Archive for December, 2009
Comments Off on Minneapolis Duplex Market Statistics Refuse To Celebrate Holidays
While the Minneapolis Area Association of Realtors apparently isn’t releasing market statistics for the week ending December 21, 2009, I nonetheless have numbers to report in the duplex and small multi-family sector of the market.
Hey, CNN never takes a vacation either.
Pending sales dropped dramatically for the week from their 2008 mark. In fact, they dropped by exactly half. And while the most inexpensive duplex to receive an offer was listed at $13,000, this is more than twice as much as the cheapest duplex that sold in the same week last year at $5,900.
To that end, the average off-market price for the week was $110,170, compared with the $95,200 for the stretch in ’08.
Of those properties that accepted purchase agreements, 6.25 percent were offered by traditional sellers. While this number seems paltry compared to data in recent weeks, it is, again, exactly double the figure for last year.
Traditional sellers did, however, hold their ground among new listings, comprising 37.14 percent of the market. This mark smashes last year’s traditional holiday offerings, which represented just 3.33 percent of the new inventory.
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While everyone was rushing to the airport or to the mall last week, the real estate market delivered news that appeared to be signs of a split personality.
On Tuesday, there were smiles everywhere when the National Association of Realtors reported sales of existing homes rose 7.4 percent in November from their October mark, and are 44.1 percent higher than they were in November 2008. In fact, current sales haven’t been this high since February, 2007.
On Wednesday, frowns appeared when the Commerce Department reported sales of newly-built homes dropped 11.3 percent; reaching a seven month low.
So what’s the truth about the real estate market?
Here’s a hint. Data for exiting home sales is reported for when the transaction closed. In other words, that leap in November transactions may well reflect the expiration of the original first time home buyer tax credit, which expired at the end of the month.
New home sales, on the other hand, are calculated based on when the contracts were signed; meaning after November 1.
In other words, we may see a similar dip in existing home sales when next month’s data is reported. However, it’s important to note the volume of existing home sales wasn’t the only good news in NAR’s report.
What’s interesting to note is that the total supply of unsold inventory on the national real estate market is down 15.5 percent from one year ago. If no new homes came on the market, we’d be out of houses to sell in 6.5 months.
The last time there were fewer houses to sell was in April, 2006; generally considered the biggest of the boom years.
The basic economic principle of supply and demand dictates that as supply diminishes, prices go up. We’ll see if that holds true as we head toward the April 30th deadline for the first time and “move up” buyer tax credits.
Comments Off on Minneapolis Duplex Market A Stocking Stuffer
The Minneapolis duplex market was both naughty and nice the week ending December 12, 2009.
As a result, there were fewer presents under the Minneapolis duplex market Christmas tree. Pending sales were down 11.8 percent from their 2008 mark.
The good news is Santa left more expensive packages. Thebig and shiney average off market price of $112,980 made last year’s mark of $85,499 look like a lump of coal. Last year 91 percent of those solds involved a bank in the negotiations. This year, 90 percent did.
This price jump may be the result of ever-tightening inventory with the number of new listings week over week dropping by 34 percent. Of these, 26 percent of the weeks duplexes were offered by traditional sellers. This is a slightly more festive number than last year’s 15 percent.
In the single family market, the number of pended sales for the week was down 2.5 percent year over year. New listings were down as well. The laws of supply and demand should eventually result in a higher average sales price.
While the news isn’t exactly the pony we asked Santa for, at least he didn’t skip the Minneapolis housing market entirely.
said on December 21st, 2009 categorized under: Tenants
Comments Off on Keep Tenants On Your Holiday Shopping List
With just three shopping days left until Christmas, it’s a good time to remember that small gestures, like including your tenants in your gift giving, can go a long way toward keeping your rental units occupied.
Times are tough for everyone, and our natural instincts are to cut back. However, as we discussed last year, small gestures like a gift card to a grocery store, iTunes or Targetcan be a way to differentiate yourself from other landlords.
And while $10 of downloadable music may not ultimately prevent anyone from moving out, it nonetheless fosters good will for the duration of a tenant’s stay, which may help keep rent payments on time.
said on December 18th, 2009 categorized under: Tax Credits
Comments Off on When Can You Get The First Time Home Buyer Tax Credit?
If you buy a Minneapolis duplex before the end of the first time home buyer tax credit ends on April 30, 2010, can you get your $8000 check now or do you have to wait until you file your 2010 returns?
After all, the original version of the credit could be claimed against 2008 or 2009 taxes.
The good news is for all qualifying purchases in 2010, first time owner occupant duplex buyers can take the credit on either their 2009 or 2010 tax returns.
However, anyone who purchased a property after November 6, 2009, needs to use a new version of Form 5405, which should be issued by the IRS in the next few weeks.
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One of the biggest obstacles to recovery in the real estate market is the glut of short sales on the market.
See, the very term, “short sales” is something of a misnomer. For while the lender agrees to accept less than what’s owed on the sale of a home, the amount of time it takes to successfully negotiate the transaction averages two to eight months.
As a result, many buyers avoid looking at those properties altogether. They simply haven’t got the patience.
In an effort to expedite the process, the Treasury Department announced a new program last week to “streamline” the short sale process.
