip the properties? Seniors helping their grandchildren buy a first house?

"There are some cash buyers buying for owner occupancy -- not a ton, but there are some," says Dickinson.

He understands the public policy concern. But "all things equal, if a city has to choose between a vacant foreclosed home and an occupied rental, usually the rental is a better (choice). Poorly managed rentals can be a problem but a rental that's got a fairly decent tenant and is a managed property is much better than a vacant house."

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Housing, mortgage mess: Version 2011

Posted at 9:20 AM on February 15, 2011 by Paul Tosto
Filed under: Housing & mortgages

MinnEcon readers know we've been in an extended malaise in the Twin Cities housing market and that it's a long way back to normal.

Still, if you were looking for signs Minnesota housing might finally be on the upswing, you would have been pretty bummed lately.

The Minneapolis Area Association of Realtors reported foreclosures and short sales drove median Twin Cities home sale prices down nearly 11 percent in January compared to January 2010. Sellers were getting only 88 percent of the original list price, worse than the crisis years of 2008, 2009 and 2010.

At roughly the same time, the Minnesota Home Ownership Center released a report showing foreclosure sales rising significantly last year compared to 2009. Some 26,000 homes were sold at sheriff sale in 2010, meaning nearly 25,000 Minnesotans lost their homes, the second highest year on record, according to the home ownership center.

Click on the chart for a larger view.

Here's a breakdown by county of homes foreclosed during 2010. Click on the map below for a larger view (use your page down key to move up and down the state).

It really shows the hit the Twin Cities northern suburbs and exurbs continue to absorb.

We're particularly familiar with Isanti County, the focus of a terrific package of MPR stories last fall. Reporter Laurie Stern wrote:

The foreclosure rate in Isanti County is the second highest in the state. In a county where less than 40,000 people live, more than 588 families have lost their homes to foreclosure since January 2009.

The recession's disproportionate impact there can be explained by two things: New homes bought with treacherous mortgages at the height of the boom; and the high proportion of workers who used to commute to the Twin Cities for work, and have lost their jobs.

Isanti also spent 2010 among the counties with the highest foreclosure rate, adding another 349.

Bottom line: The Minneapolis Realtors thought the market was on "recovery road" going into 2010. It wasn't. In 2011, there are still plenty of problems with the current housing market and worries about mortgage problems to come.

The Minnesota Housing Finance Agency has kept close watch on the number of non-prime (read: possibly shaky) adjustable rate mortgages that have yet to reset their interest rates. Here's a heat map by zip code.

An index score of 200 means the zip code's rate is twice the state rate.

The problem, the housing agency notes, is that "with a high proportion of borrowers currently owing more on their mortgages than their homes are worth, some borrowers will be unable to refinance out of the ARMs."

So you can't get the current low rate that might make the difference between keeping and losing your home because the value of the home has fallen so far.

This current mess won't be as huge as the first round -- but it will continue to hurt, especially in the northern exurbs and central Minnesota.

Data collected by the Federal Reserve Bank of New York show some of those counties with some of the highest mortgage delinquency rates (90-plus days behind) in the Upper Midwest.

That includes Mille Lacs where 7 percent of all mortgages were delinquent as of October and, yes, Isanti, where 7.3 percent remain delinquent.

Here's another way to look at foreclosure problems in Minnesota and the nation from the terrific Patchwork Nation blog.

Dante Chinni of Patchwork Nation also notes that mortgage problems we thought might be behind us have simply been delayed. He writes:

Nationally, the firm RealtyTrac reports foreclosures were essentially flat in January compared with December. But the caveat this time is a big one -- the numbers are flat because there is a raft of foreclosures being held back due to the robo-signing problem from last year.

By the end of the quarter, says RealtyTrac's Rick Sharga, foreclosures will probably be up dramatically.

Rising employment, eventually, will make things better. People with jobs typically keep their mortgages current and don't end up in foreclosure. But until that happens, we won't see normal in housing or mortgages.
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Twin Cities housing values: How big a drop in your neighborhood?

Posted at 7:00 PM on January 25, 2011 by Paul Tosto (1 Comments)
Filed under: Housing & mortgages

If you're a Twin Cities area homeowner, here are a couple charts from today's year-end 2010 report from the Minneapolis Area Association of Realtors that will make your head hurt.

They show the change in median value of houses by Multiple Listing Service area from 2006 to 2010. It is not pretty. Click on the charts for a larger view and use the "page down" key on your computer to scroll to the bottom.

We've written a ton on MinnEcon about the long road back for housing values. These charts really bring it home.

As far as I can tell, only the Chanhassen and Maple Grove / Osseo areas showed increases in value since 2006.

Take a look at the charts and report and let me know if something surprises you.

It's worth remembering that this isn't just a numbers game. A house is typically the single biggest investment Americans make, an asset once relied on to build wealth and provide the means to send kids to college and provide a financial cushion in retirement.

Twin Cities housing values: a long way back

Posted at 1:03 PM on January 13, 2011 by Paul Tosto
Filed under: Housing & mortgages

Don't look at Zillow.

Or, rather, don't look for your house on the real estate site to see its current value. I did with mine and it's not pretty.

We've written a ton over the past year about the ongoing housing malaise in the Twin Cities real estate market. Things really flamed out after the federal tax credits ended in the spring, resulting in the worst year for housing sales in eight years.

We're left looking through the pieces of the market for hopeful signs for 2011.

The Minneapolis Area Association of Realtors came out with some stuff today suggesting some stability and hope for growth. But it's a long way back.

Here's a look at detail from a Minneapolis Realtors report from earlier this week (click on the chart for a larger view).

In 2007 sellers were getting nearly 95 percent of their asking price.

We were also struck by this Zillow chart showing the gap between median sale price statewide in Minnesota compared to The Cities.

Minnesota Zillow Home Value Index

Minnesota Home Values - Interactive chart

The value gap between the Twin Cities and all of Minnesota closed significantly in four years, an indication of the hit the metro area's taken relative to the rest of the state.

Depending on the measure, average values have dropped about 30 percent in four years.

Markets recover. But even the normally upbeat Realtors expect only about a 3 percent increase in median Twin Cities home prices during 2011.

The group's final assessment of 2010: worst sales in eight years.

Once again, it seems like ancient history but in December 2009, the Realtors announced 2010 would be the year the housing market found "Recovery Road."

That was ... premature.

As we noted a few weeks ago, people with jobs buy homes and can afford to keep them. And until more people are employed again in Minnesota, no one will be making predictions about the market turning onto Recovery Road.

Recession feel like it's over in your home?

Posted at 3:00 PM on January 14, 2011 by Paul Tosto
Filed under: Housing & mortgages, Jobs & unemployment, Saving & spending

Back in September, I agreed to help edit and manage MPR's Minnesota Today site until a permanent editor could be found.

It ended up consuming more time than I expected and some things fell through the cracks, including the monthly shout out to MinnEcon readers and Minnesotans in MPR's Public Insight Network seeking stories about life in this economy.

Well, we're back. As of this week, I have both eyes back on MinnEcon.

In coming week's we'll be making some cool changes to the site that will make it a lot easier for you to contribute and share -- not just comment but ask and answer questions, jump onto online forums and find just about everything you need to understand and talk about Minnesota's economy.

The best way to re-start is to resume our regular shout-out: So tell us what the economy looks like for your household in February.

Feeling better about things yet or does it still feel like recession? Are you in saving mode to pay down debts or you feeling like you can spend again on non-essentials? Your stories and insights will make us all smarter about where things are headed across Minnesota.

One of the new questions we included last fall was: Does the recession feel like it's over in your home?

We got a bunch of good responses. A lot of folks are still hurting, though I was surprised to find some Minnesotans who felt only nicked by the Great Recession.

Click on the map icons below to read how some of your neighbors answered: "Does the recession feel like it's over in your home?"

And then add your voice.

Let's start sharing our stories again.

In housing, an elusive 'Recovery Road'

Posted at 1:45 PM on December 30, 2010 by Paul Tosto
Filed under: Housing & mortgages

A year ago this month, the Minneapolis Area Association of Realtors declared the Twin Cities housing market on "Recovery Road."

But the group's final weekly report for 2010 shows the declaration was, well, premature.

The reality is data continue to show a market that won't get back to normal until more people find jobs. And experts don't expect Minnesota to recover the jobs lost in the recession until mid-2013.

Key numbers -- average number of days on market, percent of original list price at sale and the supply of homes for sale -- worsened over the "recovery road" year, the newest Minneapolis Realtors' report shows.

Click on the graphics for larger views.

The lousy weather this month no doubt played a role in the market hobbling at the end of 2010. But a look at the trends show snow can take all the blame.

Here's a look at how the values of our homes have fallen the past couple years, from the Realtors' Housing Supply Outlook.

Single family detached housing values seem to have stabilized but if you're in a condo your values have been hit pretty hard.

Markets recover. But as we've noted for months now, the malaise that hit Twin Cities housing when the federal housing tax credits ended was deeper than anyone expected.

There are some positives -- an increase in the the sales of homes valued at and above $350,000, for instance.

But people with jobs buy homes and can afford to keep them. And until more people are employed again in Minnesota, no one will be making predictions about the market turning onto Recovery Road.
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What's the housing market like around you? Post something below or contact us directly at MinnEcon.

Haves, have-nots and the housing market

Posted at 3:35 PM on December 22, 2010 by Paul Tosto (1 Comments)
Filed under: Housing & mortgages, Jobs & unemployment

Job. No job. That remains the bright line dividing Minnesotans who are feeling an economic recovery and those who aren't.

The phenomenon can be seen in all kinds of economic data, including the latest report from the Minnesota Housing Partnership.

The Partnership's third quarter report on the state's housing market finds pre-foreclosure notices rising and a tightening rental market through the three months that ended in September.

Check out the key graphs below (click on them for a larger view).

The report isn't all bad news. Mortgage delinquencies fell for the third straight quarter "signaling that fewer foreclosures may be fewer ahead."

Overall, though, it's a picture of an economy still trying to find its footing.

The rental market tightness, for instance, is likely from ex-homeowners who've lost their homes in the housing crisis. Employment in the state's construction market continues to languish, with the "fewest jobs in the sector since 1993 for the time of year." And the number of homeless children in the Twin Cities is up from the same period last year.

"Taken together," the report notes, "these trends suggest that the holiday season may be brighter for some families with reliable earnings, while others face continued hardship with persistent unemployment and ongoing foreclosures."

The Federal Reserve Bank of Minneapolis recently declared "optimism is back" as it released its 2011 economic forecast for the Upper Midwest with forecasts for expected income and employment growth.

The Fed, though, acknowledged that job growth rates, "are expected to exceed 2010 rates in all areas except Minnesota, where the pace of employment growth will remain the same."

If the region's sputtering job creation continues, it'll cause more collateral problems in the housing market, widening the divide between the recovery's haves and have-nots.

As housing values drop, some eye the "swap"

Posted at 11:56 AM on December 15, 2010 by Molly Bloom (1 Comments)
Filed under: Housing & mortgages, Small business

Peggy and John Palumbo once hoped their home equity would finance their dream to open a restaurant. But when home values unraveled in the recession and they couldn't find a seller at the right price, they needed a new plan.

A Craigslist devotee, Peggy dove into the site's "Housing Swap" section, thinking it made more sense than letting a house languish in the slow housing market.

The Palumbos have yet to find the perfect swap. But with so many people stuck in their homes, she's seen an increase in the people looking for this kind of option and thinks it will only become more popular.

They were planning to swap with a young couple in Oakdale but the deal fell through when the couple was unable to get financing for their new mortgage.

Besides the frustration, Peggy feels that stifled entrepreneurship is one of the overlooked consequences of the stagnant housing market.

Start-ups will often take out second mortgages and use homes as collateral in order to get their business going. But without that, and the ability to downsize and free up money, it's much harder for new entrepreneurs to start businesses.

Peggy and John are doing everything they can to make their restaurant dream come true. They recently petitioned Ramsey County to get their property re-assessed and their property taxes will be $1200 lower next year.

"You have to get creative and think outside of the box," Peggy says. "It's not business as usual anymore."

What's your housing story? We'd love to hear it. Tell us here - or leave a comment below.

Twin Cities housing: Malaise

Posted at 2:47 PM on November 10, 2010 by Paul Tosto
Filed under: Housing & mortgages

We've read a lot of headlines the past couple years about the Twin Cities housing market. But this one today pretty much sums it up.

Sales Down, Inventory Up, Prices Flat

It's startling because it comes from the Minneapolis Area Association of Realtors. Even in the toughest markets, Realtors seem perpetually upbeat. Not these days.

"While there have been modest rays of hope in recent economic news, it has not been enough to infuse energy into the realty market," Pat Paulson, the group's president-elect, said in a prepared statement.

The details won't shock MinnEcon readers.

We've reported on the hangover the market expected once the federal home buying tax credits expired in April, the rising inventory of houses for sale at a time when it should be falling and the reality that housing starts won't save the economy this time around.

And while things aren't great, a look at this Realtors chart reminds us that things were worse a couple years ago:

The chart looks at year over year changes by month. So the blue .6 on the far right indicates median sales price in October 2010 was up .6 from October 2009.

Markets recover. The troubling thing is how long this market's been bumping along the bottom. Like other parts of the economy, we've been told that liftoff is imminent. But there's no ignition. When does that happen?

Eleven months ago today, the Minneapolis Realtors group pronounced the market on "recovery road."

The November median sales price of $170,000 was a slight increase from October -- a rare occurrence in this month that typically marks the beginning of a temporary winter price swoon. This mark is 2.9 percent behind last October, the lowest year-over-year price decline in more than two years.

"This is the surest sign we've seen yet that we're on recovery road," said Steve Havig, President of the Minneapolis Area Association of Realtors. "We've seen sales growing for almost a year and a half, and prices are starting to reflect that, particularly in the lower price ranges."

For now, at least, those words feels like ancient history.

Let's hope it's not 1979.

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Got some insight into the housing market in the Twin Cities or across Minnesota? Post below or contact us directly at MinnEcon.

In Cass County, signs of the next mortgage mess

Posted at 10:09 AM on October 20, 2010 by Paul Tosto (1 Comments)
Filed under: Greater Minnesota, Housing & mortgages

Back in March we talked about the approaching next mortgage mess and how the Twin Cities ex-urbs and selected parts of central Minnesota were likely to feel it worse.

So we took notice this morning when we read in today's Brainerd Dispatch, "Foreclosures increase in Cass County." Cass and the Brainerd Lakes areas were among the areas we highlighted in the spring. MPR reporter Tom Robertson focused in, too.

The Brainerd story reports data showing 35 Cass County properties went into into foreclosure from July to September compared with 33 last year.

While the number didn't change that much the nature of those foreclosures shifted.

The value of properties foreclosed remained at about 10 for those under $100,000 and about a dozen for those worth $100,000 to $200,000, but the number valued at $200,000 to $400,000 more than doubled from five to 11. Only one property worth over $400,000 went into foreclosure this year, compared with five in 2009.

It looks like what John Patterson, research director for the Minnesota Housing Finance Agency identified earlier this year.

Patterson built maps examining non-prime adjustable rate mortgages that have yet to reset their interest rates. Here's the map from June. The darker the color the bigger the potential problem. (Click on it for a larger view.)

The map's important because there's an ongoing concern the last chunk of adjustable rate mortgages made while economic times were good and home values were still rising, are the ones likely to cause trouble in coming months.

These would be ARMs built to reset their interest rates and recast their monthly payments after five years. Think of it as the "deals" from 2005 coming back to haunt in 2010 and beyond.

Back in the spring, looking at similar maps from December, it looked like the potential problems were concentrated in some of the farthest reaches of the Twin Cities suburbs and in central Minnesota where lots of larger, expensive homes were built earlier in the decade.

The Brainerd story offers some evidence that's what we're seeing -- foreclosures rising now for houses in the $200,000 to $400,000 range. I'll speculate that these are folks who found a way to afford lake homes using adjustable rate loans and who couldn't make it.

We're not talking about the super rich or low income folks or people who were the worst credit risks. As Patterson notes:

The foreclosure crisis is transforming from a subprime crisis to a prime crisis.

-- Between 2007 and 2010, the subprime market's share of residential mortgages in foreclosure dropped from 54% to 25% in Minnesota.

-- During the same period, the prime market's share increased from 40% to 60%.

Yes, it's only Cass County and a small sample size. But that's typically how these bigger problems surface, not as a huge wave but a trickle.

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Think we're off base on the housing and mortgage concerns? Tell us. Post below or contact us directly at MinnEcon.

Twin Cities housing: Creeping toward oversupply

Posted at 1:00 PM on October 11, 2010 by Paul Tosto
Filed under: Housing & mortgages

We're running out of analogies and metaphors to try and explain the struggles of the Twin Cities housing market.

Last week's market update from the Minneapolis Area Association of Realtors described the housing market as stuck "in a sort of frozen state" compared to last year, when federal tax credits were driving deals.

Today, in its newest report, the association's president says the group was no longer able to give an "apples-to-apples" comparison because last year home sales got a boost from the home buyer tax credit.

There's no doubt the federal home buying incentives front loaded a lot of purchases. But the current malaise is deeper than expected.

Now one indicator that had returned to normal -- the supply of housing for sale -- is out of whack again.

Today's data show 8.6 months of inventory for the entire Twin Cities market, "up 30.3 percent from the 6.6 months of supply last year at this time," the association noted.

"Negotiations also slid back toward buyers for the third consecutive month. The percent of original list price received at sale declined 3.2 percent to 90.9 percent. The last time this metric was this low was April of 2009."

The inventory number is much greater than the five to six month supply typical of a market in sync.

Here's the Realtors' inventory graph from last week (click for a larger view):

It seems like ancient history, but we recall the Minneapolis Realtors in December talking about the market being on "recovery road."

While we're not at the bad old days of 2008, the climbing inventory and sliding list price is good only if you're looking to buy a house.

If you're waiting for a normal market and the economic positives that come with it, it's not a good sign. The reality is that the "recovery" is going to have to save the housing business this time around.

"Private companies are hiring," Minneapolis Realtors President-Elect Pat Paulson said, in a written statement. "But we need several months of real job growth for housing demand to improve."

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What's the housing market like around you? Post below or drop us a line directly at MinnEcon.

Mortgages, rentals and accidental landlords

Posted at 3:45 PM on October 6, 2010 by Paul Tosto
Filed under: Housing & mortgages

Before the mortgage / housing crisis, it was easy enough to sell your old house and buy another.

Then came the market drop. It created a class of "accidental landlords" -- people who couldn't sell their home but were still able to rent it out as they bought another. That helped keep the housing sale skids greased.

Problem is much of that grease is gone.

Lenders have tightened down on rental income arrangements, making it harder for people who want to buy a home but can't unload their old one.

It's one of the quieter problems facing housing markets in the Twin Cities and the country. If you can't sell your own house to buy another and if lenders won't let you count income from renting it, then what do you do? What does the market do?

We asked Alex Stenback, a Twin Cities mortgage banker and writer of the Behind the Mortgage blog for some insight. He writes:

Rental income on a primary residence being converted to rental can only be used if there is 25 percent to 30 percent equity in the subject property (as measured by appraisal or in some cases an automated valuation, not tax or other valuation methods) along with a signed lease and evidence of a security deposit.

[Mortgage giants] Fannie Mae, Freddie Mac and the Federal Housing Administration all take this position and also generally require that the borrowers have at least six months payment reserves on both properties, though exact reserve requirements can vary according to circumstances to numerous to list here.

Fannie/Freddie/HUD created these rules to get in the way of the "Buy and Bail" phenomena, where a borrower would purchase a new primary residence with no intention of making payments on the old home.

The theory being that these leases were not real, or at least not worth the paper they were written on.

With an equity position, at least there were some assurances that the trailing primary residence could be sold without the borrower suffering a major loss that might severely impair the borrowers financial position.

This week's market update from the Minneapolis Area Association of Realtors says the housing market remains "in a sort of frozen state" compared to last year, when federal tax credits were driving business.

The inventory of Twin Cities homes for sale continues to climb. There was an estimated eight month supply in September, the report showed. It's much higher than last year and greater than the five to six month supply typical of a market in sync.

Here's the Realtors' inventory graph (click for a larger view):

The rental-sale jam-ups aren't a huge influence on the market's overall health, says Stenback, "just one of many contributing factors to the general real estate market malaise: Poor economy, anemic job market, blight of upside down homes, too much supply, too little demand."

Correction: In an earlier version of this post, I inadvertently included some of my introductory comments into Stenback's analysis. I've since removed my remarks.

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What's the housing market like in your neighborhood or town? Share a story. Post something below or contact us directly at MinnEcon.

Housing starts won't save us

Posted at 2:10 PM on September 27, 2010 by Paul Tosto (3 Comments)
Filed under: Housing & mortgages

Minnesota's jobless data continue to show construction jobs are getting whacked.

