Ben 's Blog

The Credit Crisis of 2008: Volume #1 Minneapolis Real Estate Perspective: Professional Opinions of our Marketplace and the Fed Bailout Bill

2008-09-30T09:30:57Z

Greetings Everyone,

Today is September 30, 2008 and 8:45am.

Uptown Financial Corp. is located in Minneapolis, Minnesota. Currently, the sun is shining and it is 45 degrees--the forecast is for SUN and a high of 65 degrees. The Minnesota Twins and Chicago White Sox will be playing a One Game playoff tonight to decided the American League Central Division Winner. Life is as usual---and somewhat normal.

Today's Rates: 30 yr. Fixed 5.75% & FHA 30 yr. Fixed 5.875%

This is the first posting in a long series of postings from Uptown Financial Corp. and those who surround us. With the 'Great Bailout Bill of 2008' failing yesterday and Wall Street Nose diving 778 points yesterday, we are all staring at the most severe Economic Crisis of our lifetimes. It has been labeled the 'Credit Crisis' and potentially could be the GREAT DEPRESSION of 2008.

In order to help educate our clients, network circles and public in general. We have been gathering professoinal perspectives from a wide array of industries to provide insights/takes on the current events of today. Should anyone have questions, comments or simply like to talk--Please do not hesitate to contact the professionals at Uptown Financial Corp. at any time.

All Current posts can also be read on our website, www.UptownFinancial.com in the Resources Section in the current Blogs Tag.

Stay Tuned and Keep Posted.

Take Care,

Ben Coulter

Uptown Financial Corp.

Ben@UptownFinancial.com

612-216-1388

612-677-3100

www.UptownFinancial.com

The Credit Crisis of 2008 Vol. #1 Minneapolis Real Estate Perspective:

by Don Edam, Minneapolis Real Estate Broker

Thoughts on the 'credit crisis' pertaining to the housing market

With all the news and media outlets playing 24-hours of doomsday clips regarding the current bank and credit issues our country is having, I've been receiving multiple calls and emails per day asking how this affects buyers and sellers in this fall market. While I am writing this at a time where no "bailout" has been agreed upon, I can give some educated opinions on where we are right now and where we're going in the housing market.

CONSUMER CREDIT
Nationally, the one thing the average person may be seeing is the tightening up of consumer debt. Car loans, home equity lines of credit, credit cards, etc., may be much tougher to obtain. This means that new car you may want/need may not come with the availability of financing. The addition you were looking to put onto your home with a newborn on the way may be put on hold because no one will approve you for a line of credit on your equity. As this seems to have the potential of drastically slowing down the economy, it has a mixed effect on housing.

You could run with the theory that the lack of consumer financing will lead to less money in the open market, thus leading to less income for companies, and a reduction in jobs. This could lead to people who own homes and lose a job to put their homes on the market (more inventory). This could also lead to those looking to purchase a home, who just lost their job, without the ability to qualify (less demand).

While I think the above point is a valid one, I also believe that many people are not going to sit on their situations without taking action. With the governments many changes lately, home lending is still going to be plentiful. Mortgage money will be one of the greatest and only places to obtain new money. If you are unable to secure a line of equity for that addition, you may end up have to become a 'move-up' buyer and purchase a home with the space you require. If you are unable to get that new car with better gas mileage, you may be compelled to purchase a home closer to your place of employment. While I don't see this as some grand acceleration in the housing market, I do believe it will help plateau the national home prices and spark a bit of demand.

FHA
FHA was almost extinct in the real estate vernacular a couple of years ago...yet, my last 3 buy-side transactions have used FHA and I expect that number to keep increasing. FHA has conforming limits for the price and type of homes that can be purchased with a FHA mortgage. Its my belief that we are going to begin to see a steep increase in demand over the next 6-12 months for homes that conform under FHA standards. It is also my belief that we may see a significant drop in demand for homes priced just over the FHA limit and some of these homes may be forced to make a tough decision to reduce to within the conforming limit or take their chances in a market with much less activity.

