Minneapolis Case Shiller Index posts a 2.09% increase

2013 was a good year for home prices in the Minneapolis/St Paul market.  The Minneapolis Case Shiller Index posted a 8.62% increase from January 2013 to October 2013.  (The totals for the entire year won’t be available until February 2014).

October posted a 2.09% increase from September to October.

We are heading the right direction!

Since it is New Years Eve 2013.  I guess I need to make my prediction for 2014.  I expect the housing market in the Twin Cities to stabilize a bit.  Interests rates will nudge up slightly slowing some of the sales, Builders will continue to add more supply to housing market holding inventory at manageable levels which will hold pricing in line.

I don’t believe we have entered into another housing bubble, and don’t believe we will.  If you drew a trend-line from 1990 to about 2000, we are roughly where that trend line would be.

12312013 minneapolis case shiller

2013-01-01  126.88
2013-02-01  128.53
2013-03-01  129.55
2013-04-01  133.35
2013-05-01  132.91
2013-06-01  131.66
2013-07-01  130.76
2013-08-01  132.24
2013-09-01  133.41
2013-10-01  135.50
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2013 Minnesota Certificate of Rent Paid form (CRP)

2013 MN CRP

 

If you are a landlord and collecting rents, you will need to file a CRP form the Minnesota Department of Revenue.

If you own rental property and rent living space to other persons, you or your managing agent must issue a CRP to those persons if:
• property tax was payable in 2013 on the property; or
• you were not required to pay property tax, but you made payments in lieu of
property taxes.

This form is Due no later than January 31st 2014.

Get form here:

http://www.revenue.state.mn.us/Forms_and_Instructions/crp_ldin_13.pdf

 

Are You Prepared To Be A First Time Home Buyer?

OLYMPUS DIGITAL CAMERARight now is an exciting time to be in the market to purchase a home.  Not only are home values very reasonable but mortgage rates are near historic lows which means that right now is the most affordable time to get the most house for your dollar.

However, qualifying for a home loan is not as easy as it used to be since the housing market has crashed.  Mortgage lenders are asking for more documentation and higher credit standards before they are willing to lend you hundreds of thousands of dollars to purchase a home.

Industry experts recommend giving yourself plenty of time to prepare for purchasing a home, starting with your credit.  Your credit score is the number one determining factor to whether you will be approved or denied a home loan.

The two biggest problems I see with first time home buyers credit is that 90 percent of the credit reports have misreporting information and high balances on revolving credit.  Both of these problems can be fixed pretty easily and depending on your situation and available cash, can be resolved in as little as a week.

Did you know that your credit card balances make up 30 percent of your credit score?  If you were able to drop the limit to what you owe on your credit cards to 30 percent of the available limit or less you could see a significant increase in your credit score and you will be able to qualify for better rates and terms on the purchase of a home.

Once your credit is under control you should obtain a pre-approval letter from a reputable mortgage lender before you begin to drive all around town looking at homes.  In order to obtain a pre-approval letter, your lender will need to verify your credit, income and assets to determine exactly what you qualify for.

When your lender hands you that pre-approval letter, you are now considered a cash buyer and are able to freely submit an offer on any home that fits into your qualifications.

Guest blog provided by:
Jeremy Redlinger (NMLS #627335)

Midwest Mortgage Capital

10900 73rd Ave N #150
Maple Grove, MN 55369
(763)957-0858

photo credit: House of Joy Photos via photopin cc

Minneapolis Case Shiller Index posts 1.8% monthly gain

The Case Shiller Index for Minneapolis / St Paul posted a 1.8% gain from July to August.   This brings the total to 10.2% price increase for the area since the first of the year.  Quite remarkable to see double digit price increases!

This is great news for many homeowners in the Twin Cities who were “under water” on their mortgages.  As the prices increase, the underwater homeowners will be able sell.   This will add more supply to the market, slowing the market and price increases down a bit.  PERHAPS, We may see a Balanced Market!   (I am beginning to believe a Balanced Real Estate Market is like a mythical unicorn…)

It would be fun if this index could equate directly to every home in Minneapolis/St Paul – but there are many more market dynamics that take place from location, housing style, and condition that determine the value.   It is still a great barometer and fun to monitor.