But I'll confess I didn't get the larger, national picture on this until Aaron Dickinson, a Realtor and source in MPR's Public Insight Network, made this point: In past recessions, new housing construction was the business that always seemed to save the economy.

This time it's the economy that will have to save new housing construction.

This chart from the Federal Reserve Bank of St. Louis tells us a lot about the current situation. The gray bars mark recessions and the red line construction starts for new, privately owned housing.

(Click on the chart for a larger view or here for a really large view.)

Looking at the chart, there's no doubt new home building came roaring out of the past seven recessions. Not so now.

The housing and mortgage crisis has thrown supply and demand out of whack. Anemic job growth in the overall economy makes it less likely people will be buying new homes. That's why housing starts are staggering out of this recession and why it won't save us this time.

Minnesota construction jobs continue to get hammered, down 2,500 in August; down 8,100 from the same time a year ago and falling much faster compared to the construction sector nationally.

Many of those are tied to the home building trades. If you haven't read Tuesday's terrific MPR story on people in the construction trades who built the Twin Cities but can't afford to live here now, read it.

Nationally, builder confidence remains in a deep rut.

"In general, builders haven't seen any reason for improved optimism in market conditions over the past month," the National Association of Home Builders said last week. "If anything, consumer uncertainty has increased, and builders feel their hands are tied until potential home buyers feel more secure about the job market and economy."

Last week's Commerce Department data showed a mixed bag. August housing starts were up 10.5 percent from July and 2.2 percent from last year. But housing permits and completions were still down from last year.

It's a big deal because new home building has a big economic reach -- from all those folks in the trades needing work to the cities and towns that rely on homeowner property taxes to pay for services.

If housing construction won't light a fire under this economy, what will?

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What you're seeing in the housing market where you live? Post something below or drop us a line directly.

Cash = muscle in Twin Cities real estate

Posted at 3:00 PM on September 24, 2010 by Paul Tosto
Filed under: Housing & mortgages

Cash moves houses and that's generally good in markets where houses for sale are stacking up. But who's buying and why? Will the cash dealing bring stability or more turmoil to Twin Cities neighborhoods?

Those are questions that need to be answered. We don't have any answers but we can say that cash is driving sales in bank-owned housing and we should be talking more about it.

Realtor Aaron Dickinson, a source in MPR's Public Insight Network, has pulled together detailed research on cash transactions for his blog.

Earlier this week he calculated that cash deals made up nearly two-thirds of every bank-owned home priced under $100,000 and sold in the Twin Cities in the first half of 2010.

He estimates that cash purchases made up about 17 percent of all Twin Cities home sales in the first half of 2010 -- a huge jump from the same time in 2006, before the housing / mortgage crisis, when it was about 4 percent.

Dickinson points out that banks love cash and that they're willing to do deals for people who don't need a mortgage. He figures most of the buyers are investors and makes an interesting observation:

Property flipping has come back in vogue -- though this time the increased home price on resale is due to the repairs the rehabbers made versus just time passing like it was in the boom years. We also have investors who are buying homes for rental properties since many homes for sale will easily cash flow even after extensive repairs.

The thing is, we don't know the implications of the change underway.

We asked back in January: Can the interests of investors with cash to spend co-exist with the policy goals of putting people in their first home and stabilizing neighborhoods? (At this point, we're going to retread stuff from our past posts on this matter, mostly because we thought we wrote it pretty well).

Here's why the cash craze might not be a good thing, or at least why we need to have a larger conversation about it.

"Investor competition is a main challenge in bringing foreclosed properties on the market to homeowners," Thomas Streitz, director of housing policy and development for Minneapolis, told a U.S. House subcommittee earlier this year.

The city, he wrote, is trying to prevent the turnover of single family homes to rentals but sellers are taking lower cash offers over the higher offers of developers working with the city's Neighborhood Stabilization Program.

"A homeowner with a FHA approved mortgage with a 30 day approval time does not compete with cash-in-hand private investors."

Similar concerns surfaced in the most recent National Association of Realtors Confidence reports. The reports include Realtor responses from surveys of market conditions.

"Buyers primarily paying cash due to inability to get mortgages," one Realtor commented in NAR's June report.

"Serious challenges in getting owner occupants into foreclosed properties due to issues with repairs and financing. The result is most foreclosures will sell low to cash investors many out of state who become slum lords," another Realtor said in the March Confidence Index.

Here's one more from March:

Competition for properties for first time home buyers has been extremely difficult due in part to the $8000 tax credit. Unfortunately for them, many new investors are also taking advantage of the low prices by moving money out of poorly performing investment accounts and buying properties cash.

Naturally, those investors are having much more success having their offers accepted.

Back to the present. So we have Dickinson's solid research and our hand-wringing about the policy implications.

Now tell us what you're seeing when it comes to cash sales and homes? Post below or drop us a line and share an insight.

BONUS: Read our past posts on cash deals and housing in the Twin Cities
Cash deals, houses and recession

Cash is King in north Minneapolis

Modifying a loan? Four things you need to know

Posted at 10:57 AM on September 23, 2010 by Molly Bloom
Filed under: Housing & mortgages

We've received several emails from sources in our Public Insight Network about the nightmare that has been the loan modification process (ProPublica has also been tracking these frustrations). People can try to seek a loan modification from their lender if they are having trouble meeting their mortgage payments because of loss of income, change in interest rates or other reasons.

It took Raghav Singh of Northfield many months -- and many letters, phone calls and visits -- to complete a loan modification.

At the height of his frustration with his bank, he called Congressman John Kline's office seeking guidance and was referred to Lutheran Social Services.

Raghav is glad he did.

"In one phone call, one of their counselors was able to tell me more about what to do and how to do it than in months of effort and attempts to talk with people," at this bank, he said.

The bank had rejected Raghav's earlier application, but after taking the advice of his counselor, the bank finally accepted his application and modified the loan.

Joanne Gilbertson, a certified credit and housing counselor at Lutheran Social Services based in Duluth. shared some of the tips that Raghav and others have benefited from:

1) Talk to someone neutral: Before you start the loan modification process, talk to someone who doesn't have a vested interest in the outcome (i.e banker, realtor). There are counselors available for free through places like Lutheran Social Services or the Home Ownership Preservation Foundation. They'll be able to tell you what your options are based on your situation (this could be the Home Affordable Modification Program, traditional modification, forbearance or a county assistance program). If you want to look at a modification, a counselor will probably be able to tell you before you even apply whether or not you'll be approved because...

2) It's all about numbers: Under the federal Home Affordable Modification Program, your monthly mortgage payment, including property taxes, insurance and interest, should be 31 percent of your gross monthly income. If your income is too low -- if your only source of income is unemployment, for example -- you will be denied. So depending on your situation, taking in a roommate or getting a part-time job might make all the difference.

3) Talk to the right department: Once you start talking to your bank, make sure you're talking to the loss mitigation department and not customer service or collections.

4) Follow-up weekly: Check in with the loss mitigation representative weekly to make sure your application doesn't slip through the cracks. If your application is missing a form or piece of information you may be able to catch it before your entire application is denied.

If you're ineligible for a modification here are a couple other things to keep in mind:

1) A short sale is not necessarily better than foreclosure: They'll have the same effect on your credit score and a short sale requires you to find a buyer. A foreclosure could give you more time to find a new place to live.

2) Stay ahead of the sheriff sale: You can file an affidavit to postpone the sheriff sale by five months. The trade-off is that this will shorten the redemption period to five weeks, as opposed to six months. This trade-off is not bad, since the only way to keep your home once it's in redemption is to pay off the entire loan in full.

Have you gone through a loan modification? What tips do you have for people considering their options? Leave yours in the comments or email me here.

Image by Hannah Webster via Flickr

Insight into a grim housing market

Posted at 2:41 PM on September 16, 2010 by Chris Farrell (2 Comments)
Filed under: Housing & mortgages

From chief economics correspondent Chris Farrell

The news on the housing market is grim. To get another read on the market, I decided to look at what Morris Davis, professor of real estate and urban land economics at the
Wisconsin School of Business at the University of Wisconsin, Madison, is writing. He does some of the more insightful research into the dynamics of the housing and rental market. Maybe I decided to look him up because I'm at the airport near Green Bay, WI, (waiting the fly back to the Twin Cities). His latest paper is Reflections on the Foreclosure Crisis. It's from June, 2010, but it makes for sober reading.

He calculates that the foreclosure crisis is far from over. And "crisis" is certainly the right word. Davis notes that in the 27 1/2 year period between 1979 and mid-2006, for example, there was a cumulative total of 7.5 million foreclosure proceedings. That's a rate of 275,000 a year. Yet in the 3 1/2 year period between mid-2006 and year-end 2009, 6 million foreclosure proceedings had been started--an annual rate of 1.7 million per year. He expects 4 to 5 million foreclosures this year and next.

Davis argues that two triggers behind the foreclosure epidemic. First, homes are worth less than the mortgage. They're underwater. To paraphrase the philosophers, that's a necessary but not sufficient condition. The second foreclsoure trigger is unemployment. Well, the past few years have the worst housing market and the worst labor market in 60 years. " Both foreclosure triggers are still in place," writes Davis.

Specifically, the Congressional Budget Office is forecasting that the national unemployment rate will remain above 9.0 percent in both 2010 and 2011. Many homeowners will remain under water. Davis assumes that house prices and housing rents will increase at the same rate over the next few years--a reasonable assumption. In that case, he estimates that house prices could rise in nominal terms by somewhere between 1 percent and 2.5 percent a year for the next two years.

My read: The housing market will stagnate at best for the next couple of years.

Got to board the plane now.

In housing construction, some unpleasant job stats

Posted at 12:20 PM on September 13, 2010 by Paul Tosto
Filed under: Housing & mortgages

Unemployment and housing are joined at the wrist. Rising unemployment hurts housing demand and that drives down the demand for residential construction jobs. That's pretty much what we've seen in the recession.

Throw the housing / mortgage crisis into the mix and it's easy to see why the home construction business is in tough straits.

So while we hope Minnesota's new jobless data -- set for release on Thursday -- show better times for construction, numbers released today by the Minnesota Housing Partnership don't give us a lot of optimism.

The group's second quarter report holds lots of great detail. But this jumped out at us:

Quarterly employment in residential housing construction fell to an average of just under 9,100 jobs per month, the lowest level in 15 years for the second quarter.

The supply of homes for sale rose to 7.2 months by the end of the quarter, which may continue to place downward pressure on prices.

On average, 29% of the supply of homes for sale this quarter included foreclosures or short sales. Three years ago only 9% of the inventory consisted of such homes.

Here's the employment trend line:

In Minnesota's July unemployment report, construction had the dubious honor of having the greatest year-over-year job loss (-6,500) and the highest percentage job loss (-6.2 percent) of any state sector.

My colleague Chris Farrell pointed out this morning how closely housing construction is tied to unemployment.

"The housing market is not a good place to be right now," he said this morning. He was talking about sales and prices.

For now, at least, it also describes the state of the folks who do the building.

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If you're in housing construction or have a different take on what's happening currently, we'd love to hear it. Post something below or contact us directly at MinnEcon.

Cash deals, houses and recession

Posted at 4:20 PM on August 26, 2010 by Paul Tosto
Filed under: Housing & mortgages

Back in February, we highlighted a chunk of north Minneapolis where cash deals for homes were off the roof.

Data showed nearly two of every three transactions in that area were cash deals in 2009, an astronomical pace compared to 2005 and 2006 when cash deals accounted for less than six percent of sales.

There's no doubt the mortgage crisis, accelerated by the recession, triggered the troubles of homeowners that led to a jump in cash deals in selected places, like MLS Area 305 in north Minneapolis.

But what's the picture nationally?

We checked in with the National Association of Realtors, which began collecting monthly statistics on cash transactions in October 2008. Here's the NAR data in chart form showing the percentage of home sales that were cash transactions (click on the chart for a larger view).

All-cash deals are obviously up in the recession, although it's still hard to tell exactly how much of it is driven by the mortgage and foreclosure crisis.

From 2000 to 2007, NAR's annual survey showed all-cash transactions made up seven to eight percent of sales, but investors appeared to be under represented in those survey results so it's not an apples-to-apples comparison, said NAR's Walter Moloney.

The data, he adds, don't show an absolute link between all-cash deals for homes and distressed real estate markets.

All-cash deals, he said, include many people who are not in stressed situations. Those include "trade-down buyers," retirees and traditional buyers who sell their property and buy a smaller home. It also includes parents helping children and international buyers.

In 2009, investors accounted for 17 percent of transactions -- it's been averaging close to that so far this year, Moloney adds.

Those are the folks, for the most part, buying stressed real estate for cash.

Are we saying cash sales are bad? No.

But the question we asked in January is still relevant: Can the interests of investors with cash to spend co-exist with the policy goals of putting people in their first home and stabilizing neighborhoods?

"Investor competition is a main challenge in bringing foreclosed properties on the market to homeowners," Thomas Streitz, director of housing policy and development for Minneapolis, told a U.S. House subcommittee earlier this year.

The city, he wrote, is trying to prevent the turnover of single family homes to rentals but sellers are taking lower cash offers over the higher offers of developers working with the city's Neighborhood Stabilization Program.

"A homeowner with a FHA approved mortgage with a 30 day approval time does not compete with cash-in-hand private investors."

More concerns surfaced in the most recent NAR Confidence reports. The reports include Realtor responses from surveys of market conditions.

"Buyers primarily paying cash due to inability to get mortgages," one Realtor commented in NAR's June report.

"Serious challenges in getting owner occupants into foreclosed properties due to issues with repairs and financing. The result is most foreclosures will sell low to cash investors many out of state who become slum lords," another Realtor said in the March Confidence Index.

Here's one more from March:

Competition for properties for first time home buyers has been extremely difficult due in part to the $8000 tax credit. Unfortunately for them, many new investors are also taking advantage of the low prices by moving money out of poorly performing investment accounts and buying properties cash.

Naturally, those investors are having much more success having their offers accepted.

What are you seeing when it comes to cash sales and homes? Post below or drop us a line and share an insight.

Residential real estate malaise ... with numbers

Posted at 12:10 PM on July 20, 2010 by Paul Tosto
Filed under: Housing & mortgages

MinnEcon readers know we've been hearing from Realtors and others connected to the local housing market that we are in a summer of discontent.

Ordinarily upbeat folks who make their livings in real estate and mortgages started feeling the effects of a "hangover" from the end of the federal home buying tax credits.

New data the Minneapolis Area Association of Realtors are confirming those down feelings with numbers.

From the Minneapolis Realtors' July Housing Outlook:

The inventory of active single-family (detached) homes is now 19,722, up 8.4 percent from a year ago, and the number of pending sales over the last twelve months has declined by 0.7 percent.

As a result, this segment is the only property type showing an increase in Months
Supply from a year ago.

Since the expiration of the tax credit, home sales have particularly slowed in the
lower price ranges--a segment that up until recently had been showing very
strong demand. Home sales under $120,000 (the lowest price range we track)
are down 3.7 percent over the last 12 months. Inventory is up in that price range
by 25.5 percent.

Home builders have been making larger price concessions in recent months to
spur sales. The Price Per Square Foot (PPSF) of new construction homes has
declined by 11.5 percent in the past 12 months, while previously owned homes
have seen their PPSF hold relatively steady.

The Realtors' most recent weekly analysis shows the drop off that began in May after the home buying credits ended.

For the week ending July 10, the number of pending sales held steady with the week before but remained well behind last year's pace. The 545 signed agreements during the week represent a drop of 45.9 percent from last year at this time.

That's the tenth consecutive week of year-over-year declines in buyer demand, a period that coincides with the loss of the federal tax credit for first-time home buyers...The July Supply-Demand Ratio of 7.44 means that there are 7.44 houses for each buyer this month, up 46.9 percent from the mark of 5.06 seen a year ago.

The market will improve. The problem is this is supposed to be the big home buying and selling season in Minnesota.

MPR Reporter Annie Baxter a couple weeks ago reported on the plunge in pending Twin Cities real estate sales.

Here and nationally, even record low interest rates can't attract potential home buyers.

Of course, to buy a new home for the first time or to upgrade your home, you need income, which for most of us comes from a job. And we are not growing jobs yet consistently in this recovery.

Seems like ancient history. But it was only December when the Minneapolis Realtors talked about the market being on "recovery road."

I'd love to hear from MinnEcon readers about which mile marker we're at on recovery road.

Post something below or drop us a line directly.

Your housing. What happened? Good responses.

Posted at 12:49 PM on July 12, 2010 by Paul Tosto
Filed under: Housing & mortgages

We challenged readers a couple weeks ago to sum up in six words what's happened to their housing during the recession.

We're getting some good responses. I wanted to highlight a couple today and give you another chance to weigh in. I'm also going to tell you my six word story.

First, though, from our readers.

Reluctant landord breathing underwater avoiding foreclosure.

That's how Matt Johnsrud of Duluth described his experience. "I bought in 2005, moved jobs to a different city, and haven't been able to sell for the incredible hit I would take. The remedy so far has been leasing to tenants, which I would rather not do," he sad. "Landlording is stressful, even more so when you are over 200 miles from the property."

Cheryl Polipnick posted that in her Twin Cities neighborhood, "I have three homes in a one block radius of my home that are in foreclosure and been sitting vacant for up to a year. Within 500 feet of my home there have been three homes that have been built within the last three months that range between $200k and $300k. What is wrong with this picture?"

Her six words: "Stop building......buy what is built!"

Here are the six words that sum up my experience:
Bought small in '98, equity survives

My wife and I came back to Minnesota and The Cities in 1998 when the market was hot and getting hotter. There were lots of houses at the high end of what we could afford.

But we were coming from a situation in another state where we'd bought too much house relative to our incomes. We decided we weren't going to do that again and focused instead on lower cost housing near work. We were able to build equity faster and stay well above water in the Great Recession.

Many Minnesotans haven't been as lucky. The research group CoreLogic reports17 percent of Minnesota mortgage holders owe more than their homes are worth. That's better than the national average of one in four mortgages underwater.

Incredibly, Nevada leads the country with 70% of mortgages underwater.

We're no geniuses. But even in 1998 it wasn't hard to figure that a steep climb in housing prices would deliver a steep drop at some point. We were also helped by my in-laws, who let us live with them for months until we found the right house.

So tell us what you've seen or experienced when it comes to housing and mortgages. But make it short!

If you're renting your home, no doubt you've been affected in some way, too. Please tell us.

We'll publish your stories in future posts.

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NOTE: Our efforts were inspired by SMITH Magazine's ongoing Six-Word Memoir project.

Your housing. What happened? Six words.

Posted at 12:15 PM on July 2, 2010 by Paul Tosto (2 Comments)
Filed under: Housing & mortgages

Malaise is a word we don't use lightly. But we threw it out there a couple weeks ago after hearing from normally upbeat real estate sources in our Public Insight Network who are having a hard time staying positive.

With the worries of real estate professionals and the concerns that a next wave of mortgage problems is approaching, we wanted to step back and let you tell us what's happened to your housing or mortgage in the recession.

But you have to be brief. Six words.

We've challenged readers before to tell us stuff in six words. You've produced some telling, creative responses. Check out what Minnesotans told us when we asked: Your career. What happened? Six words.

Now help us all understand the impact on housing and mortgages.

For those who've been able to keep their heads above water with their homes and jobs, this is a great time -- mortgage rates are their lowest in decades, making it really attractive to buy or refinance.

Of course, if you've lost your job, the low rates won't help. You likely won't be able to refinance and you'll have a hard time hanging on to what you've got. Minnesota foreclosure rates outpaced the nation in May.

So tell us what you've seen or experienced when it comes to housing and mortgages. But make it short!

If you're renting your home, no doubt you've been affected in some way, too. Please tell us.

Post something below or use our handy form.

Like we did with Your Career. What happened? Six words., we'll share your housing experiences and stories.

NOTE: Our efforts were inspired by SMITH Magazine's ongoing Six-Word Memoir project.

A residential real estate malaise?

Posted at 11:46 AM on June 22, 2010 by Paul Tosto
Filed under: Housing & mortgages

We pretty much knew it was coming. Home sales were bound to take a dive after the federal home buying tax credits ended in April.

But maybe we didn't realize the extent of the hangover until my colleague Molly Bloom checked in recently with real estate pros in MPR's Public Insight Network.

Many of the responses she got back show a deep frustration right now among typically upbeat people whose livings are tied to residential real estate.

No one used the word malaise (yes, I'm old enough to remember Jimmy Carter's "malaise" speech) but that's what it feels like.

"The next big story is that foreclosures are creeping up and that this isn't over," said Teresa Boardman, a St. Paul Realtor who writes the St. Paul Real Estate blog.

"The rest of this year is going to be very slow. Prices may tick down again.... Buyers have more choices but already the absorption rates are going up. The numbers are what I would expect to see in the fall, not during the height of the buying season."

