Minnesota Real Estate Blog
by Ryan O'Neill, Co-Host of The Minnesota Real Estate Talk Show
2008 Housing Bill
I can't wait for the conspiracy theorists, finger pointers and complainers to start bad mouthing the recently passed housing bill. Though the bill is expected to help 400,000 American families from losing their homes, there is a provision in the legislation that requires the home owner to share the proceeds of sale with the government when the home is sold. Someone close to me, who shall remain nameless, asked me the other day if this was a scam by the government to take even money from home owners who are already hurting. I thought, "Oh boy, here it comes." Since the housing correction and credit crisis began, the collective sentiment of The Fed, Congress, the White House, the media and the public has been that there should be some kind of help but NOT a bailout. The provision of sharing profits upon sale is one way our legislators devised for the tax payers to avoid shouldering the burden of fixing the crisis we are experiencing. It is a sensible solution that should be applauded. But the same people who are now flooding the media with their horror stories will undoubtedly find a way to paint this as another evil scam perpetrated on the public. From the chambers of our governing bodies to the board rooms of the banks, to the living rooms of the average family, no part of society or any level of the industry is innocent of helping to cause this problem. The Fed followed its mandate to stimulate the economy. Banks and investors took the opportunity to borrow cheap and lend money. Consumers let their emotions and desires overpower their logic and lost the ability to see that they were over extending themselves. Certainly, there were bad actors at every level trying to take advantage of the situation. But there were also hard working, ethical and moral people working to create opportunities for themselves and others. There is nothing wrong with that. It is disappointing, however to see and hear accounts of those who are in over their heads seeing the crisis as an opportunity to point the finger at others rather than holding themselves accountable for their own decisions. Now that some relief is being allowed to move through Congress and Bush has signed it, let's all pull together and turn this thing around instead of trying to find the worst in everything and slander those who are trying to help. Ronny Loew is the Move-up Specialist with The Minnesota Home Loan Partners. He can be reached at 952-808-2815 or rloew@houseloan.com
Bloomington MN real estate
Bloomington, MN Real Estate Monthly Market Update - June, 2008Seeing that my wife and I have lived in "good ole" Bloomington since 2001, I wanted to blog today about the real estate market in this community. Kathy and I first bought a home in 2001 in East Bloomington, and we really enjoyed living there. 35W technically is the dividing line between East and West Bloomington, with West often referred to as "Prestigious West Bloomington." This area obviously has a few more expensive neighborhoods than East Bloomington. However, whether East or West, I can definitely say I have enjoyed living in both parts of town, with there being many "pluses" for each. Let's talk numbers today, and see what is "shaking" for real estate activity in Bloomington as a whole. Let's first take a look at June of 2007 compared to the month of June in 2008. There was a rise in closed sales this past June, with 91 properties closing (an increase of 3.4% compared to June of 2007.) New listings were down 7.8%, with only 189 new properties being put onto the MLS. The average sales price in Bloomington did take a sizable dip, going from $266,965 to $225,996 in June of 2008. This is a decrease of 15.3%. Average days on market rose by 37.6%, going from 90 to 124 days. The overall inventory levels rose from 343 homes on the market June of 2007 to 356 properties this past June. There also was an increase in the townhome and condo inventory levels. The average active number of townhomes for sale on the MLS in June of 2008 was 209, with 196 being the average in June of 2007. Now when we take a look at January through June of 2007 compared to January of June in 2008, there has been a 1.8% decline in the number of new listings posted on MLS. This year has seen 1066 properties put on the market. Closed sales are down 5.2%, with 348 properties selling here in 2008. The average sales price year to date is down, but not down as much as comparing the month of June alone. The average price dropped from $252,384 to $229,339, a drop of 9.1%. The percent of original list price received at the time of sale in 2008 has been 93.8%, a drop of 2.4% compared to 2007. Average days on market has risen 16%, going from 112 to 130 days. When we take a look at these numbers, we see still a very significant number of closings taking place. With its close proximity to 494 and 35W, as well as the Mall of America (for all the diehard shoppers out there) and the great parks and lakes in Bloomington, this area has stayed in demand. Six months into 2008, there has been almost 60 homes a month closed in Bloomington. Granted those are not crazy sales numbers that were taking place back in the early part of this decade, but still very respectable to say the least. If you have any particular topics you would love to know more about or have our team blog on, please don't hesitate to let us know!