(Seasonally Adjusted figures: Minneapolis posted a 1.0% gain from July to August.  Charts below are Seasonally Adjusted.)

10292013 Minneapolis Case Shiller Index

  • 2013-01-01 126.84
  • 2013-02-01 128.66
  • 2013-03-01 129.90
  • 2013-04-01 133.62
  • 2013-05-01 133.04
  • 2013-06-01 131.65
  • 2013-07-01 130.62
  • 2013-08-01 131.98

Minneapolis vs Composite 20

10292013 Minneapolis Case Shiller Index vs composite 20

 

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Replace you thermostat batteries!

Just a quick reminder to change your batteries in your thermostat.  You don’t want your heat to go out during the cold winter months ahead!

This mindless task fooled me once, but not this year…  I was reminded because it happened yesterday to someone else I know…  So I thought I would share the reminder.

thermostat

Do you remember the old fashioned thermostats with the mercury switch?  No batteries required.  Maybe those aren’t such a bad idea…

 

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Map of Failed Banks 2007 – Present

I am a map geek, so anytime there is a map with new information on there I get pretty excited.  Here is one from the St Louis Federal Reserve showing the Bank Failures since 2007.

Click on the image to take you to the St Louis Federal Reserve’s interactive map.

Failed Banks 2007 – Present via St Louis Federal Reserve

failed banks map

1st American State Bank of Minnesota
Hancock, MN
Closed on 2/5/2010
Assets: $18,200,000
Deposits: $16,300,000
View Press Release

1st Regents Bank
Andover, MN
Closed on 1/18/2013
Assets: $50,200,000
Deposits: $49,100,000
View Press Release

Access Bank
Champlin, MN
Closed on 5/7/2010
Assets: $32,000,000
Deposits: $32,000,000
View Press Release

Brickwell Community Bank
Woodbury, MN
Closed on 9/11/2009
Assets: $72,000,000
Deposits: $63,000,000
View Press Release

Community National Bank
Lino Lakes, MN
Closed on 12/17/2010
Assets: $31,600,000
Deposits: $28,800,000
View Press Release

Community Security Bank
New Prague, MN
Closed on 7/23/2010
Assets: $108,000,000
Deposits: $99,700,000
View Press Release

First Integrity Bank NA
STAPLES, MN
Closed on 5/30/2008
Assets: $54,700,000
Deposits: $50,300,000
View Press Release

Home Savings of America
Little Falls, MN
Closed on 2/24/2012
Assets: $434,100,000
Deposits: $432,200,000
View Press Release

Horizon Bank
Pine City, MN
Closed on 6/26/2009
Assets: $87,600,000
Deposits: $69,400,000
View Press Release

Inter Savings Bank, fsb D/B/A
Maple Grove, MN
Closed on 4/27/2012
Assets: $481,600,000
Deposits: $473,000,000
View Press Release

Jennings State Bank
Spring Grove, MN
Closed on 10/2/2009
Assets: $56,300,000
Deposits: $52,400,000
View Press Release

Mainstreet Bank
Forest Lake, MN
Closed on 8/28/2009
Assets: $459,000,000
Deposits: $434,000,000
View Press Release

Marshall Bank, N.A.
Hallock, MN
Closed on 1/29/2010
Assets: $59,900,000
Deposits: $54,700,000
View Press Release

Patriot Bank Minnesota
Forest Lake, MN
Closed on 1/27/2012
Assets: $111,300,000
Deposits: $108,300,000
View Press Release

Pinehurst Bank
Saint Paul, MN
Closed on 5/21/2010
Assets: $61,200,000
Deposits: $58,300,000
View Press Release

Prosperan Bank
Oakdale, MN
Closed on 11/6/2009
Assets: $199,500,000
Deposits: $175,600,000
View Press Release

Riverview Community Bank
Otsego, MN
Closed on 10/23/2009
Assets: $108,000,000
Deposits: $80,000,000
View Press Release

