Twin Cities Real Estate Update-August 2013 Interest rates hit their lows early this summer and have inched up to a still-low 4.5%. The combination of low interest rates, low prices and rising rent costs have continued to drive sales with pending sales up 13.6% over the past 3 months from a year ago and the resultant inventory decline of 14.3% over the same period.

What does the future hold? There are several issues that could impact the real estate industry.
(1) The federal government is proposing reducing their bond purchases. Just the threat of this has caused 10 year bond yields to go up which tends to drive up mortgage rates.
(2) The federal government is also contemplating what to do with Fannie Mae and Freddy Mac, the government-sponsored entity (GSE) mortgage guarantors that the government had to bail out to keep solvent. These GSE's could be privatized with banks and other mortgage originators taking more of a risk in mortgage losses. This would likely further drive up the costs of obtaining a mortgage.
(3) Past home-owners who lost their homes to foreclosure or short sale are beginning to re-enter the market as potential home-buyers, this will drive up demand and further drive down supply.
(4) Home investment companies have blossomed over the past year. Most homes for sale are seeing at least one, if not several offers to purchase from out-of-state corporations that are buying thousands of homes to build their rental portfolios. This will also potentially drive down supply.

Summary
As the economy rights itself and employment continues to improve, people will return to home-ownership as a historic cornerstone of personal stability and wealth-building. Price appreciation is expected to be around 4-6% over the next 12 months due to the resulting increasing sales. This appreciation will bring homeowners that are currently unable to sell their homes back above water which will allow inventory to increase and the real estate market to continue its recovery. All this could be impacted by the feds moves which drive up interest rates but as long as interest rates remain below approximately 6%, the housing market should remain healthy and stable.

Special thank-you to the Minneapolis Area Association of Realtors:
Data and graphics are courtesy of the Minneapolis Area Association of Realtors

Real Estate Update

Summary: Inventory is down, Rates are going up, and Prices are inching up

Mortgage Rates
At the past couple federal reserve meetings, the chairman has announced that with unemployment improving, he will soon phase out "quantitative easing" or the bond purchasing programs. This has driven down the price of 10 year notes (if you pay a lower price, that means your yield goes up on a specific face value bond). 30 year mortgage rates follow 10 year bond rates so mortgage rates have also increased. Mortgage rates have risen from 3.5% to 4.25% over the past 30 days.

Inventory
With the number of homeowners who have lost their homes to foreclosure, there is an ever-increasing number of people renting. This has led to a very low 2.8% vacancy rate (Marquette Advisors, May 2013). Low vacancy rates has led to increases in rent amounts, driving home buyers and in particular, 1st time home buyers into the market place and driving inventories of homes for sale to 10 year lows.

Prices
Supply and demand is also driving up the prices of homes with the median price of a home in the Twin Cities up 14.9% from this time in 2012.

Neighborhood Garage Sale June 13, 14 and 15 (8 a.m. to 5 p.m.)

1. 11867 101st Ave N
2. 9955 Hemlock Way
3. 9772 Ives Lane
4. 11421 99th Pl N
5. 9907 Deerwood Ln N
6. 11262 98th Place N
7. 11282 98th Place N
8. 11655 100th Ave N
9. 9817 Kirkwood Lane N
10. 10065 Hemlock Ln

Other garage sales:
224 4th Ave SE, Osseo

2012 Neighborhood Real Estate

For those of you wanting to know how the story ends, read no further:
The market has finally turned!

What led to the recovery:
(1) Interest rates have remained at ridiculous lows (apprx 3.25% at the time of writing)
(2) Rents have gone up making owning more affordable than renting
(3) First time home buyers have re-entered the market in increasing numbers
(4) All this led to an increase in demand and therefore, a shortage of supply
(5) Driving prices up and leading in 2012 to an APPRECIATION of home values

In our neighborhood, 18 homes sold with an average of 75 days market time and an average sale price of $202,122.
I divide these homes into two general categories:
(1) Distressed sales-those involving a bank to sell the home (short sales and foreclosures)
(2) Traditional sales

There were seven distressed sales with an average sale price of $164,971 and 11 "traditional" sales with an average sale price of $225,764.

DISTRESSED SALES SUMMARY

MAP OF 2012 DISTRESSED SALES

1. 9926 Deerwood Ln N
2. 11700 N 98th Ave N
3. 12282 97th Ave N
4. 9964 Cottonwood Ln N
5. 9792 Ives Ln N
6. 11600 97th Ave N
7. 12169 97th Ave N

TRADITIONAL SALES SUMMARY

MAP OF 2012 TRADITIONAL SALES

1. 9877 Deerwood Ln N
2. 11534 100th Ave N
3. 11573 100th Pl N
4. 9852 Norwood Ln N
5. 12052 99th Ave N
6. 11575 98th Ave N
7. 9805 Kirkwood Ln N
8. 11331 100th Pl N
9. 12468 99th Ave N
10. 12344 99th Ave N
11. 9843 Kirkwood Ln N

Our neighborhood offers easy access to 610, 169 and 94 and the park reserve is unbeatable! I see the recovery continuing through 2013 provided interest rates remain relatively low and unemployment doesn't rise significantly.