MN investment property
In today's entry, we wanted to continue along the same "vein" as our last entry on Wednesday this week. In that entry, we blogged on what "groups" of tenants rent out the various single family homes here in Minnesota. Today, we wanted to expand a little more on probably the biggest fear every investor goes through on their first property: "How can I purchase a nice property and get it rented? What if this property sits vacant?" In addition, we wanted to discuss how to screen tenants. Believe me. I know the fears and anxieties that are going through your mind. I too had those fears when I started investing in real estate in 2001. As a team, we do not want any of our clients to purchase something that sits vacant for one month or longer. With that being said, every investor client our team has have ever worked with has rented the property within one month of closing. That's about 250 people the last few years alone. Every agent on our team works directly with the client to make sure the property gets rented. Here are some things we have found to work. First of all, in the actual purchase agreement that we write up, you will have the ability to "show" the home to prospective tenants up to the day of closing. Let's say you get an offer accepted on August 1st, and you are closing the end of August: we will be able to show the home to prospective tenants the entire month of August. Then we can get it rented for August 1st, and your first mortgage payment is not due until September 1st! One month of rent coming in and no mortgage payment always is a happy day for any investor! Here are three great sources we have found to get properties rented out: 1. Get your property on the internet! There are a number of effective sites where you can advertise. The internet will prove to be a great lead source, and an excellent way to find qualified candidates to rent your home. 2. Put out a "for rent" yard sign out. This too will generate a great amount of leads for you. 3. Get the property in the newspaper on Sundays. Depending upon your location, pick either of the "big" newspapers here in Minneapolis and St Paul. Between these three sources, we have found clients will most assuredly get interest in their property. Now that there is interest in your rental property however, how do you know if someone will be a good tenant? As a landlord, the four main items you want to check on the tenant's application are: rental history, work history, whether the tenant can give you money to hold the property, and whether they have an Unlawful Detainer. Let's discuss all four. 1. Rental history - Call their current landlord and also their previous landlord. You will probably have to fax over a one page sheet called the "Tenant Sheet to Current Landlord" along with the authorization form (our team can provide you both of these documents.) Have the landlord fill out the form and fax it back to you. We are creatures of habit. If someone has been a bad tenant before, they probably are going to continue. However, if their rental history is good, they are probably going to continue to be good tenants. 2. Work history - Again, check on their work status. Are they working right now? Talk to their boss; find out if they are reliable employees. 3. "Show me the Money!" - Ask the tenant how much they can give you to hold the property. They need to give you some money before they move in, at least one month's rent. This will really separate the good from the bad. The good tenants will be able to give you at least one month's rent to hold it. Get a cashier's check. I have however rented to someone if they could not give me the full deposit. For example, say the rent was $1500 a month, and deposit the same at $1500. I will rent to someone as long as I get $1500 for first month's rent to hold the property, and then I tell the tenant they can pay me the deposit over a 3-5 month period after they're in the house. They need to get you the money ASAP though. You snooze you lose. The only way you can hold the property for them is if they get you at least one month's rent. 4. Unlawful Detainer - An unlawful detainer is the cardinal sin a tenant can commit. If a prospective tenant has one, I wouldn't rent to them. A "UD" (as they are called), is when a tenant has not paid their rent, and they have been evicted. The landlord goes to the courthouse and files the UD onto their record. I personally would stay away from the tenant if they have a UD. If you have interest in learning more about investment property here in the Twin Cities and our team's monthly free seminars, go to http://www.investmentpropertyguys.com/.
