Those of you waiting for the Minnesota real estate market to return to the activity levels of 2002 through early 2005 may want to pick another post. I attended a very informative information session put on by our Countrywide Mortgage regional vice president. I had been beating my brains out trying to figure out how it all got so overheated and why the brakes got hit like Fred Flintstone shoving his feet through the floor.
My answer, came in two words, Wall Street. Do yourself a favor and check out how much money exited the dot com sector after the late nineties run and came flying into real estate. Historic safety and solid returns made real estate the haven of choice for billions of dot com dollars. Hedge funds and other huge pools of capital were buying mortgage backed securities like never before, often with little regard to what made up the bundles. Buildings were financed and built by companies who were basically sophisticated flippers. At one point one in four townhouse or condo purchases was made by an entity that was not going to live in it.
Now I tend to be an over-simplifyer, probably because I slept through too many classes in college. But, what happens to any market when incredibly large amounts of cash get thrown at them? Prices go up. Increasing values attract more cash and so it goes until the first sign of trouble. In our case that trouble was fourteen consecutive increases in interest rates. Then the cash leaves. That giant sucking sound you heard during the second half of 2007 was Wall Street running away like their hair was on fire. Those creative loans that disappeared went away because Wall Street quit buying them, period.
So where are we now? Well maybe this is it. Maybe this is the market. The Hennepin county real estate market, where I work, 
will finish the year down roughly 17% from 2006. I'll bet twenty to twenty five percent down from the highest point. What if this is it? Are you ready? Will you compete with the highest seventy five percent or will you fade out with the weakest twenty five percent. The new market is competitive. The overpriced will not sell. The most competitive seventy five percent will sell. Will you say no to the overpriced? Will you help your client be among the most competitive seventy five percent? Will you be afraid of what isn't there or go get your share of what is there. There is no more free money in real estate. You want it? Go get it. Outwork 'em! Out perform them. Attack! The new market belongs to those who will help their clients compete. I don't know about anyone else but I love this! Bring it on!
Thanks for reading and for more information about Minnesota real estate or Hennepin County real estate...
Tim Ross * Re/MAX Assocates Plus * 612-598-9295 *
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