MINNESOTA MARKET
There are many things that I am seeing independent of much of the national market here in Minnesota lately.

The first thing that it capturing my attention is some of the quality of foreclosures coming on the market. In the past, a flashlight, sturdy shoes, and a faith in a higher power were required to step into a bank owned home. These properties were continuing to sit vacant and helping to drive down values in the areas they were listed. In the past month or so, that has changed. While I've still been in my fair share of "fixer-uppers", I have also witnessed many extremely well kept single family homes that are receiving multiple offers. These REO homes are not lingering on the market and are great values to the first and second home buyers out there.

Another thing that has really captured my attention lately is the number of multiple offers on newly listed properties. As near as last spring, many of my buyers were able to find a couple of homes they liked and then sit around and think for a couple of days (or weeks) before making an offer. Within the past week alone, I've had two separate buyers involved in multiple offer situations where the home has gone for at or above listing price. The pace of the Minnesota market is accelerating and inventory is starting to shrink for the first time in a couple of years. Average days on market in many areas of Minneapolis are declining sharply and transaction sides are increasing.

Now, I'm not trying to paint a rosy picture of the next housing boom coming to a town near you...but, with all of the calls and emails I have been receiving regarding worry over the state of the nation's economy, my team has also had their best month in 2 years...and I'm not alone. Other agents I have been talking to around the Twin Cities are expressing controlled optimism regarding the pick-up in business.

SUMMARY
I realize there are differences between the time we live in now and any other time this economy has gone through. I'm not going to get into personal feelings about the current state of the economy or some of the plans the government has to "fix" it. I see a large tightening in the "free money" that was rolling out over the past couple of years through the consumer credit markets, which will force people to put more thought into what is important to them materially. What I also see is an opportunity in this "crisis" to revive the housing market. In Minnesota, I see these times as additional fuel to ignite a market that is beginning to make the turn. I don't see it leading to the housing craziness we experienced at the beginning of this decade, but do see us well on our way to a more normalized market.

I would be happy to answer or comment on any questions anyone may have regarding the housing market, any current statistics, or any other related housing or economic thoughts.

Don Edam
The Don Edam Group
Owner Options Realty
952-486-7584 (direct)
952-400-5633 (fax)

www.DonEdam.com

Nehemiah, FHA, and Minnesota Home BuyersMinnesota Home Buyers

2008-05-13T13:54:10Z

Nehemiah, FHA, and Minnesota Home Buyers Minnesota Home Buyers, primarily those with moderate to low income, got a big break recently as a federal judge ruled that HUD did not adequately explained their decision to reverse a policy allowing seller-funded down-payment assistance on FHA-backed loans.What this means for home buyers nationwide is that 100% home financing is still available through a combination of the FHA and down payment assistance (DPA) companies like Nehemiah.

What is the Nehemiah Program?

Answer: The Nehemiah program is the nation's largest privately funded down-payment assistance (DPA) program, helping thousands of people achieve their dream of homeownership.

The Nehemiah Program provides gift funds to qualified homebuyers who purchase participating homes using an eligible loan program. The Nehemiah program is approved to provide gift funds by the FHA (Federal Housing Agency) which allows charitable organizations to provide gift funds toward downpayment and closing costs.

Here are some of the features of the Nehemiah program:

Gift funds up to 6% of the final contract sales towards your downpayment and/or closing costs.

Gift funds for both first time and repeat homebuyers.

Gift funds for both new construction and resale homes.

No repayment of gift money.

No income or asset limits.

No geographical restrictions.

If you are a qualified homebuyer using an eligible loan program, such as an FHA loan, you may be able to move into your new home with zero cash out of pocket!

The Nehemiah Program can help you become a homeowner!For more information or to see if you qualify, call Ben Coulter 612-216-1388.

Get to Know Me

http://www.uptownfinancial.com/

Save Energy and MONEY----Green Financing w/ EEMs and EIMs Minnesota

2008-05-08T23:12:28Z

Energy Efficient Mortgages? Who would have thought?