Minnesota Investment Property
Earlier in June, we blogged about investors who purchase single family homes used as rental properties. In this blog entry, I wanted to comment on who actually rents these homes. Many prospective investors often ask our team this question. I have grouped the tenants into the following categories: 1. Groups of three to four friends - You will definitely have some of these groups who come to you as a landlord. They want to live together and save themselves some money in rent. Why rent a 1 bedroom apartment at $600 a month when they could live with three of their friends and pay $400 a month? A number of clients of agents on our team have rental homes rented to groups of friends right now. For the most part, they have been excellent tenants. With four different income sources, the landlord in no way has to worry about collecting the rent. Realize of course that a group of four college aged students are going to be "tougher" on the house. However, collecting rent is almost never an issue. 2. Section 8 tenants - Some of your prospective tenants may be Section 8. I personally do have Section 8 tenants and they generally are very good. Basically, what section 8 means is that the government is paying a portion of their rent. They have to get "approved" by Section 8 to get Section 8 voucher. This voucher will give them a credit towards renting your house. For example, if a section 8 tenant applied for one of my homes, I would still do the normal background check and check their rental history. And if everything "pans out," I would ask them if they have some money to "hold" the house. Once I get the deposit money from them, I'll meet up with them to sign their section 8 paperwork. If they are approved, they should have the paperwork that you need to fill out as the landlord. After you fill it out, the tenant will turn it in to their case worker. Once HRA (Housing and Redevelopment Authority, aka "Section 8") receives the paperwork, they will set up a time to inspect the home. After the home passes inspection, you will begin receiving monthly checks from HRA on the first on the month. Again, it will NOT be the full amount of your rent. It will be a portion of it. The HRA worker figures out how much they are going to pay based on the income of your prospective tenant. 3. People who just moved to the Twin Cities - You will find a good number of job transferees that are looking for rental homes. A friend of mine just rented their home out in Lakeville to a couple moving from Ohio. They are going to be in Minneapolis for three years and did not want to purchase a home. They signed a three year lease with him. You will find a large number of people who are moving to the area and do not want to purchase. They want a nice home to rent for a year or two, maybe even longer. 4. Foreclosure/Bankruptcy Victims - There is a large number of very good tenants (that have had financial problems) that are looking to rent nice single family homes. Perhaps they made some bad decisions in their past in regards to their personal finances, or they had a medical illness that prevented them from working. As we all obviously know, we need a roof over our heads and a place to live. What I have found, is that even if people have horrible "money trouble," have filed bankruptcy, etc., as long as you check out their rental history, you will be safe. Think of it this way. If there is only so much money each month, the first thing that DOES get taken care of is the rent. Other things like the cable bill, cell phone bill, etc. may not get paid on time. Right now, a client of mine has three different tenants that have filed for bankruptcy in their past. And according to this client, all three of these tenants are excellent, have stable jobs, and pay their rent on time. As investors or prospective investors, realize that rental demand is extremely high right now in the Twin Cities real estate market. Not only for apartments of course, but single family homes as well.
Lake Minnetonka Real Estate
The Lake Minnetonka Real Estate Monthly Market Update - June, 2008Lake Minnetonka real estate seems like it always has be a "hot spot." It has been come be known as one of the "highest end" part of the Twin Cities as far as real estate prices go. Being that we are right in the middle of summer, and it is a hot day to say the least, people are thinking boating and lakes! If you took a cruise on this great lake, you will see some enormous homes and palatial estates! I thought today we would take a look at a snapshot of what is happening in and around Lake Minnetonka for real estate activity. Let's first take a look at June of 2007 compared to the month of June in 2008. This June, there have been 220 new listings put onto the MLS, a drop of only 4.3% compared to last June. Closed sales were down quite a bit, going from 84 in June of 2007 to 65 in June of 2008. The average sales price really has taken a dip. June of 2007 saw an average sales price of $665,768, with June of 2008 coming in at $502,028. Average days on market has also seen a considerable increase, going from 158 days to 207 days this past June. The inventory levels for single family homes in and around the Lake Minnetonka area was at 759 in June of 2008, and 697 in June of 2007 (an increase of 8.9%). Now when we take a look at January through June of 2007 compared to January of June in 2008, there has been an 8% decline in new listings put onto MLS. Closes sales unfortunately have also taken a dip, going from 319 last year to 257 this year. Thankfully, the average sales price has not seen that huge of a drop, going from $662,579 to $606,329. The percent of original list price received at the time of sale dropped from 94.1% last year to 90.3% this year. Average days on market has seen a modest increase, from 178 days to 202 days. When we look at various "pockets" in and around the Lake Minnetonka area, there are some interest stats to share. Closed sales in Mound are down from 78 last year to 39 this year. New listings in Spring Lake park are down 48.3% this year. The average sales price in Long Lake has increased from $231,575 to $294,200, an increase of 27%. Wayzata has seen a real drop in average sales price comparing year over year, going from $734,256 to $534,496. Orono's average sales price has gone from $1,374,117 to $1,116,177, a drop of 18.8%. In conclusion, there is obviously still some very good buying and selling activity taking place in and around Lake Minnetonka. We Minnesotans love our lakes and boating! With the average sales price in and around Lake Minnetonka being higher, it obviously limits the "available" number of buyers out there. However, even in the tougher real estate market of the last few years, real estate in and around Lake Minnetonka continues to be in demand.