"Values are still dropping. Look at your assessed value and reduce it by 10 - 20 percent and you will be close to sale price," said Jake Ehlers, a real estate broker from Plymouth, "There will be more foreclosures until we can get decent jobs, not $8 per hour jobs."

Click on the map icons below to see what others told us about the housing market around them. If we get more responses we'll post more, so please add your voice to the discussion.

Most of the responses we got were from The Cities. But Benjamin Denton, a real estate lawyer in Pipestone told us things were improving around him. The southwest Minnesota economy has stayed pretty resilient during the recession with a jobless rate consistently below the state average.

The market there was hobbled, though, by the feds suspending a popular rural home loan guarantee program.

Young homeowners, Denton said, "could get a home here in Pipestone with no down payment and also no mortgage insurance through that program. It's been a concern whether the funding will come back -- it's been responsible for home sales from young families more than the tax credit."

Twin Cities mortgage broker Carlos Gutierrez said his business was "reasonably active with people refinancing with low rates." All of his clients were on track to close their deals by June 30, the deadline to complete a purchase to still get the tax credit.

Others, though, see financing hassles as an ongoing problem to getting deals done.

"Lenders are so afraid to make loans that Fannie Mae or Freddie Mac might force them to buy back, that they are setting guidelines even the most credit-worthy buyers are having trouble meeting," said Jim Luger, an Edina real estate broker who owns a company with 40 agents.

"In my 37 years of real estate practice, I have never seen so many transaction fall-throughs because of lender underwriting rejections," Luger said. "The credit tourniquet has stopped the flow of money, and gangrene is starting to kill an already sick housing market."

The Minneapolis Area Association of Realtors noted Monday that "pending sales in the Twin Cities housing market trended up for the first time in four weeks," adding:

This may be a sign that the drastic drops in sales seen in May and early June were simply temporary aftershock reactions to the tax-credit build up and that demand will slowly return over the course of the summer, but it's far too early to say that with any certainty.

"We are getting more applications. The difficulty is getting the loans closed," said Bill Dreischmeier, a home loan originator in Andover. "Lending requirements are very strict." The biggest problem, though, is getting a "high enough appraised value to do the loan. Last month I was able to close only one of six loan applications."

UPDATE: The National Association of Realtors today noted that nationally, "approximately 180,000 home buyers who signed a contract in good faith to receive the tax credit may not be able to finalize by the end of June due to delays in the mortgage process, particularly for short sales.

Collectively, our Network sources are showing us the challenge.

It's a complex market that depends on lots of different cogs working together -- people with jobs who want to buy houses, a market that can absorb short sales and foreclosures, a financing system that can expertly measure risk.

None of those cogs are functioning great at this point. Until they do, the housing markets will continue to stagger.

Melissa Melnick , a Realtor from St. Louis Park, came up with one novel solution.

"People don't really acknowledge this, but I believe immigration reform and housing are tied together. If there is a reform, imagine all of the people who would then be able to purchase a home."

I talk to undocumented immigrants quite often who would love to purchase a home but they can't get a loan. Many of them are doubling and tripling up. If there are supposed to be around 12 million undocumented immigrants, even a fraction of those people who would purchase would help the market.

6/28 UPDATE: Here's a new MPR story on why some home buyer tax credit deals won't get done by the Wednesday deadline.

Minnesota housing: Still a long way from normal

Posted at 12:00 PM on June 14, 2010 by Paul Tosto
Filed under: Housing & mortgages

MinnEcon readers know we've been concerned about the next wave of foreclosure problems in Minnesota and their potential effect on any housing recovery.

A new report today from the Minnesota Housing Partnership shows why there's reason to be concerned. It also offers a little hope.

The operative graphs from the partnership show more than 6,700 foreclosures in the first three months of 2010 -- the highest since mid-2008 -- along with a rising number of pre-foreclosure notices.

On the upside, the percentage of delinquencies on first mortgages slipped to 7.7 percent, the first time since the mortgage crisis hit that delinquencies didn't rise, the group said.

Renters are also doing better keeping up with the rent (click on graphic for a larger view).

We'll be seeing these kinds of good news / bad news reports in coming months. The bottom line is things are still tough in housing. That won't be changing any time soon.

The local market's swooning now, trying to regain its footing following the the end of the federal home buying credits.

There are some positive signs looking forward.

But as Chris Farrell, MPR's chief economics correspondent, noted a few weeks ago as he examined national housing data, it's still a story of a "market reaching bottom than of a market heading up. It's going to take a long time for housing to come back after the debacle of recent years."

Farrell talked about local housing concerns this morning on MPR's Morning Edition. Click on the play button to listen.

As always, we're interested in your insights and experiences with Minnesota housing. Post some thoughts below or contact us directly and tell us what you're seeing.

BONUS: Here's the MPR News story on the report.

With tax credit gone, how long will home sales hangover last?

Posted at 12:00 PM on June 10, 2010 by Paul Tosto
Filed under: Housing & mortgages, Twin Cities metro

Local real estate market watchers expected home sales to drop off after the federal home buying tax credits expired at the end of April.

But maybe they didn't expect this kind of drop.

(Source: Minneapolis Area Association of Realtors)

The newest data from the Minneapolis Area Association of Realtors shows a roller coaster dive in sales since the credits -- $8,000 for new home buyers and and $6,500 for repeat home buyers -- ended.

The thick red line shows a steep rise to the end of April as buyers rushed to grab the credits and then the drop afterward.

The credits, part of the massive federal stimulus package, helped keep the residential real estate market alive during the housing crisis. There was a lot of breath holding as folks waited for the fallout once the credits ended.

By mid-May, the Minneapolis Realtors declared, "We are pleased to announce that the tax credit deadline has officially passed and the world did not end!"

The group did project a slow summer selling season, noting that many would-be summer buyers got in earlier to get the credits. Still, this is prime home buying season.

So what happens next? The sales market has tanked temporarily. How long does that go before folks start to really get concerned?

We turned to Aaron Dickinson, a Realtor and source in MPR's Public Insight Network. He wrote on the issue recently in his data-driven blog on the Twin Cities market.

"If year over year (pending home sales) don't really start to close the gap by the end of June I'm going to start getting nervous," Dickinson said.

"From a basic search I ran the numbers for next week should be up. So that's a step in the right direction. But the same week last year was our best week last year and we're still going to be down from that substantially."

Searching for comparisons, Dickinson looked at auto sales after the "Cash for Clunkers" car buying credits expired.

Here's a chart by the Federal Reserve Bank of St. Louis showing U.S. auto sales. That spike coming out of the gray area is the sales boost provided by "cash for clunkers." The business then swooned before showing some signs of recovery.

The cash for clunkers experience "suggests a month or two hangover is very likely, though this (housing) stimulus was going for so long that the hangover could be longer too," Dickinson said.

"Come July or early August we'll have a better feel for what the second half of the year will look like" with Twin Cities home sales, he added. "Up until then there's just too much influence from the tax credit expiration to draw any good conclusions."

Looking at the auto sales chart above, there may be one other lesson for the local housing market: Recovery is coming but it'll be a long climb back to the days before the recession.

Bonus: Brad Fisher, President of the Minneapolis Realtors group, tells MPR News the drop doesn't bode well for home prices. "We expected to see a decline. We are just uncertain now to see how long it's going to take for the consumer to realize they still have great interest rates, they still have great values out there."

Double Bonus Chris Farrell, MPR's excellent economics correspondent, posted a "good riddance" to the tax credits the day they expired, arguing, "The market shift to lower values would have been much quicker and fairer without the credit. The best policy in this case is let the market work."

*********************************************
Got insights into the housing market in the Twin Cities or greater Minnesota? Post below or contact us directly at MinnEcon.

Commercial real estate concerns: Two more views

Posted at 11:00 AM on June 3, 2010 by Paul Tosto
Filed under: Greater Minnesota, Housing & mortgages, Twin Cities metro

We raised the issue a few days ago about the problems some are seeing in the Twin Cities commercial real estate markets -- specifically concerns about financing and a coming foreclosure wave.

We reached out to more than a dozen experts from MPR's Public Insight Network for perspective and got some great feedback, including two more views we thought were important to highlight in a second post.

"My clients are experiencing more difficulty getting their properties to appraise at a level sufficient to refinance existing principal mortgage balances," said Brent Holmes, owner / broker with the Twin Cities firm Holmes | Tongen Investment Real Estate Sales.

"As a result, my clients are more frequently having to bring additional cash (aka equity) to close a refinance of their properties. "

The same is true on acquisitions; in many cases purchasing power has declined - in some recent examples it takes 3 times the equity to make the same acquisition as it did 2 to 3 years ago.

Owners / investors are experiencing an erosion in their balance sheets, which makes it much more difficult to borrow dollars. Operating lines of credit have been eliminated or much diminished even for very strong clients.

All this leads to a cash crunch and higher risk of problems coinciding with the maturity of debt. There is an inability to sell and an inability to refinance -- yuck!

There are owners with strong equity in their properties, he adds. "Most owners that I am in touch with are finding there way through, but it remains a difficult uncomfortable time."

Tarry Edington typically deals with residential housing in Grand Rapids with teh Itasca County Housing and Redevelopment Authority

But the housing development specialist was willing to share his commercial real estate observations on the town he's lived in for 20 years. He says he's never seen so much commercial real estate for sale and for lease.

What I see is that which is advertised for sale or lease, most of which is retail and office space. I am certain there is other property, as there always is, that is vacant and available but not openly advertised.

I have seen some of the advertised property vacant for well over a year. And, it appears there are additional properties coming into the market regularly. In addition to the vacant properties, I observe an increased number of small businesses for sale. It is my conclusion that the vacant commercial real estate and the businesses for sale are a reflection of the general economic conditions.

While the Grand Rapids community remains vibrant it is obvious there is a retraction in the level of economic activity... Some of the "strip mall" and "reuse/conversion" properties have never been occupied because they were just coming to market when the recession and meltdown events occurred.

Minnesota Public Radio's Dan Olson gave us an in-depth look last year at the commercial real estate market in the Twin Cities and the potential for a foreclosure storm. The basic problem then -- making payments and refinancing -- haven't gone away.

"Those issues are largely hidden from public observation," Edington added. "In large part, the resolution of those issues will be dependent upon equity, cash flow, property valuation and lender forbearance. We will all get to observe as it plays out in the days ahead."

UPDATE: A new University of St. Thomas survey shows "light at the end of the tunnel for commercial real estate in the Twin Cities market," signs of recovery over the next two years. We'll interview the St. Thomas prof who oversees the survey and post later.
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Think these concerns about commercial real estate are on point or out of line? Post your insights below or contact us directly.

A tax bill for giving up your home?

Posted at 12:00 PM on June 8, 2010 by Paul Tosto
Filed under: Housing & mortgages

I've written a lot about foreclosures, short sales and other problems connected with the housing crisis and people losing their homes. But I didn't realize until recently that a homeowner can end up owing the feds taxes on debts that are forgiven.

I came across a warning about that while researching some stuff around the issue of deed-in-lieu-of-foreclosure, where homeowners basically agree to throw the keys to the lender in exchange for the lender forgiving the remaining mortgage debt on the home.

But just because the debt is off you doesn't necessarily mean you're off the hook.

I admit I have a lot more questions than answers at this point. Let's try to pool our experiences and smarts and learn more together.

If you've had experience dealing with the tax issues around homes and debt forgiveness, please post below or contact me directly.

I haven't seen a ton written on this issue and would like to get homeowners tax people and others with first-person insights to share their perspective.

Tell us what you know and I'll write about it in a future post.

Here's what I do know: With housing prices falling and the economy sliding toward recession, Congress passed the Mortgage Debt Relief Act of 2007, which generally excludes the mortgage debt you've walked away from as taxable income in a restructuring, short sale or similar situation.

But there are limits. It's only good on your principal residence, not on the debt for a vacation home. You can only use it for debt forgiven between 2007 and 2012. And you still have to report the forgiveness to the IRS.

I haven't found any reporting or analysis on how this is working or who's using it. But I'm interested.

Here are some other key sites where I've found information.

>The Mortgage Forgiveness Debt Relief Act and Debt Cancellation
>Good, practical web explainer on the law.
>IRS info on debt cancellation and taxes.

Any thoughts? Let me know.

Foreclosures in better shape?

Posted at 10:00 AM on May 25, 2010 by Paul Tosto
Filed under: Housing & mortgages

Foreclosures are still a drag on the Twin Cities housing market and new data suggest we'll be seeing the foreclosure tide rising again.

But there are a few differences between now and when the crisis began that may ease the next round of foreclosure pain.

MPR's Jess Mador reported this morning on the aggressive efforts by Anoka County to reclaim foreclosures to get them back on the market and stabilize hard hit communities.

We've heard from local Realtors who believe the Twin Cities market should be able to better absorb the houses that come on the market in the next foreclosure bump -- and that the physical condition of foreclosed homes coming on the market has improved, making them easier to sell.

"A few years ago every house we got was abandoned. I think more people are staying in their homes now and trying to see what (options) are available to them," said Barry Tanner, an Edina Realty agent who specializes in foreclosures.

The early days of the foreclosure crisis created a spate of vacant houses that led to thefts of copper piping and other crimes. In some neighborhoods, Tanner said, you'd see aluminum siding torn off the house as high up as thieves could reach without a ladder.

"We had a lot of homes in the more urban parts of Minneapolis or St. Paul that we got back that were just completely boarded, condemned."

It's harder to sell a condemned house. "You're probably not going to get a standard loan on it" so it likely needs to be sold to an investor rather than a potential homeowner. The house needs to be brought up to code before anyone can live there.

Tanner also sees fewer of those situations now as people who have lost their homes are staying in the home through the foreclosure and sheriff's sale process. Lenders are also paying for new carpet, paint and other improvements before the house is put on the market, he added.

Finally, the use of "cash for keys" -- getting an ex-homeowner out quickly and neatly by paying them a couple thousand bucks to leave the house "broom clean" on the way out -- is also helping keep the foreclosed homes in better condition.

(Mador filed an in-depth piece for MPR last week on "cash for keys.")

We don't know yet how much the changes in the condition of foreclosed homes will help the market in the coming months. Can't hurt.

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Got a different view or better data on the condition of foreclosed homes in the Twin Cities? See something we're missing?

Post below or contact us directly.

Too good to be true II

Posted at 12:00 PM on May 19, 2010 by Paul Tosto (3 Comments)
Filed under: Housing & mortgages

We recently highlighted a wickedly creative scam attempt in the Twin Cities rental housing market.

It didn't take long for folks to start sharing similar stories.

Happily, no one has told us they were taken. But we're still vexed over these scams and what to do about them. Read on and if you have some answers beyond "buyer beware," please drop us a line.

This particular scam involves Craigslist, a suspect leasing agent and a housing deal too good to be true.

"I ran into this exact same situation just two days ago," said Adam Hayes. "My initial questions were not answered in my email, and the 'leasing agent' wanted to run a credit check before I would get to see the place."

Hayes, an English teacher, has been looking to rent a house in Minneapolis. He told us he'd seen a Craigslist ad for what appeared to be the perfect find: a two-bedroom house with hardwood floors and a fenced-in backyard for $500 a month.

He emailed a brief inquiry to the "agent" and got an extended response that made it sound even better: water, trash and lawn care all paid for by the leasing company.

He was directed to a link called ctgreport.com to complete a "free credit report... as soon as you can." (The link is broken but beware anyway.)

The home's address wasn't listed. The "agent" wrote that he had to stop publishing the exact address for fear of vandals but he would happily send it once Hayes replied. The "agent" even said he'd lived in the house for two years and called it "very cozy."

Hayes told us he saw several red flags.

First off, the respondent failed to answer my question, instead giving me a mountain of unbidden information. Second, his conditions are totally foreign to me, especially as I have rented in the Twin Cities for four years, seven different apartments.

Third, the link he gave me - which no longer works - redirected my browser three times before bringing me to a legitimate-looking credit report website.

I am not an IT sort of person - I am an English teacher - but I do know that websites can be made to look authentic in phishing scams, and this is usually achieved via multiple redirections of the browser.

Given my suspicion, I had no intention of filling out this credit report.

Hayes says he hasn't heard back. "The link included on their only reply no longer works and the ad has been removed from Craigslist. This all happened over the span of a couple days."

Aaron Dickinson, a Realtor who writes a detailed blog about the Twin Cities market, says he's heard similar stories from other agents about this kind of scam attempt and that it's been going on for at least a year.

"Just like anything else on Craigslist," said Dickinson, a source in MPR's Public Insight Network, "if you can't meet the person face to face then you might not want to do business with them."

One of the problems here is that it's not clear who to complain to (beyond Craigslist) or what crime is being committed.

"Because the scammer used a free email service, what I assume to be a fake name, and Craigslist, I assume there is nothing to be done legally speaking as the scammer is seemingly untraceable. Additionally, as far as I know, no crime technically happened as I did not take the bait."

Says Dickinson: "The absolute best thing would be for the consumer to notify the owner/responsible party for the property, though that can be difficult in many cases with vacant homes."

The best we could find at this point was information from the Minnesota attorney general's office on phishing scams.

If anyone else has seen this kind of scam attempt -- or if you can share a thought about how to stop it -- please let us know.

Too good to be true? The latest real estate scam

Posted at 11:21 AM on May 14, 2010 by Paul Tosto (6 Comments)
Filed under: Housing & mortgages

Michael Wherland saw the Craigslist ad -- $700 for a suburban house rental -- and knew it was too good to be true. Why? He was the Realtor trying to sell that house.

Someone he didn't know was pretending to be a lease agent on the same property.

As real estate scams go, "this is a new twist," said Wherland. Just a very strange and odd new twist."

It took me a couple times to get my head around what happened. When I finally got it, I realized it was a pretty good story -- not just one about potentially losing money but also your identity.

Wherland wanted to get the word out because, "it can't just be happening in Minnesota."

His odyssey began when someone drove by the property and saw the for sale sign in the front yard with Wherland's contact information. They called Wherland to say they'd seen the same house for rent on Craigslist.

The owner (an investor) was trying to lease the house as well, so Wherland wasn't surprised -- until he heard it was on Craigslist for $700 a month, far below the market value.

He found the Craigslist ad with an email address contact. The ad was using the name of the legitimate leasing agent -- but not her real email. The scammer had created a separate Yahoo account with the leasing agent's name.

Wherland responded to the bogus email. He got back a story that they were the owners of the house and were trying to rent it because they were moving to west Africa for five years.

He asked for more information about them but they wouldn't budge.

"I couldn't get too far," he said. "They wanted to know my information and wouldn't give me their information no matter how much I asked."

Wherland was also surprised by the nature of the bogus emailer's questions seeking personal information. He thinks the scammer wasn't just interested in grabbing a few hundreds bucks but also wanted data that could be used to lift his identity.

The phony ad was off Craigslist for awhile but Wherland says it reappeared a few times. (The real leasing agent didn't respond to my inquiry.)

As far as Wherland knows, no one has lost money, "but people get embarrassed or scared of what they did, so who knows?"

More worrisome to him is how easy a scammer could lift someone's name off an ad and pretend to be them via email. "I don't think there's anything you can do except buyer beware..."

Note: We learned about this story first from a Tweet by Mike's mother Virginia and then from his sister, Carrie Newhouse, a source in MPR's Public Insight Network.

Economic Lookout: Entrepreneur in a recession

Posted at 12:00 PM on May 10, 2010 by Paul Tosto
Filed under: Economic Lookouts, Housing & mortgages

MinnEcon note: JP Rennquist gave us a great look recently at the challenges of being jobless in Duluth and the hope for better days. Today, he gives us a view on trying to start a nonprofit in a lousy economy.

As we've written, there's nothing like a recession to get you thinking about being your own boss. Rennquist shows us why it might not be that easy.

Interested in being an Economic Lookout? Contact us directly at MinnEcon.

Economic Lookout
JP Rennquist | Duluth

I am looking for work. But as someone with an entrepreneurial spirit, I'm also looking to create my own job.

I had worked for many years as a parent educator for dads and I have a wealth of experience, training and connections in that field. So I decided to explore creating a nonprofit called Father Fire, an education program for dads in NE Minnesota and NW Wisconsin.

I assembled an advisory board, we applied for a grant and got it. Father Fire received a demonstration grant from the Lake Superior Initiative.

I think our organization can grow and develop into an actual job for me that pays a living income and allows me to use my skills to help strengthen families in our region.

But we're definitely not there yet.

Unfortunately, the grant has no funds for actual programming, or even to pay me a small honorarium for my work. So as I have been looking for work, applying for jobs, networking and all of the traditional and not-so-traditional job search activity, I have also been volunteering about 20 hours a week to help build up this new organization.

Survival is a real problem for nonprofits right now. Changes to tax exempt laws, government funding shortfalls and other financial pressures along with a greatly increased need for services could force many nonprofits completely out of business.

