Chad & Sara Huebener

By Sara Huebener

Some popular news is being discussed in the real estate industry these days. Chris Galler, a highly respected former colleague of mine from my days at the REALTOR Association, frequently puts out information to local REALTORS covering timely topics. Here is one that might be of interest to ALL West Savage homeowners:

The First Time Homebuyer Tax Credit is set to expire on November 30 of this year. Right now, the House and the Senate are modifying the tax credit to include the following alterations. Stay posted to our blog where we will be notifying homeowners if and when these changes get approved.

PROPOSED CHANGES INCLUDE:

1. The $8000 First Time Homebuyer Tax Credit would remain in effect for those purchasing their first home.

2. Existing homeowners who have lived in their home for at least 5 years would be eligible for a $6,250 tax credit if they choose to sell their home and purchase another home.

3. The tax credit would be extended from December through April 30, 2010.

4. The tax credit would not have a hard close date like the current tax credit does. Currently, first time buyers must CLOSE on the property on or before November 30, 2009. The new plan would allow first or existing homeowners to secure a purchase agreement by April 30, 2010, allowing 60 days to close on the home after the purchase agreement has been secured.

Again, these details are not yet set in stone and are still moving through the House and Senate. Keep watching www.WestSavageBlog.com for status updates!

By Chad and Sara Huebener

The following is a 60 Minutes video that is interesting. When watching the video, the initial feeling might be somewhat depressing. However, keep in mind a number of factors:

1. The video pertains to the housing market on a national level. It discusses inventory on the rise. In our pocket of West Savage, inventory has dropped steeply. As of November 2, 2009, inventory in West Savage is down 50%.

2. The video predicts another wave of foreclosures coming in 2010 and 2011. This is something we have long been discussing in communications with West Savage homeowners. We expect that many of the ARMS will be resetting in these upcoming couple of years. Knowing that, many lenders are offering loan modifications to troubled borrowers. While the long-term success of these programs is yet to be discovered, we know that from an initial standpoint, it has staved off a few of the foreclosures that would have otherwise hit our local market. It can be expected that some of those who underwent loan mods will eventually default on those as well. The rate of this is still to be determined.

3. The video discusses that home prices will continue to fall. On a national scale that is most certainly true. And we really cannot predict what will happen to us locally. We can state that, at least in this part of West Savage, the steep drops in inventory have helped slow the pricing fall. What winter will bring is anybody's guess. But right now, here in West Savage, we are seeing a stabilizing of pricing, as we head into winter. We hope that trend will continue through Minnesota's coldest months.

So then, why are we posting this video? We think it contains some interesting points of value on a national scale. Homeowners with any plans for selling in the future should be aware that these ARMS are going to resetting in large waves. How they are dealt with (i.e. refinancing, loan modifications, foreclosure, etc.) is anybody's guess at this point. And how many will affect our local market, no one knows.

WATCH THE 60 MINUTES VIDEO HERE.

By Chad & Sara Huebener

If you know of someone buying a home in the price range below $120,000 (or if you are looking in that range for investment purposes), they (or you) are going to have to move fast. The Southern Twin Cities Association of REALTORS reports there's only 2.9 months of supply in that range, which places it in the extreme seller's market category. The reason for the tight inventory picture? There's been a huge upsurge in home buying activity-sales are up 127.5 percent in that category over the last twelve months.

Our Association also reports that the number of new construction properties available for sale continues to shrink rapidly as builders pull back from creating new inventory. The current inventory of 2,426 listed new construction properties in the MLS system represents a drop of over 1,200 units from a year ago. Unfortunately for builders, new construction home sales have also rapidly declined, falling by 18.8 percent (over 800 units) in the last twelve months.

We have certainly seen the flood of homebuyers scooping up properties because of the $8,000 tax credit, as well as investors taking advantage of steals of deals when the market was in a deep state of stagnancy - particularly last winter. Heck, we took advantage of it as well, and picked up another rental property for dirt cheap.

The statistics above are changing things considerably: First time homebuyers in the $175,000 and under price range have very little wiggle room for negotiating on the basis of price. When the state of the market in that price range is that hot, seller's in that price range don't need to sell at a discount any longer.

Additionally, FHA has a flipping rule in place prohibiting FHA buyers from purchasing properties that sold less than 90 days ago. Although controversial, we can lend some credence to investors who buy "junk homes", fix them up and turn around and sell (or "flip") them in turnkey condition to buyers. FHA will not insure these loans based on the no flipping rule. Since most first time home buyers are FHA approved, and as a general rule, FHA-approved buyers cannot purchase homes that need extensive repairs due to FHA requirements, this restriction narrows their housing supply pool even more.

