NOTE: You might want to check out how your local market fared on the report referred to in this article. Obviously, an undervalued market would be a selling point for you. You could also spin an "overvalued" market as a negotiating tool to get a property below asking price.
Four years ago, when real estate prices were rising like there was no tomorrow, National City Corp. and IHS Global Insight did an analysis of 299 markets in the United States and determined that homes were overvalued in 87 percent of the markets.
A new analysis, done by PNC Financial Services -- which absorbed National City -- and IHS shows that a big majority of U.S. markets, 242 out of 330, are now UNDER-valued. What's kind of interesting is that the markets that were ranked among the most overvalued four years ago are now among the most undervalued.
This illustrates what market timing expert Robert Campbell calls the "pendulum" effect. He points out that the further the pendulum swings one way, the further it will go in the other direction once it does change direction. In other words, the markets with the biggest overvaluations don't just tend to undergo a correction; they go through an OVER-correction.
The same thing happened in the stock market when it kind of crashed in 2008. Sure, stocks were overvalued prior to that, but the overcorrection brought even some blue chips into the ridiculously low-priced area. In the stock market, that has occurred before. But it might have taken the bubble of crazy proportions we saw in the last decade for us to realize that it could truly apply to real estate, too.
It's a lesson we should take note of and remember for the next bubble. Or if you're in Canada, think about how it might apply to the cycle you are experiencing now.
What this means in the U.S. right now is that, thanks to overcorrection, homes are undervalued in 242 of the markets in the U.S. That means homes are available at bargain prices. And it's logical to think that there will be another pendulum swing, meaning the places where homes are the MOST undervalued will, in theory, see the greatest appreciation.
According to the CNNMoney article, Richard DeKaser -- the real estate expert who did the report for National City -- said the original report predicted with uncanny accuracy what would happen when the bubble burst. According to the article:
"At the risk of immodesty, I must say the whole model has performed too well to believe," said DeKaser.
"I've done some research that shows when you get a bubble, you don't just return to normalcy," he added. "You go past normalcy for a long period of undervaluation."
It's a big lesson. And in four years, it will be interesting to again see where the pendulum is.
Recently I found a useful tool that will keep you up to date with real estate trends as they are happening. It is Real Estate Today Radio. Listen to it and see what you think. In addition to the radio show, consider visiting our Minneapolis Realtor site at http://www.MplsRealtor.com. When you go there, if you click on market activity in the navigation bar, you will find statitics-Monthly-year to date, and year over year. I think it is one of the best indicators of things such as marketing time to sell a home and percent of list to sale price. Average prices of homes can be skewed if there is a big variance of properties within that community. When you want to search for MN homes, simply visit my Minnesota RE/MAX website and begin your search. MN mortgage financing can be arranged at our mortgage site.
Here is more "great economic thinking" from the genius pool in Washington. Want to KILL the housing recovery in the Jumbo market?? Pass this into law and see what happens to homes that require a mortgage greater than 417K. Already 12% of the homes in this bracket are in default. MORE will follow if this garbage passes. We are being Robin Hoodwinked. Do you know that almost 50% of the people in this country don't pay federal taxes. 1% pays almost 40%. Now, they want more blood. At some point, possibly soon, enough will be enough.
I highly recommend a children's book by Dr. Seuss called Thidwick The Big Hearted Moose. In very simple terms you can see in picture book format what this administration and it's policies are doing to this country.
Administration 2011 Budget: Eliminate Mortgage Interest Deduction for Some
Sorohan, Mike The Obama Administration yesterday submitted to Congress a record $3.8 trillion budget for fiscal year 2011 that includes elimination of the mortgage interest deduction for individuals who make more than $200,000 per year and proposes fees on many large banks.
The Mortgage Bankers Association reacted strongly to the mortgage interest deduction proposal, saying the Administration's efforts to reduce the federal deficit, while vital to the long-term health of the U.S. economy and the real estate finance industry, should be done without negatively impacting the already-fragile housing market.
"Limiting the mortgage interest deduction and imposing additional taxes on lenders will only make economic recovery more difficult," said MBA Chairman Robert Story Jr., CMB.