The nonprofits most likely to survive are the nimble organizations, that are able to target services accurately and make changes in strategy quickly and smoothly in response to the needs of constituents and demonstrate effectiveness to donors, foundations and other financial contributors those are the groups most likely to survive.

In the "new normal" for nonprofits, small, single purpose organizations like the one I am creating are going to be eclipsed by larger more stable organizations.

My organization is being urged to consider working with a partner, or becoming part of another organization. We aren't able to access any funds from our demonstration grant until we either incorporate as our own 501c3 organization, or enter into a contract with an existing non-profit as our fiscal agent.

The Catch-22 for a start up is deciding if we want to find a solid, stable nonprofit organization to sponsor our organization or stay small and focused.

On our own we are independent, nimble and adaptable, as part of another organization we can be strong, stable, and more secure in rough waters. This is a tough choice.

At a recent workshop, Reid Zimmerman, a nonprofit trainer, got to the heart of the dilemma. "Nonprofit," he said, "is an IRS Tax Status, NOT, a management technique!"

JP Rennquist describes himself as "pretty broke" but with a million-dollar view of Lake Superior from his modest home in Duluth's Central Hillside neighborhood.

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Foreclosure tide rising again across Minnesota

Posted at 12:00 PM on May 4, 2010 by Paul Tosto
Filed under: Greater Minnesota, Housing & mortgages, Twin Cities metro

Like a pummeled prize fighter, Minnesota housing markets continue to rise but stagger.

Positive signs -- supply and demand of homes for sale is stabilizing in the metro area -- continue to be met by data showing more problems on the way.

The latest troubling numbers come from HousingLink, a Twin Cities housing and research group that found big percentage increases in foreclosures in the Twin Cities suburbs and exurbs in the first quarter of 2010 vs. 2009.

CORRECTION: HousingLink corrected several numbers this afternoon. A double-counting issue by Dakota County led to numbers being overstated in the HousingLink report. That threw off the overall numbers. Dakota County showed 545 foreclosures in the first quarter of 2010, a 36 percent increase over the same time in 2009.

I've corrected the data below and updated the charts.

Overall, the HousingLink data showed nearly 7,000 6,716 Minnesota foreclosures in the first three months of 2010 -- up 31 28 percent over the same period last year.

"I think we're seeing somewhat of a realization of a foreclosure crisis that has gone from being more of a metro and urban phenomenon (lending/borrowing practices) to one that hits more broadly across all geographies as a result of unemployment," said Dan Hylton, research manager with HousingLink.

The Minnesota Home Ownership Center notes that pre-foreclosure notices are up nearly 20 percent between the first quarter of 2010 and 2009.

"I do believe that we are seeing the number of notices trending upward in the suburban and exurban areas," said Ed Nelson with the center, a non-profit group that counsels people in danger of losing their homes.

"All of the suburban counties are trending upward for 2010... and are already ahead of where they were during the same time period last year."

While the numbers are definitely not good news, Realtor Aaron Dickinson notes the market is in much better shape to handle the next wave of mortgage problems than it was in 2008.

"For a year or so there have been stories of more foreclosures coming," Dickinson wrote on his Twin Cities real estate blog.

"While I don't doubt the warning and we're starting to see a tick up in sheriff sales, I do think that given the speed that the banks are going that it will be 2011 before we see much of this expected surge of foreclosure/(real estate owned) inventory on the market."

We wrote a few weeks ago that the next wave of mortgage problems was approaching.

While they won't swamp the market like they did two years ago, the newest wave will continue to push back the day when we can declare the market recovered.

BONUS: Listen to HousingLink's Dan Hylton talk about the numbers with MPR's Tom Crann:

What's the housing market like around you? What story(ies) should we be reporting on when it comes to housing?

Tell us. Post something below or use this form to share a story.

The homebuyer tax credits expire

Posted at 1:25 PM on April 30, 2010 by Chris Farrell (1 Comments)
Filed under: Housing & mortgages

From chief economics correspondent Chris Farrell

The first-time homebuyer and move-up tax credits expire today. (And the purchase has to be completed before July 1). The tax credit was expanded and extended past its original expiration date of November 30, 2009 to April 30th. It's about time.

The first time buyer credit was for up to $8,000 and the move-up credit could go as high as $6,500. The idea behind the credits was to boost sales. However, at best the credits may have helped brake the downward momentum of the housing market--if that.

To be sure, the housing market implosion was the epicenter of the Credit Crunch and Great Recession. The federal government directed enormous resources at the home market. Besides bailing out banks, it nationalized Fannie Mae and Freddie Mac, opened the lending spigot at the Federal Housing Administration, established a mortgage modification program for troubled homeowners, and passed the homebuyer tax credits. The Federal Reserve also embarked on a $1.25 trillion purchase of mortgage-backed securities in an effort to engineer lower mortgage rates. (It has also ended.)

Much of the recent gains in home prices is attributed to buyers making a deal before the credits expired. But those sales--which haven't been exactly sizzling--probably would have happened anyway. The credit's deadline simply moved them forward by a few months or maybe a year.

Worse, the policy was geared toward propping up home prices, which is perverse. Artificially holding prices at above-market levels harms new potential buyers, from young adults starting their own households to immigrants putting down stakes in the American Dream. The subsidies wrongly delayed the inevitable home market price adjustment to excess supply in many markets across the country.

The market shift to lower values would have been much quicker and fairer without the credit. The best policy in this case is let the market work.

Longer-term, the Administration and Congress should start the process of culling the U.S. tax code of the many tax provisions that favor housing. In a modern economy it makes no sense for homes to get preferable tax treatment over stocks and other investments. What's more, Canada doesn't allow for mortgage interest deduction yet its homeownership rate is comparable to the U.S.

At least the tax credits are expiring. I say, good riddance.

Housing credits? Worked, but ...

Posted at 12:00 PM on May 3, 2010 by Paul Tosto
Filed under: Housing & mortgages, Twin Cities metro

Was it worth the money?

It's a question with no easy answer when it comes to the federal home buyer credits.

The credits ($8,000 for first time buyers, $6,500 for repeat buyers) ended on Friday. The Congressional Budget Office expects the taxpayer cost to run about $14 billion.

There's little argument the credits threw a life line to the housing and real estate business and made the buy-now decision easier for many people -- especially younger buyers.

But the bill's coming due.

"My real estate business has been extremely busy for the months of February, March and April," said Jim Dooley, an independent real estate broker in Apple Valley and a source in MPR's Public Insight Network.

"All of the business was directly related to the $8,000 first time home buyer credit, and the $6500 move up buyer credit," said Dooley. "Sellers rushed to get their properties ready and on the market to have time to get a contract by April 30th."

Now, though, he's seeing "a dramatic drop in my business happening after April 30th. The number of potential and actual clients on the horizon is very small. Without more federal stimulus, I can't see where strength in the real estate market will come from."

John Ehlers,a residential broker in Plymouth, felt the same. "Buyers that were going to buy in the next few months bought in the last two months, thereby lessening demand into the future."

The first tax credit deadline (in November) made a huge impact on the first-time home buyer market," said Emma Faris, a Minneapolis Realtor.

I had as many closings in November as I had had during the entire summer (my busiest time).

This time around, with the April's-end deadline, my buyers are not nearly as motivated. It was a bit of a "cry wolf" scenerio.

Some buyers believe it will be extended and the other pool of buyers feel they don't want to "push it" just for the $8,000.

Also, from questioning my buyers about the tax credit-- many felt it was going to be put in a savings account and used in an emergency situation. The real estate community (and perhaps the federal government) thought it would be used as a financial incentive to buy and to increase the value of the home. That was not the case with my buyers.

Aaron Dickinson, a Plymouth Realtor who writes a detailed blog on the Twin Cities real estate market, noted a "huge crush of buyers descending on the lower priced segments of the housing market" the past 45 days.

Several of my buyers have been in 5+ multiple offer situations and even more have found that 1/2 the houses they wanted to see were sold before we even saw them. This surge of demand is most certainly a result of the tax credit.

Many of the Realtors, loan officers and title closers that I've talked to are all expecting (and hoping!) for a little calm in our market in May & June so that we can get caught up and take a second to relax. Just like car dealers saw a little lull to their business after the cash for clunkers, I expect the same in housing.

Big-cost houses -- $500,000 and higher -- will continue to struggle, though, he adds. "Too much inventory, tougher rules on jumbo mortgages, and fewer move-up buyers will all temper demand for the near future."

Overall, though, Dickinson believes as the economy starts to add jobs and consumer confidence rises, "I think we'll see demand for housing take up the slack left by the tax credit, which is what was hoped for all along."

Keep the conversation going. Post something below or contact us directly and tell us your experience with housing or the home buyer credits during the past few months and what the future looks like from your vantage point.

BONUS INFO:

MPR chief economics correspondent Chris Farrell bid "good riddance" to the home buyer credits.

St. John's University economist and MinnEcon contributor Louis Johnston wondered aloud a few weeks ago about the broader costs of the credits.

Minnesota housing: What do you see?

Posted at 1:30 PM on April 28, 2010 by Paul Tosto (2 Comments)
Filed under: Housing & mortgages

We wondered aloud a couple weeks ago what would happen to the state's housing and real estate markets once the federal home buying tax credits went away.

With the credits set to expire on Friday, my colleague Molly Bloom today reached out to mortgage and real estate sources in MPR's Public Insight Network to find out what they're seeing right now.

We need MinnEcon readers to share their perspectives, too.

What will happen when the credits go away? What story(ies) should we be reporting on when it comes to housing? Tell us. Post something below or use this form to share a story.

Molly notes that last time we asked about real estate, homes and mortgage issues we got some great story ideas, including this one about concerns about a possible next wave of foreclosures. It's a concern we also highlighted on MinnEcon.

Last week, MPR chief economics correspondent Chris Farrell looked at national home sales data and concluded that housing remains a story of the market reaching bottom, not the market heading up.

On Tuesday, one of our citizen Economic Lookouts shared a story of housing frustration in Rochester.

You don't have to be a real estate pro to answer. Anything you see and hear about the housing market around you -- or your own experience -- will make us smarter and help shape MPR's reporting.

So drop us a line and tell us what you're seeing.

New home sales, percentages, and charts

Posted at 2:21 PM on April 23, 2010 by Chris Farrell
Filed under: Housing & mortgages

From chief economics correspondent Chris Farrell

The signs that the economy is gaining upward momentum are multiplying. While no one should say that all the danger is past, investors seem to be shedding their worries about a faltering economy or even a double dip recession.

For example, the stock market is up some 79% since its March low of last year. The economy grew at a 5.6% annualized rate in the fourth quarter of 2009. Consumer spending is up 5 months in a row. The U.S. manufacturing sector has expanded for eight straight months. In March the economy added 162,000 jobs--more than it had during any month in the past three years. Even the battered auto market is turning up. Little wonder many Wall Street economists are upping their growth forecasts for 2010.

The March surge in new home sales announced this morning fits in with the story of a stronger economy. Sales of new homes surged 27 percent in March. That was the biggest gain in 47 years.

Impressive, no? Well, not quite. Take a look at this chart.

Fact is, new home sales hit a record low in February. So a 27% bounce off that depressed level isn't as striking as the headlines suggest. I'm not discounting the direction--the numbers are increasingly positive. But looking at the graphic it seems to me it's more a story of a market reaching bottom than of a market heading up. its going to take a long time for housing to come back after the debacle of recent years.

Putting the latest figures in a chart is easy to do if you'd like. One way to do it is to go to the website economagic.com. Click on the series you're interested in. And then you have a set of choices to create a GIF chart, a PDF, and so on. You can play with the dates and percentages, too. It's easy. It's fun. Sometimes a picture is worth several hundred words.

Economic Lookout: Housing frustration in Rochester

Posted at 12:00 PM on April 27, 2010 by Paul Tosto
Filed under: Economic Lookouts, Greater Minnesota, Housing & mortgages

MinnEcon note: Teri Gibbons is a Rochester nurse and a MinnEcon economic lookout, sharing stories about the economy around her. A few weeks ago, she gave us a thumbnail look at Rochester.

Today, she shares a story of being sideswiped by the real estate crisis.

Interested in being an Economic Lookout? Drop us a line.

Economic Lookout
Teri Gibbons | Rochester

It was obvious many houses were being sold for far less than they were worth but even more were being sold for much more than they were worth so the owners could try to catch up financially.

I asked if I could rent with option to buy since I've lived in an unexpected money pit or two over the years. The answer was that it was a final sale or nothing.

To my way of thinking, if a person was due to be foreclosed on, any income that could go to a mortgage payment was better than none whether it was by renting out the property or selling it.

The reason I had to move was because the landlord had failed to make payments and the house had been foreclosed on.

I called the Realtor that was handling the property and the mortgage company that held the lien to the house.

Both agreed to me continuing to live there and keep the property up (improve it, actually!) but the bank said I would have to completely move out for two months and then they would sell it to me.

Sorry, but once I move my furniture it's staying there for a while.

Most of the houses that owners refused to rent out remain vacant almost a year later.

The house I had been renting has fallen into such disrepair it will need to be condemned
or the bank that owns it will have to put thousands of dollars into repair before it will meet any code and be available for sale.

The legal notices in the paper have gone from a few pages of foreclosures and delinquent taxes ( I personally find it painfully humiliating to those that have struggled in good faith but fell on hard times, a further insult) to full sections of the newspaper.

"Experts" may say the market is rebounding but I have to wonder.

Teri Gibbons is a registered nurse in Rochester. She says she's always looking at what's going on around her, trying to be impartial.

Bonus Info: In 2007, nearly one in four homeowners and four of ten renters spent 30 percent or more on housing in Rochester's Olmsted County, according to the Minnesota Housing Partnership.

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Three things I learned this week

Posted at 12:00 PM on April 2, 2010 by Paul Tosto
Filed under: Health care, Housing & mortgages, Jobs & unemployment

1.) The $14 billion in taxpayer money spent funding home buying tax credits may not be worth the cost. Economist Louis Johnston raised questions that I hadn't thought about before, including: Are the credits just an attempt to re-inflate the housing bubble?

If that's the case, the housing value roller coaster ride isn't over yet.

2.) New, well intended plans to help unemployed people modify their mortgages and avoid foreclosure will likely provide little help.

There are sweeteners to boost payoffs to second mortgage holders and that may help get short sales moving.

But Realtor Carrie Newhouse, a source in MPR's Public Insight Network who does a lot of short sale work, told us the efforts are mostly creating "false hopes" for many.

3.) Your health stories. Oh my goodness.

We asked MinnEcon readers and Minnesotans in our Network to sum up their health care and coverage experiences in six words.

Once again, you were honest, creative and compelling. More than 100 people responded and I'll be following up with many of you in coming weeks to see if you'd be willing to talk in greater detail.

Some samples:

Housing or insurance. Can't afford both.

Great insurance. Horrible care. Life outstate.

This one came in this morning. It's more than six words but still gets to the point.
$6,000 deductible. Choose between children. OR Choose between children. What to do?

We're still looking for stories. Share your six words here (OK, it can be a little longer).

Here are my six words: Job questions: Prior conditions covered? Affordably?

What did you learn this week about Minnesota's economy? Post below or contact me directly.

As housing credits end, were they worth the cost?

Posted at 12:00 PM on April 1, 2010 by Paul Tosto (2 Comments)
Filed under: Housing & mortgages

From economist Louis Johnston, St. John's University | College of St. Benedict

The home buyer tax credits ($8,000 for first time buyers, $6,500 for repeat buyers) will expire on April 30. In a Tuesday post , Paul focused on how the end of the credits may affect the housing market.

But did the credits help the economy in general?

Economists love the phrase, "There's no such thing as a free lunch." In a world of scarce resources, we all need to make choices, and every choice we make has benefits and costs.

A good way to make choices is to ask if the extra benefits we earn by making that choice exceed the extra costs.

The credits were a policy choice, and in using some of the government's scarce resources this choice created benefits and costs. Did the benefits exceed the costs?

The Congressional Budget Office estimates the total expense of the credits will be about $14 billion. But that's not the only cost.

Economists consider both the monetary costs and the value of the alternatives to the credits that were not pursued. These opportunity costs, not just the dollars spent, must be compared to the benefits of the program to evaluate its effectiveness.

What could the federal government have done with $14 billion instead of enacting the credits?

There are many possibilities. For example, it could have use those resources to:

• Help existing homeowners who are having trouble paying their mortgages rather than subsidizing new homeowners;
• Enact across-the-board tax cuts rather than awarding tax credits only to home buyers;
• Pass along additional funds to state governments to help with their budget problems;
• Reduce the federal budget deficit.

When we add together the $14 billion dollar monetary costs of the credits to the value of any one of these alternatives, the case for the credits looks much shakier than when only the benefits are considered.

It is possible that the when all is said and done the home buyer credits will pass this cost-benefit test. Advocates say the credits have increased home demand and stabilized the housing market, benefiting building supply companies, construction equipment makers, title companies, and other firms and driving overall economic activity higher than it would been been otherwise.

However, there is one final, nagging question about the credits: Were they just an attempt to re-inflate the housing bubble?

If so, we have already seen the costs of this type of policy. I would add these costs in as well, which makes it even less likely that the home buyer credits were a good deal for the economy as a whole.

Johnston teaches economics at St. John's University and the College of St. Benedict and is a regular voice on MPR News.

Will the new mortgage relief help?

Posted at 12:00 PM on March 31, 2010 by Paul Tosto
Filed under: Housing & mortgages, Twin Cities metro

Carrie Newhouse shared some great perspective recently on the short sale mess in the Twin Cities housing market. So when the feds unveiled new mortgage relief with sweeteners for short sales and second lien holders, we asked Newhouse, a source in MPR's Public Insight Network, to take a deeper look.

Her read on the newest plan: Might help some, but it's "false hope" for many.

The newest changes to the Home Affordable Modification Program (HAMP) should cut some temporary slack to unemployed homeowners in the hardest situations and encourage some mortgage write-downs.

The private sector and the feds would share the costs.

Maybe the most intriguing idea: boosting payoffs to second mortgage holders to get short sales moving. That's been a growing concern in The Cities.

In short sales, the homeowner owes more on the house than he'll get from the sale. The bank, which likely ends up losing money on the deal, must sign off. That creates a tough situation with lenders wanting to protect their financial interests and Realtors, sellers and potential buyers frustrated by an approval process that can drag on for months.

It's hard enough doing the deals with one mortgage holder -- even more complicated when there are other lenders with a financial claim to the house.

Boosting the payoffs may make short sales more attractive to the mortgage companies, said Newhouse a Twin Cities Realtor who writes the Helping People out of Foreclosure blog and has a lot of experience working with short sales.

Homeowners, she added, may also benefit from doubling the relocation stipend for those who are able to sell their troubled home without going into foreclosure.

But while she sees some potential upside in those efforts, Newhouse's practical nature tells her not to expect much.

"My experience is that these have been guidelines only," she said of the past efforts to help homeowners. "There are no real teeth."

Prior changes to the mortgage relief program were also intended to speed up troubled loan clean up but didn't make a big difference, she added.

"What makes these revisions different? All of the mortgage help programs have been false hope for so many and help for so few. I believe these changes will be no exception."

Take a look at the plan and let me know if you think it will help or if you agree or disagree with Newhouse's take.

Post below or contact me directly.

I gave a heads-up to one struggling homeowner in our Network who might benefit and I'm hoping to share her story if she pursues the new aid.

"The majority of the people I see in trouble are there because of job loss/ change, medical problems or divorce," Newhouse added.

"And by not assisting short sales for every willing seller that doesn't qualify for a modification is just asking for longer-term problems than we have now. And we have long term problems already!"

BONUS INFO: The Minnesota Home Ownership Center today posted a fact sheet and other info on buying a short sale home.

The housing tax credit: the end is near

Posted at 10:00 AM on March 30, 2010 by Paul Tosto
Filed under: Housing & mortgages, Twin Cities metro

The $8,000 new home buyer tax credit and $6,500 credit for repeat home buyers has helped keep the residential real estate market alive during the housing crisis.

But that life line is nearly at an end.

The credits are good on purchases made by April 30. In some cases, it works to have a binding contract in place by the end of April if the purchase is completed by the end of June. But the bottom line is we're nearly 30 days away from the end.

The credits and historically low interest rates have eased an otherwise miserable housing market the past year.

"When we lose those market boosters, what will happen," the research director for the Minneapolis Area Association of Realtors asked last month..

His answer? "Expect a second (smaller) dip in sales and prices."

That's what Realtors in MPR's Public Insight Network have been telling us the past few weeks. Assuming the credits aren't extended, the April 30 deadline will deliver a burst of buying in the next 30 days. What happens after that?

There are some positive signs. But this market and others will continue to struggle for years with people trying to sell homes that are worth less than they owe on the mortgage. That short sale mess could keep a damper on home values for years.

We know that. What we don't know is how much the federal credits have been propping up the home buying market the past year. We'll find out pretty soon.