Rosemount National Bank
Rosemount, MN
Closed on 4/15/2011
Assets: $37,600,000
Deposits: $36,600,000
View Press Release

St. Stephen State Bank
St. Stephen, MN
Closed on 1/15/2010
Assets: $24,700,000
Deposits: $23,400,000
View Press Release

State Bank of Aurora
Aurora, MN
Closed on 3/19/2010
Assets: $28,200,000
Deposits: $27,800,000
View Press Release

The RiverBank
Wyoming, MN
Closed on 10/7/2011
Assets: $417,400,000
Deposits: $379,300,000
View Press Release

 

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Are we in another real estate bubble?

medium_2264987865Are we in another real estate bubble?  People ask me some really difficult questions, and this is one requires a lengthy answer.

The answer is:  Not Yet, I think. – It depends who you ask and it depends on what you consider over-inflated housing prices…

There are a lot of people questioning this right now with good reason.  First of all, we all experienced a very painful real estate market correction so the pain is fresh in our minds.  Also, many of us all understand that something isn’t quite right about this recovery but can’t quite place our fingers on exactly what it is.

A healthy real estate market is a balanced supply and demand ratio driven by economic growth and job growth.  This recovery seems to have bypassed that and gone straight from ridiculous levels of over-supply to extreme demand overnight.  Economic and and job growth seem to be no where on the horizon.

While it may seem magical, there were forces at work behind the scenes.

The Fed had been ‘tinkering’ with the markets since 2008 with different attempts to influence the stock market and interest rates.  The super low interest rates we have been seeing is a result of those actions.

Below is a chart I quickly put together, it isn’t exactly pretty but it shows the Twin Cities Median Sales Price of homes over the last 10 years and the average 30 year fixed rate mortgages with indications on Fed Action dates.

 

10132013 Twin Cities Median Sales Price vs fed action and interest rates

 

The Fed action dates I pulled from Calculated Risk blog.

• November 25, 2008Press Release: $100 Billion GSE direct obligations, $500 billion in MBS

• December 16, 2008 FOMC Statement: Evaluating benefits of purchasing longer-term Treasury Securities

• January 28, 2009FOMC Statement: FOMC Stands Ready to expand program.

• March 18, 2009FOMC Statement: Expand MBS program to $1.25 trillion, buy up to $300 billion of longer-term Treasury securities

• March 31, 2010: QE1 purchases were completed at the end of Q1 2010.

• August 27, 2010: Fed Chairman Ben Bernanke hints at QE2: Analysis: Bernanke paves the way for QE2

• November 3, 2010FOMC Statement: $600 Billion QE2 announced.

• June 30, 2011: QE2 purchases were completed at the end of Q2 2011.

• September 21, 2011“Operation Twist” announced. “The Committee intends to purchase, by the end of June 2012, $400 billion of Treasury securities with remaining maturities of 6 years to 30 years and to sell an equal amount of Treasury securities with remaining maturities of 3 years or less.”

• June 20, 2012“Operation Twist” extended. “The Committee also decided to continue through the end of the year its program to extend the average maturity of its holdings of securities.”

Read more at http://www.calculatedriskblog.com/2012/06/qe-timeline.html#QTWbv1zxCsRe5l3K.99

(check his chart out as he shows these dates and the S&P 500)

Quantitative Easing and Operation Twist seem to have been the catalysts that spurred on the low interest rates which is driving the sellers market.  While this has has spurred life into a fledgling real estate market, the longer term impacts are yet to be seen.

So what happens when interest rates go back up?  Will a $300,000 home still be worth $300,00, or will the price have to drop to accommodate for the change in mortgage payments?  The answer will depend on the job growth…

How will the markets correct when the Fed stops injecting money into it?  Will it drive the bonds to record high rates which will bring mortgage rates sky high or will it be a gradual transition?

While there are some pretty big unknowns in my mind about this resurgence in the housing market, I do believe it is still a good time to purchase real estate taking advantage of these low interest rates.  I personally like the asset based investment, especially since I need to live somewhere anyhow – why rent?  I also like it because historically home values have paced inflation, and we may see inflation from all this Fed stimulus!