Available only to home sellers who don’t have the income or debt levels necessary to qualify for the Making Homes Affordable program.
In order to qualify for the new program, the property must be the homeowner’s principle residence. He or she must have taken the loan out before January 1, 2009, and be delinquent or appear as if default is likely. Finally, the borrower’s mortgage payment for the month must be more than 31 percent of their pre-tax income.
The plan is designed to expedite agreements between lenders, buyers, sellers and Realtors.
Unfortunately, implementation of the plan may be slow. Mortgage companies don’t have to start the program until April, 2010.
Participation by lenders who hold second mortgages like home equity loans, however, is voluntary.
Comments Off on Minneapolis Duplex Market Open For Interpretation
Look at the image to the left and tell me what you see.
I don’t know what it is, let alone what it means; kind of like the real estate market statistics for the Twin Cities for the week ending December 5, 2009.
In the single family sector, pending sales were up from the week before, but still trailed the mark from the same week one year earlier by 7.7 percent.
The months supply of single family inventory dropped to 5.7; the lowest it’s been in two years and down 32.9 percent from last year. Look a little closer, however, and numbers indicate there’s a 7.6 month supply of homes offered by traditional sellers, a 1.4 month supply of foreclosures and a big, black splat of short sale inventory at 12.8 months.
Houses priced below $190,000 have sold 49.9 percent faster over the last twelve months than they did the year before. For properties listed above that $190,000 mark, however, sales are down 10.5 percent.
Over in the duplex sector, the average off market price for pending sales was $132,355. This is a leap of $22,125 over the average sold price for properties one year before.
Of the small multi-family properties that received purchase agreements, just 13 percent were negotiated by traditional sellers. While this is a significant drop from previous weeks, it is nonetheless a 10 percent gain year over year.
The amount of new inventory to hit the market was down 33 percent from last year. Of these new offerings, traditional sellers were obvious, representing 49 percent of the market. Last year, they were responsible for just 17 percent of the new inventory.
All in all, there doesn’t seem to be an obvious picture in any of it.
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If you’ve been waiting until after the holidays to buy a duplex, it may prove you may want to get out of the mall and into my office.
It seems buying your first house or duplex may soon cost you more.
HUD Secretary Shaun Donovan told Liane Hansen of NPR‘s “Weekend Edition Sunday” that in an effort to boost FHA reserves back to the minimum standards Congress set for the agency, “We’re going to raise some of our standards.”
In the interview, Donovan said that in addition to raising the level of enforcement of adherence to underwriting standards on lenders who offer FHA loans, some of the FHA loan requirements themselves are probably about to change.
Donovan said, “We are going to require somewhat more skin in the game from our borrowers to insure that if we do get another decline in the market ahead of us that we don’t see foreclosure rates and delinquency rates rise in the FHA portfolio from where they’ve been.”
While he promised an announcement of the specifics by the end of January, he did indicate the agency was leaning toward increasing the minimum buyer down payment from 3.5 percent to 5 percent.
The amount a seller may contribute toward a buyer’s closing costs may also be cut in half; dropping from the present maximum of 6 percent to 3 percent.
It’s likely that it will take some time after the January announcement to implement any changes HUD recommends.
Nonetheless, if the increased down payment offers a greater challenge to your buying ability, the time to shop is now.
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When I first sit down in the office with a duplex buyer, one of the first questions I ask is, “What are your goals in buying a duplex?”
For investors, the answer may be a certain rate of return; for most, that is defined as a specified percentage of cash on cash return. If the investor rehabs properties, her goal may be for a certain profit margin.
For most owner occupants, the goal is to find a nice, comfortable place to live, with their portion of the mortgage payment not to exceed a specific dollar amount.
Much of the time, I’m able to find a property that meets these main objectives in a relatively short amount of time.
But what I find, time and again, is when I do, clients come down with an acute case of “Analysis Paralysis”. They get so bogged down in the minutia of the numbers that they fail to act. And while they’re analyzing, somebody else buys the property.
Almost always, the numbers they’re crunching, or criteria they’re evaluating, aren’t in keeping with the information provided in our initial meeting.
This usually has to do with suddenly wanting to make a lower contribution to the mortgage payment, or no longer being “willing to do work” . Sometimes, buyers decide they want the property for a greater discount; even though it’s already on the market for 30 – 60 percent less than what it sold for three years ago.
What do I attribute this to?
Read the rest of this entry »
said on December 10th, 2009 categorized under: Tenants
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One of the fears many duplex investors express to me is of a middle-of-the-night phone call about something breaking.
Of course, while there are always plumbers and repair people happy to correct the problem for a fee, one strategy many landlords here in the Twin Cities take is to require, in their lease, that tenants carry a Centerpoint Energy Service Plus insurance plan.
While there are a wide range of coverages available, the basic plan, which runs about $17 a month covers repairs to a gas furnace or boiler, gas or electric clothes dryer, water heater or range.
Coverage for all appliances, as well as the central air conditioner, may be purchased for just under $38 a month.
Once they have the repair plan, tenants can then call Centerpoint directly for repairs. This not only relieves some of your stress, but helps you reduce your own property maintenance expenses as well.