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Tell us what you think will happen to the Twin Cities housing market when the credits are done. Post something below or contact me directly.

Click on the map icons below to read what Minnesotans in our Network have been saying about the housing market around them. Then share your story.

Three things I learned this week

Posted at 11:12 AM on March 26, 2010 by Paul Tosto
Filed under: Housing & mortgages, Jobs & unemployment, Saving & spending

1.) That second wave of mortgage and foreclosures we've been worried about for months is close to hitting.

We're through the worst of the mortgage crisis. But that doesn't mean we're done. "Exhibit A" may be this map from Minnesota Housing Finance Agency illustrating non-prime adjustable rate mortgages still to reset:

Thanks to the Minnesota Home Ownership Center for pointing it out to us.

We're particularly interested in those dark blotches in Crow Wing and Cass counties. We're planning a deeper look at what that's about.

Are those the really nice lake homes built when the economy was great and may be in danger of foreclosure when the loan resets and the monthly payments are recast?

If you know something about housing and home loans in that region, tell us what you're seeing.

2.) We really need to pay attention to the talks on a new nurses contract.

It's really flying under the radar at this point, but the formal negotiations have begun on a new contract between 12,000 nurses and six hospital systems in the Twin Cities. The current deal ends May 31.

I can't imagine a nurses strike given the lousy economy and the flux in the nation's health care system. But it worries me.

The Minnesota Nurses Association notes: "The last time there was a large-scale RN strike in Minnesota was summer 1984, when 6,000 nurses walked off the job for 35 days. It remains the largest RN strike in U.S. history."

So that strike happened about a year and a half after the early '80s recession bottomed out in November 1982.

Experts tell us the economy has already bottomed out in the recession and while we don't have an exact date, the economic timing of the '84 strike and a potential 2010 strike is eerily similar.

One source in MPR's Public Insight Network pointed out to me earlier this week that we may see a generation gap form in the current talks between older nurses who see pension benefits as a huge contract issue and younger nurses who don't believe they'll ever see much of a pension anyway and won't strike over it.

If you have any thoughts on this or just want to talk about the nurse contract talks generally, drop me a line.

3.) Six word recession? Grace under pressure.

More than 200 of you shared your recession experiences in (mostly) six words. And they were great. Thank you.

I'll be reaching out to many of you in the coming weeks to see if you'll share a bit more of your story. That's what MinnEcon's all about.

If you haven't sent in your story, take 2 minutes and sum up your recession.

The next mortgage mess approaches

Posted at 4:13 PM on March 24, 2010 by Paul Tosto (1 Comments)
Filed under: Housing & mortgages

We've worried for months now about the next wave of mortgage problems. People who watch this stuff closely say it's approaching.

While it won't be as bad as the wave of delinquencies and foreclosures that crippled home values the past two years, it will still hurt. There's some evidence it may land particularly hard on parts of central Minnesota and some of the Twin Cities far suburbs.

There are a few things going on.

Sources in MPR's Public Insight Network have told us the market's been in a foreclosure lull as lenders hold off on moving against borrowers in default because of the requirements the Obama administration has put on them to try to work things out with the homeowners. That won't last.

There's also a concern that the last chunk of adjustable rate mortgages made while economic times were good and home values were still rising, are about to cause trouble.

These would be ARMs built to reset their interest rates and recast their monthly payments after five years. Think of it as the "deals" from 2005 coming back to haunt in 2010.

Ed Nelson, a source in our Network with the Minnesota Home Ownership Center told us last summer that we hadn't seen all the foreclosures that will be caused by the Alt-A recasts and the remaining Prime/Alt-A resets that will still happen."

Alt-A mortgages are loans riskier than the highest-quality loans but less risky than sub-prime. "Reset" involves an interest rate change; "recast" is a change in the payment schedule.

Nelson was concerned particularly about interest-only or "pick a payment" loans that would generate a bigger monthly bill for the mortgage holder when the loan reset. Combine that with the jump in unemployment since 2005 and it's a good bet many of those mortgage holders won't be able to make the payments after the recast.

Last week, Nelson posted that the next wave is "rapidly approaching" and cited some eye opening research from the Minnesota Housing Finance Agency, including this map of non-prime adjustable rate mortgages still to reset:

Click on the map for a larger view.

It's fascinating because it shows the potential problems concentrated in some of the farthest reaches of the Twin Cities suburbs and in central Minnesota where lots of larger, expensive homes were built earlier in the decade.

Who are they? My guess is they are homeowners who bought more house than they could afford using an ARM in the far suburbs of the Twin Cities or the lake areas of central Minnesota. We obviously don't know how many of those will turn into defaults but if they now owe more than their homes are worth or if they've lost their jobs, the reset will bite hard.

Jeff Crump, associate professor of housing studies at the University of Minnesota sees high foreclosure rates continuing and agrees the next potential hit may show up in the suburbs.

He cites job loss in the recession, continuing home price declines and "high percentages of Alt-A and other prime products especially in the suburbs. The default rate on these loans is relatively high."

Crump talked about foreclosure this afternoon on MPR's All Things Considered. Click the play button to listen:

Here's a chart from the Federal Reserve Bank of New York's credit conditions site showing the share of Alt-A loans with a late payment in the past 12 months:

On that score, Minnesota doesn't look great with among the highest late payment share between the Rockies and the Appalachians. (The Fed doesn't break out the ARM data by interest-only.)

David Bichanga, a Plymouth Realtor and Network source told us this week he thinks the wave will crash "probably towards the end of 2010" because of the five-year ARMs adjusting and the banks slowing foreclosures from the federal pressure.

"There are also a few cases of home owners just walking away from their homes, home owners intentionally letting their homes go into foreclosure."

There are signs that, maybe, we've learned a collective lesson about mortgage products that seem affordable but really aren't.

Last month, mortgage giant Freddie Mac said it will stop buying interest-only mortgages. That's a big deal and will take much of the shine off of making those mortgages.

But that's a balm for the future. We'll still be dealing with the mortgage excesses of the past awhile longer.

BONUS INFO: Bank of America today announced that it will consider forgiving some debt on some loans that are deeply under water.

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Got another perspective? Don't think there's a serious next wave of mortgage problems on the way? Tell us where we're out of line. Post below or contact me directly.

How real estate grads rate the market

Posted at 6:00 PM on March 17, 2010 by Paul Tosto
Filed under: Housing & mortgages

Following up our post today on seasoned pros vs. rookies in real estate, here's a look at additional data from St. Cloud State prof Steven Mooney's survey of 135 graduates of the university's real estate program.

The data come from surveys done in early 2006, 2008 and 2010. He labels them '05, '07 and '09 because those were the years he asked graduates to reflect on. Here's the data broken down by where the graduate works and how they rated the market.

(Forgive my lousy graphic arts skills.)

"In the 2009 survey nobody thought the market was very good and only a handful thought the market was good," said Mooney.

You can almost see the real estate cycle by looking at the 2005 results where nobody thought the market was poor to the 2009 results where nobody thought the market was very good.

In 2009 the industry with the 'rosiest' outlook appears to be the property managers, with 37% thinking that the market was average to good. Only the mortgage bankers were close to that with 35% thinking the market was average to good.

Still, the grads' 2007 predictions about the future were a little, uh, optimistic.

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As noted in the early post, I'm really interested in hearing from real estate pros about whether what St. Cloud State grads are telling Mooney reflects what others are seeing in this market. Post something below or contact me directly.

USDA suspending rural home loan guarantee program

Posted at 8:00 AM on March 16, 2010 by Paul Tosto
Filed under: Greater Minnesota, Housing & mortgages

A federal home loan program that does a lot of business in greater Minnesota expects to be out of funds by the end of next month.

The Single Family Housing Guaranteed Loan Program run by the U.S. Department of Agriculture expects to run out of budgeted funds by the end of April, which will stop the program through September, the end of the federal fiscal year.

A new federal budget should contain new money after that, but USDA is telling lenders it's not certain when new guarantees will be be available.

The federal program provides lenders with a 90 percent loan guarantee. Prospective homeowners don't have to put any money down and don't have to pay mortgage insurance. It's especially popular in Minnesota.

It makes a "big impact in rural Minnesota by supporting a strong rural housing industry and increasing home ownership opportunities, which helps create employment opportunities, retain population, and create overall economic development," said Adam Czech, USDA spokesman in Minnesota.

Strong demand for the program nationally led to the shortfall, he added.

Here's the mortgage volume guaranteed by USDA in Minnesota under the program.

2006: $185 million
2007: $164 million
2008: $273 million
2009: $440 million (3,781 total loans in 2009)

Much of the 2009 funding -- $280 million for 2,379 loans -- came from the federal stimulus bill.

"It normally runs out early but this year it's far sooner than typical," said Aaron Dickinson, a Realtor and source in MPR's Public Insight Network who first alerted us to the USDA funding stop.

"My bet is it's because of the dearth of other zero down financing options and the surge of first time buyers who would want that."

USDA's getting inquires from lenders, Czech said. With the uncertainty in the guarantee program, the agency's been highlighting it's direct home loan program.

"These loans are intended for qualified very low and low income applicants," Czech said.

"Sometimes borrowers who qualify for the guaranteed loan may also qualify for the direct. These loans come directly from the government and interest rates are based on repayment ability. Sometimes, an individual will receive a direct loan and then move into the guaranteed program at a later date."

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We're checking with some of the state's rural and independent lenders to see what kind of effect the program's suspension will have on part of Minnesota. If you have some insights, post below or contact me directly.

This USDA map shows how critical the guarantee is in parts of rural Minnesota: It's also being used in exurban counties. Click here for a larger view.

Seasoned real estate pros doing better than rookies?

Posted at 12:00 PM on March 17, 2010 by Paul Tosto (1 Comments)
Filed under: Housing & mortgages

Real estate markets in Minnesota and the nation took a hit during this recession as did the people who earn a living from them. But did experience make a difference in who got hurt and who didn't?

Survey data from St. Cloud State University suggest people with a lot of experience in the real estate business have been able to ride out the tough times better than those just starting.

"It seems the more seasoned people were more able to deal with the changing market," Steven Mooney, chair of St. Cloud State's department of finance, insurance, and real estate, said after looking at the 135 new responses from graduates of St. Cloud State's bachelor's in real estate program.

"I was a little surprised by that."

The grads are in fields from appraisal and property management to mortgage banking, commercial and residential sales.

Mooney queries students every couple years. The conclusions are anecdotal but can be revealing. The last survey two years ago showed the bite from the sub-prime mortgage crisis.

This time, he found graduates one year out of the real estate degree program reporting median income down about 7.5 percent compared to the first-year-out students surveyed in January 2008.

But real estate veterans with 20 years plus experience reported income up 13 percent compared to two years earlier.

Mooney said the surveys found the median income of property appraisers falling, although jobs were still available. "I talked to one firm that had their best year ever last year and others scrambling for business," he said.

Incomes were also down for the mortgage banking business, though many companies are gone and those that remain are getting the business that's out there, he added.

Overall, there are still job opportunities in real estate, Mooney added, but they're more focused these days on real estate management.

Mooney's also forwarded some interesting charts showing how graduates of the program have rated the real estate markets the past five years. I'll put those in a post later today.

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I'm really interested in hearing from real estate pros about whether what St. Cloud State grads are telling Mooney reflects what others are seeing in this market. Post something below or contact me directly.

Years away from cleaning up the short sale mess?

Posted at 12:00 PM on March 15, 2010 by Paul Tosto
Filed under: Housing & mortgages

Short sales continue to bedevil the Twin Cities real estate market. Even as the Minneapolis Area Association of Realtors last week applauded two consecutive months of year-over-year median price increases for traditional home deals, it noted short sale values slid again.

As we've noted before, the short sale supply in the Twin Cities remains big and the market here really won't recover until that inventory gets sold.

"I think short sales are going to be a big deal for the foreseeable future ... maybe three-plus years." said Carrie Newhouse, a Twin Cities Realtor who writes the Helping People out of Foreclosure blog.

Newhouse, a source in MPR's Public Insight Network, has a lot of experience working with short sales. We asked her recently for a practical look from her vantage point at the process and its challenges.

In short sales, the homeowner owes more on the house than he'll get from the sale. The bank, which likely ends up losing money on the deal, must sign off. That creates a tough situation with lenders wanting to protect their financial interests and Realtors, sellers and potential buyers frustrated by an approval process that can drag on for months.

"Short sales are a key component to the recovery of our real estate market," Newhouse said. "On my team, we are handling about 40 short sales at any given moment and we have seen changes in that specialty market over the last eight months."

Often times, we have to sell a property two or three times before we can get it closed. Not because of buyer financing, or because the home doesn't pass inspection but rather because we can't get an approval before the buyer is unwilling to wait any longer.

How long should a buyer wait before they know if they can even buy the house they have agreed to purchase? Could you wait 90 days, not to close but to find out if it could even be your house?

We just got an approval on a purchase agreement written SEVEN months ago. (It) was for a home with two mortgages and there have been lots of twists and turns on this transaction.

The buyer has to be able to execute their financing -- and we have to be granted an approval from a second mortgage to make this happen. The end of the redemption period is about the day after the allowed closing.

This first mortgage was a government backed loan and there was no streamlining, no fast track. If this is how government-back loans will be handled, we the tax payers can expect to lose a lot more money.

Short sales hurt housing markets. Their numbers in the metro area were negligible in 2006 before the recession. By October 2007 they passed 2,700 homes and jumped to 4,500 a year later, according to data from the Minneapolis Realtors group. The inventory was down to about 4,100 by January but still way more than the market can handle.

Getting them sold is crucial to the recovery, though Realtors and bankers tend to view short sales differently. Lenders are trying to minimize their losses on these deals and Realtors are trying to sell them.

Newhouse, though, is seeing some of the ice start to break. "Many banks have improved their time lines," she said.

We recently completed a short sale within 30 days of application. First Franklin was the servicer, they were reasonable and even were willing to help their former borrowers with moving expenses. Wells Fargo and CitiMortgage are also quick to respond and we usually expect an answer on files within 60 days.

The difference between the lenders who operate quickly and those who don't maybe be philosophical or organizational. It seems that lenders who move more quickly believe that short sales are a benefit to them and not just an easy out for the homeowner (which they never are an easy out for the homeowner).

It also appears that those fast moving lenders have negotiators in place who are empowered to make decisions, approve some files or quickly send them for investor approval.

"We are hearing of people who are hearing from their second mortgages, or their collection agency, years after the foreclosure action," Newhouse told us.

We'll save her perspective on that for another post.

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Got another perspective on short sales in Minnesota? Post below or contact me directly.

Click on the map icons below to read what Minnesotans in our Public Insight Network have been telling us over the past year about the housing market around them and then share your story.

In this recession, don't wait to ask for help

Posted at 11:55 AM on March 11, 2010 by Paul Tosto
Filed under: Housing & mortgages, Saving & spending

Telling strangers you need help isn't easy. We talked about that in a recent post on leveling with your kid's college about your financial woes.

The stakes are higher, though, when your struggles put your home at risk. Waiting to ask for help is a big mistake many people continue to make in this recession.

Minnesotans who've never asked before for help from the government or their bank or any institution are being hit especially hard -- people like Kristine Holmgren.

Holmgren's been struggling since October 2008 when she lost her job working for a non-profit. With her unemployment benefits running out, she called her lender a few weeks ago to see if she was eligible for any kind of help.

What she heard shocked her: There was little they could do at this point because her unemployment was running out.

"He told me had I called as soon as I was unemployed, I would have been eligible for a complete modification of my loan. I could have reduced the entire loan," said Holmgren a source in MPR's Public Insight Network from St. Paul.

The mortgage company told her she had to have nine months of unemployment ahead of her to be eligible for a complete modification. "They asked why didn't you call us right away and I said I didn't know. The only reason I called at all is I wasn't sure how I can make it work."

Holmgren wanted us to tell her story, hoping other Minnesotans don't try to tough it out without seeking help.

This phase of the housing crisis is hitting "homeowners that have never had to seek help before. They don't know where to turn," said Ed Nelson with the Minnesota Home Ownership Center, a non-profit group that's been busy trying to help people keep their homes.

"We're eternal optimists, especially in Minnesota. We think, 'I will resolve this problem before it gets too far. I'll find work. I'll be able to find a second job to make the payment.'"

Most homeowners, he added, wait until they've fallen behind or unemployment runs out, or they've exhausted every penny and there's nothing left to do. We tell homeowners to seek help sooner rather than later. If they wait until they're almost out of unemployment benefits, most banks won't renegotiate."

Holmgren said she was offered, and took, a six month loan modification.

"It's a payment deferral agreement. I'm paying 70 percent of my mortgage payment. It's going to help me a lot but it's going to be for six months. At the end, the lender will review my loan to see if other aid can be offered."

She hasn't missed a payment but says she was told the deferral plan will still hurt her credit score. The mortgage company still reports her as late and she'll be charged a $50 late fee each month. That will be reported on her credit score and the deferred amount and fees will be added to her mortgage balance.

"I thought about it for a couple of weeks. I've never not paid my mortgage on time. I'm saving $60 a month and $60 a month will pay for all my utilities except my Xcel bill."

An ordained minister, Holmgren believes she'll be able to keep her home. She has grown children who are supportive and able to help. She's taken in renters and that covers the mortgage. "My challenge is to come up with an income."

Looking back, she says in February or March 2009, she got a call from her lender saying she might qualify for a modification. "I said 'I don't think so, I'm unemployed.' This person said you don't know. I said it wouldn't work because I'm not working. I stayed on the line for 20 seconds and hung up."

Nearly 62 years old, she says she and other friends who've lost their jobs are "just hunkering down for a new lifestyle" in the recession.

"I have a lot more than most people and I'm thankful. But it's so stressful. I really do believe that on the other side of this is a new whole pile of wisdom on what it means to be a human being."

Help for Homeowners:

The Minnesota Home Ownership Center has lots of resources and help for people struggling to keep their homes.

Making Home Affordable is a site with links to the federal aid that's available.

An unusual partnership, forged by recession

Posted at 4:00 PM on March 4, 2010 by Paul Tosto
Filed under: Housing & mortgages

We all need a good story in this recession. We haven't had many. Here's one.

Kim Otterson always loved this land, 140 acres of rolling fields and trees in central Minnesota, from the day she walked it as a newlywed to the day she gave it up in divorce. She's come back now, for a few months, to ride out the recession with her ex-husband's widow.

The economy's brought them together in an odd way. But it's working.

That was my shorthand on the story I'd been told. Two women, Kim Otterson and Jess Benson, hurt by the recession, touched by the death of the same man, Glenn Benson, working to keep together the farm that they all loved.

We knew we needed to tell it.

Click on the play bar to hear reporter Sasha Aslanian's lovely radio piece.

Kim, 54, is a farrier, someone who shoes and cares for horse hooves. (Yeah, I'm a city kid and had to look up the word. ) I asked her to send me a view on the economy from her vantage point. I hadn't realized until she told me how bad things were in the horse business in the recession.

"It's kind of a perfect storm. Surplus horses... high feed costs, due to a weather, and maybe even ethanol production, indirectly; and the economic situation on top of it."

Then as we emailed, she wrote,

Just wanted to let you know, I moved a couple of weeks ago. I'm now living near Randall. I actually moved in with my ex-husband's widow. Kind of a weird set up but it's working. Glenn passed away the end of May and Jess has had kind of a crash course in farming.

Kim was living in Oklahoma and returning to Minnesota. Glenn offered to help her find property. He died about the same time she returned.

Suddenly, Jess, 36, needed help keeping the farm together. She wasn't a farm kid and Glenn had taken care of so much. Kim was trying to find a way to save money to buy a farm but was burning away her savings on rent and boarding her own horses.

Keith Spandl, a friend who knew Glenn, Jess and Kim, was the first to say Kim ought to move back to the farm and help Jess. "He thought it'd be good for them both," his wife, Sharon Spandl, said.

"Kim needed a place to stay and Jessie was all be herself. Kim can run just about anything in farm equipment. So Keith says (to Kim), 'Just go over and ask her.'"

"Glenn was a fun guy," Sharon Spandl says. "He could tell you stories. We really miss him because he was a good friend."

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Jess is doing all she can to keep the farm. She has a telecommuting job as a customer service representative. But keeping the land in tact will still mean selling many of the horses, including Jackson, a stallion that Kim and Glenn bought together when they were married.

Kim has filled the breach, fixing the daily problems of farm life: Buying hay, fixing tractors and stoves, knowing who to call in the region for other stuff.

The horse business has been miserable, though. Jess and Kim told us stories of how the market's dropped. That makes it even more challenging because Jess has to sell some of the horses to keep the farm intact.

She's adamant about not selling the land.

Kim's not sure how long she'll stay. She has a boyfriend and she's doing pretty well saving money for a down payment on property. She moved back to Minnesota because she thought it was her best chance to own a place again. For now, in this recession, this works.