My recommendations when buying now are:

  1.  Make sure Rents support the value of the home you are buying. (this is ultimately the true value of a property.)
  2.  Be conservative, don’t take on more debt than you can really afford.

If you are concerned about these 2 fundamentals, then maybe you might listen to Nobel Prize winning economist and creator of the Case Shiller Index, Robert Shiller:

Nobel prize winner warns of ‘bubbly’ home prices

….Bubbles are created when investors fail to recognize when rising asset prices become detached from underlying fundamentals….

Shiller and other economists warn that prices in some markets have risen too far, too fast due to the Fed’s ultra-easy monetary policy.

Read Article from CNBC October 14, 2013

 

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photo credit: The Consumerist via photopin cc

Minneapolis/St Paul Housing Starts dipped in August

medium_4745979165Minneapolis / St Paul seems to be back in the groove of building new homes again.  Builders are beginning to run into shortages of available land to build on again as well as have trouble finding trades (labor) to build the homes.  These are good problems to have again!

While things appear to be moving along, the Twin Cities did take a slight dip in new housing starts on 1 Unit structures (single family homes) in August.  34 Fewer Single Family home starts in August from July.  It still up over June this year by 52 units, so 1 month does not make a trend…

There are a couple theories about this slight dip in August.  1) Interest Rates nudged up a bit  2) Land prices nudged up a bit 3) Material and Labor prices are going way up.

I don’t know if I would call those theories as much as I would call them dynamics of the marketplace.  All 3 of those factors are playing into the buyers decisions on whether to build new, wait, or buy existing homes.

As demand slows down, the pricing on material, labor, and land should come back in line.  It may feel at times like we are finally through the correction, but we still have some pains ahead of us as the markets continue to adjust.

The big wild card is what interest rates will do going forward.  Interest rates are driving the current demand.  If jobs growth picks up, the real estate market can easily handle higher interest rates – it has for years…

 

09272013 building permits minneapolis

Title:               Privately Owned Housing Starts Authorized by Building Permits: 1-Unit Structures for Minneapolis-St. Paul-Bloomington, MN-WI (MSA)
Series ID:           MINN427BP1FHSA
Source:              Federal Reserve Bank of St. Louis
Release:             Housing Units Authorized By Building Permits (Seasonally Adjusted) (Not a Press Release)
Seasonal Adjustment: Seasonally Adjusted
Frequency:           Monthly
Units:               Units
Date Range:          1988-01-01 to 2013-08-01
Last Updated:        2013-09-26 9:01 AM CDT
2013-04-01   603
2013-05-01   622
2013-06-01   555
2013-07-01   642
2013-08-01   608



photo credit: Best Practices Research Alliance via photopin cc

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Property Taxes Due OCTOBER 15th – Reminder

Just a reminder, your 2nd half Property Taxes are due October 15th. Right around the corner!

09272013 Mn Property Tax collection in thousands of dollars

MN Property Tax Collections – Data to end of 2012.
Thousands of Dollars, not seasonally adjusted

 

Not too much longer you can procastinate…

To pay in Hennepin County, you can go to Hennepin County’s website and pay online.

http://www.hennepin.us/PropertyTaxPayments

9282013 Henn County prop tax

Hennepin County Property Tax Website

 

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Minneapolis Case Shiller Index up 9.5%, Composite 20 up 12.4%

The Composite 20 Case Shiller Home Price Index posted a 1.9% increase in July for data published today.  You have probably read the news that this is 12.4% Home Price Increase nationally year to date.

Read Press Release from S&P

Minneapolis, MN Case Shiller Price Index posted a 1.8% increase in July and respectful 9.5% increase year to date.

Not a bad a return on an investment… …unless of course of you were like me and bought between 2004-2007!  At least it is headed in the right direction.

Nationally speaking, experts are predicting more and more homes coming on the market as more and more people are in the position to sell again.  With this increase in new inventory, prices are expected to level off again.  So far, we haven’t seen this added increase in inventory in the Twin Cities, but I suspect we will be seeing signs of that soon enough.

 

09242013 Mpls Case Shiller

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