MBA opposes the proposal to reduce itemized deductions, including the deduction of mortgage interest, for taxpayers reporting income above $250,000 (joint) $200,000 (single). MBA said this would have a negative impact on the housing market, particularly in high-cost states such as California and New York, as it would increase the cost of mortgages for many potential homeowners, especially in high-cost states.
"It will be most felt in the markets with higher-priced homes such as California and New York, because that's where the mortgage interest deduction has been most clearly capitalized," said MBA Chief Economist Jay Brinkmann. "These are the markets that are not showing signs of recovery. In California it's the lower price homes that have seen stability; the higher-priced homes remain volatile. So when you take the mortgage interest deduction away, you're effectively reducing the potential pool of buyers who are willing to pay for those homes, and that can have a potential price impact on the market."
Throw in jumbo lending, Brinkmann said, where borrowers of that level have had problems getting loans, and the situation becomes worse. "If jumbo lenders aren't sure what prices will be going forward, is it going to result in higher volatility," he said.
From a macro economic perspective, Brinkmann said, people in these tax brackets look at relative yield. "What you're doing is disadvantaging the mortgage relative to other usages of money, so they may decide to reduce mortgages or pay off the house rather than make other investments conducive to the economy, such as the stock market."
MBA also expressed opposition to a proposal to tax carried interest at ordinary tax rates (as opposed to the capital gains rate, as it is taxed now), as it would discourage capital formation for lending.
Additionally, MBA said a previously announced Administration initiative to impose a Financial Crisis Responsibility Fee on some of the country's largest banks would reduce availability and increase costs of real estate loans to consumers and small businesses by discouraging large financial institutions from entering into new, private-label commercial mortgage-backed securities and residential mortgage-backed securities transactions and significantly reducing the profitability of non-agency servicing.
Story also noted that the budget did not offer any indications of the Administration's plans for the future of Fannie Mae and Freddie Mac.
"MBA has been at the forefront of the debate over the future of the government's role in the secondary mortgage market," Story said. "We rolled out our proposal in September and have been meeting with all stakeholders on Capitol Hill, within the administration and across the industry to share our perspectives. Our proposal would provide a new foundation for supporting the core of the mortgage market. We look forward to continuing our discussions as the administration readies its suggestions."
Sell When Everyone Else is Buying...and Vice Versa
By Rob Minton & John Mazzara
You always hear about trying to time the market's bottom when it comes to buying a property.
You've heard the phrase "buy when there's blood on the street" and probably have taken note of expert investor Warren Buffet's advice, "Be greedy when everyone else is fearful, and fearful when everyone else is greedy."
Those lessons are being taken advantage of by real estate investors in today's real estate market, as distressed properties are available at bargain prices and have made up a large percentage of real estate sales in the past year.
There's another lesson in today's news, however, about the flip side of that equation: selling at the top of the market, being fearful when others are greedy.
The lesson is about MetLife Inc. According to an Associated Press article, Metlife sold a pair of giant apartment complexes in New York in 2006, near the height of the real estate boom. It was a record sale -- $5.4 billion for 110 buildings and 11,000 apartments overlooking the East River.
Things were going great at the time, with real estate prices in New York (and just about everywhere else) soaring. Instead of holding on to the property, which had been built by MetLife in the 1940s when there was a demand for housing for returning World War II veterans, and seeing what additional appreciation it might bring, though, MetLife sold. It might not have been fearful, but it was at least a cautious move at a time when everyone else was greedy.
The buyers of the property at the time had big plans. They were going to convert some of the rent-controlled units to luxury apartments and capitalize on the huge demand for high-priced digs at the time. However, as the real estate market deteriorated, the investors ran into problems.
A state court ruled that some of the rent increases were improper, according to the AP article. The value of the property, analysts pointed out, dropped to $2 billion, less than what the more than $4 billion owed on the property. The article states that now, facing bankruptcy, the investors will turn the property over to their lenders.
On the surface, the bankruptcy and forfeiture of the properties to lenders make it look like a poor investment for the group who purchased the apartment complexes in 2006. But the real lesson is how good MetLife's investment was.
It built the properties into the demand of World War II veterans. It held he properties for 60 years, enjoying the cash flow and -- you can bet -- paying down debt while the properties appreciated. And when others were greedy, it sold them near the height of the market.