Apparently, energy-efficient mortgages have been available since the 1980's. They are known as an EEM, the mortgage combines a traditional loan product with ongoing savings related to ernergy-efficient improvements. The caveat is that the energy-saving measures must save more money that the increase in monthly mortgage payment from adding the cost of the corresponding efficiency improvements.

EEMs are used to finance new homes with energy-saving measures while an Energy Improvement Mortgage (EIM) finances energy upgrades in an existing home.

There are no special requirements to qualify for an EEM or EIM. Anyone who can qualify for a home mortgage can also qualify for an energy loan.

EEMs take energy savings into account when determining loan limits. Buyers of more energy-efficient homes can qualify for up to 10 percent more mortgage than would otherwise be possible. The lender looks at the entire picture of payments for mortgage and utilities when evaluating an applicant. Qualified energy efficient imporvements can include new windows, furnaces, additional insulation, energy-saving lights and appliances.

Recent statistics show that 58 percent of the greenhouse gas emissions in Minnesota are attributable to construction and operation of buildings.

The energy used in our homes for heating, cooling, and lighting accounts for 20 percent of all greenhouse gas emission in the United States, according to the Envitonmental Protection Agency.

In addition to reducing greenhouse emissions, energy-efficient homes are more comfortable. Unlike turning down the thermostat, newer, more efficient building products and techniques save energy while providing expected creature comforts.

Much of the housing stock in the Twin Cities is older and was built without an emphasis on energy savings. As fuel costs increase and a slowed real estate market has people staying for the long term, energy efficiency will become more important. become more important.

Lenders as well as homeowners have begun to look at the full cost of owning a home, including operating costs. Utility costs may eventually be more of a burden than the monthly mortgage payments as energy costs increase, asuming that homeowners locked into a 30 year low interest loan in the past several years.

HOW TO GET an EEM

The first step to getting an EEM or EIM is to find a lender that offers them. The next step is to have a qualified professional do a comprehensive evaluation of the energyuse in the home, or prospective home. ( Buying a new home in Minnesota does not necessarily assure energy efficiency.)

A Home Energy Rating System (HERS) is the only way to evaluate a home's efficiency. Several nonprofit agencies and companies in the Twin Cities are certified as third-party evaluators for HERS.

Once the homeowner has the HERS evaluation, for an existing home, he or she is responsible for getting bids to make the energy imporovements suggested by the evaluator. The improvement plan and costs are submitted to the lender, and the money for the work is put into escrow.

After the improvements have been completed, the rating professional returns to inspect and verify that the energy improvements were done correctly. The bank then closes the loan and release the improvement money as with any other mortgage. The cost of a HERS inspection for and existing home runs $400 to $600, which can usually be included in the mortgage amount.

In an effort to sell more new homes, some builders are paying for the HERS evaluation, which saves the buyer the $500 to $900 cost to evaluate new construction. The perception among builders is that the buyers are becoming savvier about the ongoing operating costs for a home. Some builder believe that energy efficiency is one of the few things selling right now. It can help sellers qualify and differentiate their homes in a sagging market.

For more information on EEMs, EIMs or the HERS evaluation, please feel free to contact me at Uptown Financial, Ben@UptownFinancial.com or 612-216-1388.

Resources:

www.natresnet.org (Residential Energy Services Network)

www.energystar.gov (Environmental Protection Agency)

www.spnec.org (St. Paul Neighborhood Energy Connection)

Article by Kim Carlson with EarthSmart Consumer

Minneapolis Real Estate: To Buy Now or Later?

2008-04-15T14:07:04Z

Stop Asking Your Real Estate Agent If "Now Is A Good Time To Buy"

For Americans wanting to buy a new home, there are always two time frames to consider:
Now OR Later

It's why prospective home buyers love to ask the question: "Is now a good time to buy?" If now is not a good time, they reason, certainly later must be.

Strangely, though, "Is now a good time to buy?" is a question that people ask their real estate agent but never their mortgage guy. It's probably a good thing, too, because loan officers have seen a lot of changes over the last few months and we're expecting a lot more this year.