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I don't really know how this story ends. But in the worst recession in decades, we can take heart sometimes in a story like Jess and Kim. We'll keep tabs on them and I'll post updates. Find more photos here.

If you know a good story about the economy, something that tells us about how you and your neighbors are faring, drop a line and tell us.

(Jess Benson (l) and Kim Otterson)

(Glenn Benson, from a family photo)

What's your take on the housing market?

Posted at 10:30 AM on February 25, 2010 by Paul Tosto
Filed under: Housing & mortgages

We've worried for a few months now about a next wave of mortgage problems. A few weeks ago we asked if the Twin Cities was in a foreclosure lull.

But we want to hear from you.Tell us what you're seeing in the local real estate market.

If you're someone with a stake in the state's housing market -- a mortgage or real estate pro, someone looking to buy a house or a homeowner keeping tabs on your neighborhood -- share a story about you're seeing. What surprises you at this point?

It feels like we're being pulled in a bunch of different directions. On days when we hear stories like Lauren Melcher's, if feels like things are on the upswing.

But then there's that worry about what's coming. Two recent alarms:

-- Mortgage giant Freddie Mac acknowledges that "the housing recovery remains fragile, with significant downside risk posed by high unemployment and a potential large wave of foreclosures."

-- Research byFirst American CoreLogic estimates more than one in five properties in Minnesota with an outstanding mortgage is "underwater" or close to underwater, meaning the property's worth less or nearly worth less than what's owed on the mortgage.

Minnesota's not even close to the worst state on that score (Hello Nevada!) But it's still not pretty.

So take five minutes and tell us what your seeing. Use this handy form or post some insights below and we'll follow up.

BONUS QUESTION: The Mortgage Bankers Association this week proposed a "bankers forbearance plan" for people who've lost jobs.

The plan would lower an unemployed borrower's mortgage payments to "an affordable level" for up to nine months so they could keep the house while they job searched.

There are details, of course. Lenders initially would be looking for people likely to find a job with nine months of losing the last one and getting rehired at salary that was at least three-fourths of what they earned in the last job.

Still, it may help. Drop us a line or post below and let us know if you think this would help you or the housing market around you.

The competition between renting and owning

Posted at 2:25 PM on February 19, 2010 by Chris Farrell
Filed under: Housing & mortgages

From chief economics correspondent Chris Farrell

In an earlier post, Paul mentioned that Minnesota state economist Tom Stinson said he wouldn't be surprised if home values in the area trend down by another 3 percent to 5 percent. The rental data in the Consumer Price Index that came out today suggests that is a reasonable forecast nationwide, too.

Many factors affect the value of homes, from the health of the job market to the state of the economy to the animal spirits of speculators. Still, the rental market is a critical anchor to prices in the home owning market. The reason is that consumers can decide to rent or buy shelter. Rent and owning are competing markets. For instance, if rental prices are going up owning may become more attractive, and vice versa.

The Bureau of Labor Statistics reported in the CPI that rents from December, 2009 to January, 2010 were unchanged; for the 3 months ending in January rents fell by 0.1 percent; and for the 6 months period it was a decline of 0.3%.

What's more, other data suggest that rents may continue to trend lower. The Census Bureau says the national rental vacancy rate in the fourth quarter 2009 was 10.7 percent, a near record high.

The bottom line: Stinson's housing market forecast seems reasonable both locally and nationally.

Young person buys a house

Posted at 7:30 PM on February 19, 2010 by Paul Tosto
Filed under: Housing & mortgages

We've written a lot of bummer stuff lately about the housing market. We've also agonized about the state's ability to keep young talent in state.

So when Lauren Melcher dropped us a line recently to tell us she was A.) a young person and B.) buying a house in Minnesota, it seemed like we ought to do something.

More than that, though, her story confirms a couple things the Minneapolis Area Association of Realtors is seeing in its data.

Buying activity is up in the Twin Cities -- especially for homes under $200,000. But low interest rates and the $8,000 federal tax credit, which expires at the end of April, are driving a lot of the activity.

Here's what Melcher, a source in MPR's Public Insight Network, told us:

Since June 2008 I have rented in Northeast Minneapolis with roommates and made the decision to start the home buying process in December 2009. I had been aware of the tax credit for new home buyers for a few months, but I hadn't imagined myself taking advantage of it until I watched my cousin buy a house in Minneapolis in November.

When the buyer deadline was extended to April, I thought, "Well, maybe I should think about doing the same thing."

My family was a big part of my decision and home buying process...although I am buying the house by myself, my parents will have one of the guest bedrooms "on reserve" and will help me with home improvement projects.

While family and investment value were the original motivation for my choice, the tax refund was a huge part of making it a feasible option. I have a job and savings, but $8,000 really makes a big difference. It just made buying a home that much more accessible -- both emotionally and financially.

I found a home in South Minneapolis in January ... I made my offer hours after first viewing it. I'll close on the house in March. When I receive the $8,000 refund later this spring or summer, I plan for most of it to go toward moving expenses and future home repairs. It will help me maintain a manageable budget and still give my new 110-year-old home some updates over the next few years.

Melcher said she looked at some foreclosures and short sale properties but was hesitant to go that route.

"I was not looking for a major renovation project, and I need to be able to move in by the end of May at the latest -- so, knowing the unpredictable nature of short sales, those properties didn't seem like the best option for my situation."

The credit, she said, made a big difference and it put a home investment within reach sooner than she expected. "There are some great values out there on the market, and I'm hopeful that my investment decision will turn out to have been a wise one."

No doubt the Twin Cities market is better because Melcher and others are buying. The real test comes when the tax credit ends and rates starts to rise. The Minneapolis Realtors group is bracing its members to "expect a second (smaller) dip in sales and prices" later in 2010.

Bankruptcy, mortgage default, and foreclosure

Posted at 3:50 PM on February 12, 2010 by Chris Farrell
Filed under: Housing & mortgages

From chief economics correspondent Chris Farrell

Paul has been closely looking into foreclosures in Minnesota. With good reason: One of the more disturbing aspects of the recent financial crisis is how foreclosures soared while bankruptcies were relatively muted. It's a real shift from previous experience.

To be sure, both foreclosure and bankruptcy are ways for financially distressed households to default on their mortgage. But foreclosure is far more damaging to neighborhoods than bankruptcy. So what accounts for the change? A major culprit is the dramatic shift in bankruptcy law in 2005.

This comes under the category of incentives matter.

In previous periods of economic turbulence, American households traditionally got out from under their onerous debts by declaring bankruptcy. They got a "fresh start" a "second chance." The old bankruptcy law, in effect since 1978, was considered housing-friendly. Most distressed borrowers favored filing under Chapter 7, essentially a cheap, quick "debt liquidation" that in practice often allowed debtors to keep their homes. The rest of their property and assets were sold off to pay down unsecured debts, such as credit cards and medical bills.

Lenders complained bitterly for years that filing for bankruptcy was much too easy. There was no stigma left against filing. Yet the fact is that since financially strapped Americans could write off their credit card and other consumer debts, they had more money available to pay their mortgages.

The 2005 bankruptcy law was explicitly designed to be more pro-creditor. For one thing, only low-income borrowers could still file for Chapter 7. Everyone else is automatically put into Chapter 13, which forces households to accept five-year repayment plans of all debts -- secured and unsecured. In other words, they're still trying to make car, credit card, medical, and other bills that used to be discharged in Chapter 7.

That makes the mortgages more onerous. And while filing for Chapter 13 temporarily halts foreclosure proceedings, the protection only lasts as long as the borrower is making mortgage payments. The fees for filing for bankruptcy were also hiked. (You can learn more about the change in the American Radioworks documentary, Bankrupt: Maxed Out in America.)

The result: More people ended up in foreclosure, leaving lenders holding the bag. The new law caused an additional 800,000 mortgage defaults and 250,000 additional foreclosures to occur in each of the past several years, estimate economists Wenli Li
of the Federal Reserve Bank of Philadelphia and Michelle J. White of the University of California, San Diego in their paper Bankruptcy, mortgage default, and foreclosure You can read a summary of their paper here.

The scholars argue that foreclosure is a bad way to deal with the pressure to default on a mortgage. "Foreclosures have very high social costs, many of which are not borne by either borrowers or lenders," they write. "The external costs of foreclosure instead fall residents of neighborhoods that become blighted because of foreclosures and on residents of towns and cities that are forced to cut public services because foreclosures caused property values and property tax revenues to fall."

Instead, they advocate for lowering the cost of filing and more troubled homeowners should be encouraged to file for bankruptcy rather than go into foreclosure. In other words, let's go back to the more housing friendly version of bankruptcy law.

They'd also like to see the foreclosure laws changed to make the process longer and more expensive for lenders. After all, economists know that incentives matter and a more costly foreclosure process for lenders will encourage them to modify mortgages rather than foreclose on homeowners.

Would a moratorium help the foreclosure crisis?

Posted at 9:17 AM on February 10, 2010 by Paul Tosto (1 Comments)
Filed under: Housing & mortgages

I typically don't pay attention to bill introductions at the start of a legislative session.

But given all the stuff we've been writing lately on foreclosure, I thought I'd highlight the newest effort to stop foreclosures and just ask aloud: What would it mean for the Twin Cities housing market?

The Session Daily has a good synopsis of the bills and where they're headed next.

Doing this job, I've certainly run across lots of people who could use that kind of break, who ended up losing their home, sometimes through no fault of their own.

There's some evidence we're in a foreclosure lull right now and that the number of foreclosures could start to pick up again this year.

But the economist side of my brain knows that incentives rarely work as well, or as surgically, as they are intended. There are always consequences.

There are protections already for homeowners in trouble.

Here's a quick read from the Minnesota Attorney General's Office for people facing foreclosure.

And a 2009 law allows homeowners to postpone the sheriff's sale for five months.

Help us understand why we'd need an extended moratorium. Or talk about what kind of challenges that might create.

Post below or contact me directly and we'll see if we can get a conversation going.

MN economist sees housing values continuing to slip

Posted at 11:27 AM on February 9, 2010 by Paul Tosto (2 Comments)
Filed under: Housing & mortgages

Deep into a Monday Midday discussion on jobs and budgets, Minnesota state economist Tom Stinson made some important points about housing with a "guess" that local home values could slip other three to five percent.

"It's going to be a lot better than it was last year, but that's still just a really miserable market," Stinson said of housing and home construction generally.

In 2008, he said, the U.S. had nearly one million housing starts, which was the lowest number since World War II. "In 2009, we had less than 600,000...This year we could have a 25 percent increase and it's still going to be the second lowest number of housing starts since WWII."

Foreclosure and short sale problems "are going to be depressing housing prices of existing homes for a while, he added.

"Our guess is we're probably going to lose another three to five percent locally and nationally on housing prices before things turn around."

Stinson's comments surprised me because the Minneapolis Area Association of Realtors in December said the Twin Cities market was on "recovery road."

Maybe there's no conflict between the two statements. Maybe "Recovery Road" is a lot longer than we think.

Click on the play button and start at the 39:20 mark to hear Stinson's housing comments

And then tell us what you see and if it jibes with Stinson's forecast. Post below or use this form to tell us what the housing market is like around you.

Click on the map icons below to read what Minnesotans in MPR's Public Insight Network have been telling us about the housing climate.

Cash is king in north Minneapolis housing

Posted at 11:00 PM on February 11, 2010 by Paul Tosto
Filed under: Housing & mortgages

There's a chunk of north Minneapolis where if you're thinking about buying a house, you better bring cash. That's not necessarily a bad thing, unless you're a first-time homeowner trying to compete against investors or a city trying to promote home ownership.

Here's the area we're looking at: Multiple Listing Service area 305

SOURCE: Northstarmls.com

Last year, nearly two of every three transactions in that area were cash deals, a pace that was off the charts compared to other areas and astronomical compared to 2005 and 2006 when cash deals accounted for less than six percent of the sales.

Realtor Aaron Dickinson first mentioned this in a blog post a few weeks ago. He crunched some data for us using Multiple Listing Service statistics for all the deals in all the neighborhoods for the past five years. There are other pockets in Minneapolis where cash deals made up 40 to 50 percent of the house transactions last year.

Investors are the likely buyers for many of the homes. People who bring cash can get good deals, no doubt. The average price of a home in the Minneapolis-North MLS area was just under $55,000, or $36 a square foot in 2009, according to data collected by the Minneapolis Area Association of Realtors, the lowest of any tract in the Twin Cities.

So, is cash on the barrel a problem when it comes to home sales? Depends on your goals.

"Investor competition is a main challenge in bringing foreclosed properties on the market to homeowners," Thomas Streitz, director of housing policy and development for Minneapolis, told a U.S. House subcommittee a few weeks ago.

The city, he said in written testimony, is trying to prevent the turnover of single family homes to rentals but sellers are taking lower cash offers over the higher offers of developers working with the city's Neighborhood Stabilization Program.

"A homeowner with a FHA approved mortgage with a 30 day approval time does not compete with cash-in-hand private investors."

Can the interests of investors with cash to spend co-exist with the policy goals of putting people in their first home and stabilizing neighborhoods? How does a young person who needs to get a mortgage compete for an affordable house with an investor who can simply cut a check?

Are we in a foreclosure lull?

Posted at 11:00 AM on February 3, 2010 by Paul Tosto
Filed under: Housing & mortgages

There's a healthy debate right now about how many foreclosures there really are in the Twin Cities and the best way to count them.

Lisa Proechel, though, left us with a sobering message recently that no matter how we look at the current data, we should expect to see the number of foreclosures start to rise again.

"I am a real estate agent who works primarily with foreclosed properties and I can tell you there are a lot of properties out there that banks have not yet foreclosed on," said Proechel, a source in MPR's Public Insight Network.

In many ways, the housing recovery of 2009 was somewhat artificial. Yes, you had low interest rates and good prices and 1st time homebuyer credit. However, you also had low inventory.

Banks have held off foreclosing on many mortgages that are in default because of the requirements that the Obama administration has put on them to try to work things out with the homeowners.

This has delayed many foreclosures which eventually the banks will be foreclosing on.

I have heard from CEO's of many banks that this has been what is going on and that you will see the banks once again foreclosing on properties which of course means more inventory.

Proechel's view surprised me a little. Clearly, we have a long way to go in this market, but the problems of inventory -- a build up of unsold homes driven by foreclosures and short-sales -- were easing.

"I do not expect the 'housing recovery' we saw in 2009 to last," said Proechel. "It was a great real estate year, but there are more challenges to come."

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Do Proechel's insights match what your seeing in the Twin Cities and Minnesota real estate markets?

Post your thoughts below or contact me directly.

The best way to look at foreclosures?

Posted at 11:00 PM on January 28, 2010 by Paul Tosto (2 Comments)
Filed under: Housing & mortgages

MPR's Annie Baxter highlights the ongoing debate over how many foreclosures there really are in the Twin Cities. It's an important question for anyone trying to figure out how fast this housing market will really recover.

From Baxter's story:

RealtyTrac's numbers indicate the Twin Cities had 29,000 foreclosures last year, up nearly 60 percent from the previous year. But data from Minneapolis-based HousingLink suggest there were half as many foreclosures in '09 as RealtyTrac shows -- roughly 14,000. That represents a drop from 2008. HousingLink surveys all 87 county sheriffs for foreclosure data.

Foreclosures are problems for lots of reasons. They push down home values, of course. For most of us our house is our single biggest asset, the root of American wealth. Every foreclosed home holds a story of a person or family struggling to make it through the recession.

But did we have 29,000 foreclosures in 2009 or half that? The RealtyTrac data's been used and questioned for the past month.

Post below or drop me a line if you have some insight into the data. Tell me what numbers you trust the most.

Better yet, tell me what the housing market is like around you these days. Better than a year ago?

The reality is that the housing market's recovery in 2010 will be linked pretty closely to the to Minnesota's job growth in 2010 and right now the experts are not upbeat about jobs in Minnesota roaring back this year.

That's likely to keep talk of a Twin Cities housing rebound subdued, no matter the foreclosure count.

2/11 UPDATE: MPR's Baxter has a story this morning that puts it all into perspective.

Click on the play button below to listen:

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Click on the map icons below to read what Minnesotans in MPR's Public Insight Network have been telling us about the housing market where they live. Then share your story.

Real estate questions and answers

Posted at 6:00 PM on January 22, 2010 by Paul Tosto
Filed under: Housing & mortgages

We invited readers recently to send us questions about the Minnesota housing market to see if we could tap MPR's Public Insight Network for some answers.

Here's the first fruit of that effort.

We asked Network source Aaron Dickinson, a Twin Cities Realtor who writes a data-driven blog on Twin Cities real estate to answer the first round of questions.

Check out the questions and his answers below -- and then keep the conversation going. If you have thoughts to add, post below or send them to me directly.

This is an experiment, so keeping it going depends on your feedback and your questions. Use this handy form to send in your own questions.

We want to continue to tap our Network expertise on real estate and other topics. But we really need to find out if this is useful to you. So post, send a question or tell me what you think.

Here we go.

1.) Extenuating circumstances aside - is it a good time to sell a townhome at a loss to purchase a home that would have been out of reach 1-2 years ago?

Many people get tied up on the whole "selling at a loss" thing - all real estate is relative. For buyers making a lateral or upward move, in most cases the price on the new home they want to purchase has made a similar (or potentially larger) price decline in the last few years. So while you may "lose" on the sell side, you are likely making it up on the buy side.

This does require that you have the cash to pay the costs to sell and still have enough to purchase - selling and buying isn't cheap so some of the savings on the new house will be eaten up in transaction costs but if the move makes sense for your situation, then go for it.

2.) I am a current renter and would like to purchase a house in the next year or so. I will also be getting married in about 6 months and am trying to figure out whether to buy before or after the wedding. Should I be afraid that long term interest rates will rise precipitously in the next six months, or can I afford to take my time before buying?

Ah, the Crystal Ball Question. Rates are going to go up... eventually. That could be in a few months or could be a year. When they do begin to climb, they may climb very quickly, leaving little time to react. The tax credit of $8000 to 1st time buyers and $6500 for repeat buyers who have lived in their current home 5+ years expires April 30th so there's some good incentive to purchase now to take advantage of both the record low rates and the tax credit.

On the other hand, weddings can be expensive and there's a lot going on in your life right now. Speak with your fiancée and together look at your calendar and finances. If you can do something before the end of April, you may get both the tax credit and a phenomenal rate - waiting is a little bit of a gamble and if you can lock things in now you have one less thing to stress about later.

3.) Did proximity to the light-rail have a positive effect on home values located nearby? If so, what distance out did the effect end?

This is a tough question due to the great state of flux in our housing market recently and the subjectiveness of the effect. Some homes are so close to the rail lines that the added noise and traffic is likely a detriment, while those just a few houses away may suffer no ill effects.

While being close to transit is a big perk for some, I think it is hard to quantify effect in a dollar amount or percentage of value that the houses surrounding light rail may have had since this amenity is valued differently by different people. I would believe that in more transit-dependent cities we'd see a more clear effect.

What's your Minnesota real estate question?

Posted at 8:00 AM on January 11, 2010 by Paul Tosto (1 Comments)
Filed under: Housing & mortgages

Most of what we write and talk about here on MinnEcon is driven by the Minnesotans in MPR's Public Insight Network -- people who share their stories and vantage points on the economy and make us all a little smarter.

Many of those Network folks also have an expertise in this economy and we'd like to spread that knowledge around.

So today we'll kick off an experiment: You send us questions. We'll seek answers from the Network.

We'll start first with Minnesota's housing market.

Use our handy form to ask your question or post something below.

We'll go through the questions and then tap the Network for answers. We have Realtors, mortgage bankers, appraisers and other folks who can help. We'll publish some of the questions and answers in subsequent posts.

There are no guarantees we'll answer all the questions (or that we'll get any!). But I'd really like to try this. It gives us a chance to tap the expertise of people in the Network and also get a conversation going about what's on your mind when it comes to housing, home values and other economy issues.

Give it a try.

And if you have ideas about other sectors of the economy where we should try this, contact me directly and let me know.

More "cash for keys" in the Twin Cities?

Posted at 12:00 PM on January 7, 2010 by Paul Tosto (1 Comments)
Filed under: Housing & mortgages, Twin Cities metro

What do you do when you're a lender with a foreclosed property and you want the ex-homeowner out quickly and neatly? Pay them to leave sooner.

It's called "cash for keys." It's become a common practice in other parts of the country, and there's some evidence we're seeing more of it in the Twin Cities.

I'll say upfront I don't have a lot of detail but I'm interested in learning more. Jim Dooley, an Apple Valley real estate broker who's part of MPR's Public Insight Network, mentioned to us recently it's a growing trend here.

We asked around to find people with cash for keys experience in this market and were introduced to Twin Cities Realtor Pat Paulson. He says he's been involved with about 20 cash for keys situations over the past year and a half.