Minneapolis condos and lofts
The downtown Minneapolis condo and loft market is one that is surely in flux right now. Four to five years ago, condos and lofts were selling like "hotcakes" and they simply could not build enough properties to keep up with demand. Within the past two years or so, things really have slowed down. It was taking forever for a condo or loft to sell and frankly, the buyers seemed to be "scared off" by the media who was saying the market is horrible, etc. Times have changed however here in Minneapolis. In today's blog entry, I wanted to share some statistics and overall market thoughts in regards to condos and lofts here in the Twin Cities. When we take a look at downtown Minneapolis, and compare June of 2007 to June of 2008, there have been 40.6% less listings put onto the MLS. It dropped from 207 last June to 123 this June. Closed sales increased slightly, going from 54 closings June of 2007 to 60 this June. The average sales price saw a very nice increase, going from $329,896 in June of 2007 to $364,908 in June of 2008. When we take a look at the percent of list price received at closing, that number has stayed fairly steady. It was 95.4% in June of 2007, and this June it was 94.8%. Average days on market unfortunately increased dramatically, going from 162 to 241 days. The active for sale inventory on MLS also dropped significantly, going from 646 in June of 2007 to 507 active listings this past June. Let's now take a look at year to date numbers through the end of June for our loft and condo market in Minneapolis. Year to date, there have been 24.1% less listings put on the market, with only 789 going on MLS this year. Closed sales are up significantly (34.8%), with 310 properties closing through the end of June. The average sales price has also seen a very nice increase, going from $319,136 to $325,687. The average days on market has increased, going from 171 last year to 213 days through the end of this June. In spite of what the media has been telling us about the downtown market and really the entire Twin Cities real estate market, things are not all "gloom and doom." These numbers we just shared are extremely encouraging for not only sellers looking to sell their loft of condo in Minneapolis, but buyers as well. Perhaps with the rapid increase in gas prices, some buyers are looking at moving and living closer to work to save money. In conclusion, the market here in Minneapolis for lofts and condos has most assuredly stabilized. Prices have slowly risen this year, and closed sales are up significantly. These are two great signs indeed! Buyers, there are a number of great units to choose from, and sellers remember however, price and condition remain paramount in this market.