But it's okay. You can ask me now: "Is now a good time to buy?"

And I answer: "Absolutely and unequivocally yes."

Now is a good time to buy -- not because home prices are flat or because sellers are willing to make like Monty Hall -- but because none of us mortgage guys can predict what the mortgage market will look like "later".

"Now" is full of knowns. "Later" is full of unknowns.

Mortgage markets are seizing and lenders have no choice but to limit what they will lend and to whom.

It may appear that lenders are going overboard with their restrictions but that's not the case at all. Lenders are simply more concerned about not wasting money than they are about making money.

Today, a bank doesn't mind if it passes on 9 good loans in a stack of applications if it means that it also passes on the 1 bad one that's in there.

Mortgages are only a small percentage of the bank's balance sheet, but it's the uncertainty about the demand for mortgages by investors that makes them nervous.

If mortgage bonds become worth less, the little guy could eventually topple the giant much like Little Mac did to Mike Tyson.

The first major change we expect to see is with second mortgages. Currently, 90% home equity lines of credit are available from most banks. Expect that percentage to fall to 80% or lower very soon.

The second major change we expect are more credit score-based fees. Currently, a 680 score puts mortgage applicants in the safe zone from credit-score based fees.

Expect that minimum score to raise to 720.

The third major change we expect is for the declining market designation to expand. This will force every home buyer to need an additional 5 percent (or more) of his own funds beyond what the bank's lending guidelines will allow. If you needed a 10% downpayment now, you may need a 15% downpayment later.

The fourth major change we expect is based on property type. New construction condos are in ample supply in many cities (including Chicago) and that may create an overall weakness in pricing. If a single-family home requires a 20% downpayment, banks may protect themselves by requiring 25% downpayments on condos.

And the last major change we expect is for every mortgage product in existence to get a complete makeover. New minimum standards will apply in all categories.

It's impossible to know what these new standards will be, but expect mortgage lenders to follow their losses and trim their menus accordingly. If you find yourself in the same Risk Class as other homeowners with high default rates, expect a tough road ahead.

So back to the question: "Is now a good time to buy?"

Yes it is. Not because homes may be priced right, though, but because mortgage products should look very different come this Fall. And no matter how "cheap" the home, you can't buy it if you can't get financed for it.

Contact Us with any questions: http://www.uptownfinancial.com/

Ben Coulter
Ben@UptownFinancial.com
http://www.uptownfinancial.com/

Technorati Tags: Mike Tyson's Punch Out, Monty Hall, Now and Later, Overboard

Minneapolis, Minnesota Spring Time? SMILE :)

2008-03-28T13:01:17Z

The lighter side of the Minneapolis Mortgage game.

Today is Friday----Finally!!!

As we all struggle with the recent 'quick underwriting of CITI' and the lovely appraisal reviews that are commonplace. I thought I would remind everyone----first and foremost---life is good and spring is coming.

Even though the past year has given all of us grey hairs----aka 'wisdom hair'---in all too rapid fashion, the fact remains-----------WE ARE STILL HERE!!!

This means we have survived the likes of 30 plus major banks---Bear Stearns and the likes. Who would have ever dreamed that each of us would outlast our lenders? As the ground begins to thaw and the sun begins to warm us from head to toe----we have to smile at the fact, the market is showing signs of turning in our favor.

For those of you not living here in Sunny Minneapolis, Minnesota---feel free to make a visit soon as the tundra is beginning to disappear.

Also, as Uptown Financial Corp. begins to show its color to the community of Active Rain; we openly invite those interested in learning more about our capabilites and relationships in the marketplace. Currently, we are working with strategic Networks to meet our clients Finance/Mortgage needs in the Residential, Commercial and International arenas. On the International Platform, our focus is on Latin America (Mexico, Costa Rica, Panama etc.)

Remember to smile----Spring is coming!!!!!!!!!!!!

Take Care,

Ben Coulter

www.UptownFinancial.com

Minneapolis, Minnesota Based Company