Cash for keys has been around for years, he says, and it's increased with the jump in foreclosures. "I would expect that it is growing in popularity since it is a good practice to safeguard and get access to the properties quicker." Paulson says he typically gets involved after the lender's taken title to the property.

Many REO (real estate owned) sellers assign properties to an agent right after sheriff sale, a few months before the end of the redemption period, when the owner still has rights to the property (MinnEcon note: redemption period is typically 6 months after the sheriff sale.)

With most of mine, the owner or tenant, if the property is occupied, knows that they will have to move soon. However, some tenants seem unaware.

(Following the redemption period), after I verify the occupancy, the seller decides on a strategy to have the property vacated. The first step is always to start the eviction process with a local attorney. They used to give the occupant 60 days to move, but have recently changed that to 90 days. After this, they often, but not always, instruct me to offer CFK (cash for keys).

The typical offering is $2,000 if the occupant moves out in 30 days. Specifically, they must have all their personal property out except in-use working appliances, and the property broom-swept clean.

Upon inspection, I give them a check for the keys then immediately have the locks changed.

Paulson says this works out well for many occupants, although, "it is always a challenge for them because they must find a new home before they receive the money. I have had new landlords call me to confirm that a prospective tenant will be receiving this money."

Another cash for keys perspective comes from Twin Cities foreclosure specialist Steele V. Propp.

Normally, he says, the cash deal is offered around the end of the redemption period. The lender or management company doesn't have title to the property until the redemption period ends "and in most instances they would rather see the property occupied than vacated."

Currently I have a couple of properties in redemption that are occupied and I have been told to not bother the occupants. I am simply to check on the houses on a weekly basis to make sure they are not vacated and the house is not unsecure (or worse yet, the heat is off now that it is winter).

If a property can be shown to be "abandoned" the redemption period can be reduced from the 6 months to 5 weeks. That process does take some time as it is a legal one. Notices are posted on the property with a hearing date and the owner/occupant is asked to attend if someone is still actually living there. If no one shows at the hearing the judge will usually start the shortened 5 week redemption.

As to cash for keys amounts, the companies I work with typically offer a sliding scale. The faster vacated, the more they offer. $1,500 to $2,000 is fairly average if vacated in two weeks. (Although I had a duplex this summer that each of the three tenants were given $750.)

We have an agreement signed with a specific date and that the property be left in "broom clean" condition. I inspect the property and if terms and conditions are met, hand them a check.

I have a few more feelers out on this and I'll write another post if I get something new.

If you have experience in Minnesota with cash for keys -- lender, home owner, real estate agent -- please post below or contact me directly and let me know your experience. Is this a good, civil way to avoid a messy eviction battle and keep a house from being trashed? Or is it a deal that foreclosed owners take too quickly?

All thoughts welcome.

Bonus info:
Here's a quick read from the Minnesota Attorney General's Office for people facing foreclosure.

A 2009 law allows homeowners to postpone the sheriff's sale for five months.

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Got a perspective to share on Minnesota housing markets? Post below or contact me directly.

Click on the map icons below to see what others in our Network have said about the housing market the past year. Then add your story.

A candid view of the Twin Cities housing market

Posted at 6:00 PM on December 28, 2009 by Paul Tosto
Filed under: Housing & mortgages, MinnEcon Indicator

We've been hearing a lot lately about the recovering Twin Cities housing market. While the numbers suggest the worst of times may be over, that doesn't mean things will get better soon.

That's the candid view we got recently from someone in the business.

"I'd like to say that we have hit bottom, that prices and sales have steadied. But I don't think so," said Jim Dooley, an independent real estate broker in Apple Valley who's part of MPR's Public Insight Network.

"Every scrap of good news is immediately evaluated and announced as the possible end to the downturn," he wrote us recently. "Most of those doing the evaluation are the same people that did not see the collapse coming!"

The current uptick in sales is mostly the result of the $8,000 first time buyer tax credit, and now the $6,500 three year owner credit. There would be far fewer gifts under Realtor's Christmas trees without these programs, that are scheduled to end in April 2010.

Jobs - where are they going to come from? Our state is broke (like 46 others), and more pain is going to take place in 2010. Cuts to the poor and social programs, layoffs of teachers and government workers, more people moving in with family because they have to.

Even people with reliable income and low debt are affected. Everyone needs to sell their home sometime. Buyer mentality right now is that everything is on sale. Solid homes feel the sting of the 2 foreclosed properties down the street that sold at a big discount. Less money available to put down on that retirement town home.

It is disheartening to take a buyer out to look at houses, and have 50% or more be short sales or foreclosures. Cold, empty, forlorn properties. Someone's broken dreams.

A couple weeks ago the Minneapolis Area Association of Realtors applauded November data showing only a 2.9 percent year-over-year decline in median home sale prices and a slight increase from the prior month. The November data, it said, offered the "surest sign we've seen yet that we're on recovery road..."

Dooley, though, notes there was a big uptick in real estate closings in October and November because buyers thought the first time home buyer program was going to end. He expects a drop in business as soon as the tax advantages end in April.

Looking back, he says it was easy to see the seeds of the crisis planted.

We saw it coming. Prices for years and years in Minnesota appreciated like 2 percent to four percent a year. Steady, sustainable growth. Buyers were required to "have some skin in the game", like at least $8,000+ on a bottom priced home.

Then, some brilliant lawmakers, bankers, regulators, and financial types decided to push 80-20 loans, where the buyer didn't have to put up any of their own money. NINJA loans (no income, no job, no assets - no problem!) became common.

The regulations and protections that were in place since the Great Depression were gone. Prices spiked for several years, everyone was encouraged to draw on their home's appreciated value and use it like a credit card.

Now the bubble has burst, and home prices are back at 2001-2002 levels.

We've speculated before that the housing market won't really recover until the short sale mess is cleaned up.

Dooley sees deeper problems. "In my opinion, we are in a vicious downward spiral that can only be alleviated by job creation," he said.

"I do not see any signs that the job market is improving, only getting worse ... The huge shortfall in the Minnesota state budget is going to really hurt everyone. How can 'experts' say we are in a recovery?"

12/29 BONUS INFO: My colleague Bob Collins takes a look at the newest home value data this morning and finds that thoughts of a home price rebound were premature.

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Got a perspective to share on Minnesota housing markets? Post below or contact me directly.

Click on the map icons below to see what others in our Network have said about the housing market the past year. Then add your story.

Update on the short sale mess

Posted at 6:00 PM on November 11, 2009 by Paul Tosto
Filed under: Housing & mortgages, Twin Cities metro

We posted recently that while the Twin Cities housing climate was improving, the market wouldn't really recover until the short sale problem gets worked out.

New detailed reporting released today on short sales by the Minneapolis Area Association of Realtors shows there's still a long way to go.

In short sales, the homeowner owes more on the house than he'll get from the sale. The bank, which likely ends up losing money on the deal, must sign off on the sale. That creates a tough situation with banks wanting to protect their financial interests and Realtors, sellers and potential buyers frustrated by an approval process that can drag on for months.

It's a drag on the rest of the business and on home prices generally. The Minneapolis Realtors report today showed a stubbornly high inventory of short sale homes -- about 4,300 in the Twin Cities, only about five percent less than October last year and still way up from 2007.

New listings of short sale homes in October were almost exact to October 2008.

On the positive side, lender owned homes in foreclosure are still selling at a good clip with less than a month and a half of inventory. Compare that though to short sales, where there's a 13 months supply, according to the most recent data.

Markets recover. But it's going to take more than an invisible hand to fix the short sale mess, which right now could be with us until 2011.

BONUS INFO: Here's the MPR story from today on the Realtors' overall market analysis.

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Got a perspective to share on short sales and the housing market in the Twin Cities or across Minnesota? Post below or contact me directly.

Click on the map icons below to read what sources in MPR's Public Insight Network have told us about housing and mortgage issues around them. Take a look, then share your story.

Are minority homeowners faring better than we think?

Posted at 1:00 PM on November 11, 2009 by Paul Tosto
Filed under: Housing & mortgages

There's no doubt many Minnesota homeowners of color have been battered in this recession. The foreclosure crisis has crippled many neighborhoods. We were riveted by the emotional eviction of Rosemary Williams from her Minneapolis home.

But amid the pain is there something positive happening we haven't seen? I started wondering about that after seeing some data showing minority home ownership rates holding surprisingly steady during 2008.

Click on the graph below to see the rates of ownership since 2000. The numbers were part of a presentation this week by Michael Grover, of the Minneapolis Fed as part of the Minnesota Home Ownership Center's Annual Emerging Markets Summit.

"Emerging markets" is a collective description for people of color. We asked Grover what he thought:

I think the biggest take away for me, especially for the Census data for 2008, was that there was no decline in the total number of or ownership rate for emerging market homeowners between 2007 and 2008 -- given the housing market we currently are in, the recent performance of mortgages, and the fact that the rate for Whites (who are not Hispanic or Latino) went down by .8%.

What's going on? Is it possible that people of color who are buying homes are offsetting many of the home losses we're seeing in the foreclosure data, so that the home ownership rates are staying relatively stable?

Grover says he hasn't had time to analyze the data enough to draw conclusions. He plans to examine it deeper.

It definitely needs more exploration. It's the seed of something interesting.

I was especially intrigued by the growth in ownership rates since 2000 among Asian and Latino people.

Of course, there's plenty of other data to show things are not good and the gap between white and minority ownership is among the highest of any state in the country. And Minnesota is nowhere near the end of the mortgage crisis. Still, it's worth keeping an eye on who's doing the home buying this year and next.

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What's your take on the housing market right now? Post below or contact me directly.

Click on the map icons below to read what Minnesotans in MPR's Public Insight Network have been telling us about the housing climate around them. Then share your story.

Little impact seen from Feds' foreclosure-lease option

Posted at 4:07 PM on November 6, 2009 by Paul Tosto
Filed under: Housing & mortgages

News Thursday that federal mortgage giant Fannie Mae had a plan to ease the pain of foreclosure by letting eligible families stay for a year or more as renters sounded like a novel way to buy some time for people who are losing their homes.

But the reality is it will probably have little impact. We reported Thursday that it didn't look like a silver bullet to the problems of people displaced by foreclosure.

Today, we checked in with banker Rick Beeson, President and CEO of Park Midway Bank in St. Paul and a source in MPR's Public Insight Network. He told us:

This seems like an effort that could have modest success, but not a major impact.
Yes, there would be owners who would want to salvage their credit scores, although most have had them damaged at that point anyway.

Yes, it allows them to pay a "market-rate" rent uninterrupted for a year, although many choose the now socially acceptable route of bankruptcy stalled foreclosure, which allows them to stay in the home over a year with NO payments whatsoever.

It's clear from the detail that Fannie Mae's plan will require lots of cooperation between the lenders, the homeowner and the government to make it work. And we haven't seen a whole lot of that kind of unity when it comes to problems like short sales.

If you're in a foreclosure situation, or know someone in a foreclosure situation, in Minnesota, you may be better off reading the local options laid out by the Minnesota Home Ownership Center.

A Minnesota law that took effect this summer allows people to delay a foreclosure sale for five months.

Here are answers to some frequently asked questions about that law.

The foreclosure pace has eased in Minnesota in 2009 compared to last year. But that doesn't make the pain any easier if you're losing your home.

And given the worries about a next wave of mortgage problems, the search for solutions isn't over.

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Click on the map icons to read what Minnesotans in our Public Insight Network have been telling us about the mortgage and housing situation around them. Then share a story.

Jobless aid, housing credit extensions today

Posted at 8:00 AM on November 6, 2009 by Paul Tosto
Filed under: Housing & mortgages, Jobs & unemployment

President Obama today signs into law a bill that extends jobless benefits and also gives potential homeowners another crack at a tax credit.

In Minnesota, it means as many as 14 more weeks of jobless aid to people who've exhausted state and federal benefits. That'll be good news to a lot of people.

It comes on the same day as the release of national unemployment data for October.

The bill also extends the federal first-time homebuyer tax credit through April 30. It was set to expire at the end of the month. And it adds a $6,500 credit to existing homeowners looking to buy another house as their main residence. The homebuilders are digging it.

If you have a stake in the bill today -- as a homebuyer, taxpayer, small business owner, unemployed worker -- post below or contact me directly and let me know what it means for you.

Will new lease option by Feds ease foreclosures?

Posted at 7:15 PM on November 5, 2009 by Paul Tosto
Filed under: Housing & mortgages

Federal mortgage giant Fannie Mae today unveiled a new leasing option they hope will ease the pain of foreclosure. Basically it lets a homeowner facing foreclosure stay in the home by signing a lease that's tied to the transfer of the house back to the lender.

The new program is designed for borrowers who do not qualify for or have not been able to sustain other loan-workout solutions, such as a modification. Under Deed for Lease, borrowers transfer their property to the lender by completing a deed in lieu of foreclosure, and then lease back the house at a market rate.

I'll take a deeper look at this Friday. Basically, it's a way to try and buy some time for people who are losing their homes.

But it's clear from the detail that it will require lots of cooperation between the lenders, the homeowner and the government to make it work. And we haven't seen a whole lot of that kind of unity when it comes to problems like short sales.

"It's very clear that it will help some people. It's just there is no silver bullet to (the housing crisis) and this program certainly isn't either," said Aaron Dickinson, a local Realtor who writes a detailed blog on the Twin Cities housing market. "A lot of this might just be pushing the rock farther down the road."

He also worries about the government's new role as landlord in these cases.

The lease would be for up to a year "with the possibility of term renewal or month-to-month extensions after that period," according to Fannie Mae.

Thoughts on the plan and its potential? Post below or contact me directly.

The short sale mess

Posted at 5:00 PM on November 3, 2009 by Paul Tosto
Filed under: Housing & mortgages

Recent national data show Twin Cities home values rebounding at a pace faster than many cities in the country. But the market won't really recover until the short-sale problem gets worked out. And it's hard to see any way out of that hole any time soon.

Why? Short sales need buyers and the process scares buyers away.

"Short sales are languishing," says Aaron Dickinson, a local Realtor who writes a detailed blog on the area's housing market. There are about 5,000 short sale properties for sale now and fewer than 500 sell per month, he adds.

So there's at least a 10 month supply that needs to be worked through. That inventory's likely to climb with the next wave of mortgage problems.

In short sales, the homeowner owes more on the house than he'll get from the sale. The bank, which likely ends up losing money on the deal, must sign off on the sale. That creates a tough situation with banks wanting to protect their financial interests and Realtors, sellers and potential buyers frustrated by an approval process that can drag on for months.

A few months ago, Adam Leistico seemed like the perfect short-sale customer. He was in the hunt back in May. Though frustrated, he was looking actively to buy.

It didn't happen.

"We did not end up buying a short sale, we actually ended up swearing them off completely," Leistico, a source in MPR's Public Insight Network, told me recently.

We waited for a long time, and the house was pulled out from under us by the bank, so we ended up buying a different house that we are very happy with, albeit for a little bit more money. We have been warning everyone we can away from the short sale process.

In an analysis he co-wrote a few weeks ago, Dickinson noted that while the inventory of bank-owned foreclosures had fallen dramatically, short-sale homes hadn't budged in a year. "It's discouraging to see that short sales remain such a substantial drag on the market's forward momentum..."

Here's a chart from the Minneapolis Area Association of Realtors. The blue line shows a big drop in the inventory of foreclosed, lender-owned homes. They're moving. They red line shows short sale homes on the market.

Ironically, Dickinson worries the $8,000 federal home buyer credit, which has done a lot in the short term to buoy the housing market, may have torpedoed the short sale market the past few months.

With the credit expected to expire at the end of this month, "a lot of people said, 'I don't want to lose the tax credit over a short sale.'"

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Got a perspective to share on short sales and the housing market in the Twin Cities or across Minnesota? Post below or contact me directly.

Click on the map icons below to read what others in our Network have told us about housing and mortgage issues around them. Take a look, then share your story.

Minnesota appraiser numbers fall; what does it mean?

Posted at 2:30 PM on November 18, 2009 by Paul Tosto (3 Comments)
Filed under: Housing & mortgages

I got interested in a statute that, starting last summer, made it illegal to pressure real estate appraisers into assessing a property for a specific value.

I wasn't sure what to write on the topic so I thought I'd start by asking the state Commerce Department for data on the number of licensed real estate appraisers in Minnesota. I was blown away by the data.

The number leaped in the first half of this decade, took a roller coaster dive and now is slowly rising.

It seems bizarre but that's the data Commerce sent me so I'll assume it's valid.

What's interesting is that the drop in the number of appraisers seems to have come before the real estate collapse -- almost like a leading economic indicator. Now we're seeing the numbers slowly rise again during the worst part of the recession.

"The number of appraisers does seem to be a leading economic indicator of the health of the real estate industry," said Julie Schwartz, an independent appraiser from White Bear Lake and a source in MPR's Public Insight Network. "The market actually started to decline in 2006, but was not public knowledge until 2007."

The increase in appraisers since 2006, she adds, relates to the soft labor market and the appeal an appraisal career holds for people trying to retrain for new jobs.

Wendy Walker, vice president of the North Star Chapter of the Appraisal Institute and a member of the Commerce Department's real estate appraisal advisory board, said she was aware of a decline although it's unclear what would explain the huge drop.

One of the problems is that many education providers have been promoting the appraisal profession as a quick route to high income. They get people to take classes and become licensed, but trainee appraisers then find that there are few jobs available.

The licensing requirements changed January 1, 2008 in response to new national requirements from the Appraisal Foundation. I know that there were a large number of applications in to Commerce in 2007 because of this.

If you had either the experience or education by Jan 1, 2008, they would give you an additional year to complete the requirements. Because of this, most people are anticipating that the number of appraisers will decline."

The state, she added, has already instituted the requirement for more appraisal-related education and hours of apprenticeship.

I'm a novice on the appraisal business but I'd like to know more. If appraiser counts are a kind of leading economic indicator, what's the market telling us now?

If you have a connection to the appraisal business, post below and tell us what you're seeing in Minnesota. Or contact me directly.

Twin Cities Realtors say stimulus tax credit driving new home demand

Posted at 10:12 PM on April 10, 2009 by Paul Tosto
Filed under: Housing & mortgages, Twin Cities metro

Realtors have an obvious interest in talking about how now is the right time to buy a house. Boom or bust markets, it's always a good time to buy!

Today, though, the St. Paul Area Association of Realtors came out with hard data that seem to show signs of a genuine upswing in the Twin Cities area housing market, driven by low rates and the $8,000 first time homebuyer tax credit.

The group said the inventory of homes for sale has fallen over the past month and fallen significantly from last year. Also, there were 7,150 deals closed for homes in 09 compared to 6,668 during the first quarter of 08.

Not everything is swell. The survey noted that the median sales price in the Twin Cites metro area continues to fall, or, as they put it, "continues to search for its low point."

The group put the median sales price for a single-family, residential property in March at $154,125, 23 percent down from a year ago, when it was $200,000.

For the first time since July of last year the median sales price increased on a month-over-month basis by 2.75 percent. The median sales price one month ago was $150,000.

Got a story about the housing market or any other economic story in Minnesota? Tell us what you know.

Making the Feds refinancing deal work

Posted at 9:54 PM on April 20, 2009 by Paul Tosto
Filed under: Housing & mortgages

When someone describes their current economic outlook as "bright" these days, it's worth a deeper look.

Chris Erickson of Minneapolis saw it as bright after recently discovering the family home's eligible for a Home Affordable Refinance that could save "a couple hundred dollars each month and tens of thousands of dollars in interest over the course of the loan."

It's part of the federal government's efforts to help eligible homeowners refinance their mortgages. Officials say as many as 9 million families may be eligible to refinance or modify their loans to an "affordable" payment. These are folks who because of the current market turmoil might not otherwise be able to refinance.

But we hadn't really come across anyone trying to make it work. Erickson, who's part of our Public Insight Network, said:

Twin Cities home values still down about 20 percent from last year

Posted at 10:10 PM on April 28, 2009 by Paul Tosto
Filed under: Housing & mortgages, Twin Cities metro

The housing price slide is slowing these days, but it's still a slide. That's the bottom line in today's data from widely watched S&P/Case-Shiller Home Price Indices.

Twin Cities housing prices in February remained about 20 percent down from February last year, the data show. That's slightly worse than the 18.6 percent average drop among the 20 metro markets tracked by the indices.

So if you're looking for some glimmers in this report: "For the first time in 16 months, however, the annual decline of the 10-City and 20-City composites did not set a new record."

Yeah!

Housing values are crucial for lots of reasons. For many people it is the single most valuable asset they'll ever own. The run-up in value during the early part of the decade offered people an inflated sense of their personal wealth.

Now, wealth people once counted on for vacations, retirement, financing college for their children and other goals is gone, at least in the short term.

Below are stories people in our Public Insight Network are telling us about the housing market where they live. Check it out then add a story we can map.