Minnesota Real Estate Show
A Recap of The Minnesota Real Estate Show - July 12th, 2008
Today, on The Minnesota Real Estate Show, Rob Bonahoom of the Minnesota Home Loan Partners, Kelly Guest, Scott Ficek, and I discussed a number of various issues in our local and national real estate marketplace. The first item we covered was the buzz surrounding Fannie Mae and Freddie Mac. All this week, there have been headlines and stories surrounding the supposed pending collapse of mortgage giants Fannie and Freddie. Fannie and Freddie were essentially created by the government to provide all of us with the opportunity to own real estate by adding to the available cash that banks can lend to customers. Simply stated, without them, the economy would truly be in shambles. So even though the stocks of these two publicly traded companies went to 17 year lows this past week, the thought of them collapsing is really hard to fathom. Of course President Bush and Federal Reserve Chairman Ben Bernanke are working to ensure that things are stabilized. Secondly, we discussed a number of the outstanding investment property seminars that our team is offering this month. We have of course our real estate investing 101 seminar coming up on July 15th. In addition Scott and Rob are presenting a Real Estate 201 Seminar where LLCs will be discussed. Many real estate investors question whether or not an LLC should be in place before investing. Matt Engle, the attorney with The Minnesota Real Estate Show will offer his expertise on this issue at this seminar. For more info on both of these seminars, go to http://www.investmentpropertyguys.com/. Rob Bonahoom also took an opportunity today to discuss his "Total Wealth Builder" appointment. Really, for anyone that is considering investing in real estate, or someone who is a seasoned investor, this free consultation is a must. Rob "goes deep" at the appointment looking at each person's individual situation and creates a customized plan based on your long term goals. As a top loan officer that works exclusively with investors, Rob is really the best of the best. Steve Rajavouri from REI property management joined us on air to discuss the latest with property management here in the Twin Cities. Steve is the owner and found of REI, a company that our team has been very fortunate to work with the past few years. He described an increased rental demand for all price ranges of properties here in the Twin Cities. Some people have the stereotype that only "lower end" homes rent. In reality, Steve has been working with home owners from all price ranges helping them rent their properties. It is a great alternative for those who are unable to sell in our current market. Renting allows them to "weather the storm" and sell when the market rebounds. Both Scott Ficek and Rob Reinke, agents on The Minnesota Real Estate Team, discussed their individual investment property programs. Scott, owner of the website http://www.minnesotainvestmentrealestate.com/ discussed his great rehab program that he and Rob Bonahoom offer. This program allows investors to get into great properties with the ability to cash flow. Rob Reinke went over his new construction investment property program that has also been so successful. We had a number of great callers and off air emails that came during the show. We had a couple direct questions in regards to our team's Guaranteed Sale program as well as the free market analysis that we offer. Overall, the show was full of great callers and great energy! If you get the chance, feel free to listen next Saturday and call in. We always welcome your calls.
Twin Cities Market Update
This Week in the Minneapolis, St Paul Real Estate Market - July 9th, 2008
I have received a coupled emails this past week from those who listen to our weekly radio show who wanted to know the most recent market "numbers." Lo and behold, here they are! Looking at new listings that were processed and put onto the market and MLS, there were 2,119 new actives. This is up only a modest 0.3% compared to last year at this exact same time. There were 856 newly signed purchase agreements this past week, down 4.8% compared to last year. And the total inventory level is at 33,083 active listings for sale. This is down (thankfully) 4.1% compared to last year at this same time. Over the last three months, the Twin Cities has seen 13.6% fewer listings put onto the MLS than last year. The updated Supply - Demand Ratio also came out this past week. This ratio fell to 8.11 for July of 2008. This number means that there are approximately 8.11 houses on the market for each buyer. This number (8.11) is 1.6% lower than July of 2007. Here's the good news: this is the first time that the supply demand ratio has fallen since these numbers have been counted by the Minneapolis Area Association of Realtors in 2004. What does the mean? This means that the buyer's market is still here of course, but the tide may slowly be starting to turn. Finally, we are seeing supply decrease a bit in relation to demand. Overall, this is great news for really our entire market. For the second half of this entry, I wanted to talk a little bit about life as a real estate agent here in the Twin Cities. Over the last few years, there has been a mass exodus of real estate agents who have got out of the business. Five to six years ago, anyone could "throw a home on MLS" and sell it. In my opinion, the services, knowledge, and expertise that a good realtor provides to his or her client was diminished. It was almost like the general public felt that they did not need a realtor to buy or sell their home. As time has passed, with more and more supply and less demand for homes, the realtor is once again seen as having some "value" in the real estate marketing process. With so many agents who have exited the business, truly the serious ones have survived. And of course, there are a number of outstanding real estate agents here in the Twin Cities. I am partial to RE/MAX agents (being one myself), but there are top agents at many companies here in the Twin Cities. When in doubt, if you are looking to buy or sell, I always encourage clients to work with a Realtor. The real estate transaction can be extremely complex with many twists and turns along the way. A good agent will guide you along each step of the process. And in addition, if he or she has survived the last few years in the business here in the Twin Cities, you can know that he or she is more than likely full time, serious, and committed to a career as a real estate agent.
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