So what might all this information mean for West Savage? Sellers in the lower-range price point can move up to the price ranges we have in West Savage. And if people are opting not to build, that keeps more buyers in the pool looking for existing properties. (Personally, we have seen the opposite - more and more people -even first time homebuyers- looking to build homes, and this affects existing sellers, particularly those in our West Savage price range.

We need to take the continuous changes in our housing market one step at a time, and right now, the true test of how West Savage will be impacted first requires following what happens with any extension of the tax credit, followed by getting through the winter.

By Chad & Sara Huebener

The pool of sellers entering the market in West Savage is beginning to cool. New listings are down, and total West Savage inventory remains well below average. Typically we see an average of 25-28 listings in our West Savage marketplace during any given month. Current listing inventory hovers around 16 - just 60% of the norm.

Pending sales have also cooled in the past 45 days. Buyer activity in early September was slow with the start of school, but picked up again in mid-late September. West Savage just experienced a boost in closed sales which included a number of foreclosures, short sales and vacant properties. As disheartening as this may be for traditional sellers, our marketplace as a whole needs to see the absorption of these properties if we are to have any hope for market recovery. Getting some of these homes "off the books" before winter is essential, as vacant properties during Minnesota winters tend to fetch even lower sales prices. Vacant, foreclosed and short sale properties remain in our marketplace, and continue to pop up from time to time.

What to watch for: Based on past experience, we expect to see a slight seasonal spike in buyer activity prior to Thanksgiving. We are starting to see some signs of market stabilization as well. We do not expect to see appreciation or a recoup of prior home values for a number of years. However, the falling of prices is starting to slow. It will be interesting to watch how pricing and buyer activity affects market times in the next six months.

Inventory is down for Savage as a whole and Scott County. This is typical of this time of year, and we expect to see this remain pretty steady through the winter.

Our West Savage absorption rate has dropped to 4%. That means if zero new homes come on the market, it will take 4 months to sell our existing inventory. This is a nice, low absorption rate!

By Chad Huebener

The other day, a woman I was talking to was wondering why homes are selling for so little in her neighborhood these days. She stated that since there were no foreclosures in her neighborhood, she did not think her neighborhood was affected by the falling home prices that tend to follow in their wake. She was getting sticker-shock when she saw the sale prices in her neighborhood, and she was surprised to learn that foreclosures DO affect her neighborhood.

While I have long ago grown accustomed to the look on people's faces when they realize how far our housing prices have fallen, her question was particularly interesting because it highlighted a consumer thought process that up until that point never dawned on me existed.

Her thought process made sense. After all, I can understand how homeowners mentally segregate their neighborhoods from other neighborhoods in terms of value. I do it myself. Houses built by the same builder in the same neighbhorhood tend to carry very comparable values.

Similarly, rarely does a home built by the same builder in the same neighborhood during the same time period with the same or similar floor plans on comparable sized lots see significantly different sale prices. There might be some value discrepancies based on location within the neighborhood, condition, or other factors, but overall, it just doesn't work that way. So it only makes sense that the home values in a neighborhood with this degree of uniformity are affected by foreclosures and short sales within that neighborhood.

So what about a neighborhood where NO foreclosures exist? It's prices would not be impacted by foreclosures and short sales, right?

The answer to this is simple .... All a buyer needs to do is shop around. Let's say that the non-foreclosure neighborhood holds its prices steady, while other neighborhoods experience foreclosures and see pricing declines. If the buyer can purchase a relatively similar home in another, nearby neighborhood where foreclosures have brought down home prices, then the buyer will tend to purchase the significantly lower priced home nearby. And when a few buyers begin doing this, and sellers in the neighborhood without any foreclosures start realizing that homes are not selling at the listed price because buyers are choosing to purchase elsewhere, then sellers (in the neighborhood without any foreclosures) will begin to drop their prices to compete with the neighborhoods that do have foreclosures.

Those sellers who do not price their home in alignment with market conditions often discover all too late that their house will not sell for list price. By the time they lower the price, the market times that have accrued are telling buyers there might be something "wrong" with the property, even if there is not. And a lower offer price will reflect that buyer belief.

Foreclosures and short sales are an unfortunate reality in our market. And it drives home one of my earlier contentions that the seller who puts his house on the market simply because "he wants to" is now, for the most part, a thing of the past. The financial flexibility simply does not exist for many.

The good news is that sales are up, inventory is down, and houses are moving more quickly than they were even this past spring. Lower inventories equate to less competition for sellers. And lower market times equate to higher offer prices. Day by day, bit by bit, we work toward market recovery. In the meantime, overpricing homes (i.e. not pricing them in line with the true market conditions) is unrealistic and hurts neighbhorhood values because when that late offer finally materializes after numerous price reductions, it is almost a guarantee that that offer will be a low one. And all the other homes in the market will be affected in some way.