Homeless families in Minnesota: A view from the shelter

Posted at 10:01 PM on April 30, 2009 by Paul Tosto
Filed under: Housing & mortgages, Twin Cities metro

Leslie Frost got one of our MPR News queries recently asking about her economic situation. She wanted to talk instead about the economic pain she witnesses daily at Families Moving Forward, a small nonprofit family homeless shelter she runs in the Twin Cities.

Frost, one of our Public Insight Network sources, says circumstances for homeless families are the worst she's seen in 17 years of work. She wrote:

Someone asked me the other day if the families that we are seeing at Families Moving Forward are different now than they have been in the past. The answer is no, they're the same, but there are so many more of them...We get 300 calls/month now. Two years ago we got 50 calls/month.

The same reasons apply now: lost job, ran out of money, couch-hopped for awhile, wore out our welcome at all those places, finally ran out of options, called for shelter, But now, there are new reasons: landlord ran out of money, quit paying the water bill, couch-hopped, applied to new landlord, got turned down because current landlord isn't answering his phone to provide a rental reference.

Also, rented a place for a year, paid damage deposit, things started running downhill, heat got turned off, called City for help, Housing Inspector came out, verified no heat, could not get in touch with landlord, came back and placarded the building as uninhabitable, told us we had three days to leave. In neither case, did the family get back the damage deposit or the rent that was unearned. The same thing happens to families whose utilities stay on, but get evicted by the sheriff, on behalf of the bank, in foreclosure.

On a typical night in Minnesota, about 600 children are homeless, according to data collected by the St. Paul-based Wilder Foundation. The group's last survey came in 2006, when times were relatively good. This year's survey is likely to draw a bleaker picture.

Got a story about the economy around you? Share it with MPR News. We're mapping the responses in hopes of getting a broader picture of economic life in Minnesota. Below are some stories of the current job climate.

Opportunity, frustration, short sales in Twin Cities housing market

Posted at 9:55 PM on May 5, 2009 by Paul Tosto
Filed under: Housing & mortgages, Twin Cities metro

With job security, low debt and a bright economic outlook, Adam Leistico sees this as a great time to buy a house. The potential boost from the $8,000 federal home buyer credit makes it even more alluring.

But the opportunities he's seeing also make him an eyewitness to the challenges of trying to buy in this market. Leistico, a source in our Public Insight Network, wrote:

We started looking for houses in St Paul in late January of '09, and we found a place that we immediately fell in love with for a price that was too good to pass up.

Sadly, it is a short sale, and we have been on the line for over two months now waiting to hear back from the bank on our offer.

In short sale situations, the homeowner owes more on the house than he'll get from the sale. The bank, which likely ends up losing money on the deal, must sign off on the sale.

That's created a sticky situation in this market and others with banks wanting to protect their financial interests in a money losing situation and Realtors and potential home buyers frustrated by the pace of the approval process.

The banks' concern is understandable. Sale prices for "lender mediated" homes, including short sales and foreclosures, fell dramatically over the past year in the Twin Cities. There's a yawning gap now between the median selling price of "lender mediated" homes compared to traditional home sales, according to the Minneapolis Area Association of Realtors.

The stock of "lender mediated" housing is starting to fall thanks largely to buyer demand. That, of course, can create its own set of hassles.

Adds Leistico:

It is a very good market for buyers out there, but it is also extremely frustrating. We have made offers on many places, all of them in multiple-bid situations that don't turn out in our favor.

We have taken tours of even more places that are sold two days after they are listed. It is exciting, but amazingly taxing mentally, especially for folks like us who are trying to find a nice place to settle down.

If you're connected to the current housing market -- banker, Realtor, homebuyer, seller, observer -- I'd love to hear from you about what you're seeing.

Click here and share an insight about the current market.

Also, check out the map below for recent responses from our Public Insight Network on housing issues.

Bonus data: Coincidentally, a Wall Street Journal story today on rural foreclosures, has a great graphic on foreclosures in Minnesota by county. Definitely worth checking out.

Twin Cities home market improving or still declining?

Posted at 9:31 PM on May 26, 2009 by Paul Tosto
Filed under: Housing & mortgages, Twin Cities metro

We've seen signs the past couple months the Twin Cities housing market is starting to drag itself back to its feet. But new data released today from the respected S&P/Case-Shiller Home Price Indices suggests it's no time for high-fives. Home values here are still on the slide.

The Cities showed a record monthly decline of 6.1% in March -- the largest monthly drop of any metro area in the history of the indices. The index is down nearly 25 percent from a year ago.

Looking at the 20 U.S. cities it charts, S&P concludes there's no evidence yet that a recovery in home prices has begun.

So what's happening?

We've seen a generally upbeat outlook from local Realtors that home sales are bouncing back thanks to the $8,000 first time homebuyer tax credit.

It's possible prices are bottoming out and it just hasn't showed up yet in the numbers. There's been a lot of "lender mediated" housing sold in the Twin Cities, driving down over all market values. That inventory is falling now. As supply and demand find a balance again, that'll be good news for prices.

But as my colleague Mike Caputo pointed out recently, we're also in a one-and-done market right now -- there's high demand for houses below $200,000, so the first-time homeowner market is solid. Current homeowners, however, are not interested in selling and buying something more expensive.

Bottom line: We're seeing a lot of activity in selected parts of the Twin Cities housing market. But that's not going to translate into a recovery in median home prices any time soon.

Below are stories people in our Public Insight Network are telling us about the housing market where they live. Check it out then add a story we can map.

Are reverse mortgages the next big financial mess?

Posted at 12:39 AM on June 10, 2009 by Paul Tosto
Filed under: Housing & mortgages

I don't pay much attention to people who claim to foresee the next financial mess. But I listen up when the warning comes from one of the nation's top bank regulators.

Comptroller of the Currency John Dugan got my attention Monday when he urged greater consumer protection for reverse mortgages:

"While reverse mortgages can provide real benefits, they also have some of the same characteristics as the riskiest types of subprime mortgages - and that should set off alarm bells."

Yikes. Reverse mortgages are designed typically to help those 62 and older tap the equity built up in their homes without having to leave/sell the home or make regular payments on a loan. Most are federally insured "home equity conversion mortgages."

Dugan's worry centered on the growth of private reverse mortgage products and three basic concerns:

The reverse mortgage creates a "pot of cash" and seniors might be pressured into putting that money into risky investments, perhaps as a condition of getting the loan.

Seniors needing the cash may overlook stiff fees attached to the loan

Older borrowers may be the target of misleading marketing claims.

Read the whole speech here.

The Minnesota Attorney General earlier this year saw some tougher laws on reverse mortgages. Gov. Tim Pawlenty vetoed the legislation, saying it could increase costs and availability. Earlier this year, though, the AARP was warning of scams linked to reverse mortgages.

So it's not necessarily the product, which has helped keep thousands of older people in their homes by creating a cash flow based on their home equity. It's the ancillary problems that can spring up when potentially vulnerable people are suddenly sitting on a pile of cash.

I saw this first hand as a business reporter during the 1990s in the Southeast when some banks began aggressively marketing mutual funds, annuities and other products that, unlike deposits, were not federally insured.

Very nice, otherwise savvy people signed their names to investment products that weren't appropriate for their age or carried extremely high ownership costs. There was little outright fraud but the banks essentially used the bedrock trust people placed in them to market products to older people who thought they were buying something like a CD or something else that was federally insured.

You can debate who's at fault in those instances. But let's hope we don't relive those episodes as the population ages. The Federal Trade Commission has a good page on reverse mortgages and your options.

If you've had a recent experience with a reverse mortgage or are looking into one for yourself or a family member, we'd love to hear about your experience. Click here and tell us what you've seen.

And check out the map below for stories people in our Public Insight Network have told us recently about housing issues in Minnesota.

Twin Cities housing prices back to 1990s levels?

Posted at 12:15 AM on June 22, 2009 by Paul Tosto
Filed under: Housing & mortgages, Twin Cities metro

Not that anyone who bought a house from, say, 1998 to 2006 in the Twin Cities needs reminding, but a new Harvard University report informs us that inflation adjusted home values in our metro area have returned to 1990s levels.

Check out the map on .pdf page 3. Looks to me from the map that the Twin Cities is among the hardest hit of the nation's major metro market. If anyone sees any other interesting facts in the Harvard report, please post below and let me know.

No doubt it's been grim here, especially during the past year.

But on my street, anyway, I'm seeing some signs things are improving.

There were four or five houses within two blocks that either had those yellow foreclosure/auction signs in the window or were clearly uninhabited during the fall and winter. All but one have been purchased. People are planting flowers and cutting lawns. Some have little kids. Great news for my neighborhood.

But as my colleague Mike Caputo has noted, Realtors in our Public Insight Network say selling houses under $200,000 is a snap. Selling houses worth more than $200,000? That's a problem.

Below are stories sources in the Network are sharing about the housing market where they live. Check it out then tell us your housing story.

Twin Cities Realtors see home price slide easing

Posted at 4:20 PM on July 10, 2009 by Paul Tosto
Filed under: Housing & mortgages, Twin Cities metro

Twin Cities home prices are still down double digits from last year but data today from Twin Cities Realtors suggest the level of decline is easing.

According to the St. Paul Association of Realtors:

The median price reported at the end of the first six months (of 2009) was $160,000 compared to $203,000 after the first six months of 2008, a decline of 21.18 percent.

However, for the month of June 09 the median sales price decreased only 15.37 percent compared to 08. The median sales price for June 09 was $173,500 compared to $205,000 in June 08.

The June 09 median sales price did show an increase of 5.15 percent from the previous month.

The group also noted that the market has about a five month inventory of housing for sale, down from 8.8 months a year ago, a sign that the supply and demand for housing may be finding its balance.

As we're reported before, Realtors tend to be a perpetually upbeat group with an obvious interest in talking about how now is the right time to buy a house. And there's still enough grim news about this market to make you skeptical about recovery discussions.

Still, baby steps in the right direction.

Below are stories Minnesotans in our Public Insight Network are sharing about the housing market where they live. Check it out then tell us your housing story.

Upper end "blight" in the Twin Cities housing market?

Posted at 3:57 PM on July 21, 2009 by Paul Tosto
Filed under: Housing & mortgages, Twin Cities metro

High end housing isn't selling in the Twin Cities. Is that just a hassle or is it creating a new kind of upscale urban blight?

In ordinary times, no one would cry over empty McMansions. But Twin Cities real estate appraiser Julie Schwartz says it's become a serious concern.

A source in our Public Insight Network, Julie tells us:

In 25 years of being in the real estate industry, I have never encountered blight in mid- to upper bracket neighborhoods before. We are seeing the next group of foreclosures in this mid- to upper-bracket.

What I see missing from most media coverage of the housing and credit crisis is the changing landscape of our communities. On the road I live, which is median to upper bracket housing, there is one house that is very blighted, sitting there with a project half done, including an addition without siding, and a roof with missing shingles.

There are streets which are partially developed, and which appear strange due to knowing no new construction will occur for sometime, as the prices of the used housing is lower than the construction cost new, less accrued depreciation.

She makes a couple of other good points. The summer months have brought into clear view the "lack of upkeep" that might have been hidden in the winter and spring.

Also, she says, local governments are having to pick up the pieces of failed developments and she sees the $8,000 credit the Feds are offering as an incentive to buy homes as "pathetic, at best."

I definitely want to explore this and may ask Julie for a tour. Do you see what Julie's seeing? Drop me a line or post below.

Better yet, send me a photo of upscale housing blight with some description of where it is and what's happening. Use this form.

Check out the map below to read what people in our network are telling us about housing markets in Minnesota.

New estimate: One of every 83 Minnesota homes in foreclosure process

Posted at 3:43 PM on July 28, 2009 by Paul Tosto
Filed under: Housing & mortgages

Two new interesting chunks on Minnesota's housing market. Together they indicate things are improving -- slowly -- but that the problems are nowhere near an end.

Twin Cities home prices uptick. Housing values in the Twin Cities remain among the hardest hit of the 20 cities tracked by the S&P/Case-Shiller Home Price Indices. But data released today showed a marked improvement from April to May.

Nationally, the survey noted, "The pace of descent in home price values appears to be slowing." Still, prices are still down about 17 percent on average across all metro areas from the prior year with the Twin Cities down nearly 22 percent.

1 of 83 Minnesota homes in foreclosure process. I was startled to read that today on the blog of the non-profit Minnesota Home Ownership Center (via HousingLink). That amounts to only about 1.2 percent of the state housing stock. It's a reminder, though, that there are still lots of problems in the pipeline.

Data show a big jump in pre-foreclosure notices last month in Minnesota.

"We're not out of the woods yet," said Ed Nelson, a source in our Public Insight Network who works for the Minnesota Home Ownership Center. He said today:

In Minnesota... we still have not yet seen the full effect of the economic downturn (as foreclosure lags unemployment/underemployment), nor have we seen all of the foreclosures that will be caused by the ALT-A recasts and the remaining Prime/ALT-A resets that will still happen.

(Alt-A mortgages are loans riskier than "prime" but less risky than sub-prime. "Reset" involves an interest rate change; "recast" is a change in the payment schedule. My colleague Tim Nelson did a story earlier this year that explains this coming, bad second wave. Read it here.)

Couple of caveats. There's no data before 2009 tracking foreclosure notices, Nelson added. He also notes the "1 of every 83" ratio is not "set in stone."

We believe that the vast majority of the lenders/servicers (through their attorneys, most of the time) do forward their pre-foreclosure notices on to a member of the Center's network -- the law only requires they send the notices to a HUD-approved counseling agency. There are a few agencies that are NOT a part of the Center's network. In addition... we have NO WAY of knowing if all lenders/servicers are complying. So we can only report on the numbers we receive.

In any case, Nelson said the number of pre-foreclosure notices will probably rise through 2009 and into 2010.

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Check out the map below to read what people in our network are telling us about housing markets in Minnesota. Then tell us what you're seeing.

A bad debt, a family home lost in small town Minnesota

Posted at 3:30 PM on August 3, 2009 by Paul Tosto
Filed under: Housing & mortgages, Saving & spending

Margie Hoyt is losing a home that's been in her family for generations because of a loan she says should never have been made.

A source in our Public Insight Network who lost her job in April, Hoyt told us Thursday she has 30 days to vacate her home inMadelia and then another two weeks to get her stuff out, including the major appliances.

Hoyt, who served on Madelia's planning commission and is now a city councilwoman, wanted to tell her story to let others know the collateral damage of a bad debt. She's about to pay a price in this recession for a financial mess not of her own making.

Here's what she told us:

Hoyt, 50, cared for her father for two years at the family home in until a few months before his death in December 2007.

The house, in her family since 1926, should have been debt free, except in 2003, she says, her 84-year-old father agreed to a 15-year, $20,000 loan for siding. Two years later her father refinanced for $26,000 and 30 years.

She knows her father showed poor judgment, but said lenders should have known better, too, given her father's age and finances.

The final hit came, she says, when the homeowners insurance lapsed. To get it re-insured, she said, an inspection was required, which found problems with the roof. What was a $160.09 monthly payment jumped to $500.

Her father, she adds, had no life insurance and his estate is insolvent:

Because an 84 year old man was approved for a $20,000, 15 year mortgage, I now face being evicted from a home his sister lived in and with whom I spent several summers with as a child during the 1960s.

I came to live in this house with my dad in 1993 and had a daughter while living here and going to school in 1996. My daughter is the 4th generation to live in this house.

Given my financial situation and trying to get back on my feet after my dad passed away I couldn't afford a lawyer to help with the probate or negotiating with the lender on the mortgage.

The job I had (night shift auditor at a local motel) only paid $7.25 with no benefits so it's not like I can get a loan.

About 1 of 83 Minnesota homes is in the foreclosure process, according to a recent estimate, with a big jump in pre-foreclosure notices in Minnesota during June.

So even as the economy bottoms out, these problems aren't going way soon.

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Hoyt's story got us thinking about all the fallout from the recession and mortgage crisis. Many people messed up their personal finances and are paying for it now.

But what about those who did the right thing and still got sideswiped?

Use this form and tell us how you're dealing with a personal financial problem that you didn't cause.

Below check out stories people in our Public Insight Network are telling us about the housing market where they live.

What Mortgage Mess II may look like in Minnesota

Posted at 3:16 PM on August 11, 2009 by Paul Tosto
Filed under: Housing & mortgages

With real estate prices bottoming out, it's easy to think Minnesota's past the pain of the mortgage crisis. Data on the state's riskier home loans, however, shows some major worries straight ahead.

We got a lesson on what the next mess may look like from Ed Nelson, a source in MPR's Public Insight Network.

He's with the Minnesota Home Ownership Center and told us recently Minnesota wasn't out of the woods yet. We "haven't seen all the foreclosures that will be caused by the Alt-A recasts and the remaining Prime/Alt-A resets that will still happen."

Alt-A mortgages are loans riskier than "prime" but less risky than sub-prime. "Reset" involves an interest rate change; "recast" is a change in the payment schedule.

Nelson sketches out the potential problem. He writes:

On a standard Adjustable Rate Mortgage (ARM) the interest rate 'resets' on its "Change Date" (after five years for a 5/1 ARM, etc.).

The payment 'recasts' exactly one month after the rate resets. (After the interest rate resets, the bank takes the new interest rate and the current balance, and recalculates a new payment that will pay off the loan over the remaining term.)

NOW... A large number of the Alt-A loans were "Interest-Only" or the even more dangerous "Pick-a-payment" variety. These loans can 'recast' when one of two things happen: either they reach their first "reset" date OR... and this is where they are dangerous... when they reach what is known as a "Balance Cap" or a "Negative Amortization Cap".

With an Interest-Only loan, or with the "pick-a-payment" loans... any amount that was paid LESS THAN the FULL Principal and Interest amount is added to the base amount of the current balance (which - - as you can see, will be CONSTANTLY rising).

These loans have a Balance Cap... where the balance cannot exceed a certain amount (generally between 110% and 125% of the original loan amount... but varies by lender and state).

SO... The Alt-A recasts can happen when the loan-holder hits their "Balance Cap" - - even if their rate "reset" isn't scheduled to happen for another year or two.

These loans were especially prevalent in the suburbs and exurban metro areas.

Data collected by the Federal Reserve Bank of New York show why thousands of Minnesotans have reason to worry, short-term.

Among states, Minnesota is 6th in the percentage of Alt-A adjustable rate mortgages resetting in the next 12 months. It works out to nearly 2,000 mortgages.

Another 2,200 sub-prime mortgages are also expected to reset in the next 12 months.

The Fed data's a snapshot, subject to change. But you see the immediate problem.

Bottom line: A lot of people who flocked to these mortgage deals are within a year or two of being socked with higher rates and/or stiffer monthly payments. Even more will feel that pinch within the next two to three years.

Combine that with still-high unemployment rates and it sets the scene for Mortgage Mess II in Minnesota with, perhaps, a bigger spotlight on the Twin Cities burbs.

8/31 UPDATE: Check out this New York Times story on the coming option ARM mess.

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Got another take on the potential problems from mortgage resets/recasts? Find something else in the data that ought to be explored?

Post below or use this form and tell us a story about what you're seeing in the housing market. And check out the map below to read what people in our network are telling us about housing issues.

MN home value worries: Not just a Twin Cities thing

Posted at 9:21 PM on September 8, 2009 by Paul Tosto
Filed under: Greater Minnesota, Housing & mortgages

We've been reporting a bunch about home prices in the Twin Cities. But David Frank reminds us that values across Minnesota have been hit as hard or harder than in the metro area.

Frank lives in Canby in western Minnesota's Yellow Medicine County near the South Dakota border. He calls his economic outlook these days "worrisome," telling us recently:

Here in "The Sticks," the value of houses has dropped dramatically. Not only have the values dropped but sales are at a bare minimum. Of the three real estate brokers in town, one of them told me just two weeks ago that she doesn't have a single looker for any of her homes over $50,000 and she only has three lookers total for homes valued under $50,000.

There are many people who want to buy a nicer/newer home but none are able to because they can't sell their existing home. If I take a drive down just a few streets of our small town (pop. 1903) I can see over a dozen homes for sale. Many of these homes have been on the market for a year or better.

I'm just glad I don't have a home for sale right now.

A recent analysis by the Minnesota State Demographic Center bears out some of what Frank's seeing.

Comparing changes in median home sale prices during the first nine months of 2007 and 2008, the report found a very mixed bag, with declines in most Minnesota counties where more than 50 houses were sold in the first nine months of last year.

In Yellow Medicine, the median sales price fell 7.2 percent over that year.

Things do seem to be bottoming out in the state's housing market but as we noted in late July it's estimated that about 1 of 83 Minnesota homes is in the foreclosure process, a reminder that there are still lots of problems in the pipeline.

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Below are stories people in our Public Insight Network are telling us about the housing market where they live. Check it out then add a story we can map.