How many similar stories will there be to come out of this current market, when investors are buying low and into the demand for affordable housing?
This story is a great example of knowing when to buy. And when to sell, which is one we don't always see.
Looking for Edina real estate-Start at my Edina RE/MAX real estate site. Bargains abound throughout the market-will you look back and wish you had purchased a home when prices were LOW! MN homes are cheap-in comparison to the past.
Looking for mortgage preapproval for your minneapolis mortgage? Start at our MN mortgage broker site.
With all the changes in the mortgage world, let's revisit an opportunity-The USDA rural development loan. This loan is available in Minnesota and our Edina mortgage company - Venture Development offers this loan. This loans works great in area just outside of the metro area.
Here are the highlights:
*No Mortgage Insurance!
*No Cash Reserve Requirements!
*102% of Appraised Value to Cover Closing Costs!
*No Cap on mortgage amount other than the Appraisal (plus 2% USDA-RD Fee)!
*6% Seller Concessions Allowed to cover closings costs!
*Gifts allowed and DO NOT NEED to come from relative!
*30 year fixed and no MI!
*All Closing Costs can be included in the loan!
*Try USDA-RD BEFORE FHA because require NO DOWN PAYMENT!
*Standard Site Built Homes. No MFH, Modular, Log, etc.
*We can order our OWN APPRAISAL for the USDA-RD file!
*First Time Home Buyers Allowed!
*Minimum of only 620 on all borrowers to go No Money Down!
I just received an email from a solar consultant company. Here is the gist of the email. Apparently, in conjunction with our local Xcel energy office, a certain number of business customers will be able to qualify for a 90% rebate on the cost of installing a solar electric system. Here are the parameters:
1) Only available to samll businesses with a maximum of 20 full time employees (or equivalent)
2) This is a pilot program with limited funds
3) Minnesota Xcel commercial customers only
4) Building roof must have a solar score of 90% or better ( many flat roofs exceed this)
5) You must either own the building or work out an arrangement with the owner to install a system.
All of this and more was in my email. I have no affiliation or relationship with the guy who sent it, but his name is Tom Reinke at Sundial Solar Consultants 612-558-6549
Just thought I'd pass on the Info-Call me for any of your residential or MN commercial real estate needs
Every wonder what is going on in the economy. Why does one leader or party believe one thing and yet another sees it in a completely opposite way? Just like with politics, there is are opposing economic view points on how to expand and manage the economy. Economists-John Maynard Keynes and F. A. Hayek differed in their interpretation. If you want to watch a fun video explaining what I'm talking about.
Looking for an Edina Home? Visit our MN real estate site and search for Edina Homes or homes in the Twin Cities. We also offer Minneapolis mortgages and mn home mortgages at our MN mortgage brokerage site.
Home sales plunge nearly 17 percent in December after tax credit deadline extended
I thought we got the message the month before that sales were up and we were out of the woods!!! So, we are getting a ton of conflicting information. Maybe the fact that major holidays and blizzards occured in December could have had something to do with the drop in home sales. That aside, it comes back again to jobs!! Jobs make the world go around and provide income to purchase homes. That and that alone is the key to jump starting the housing market and our economy. THAT is where the focus to recovery should be-everything else is secondary.
Also, this week we learned that FHA (the primary provider of loans these days) has a better than 10% default rate. In order to preserve themselves, we find out that mortgage insurance is increasing, down payments are increasing, credit scores are increasing, and debt to income ratios are decreasing. This means fewer people will qualify and fewer homes will be sold, which means prices will continue to slide--unless of course this is offset with more jobs and these folks turn into home buyers.
So is this post about gloom and doom or Opportunity? It is about opportunity. IF you believe that the market will rebound sometime in your lifetime, now may be the BEST time to purchase a new home. Only with hindsight can we be sure. But, by then it could cost you more. The first time buyer credit and existing home buyer credit are in place until April 30th 2010. NOW is the time to act upon the deals. I am working hard to make it happen and the results are encouraging. I have sold 3 homes this month and have 3 very close to being put together. This could be an amazing January. Yet we hear it is the worst of times. Life is really what you want to make it. Visit our websites if you are looking for Twin Cities real estate or need to refinance your MN mortgage.
It's hard to believe, but we're now closer to February 1 than January 1, which means the New Year's resolutions that were so easy to be excited about at first are probably losing steam. It happens every year.
Everybody tells you to set goals, so you've probably gotten good at that over the years. The problem is, it's easier to set them than to stick with and ultimately achieve them. But there are a few tricks you can use to stay motivated and on track to achieve your goals.
It may be too late already, as you probably have already set your goals for 2010, but hopefully, you set realistic goals. Your goals don't have to be easy -- but they should be realistic.
It is extremely difficult to stay motivated when your mind knows you really have no shot at achieving whatever benchmark you have set for yourself. If you want to lose 50 pounds by the end of the year, for example, but the most weight you've ever lost in 12 months is only 10 pounds -- you might want to re-adjust your goal. You cannot trick yourself into staying motivated to accomplish something that, deep down, you know is nearly impossible.
Once your goals are in line with reality, here are some other mechanisms you can use to stay motivated:
Visualize: Try to see yourself not just having achieved the goal, but also enjoying whatever REASON you had for the goal. This is big-picture focus, and it will require you to think deeper. But sometimes our goals are not really THE goal, but part of a larger plan we have. Visualize the result. For example, if your goal is to invest $10,000 toward retirement this year, picture your ideal retirement, lying on the beach or playing golf...whatever. That will motivate you more than watching zeros on bank statements.
Share: Make your objectives public. Tell people what your goals are. It's no secret we hold ourselves more accountable when we have broadcast to others our intentions. If you want to run a marathon this year, tell everyone you know. You're much more likely to push yourself when you know that you've made your commitment public.
Measure: Keep track of your progress diligently. That which we measure improves. Get on the scale regularly. Write down every dollar you spend. When you track results constantly and consistently, you are more likely to stay on the right path. When your measuring gets lazy, so you will your commitment.
Piece it together: Instead of one big goal, figure out all the little goals that might lead you to a larger goal. We humans stay engaged when we can take action in many small steps rather than a couple of big steps. Lose a pound every two weeks throughout the year, and you'll lose 25 pounds. And a pound every couple of weeks is more manageable than the bigger, more abstract goal of 25 pounds.
As you head into February, keep in mind that 2010 is still young. You have time to accomplish the things you want to accomplish this year, and it doesn't hurt to take a few moments to figure out if you can use a few tricks to stay more motivated!
Is one of your goals this year to find a new home? Search the Twin Cities MLS from my REMAX website and get a MN home loan at our MN mortgage broker website.
John Mazzara | RE/MAX Associates Plus | 952-929-2577
3132 Louisiana Ave N, Crystal, MN
Almost like new – major remodel + newer mechanicals. 2007 kitchen cabinets, tile, countertops, microwave + sink. 2008 – furnace, roof, siding, bam
3BR/2BA Single Family House
offered at $199,900
Year Built
1971
Sq Footage
1,890
Bedrooms
3
Bathrooms
2 full, 0 partial
Floors
2
Parking
Unspecified
Lot Size
9,147 sqft
HOA/Maint
$0 per month
DESCRIPTION
Almost like new – major remodel + newer mechanicals. 2007 kitchen cabinets, tile, countertops, microwave + sink. 2008 – furnace, roof, siding, bamboo floor on main 2010. Fresh paint, updated lower level bath. Fenced walkout lot. Not a distressed sale.
Information about minnesota real estate, twin cities real estate market, the twin cities, twin cities relocation, and other things that might be fun or of interest. Articles will be posted that describe the real estate and mortgage markets and provide useful information to first time buyers, move up buyers, and investment property buyers. http://www.MinneapolisStPaulHomes.com or http://www.MinnesotaRealEstateBrokerBlog.com
Disclaimer: ActiveRain Corp. does not necessarily endorse the real estate agents, loan officers and brokers listed on this site. These real estate profiles, blogs and blog entries are provided here as a courtesy to our visitors to help them make an informed decision when buying or selling a house. ActiveRain Corp. takes no responsibility for the content in these profiles, that are written by the members of this community.
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