Chad & Sara Huebener

By Sara Huebener

We attended an interesting class recently that discussed patterns the state of Minnesota is experiencing in regards to demographics, and the implications these patterns will have for our local real estate market. It was fascinating to look at all the graphs and charts and how these trends have changed from the 1950's until today. While the class discussed mainly the changing demographics of our state and marketplace and some conclusions could be drawn, it will be interesting to see the extent to which our market will be impacted by these changes. Only time (as in a decade) will tell. To recap the entire class would require an entire newspaper, so here are just a few points.

One of the points that stands out in my mind is the growing change in the family structure from the typical married couple with children, to unmarried couples (or singles) with children. Obviously in the 1950's married couple households with children was commonplace, yet that trend is disappearing rapidly. The graph showed two lines, with one line representing married couples with children,and the other representing unmarried couples and/or singles with children, getting closer to crossing in the future, meaning that unmarried households with children will be the majority. This raises some questions about our current housing stock. Many traditional suburban homes are fairly spacious, with two stories and four or more bedrooms. The decline in the traditional family structure as we know it raises some curious thoughts about how, ten years from now, our suburban housing stock will meet the needs of the consumer once the number of unmarried/single parent family households becomes more commonplace.

It is no surprise that the baby boomers are a significant group to consider as well. The number of childless couples and/or single persons living alone is expected to grow significantly by 2015, mainly attributed to empty nesters, widows/widowers, and also single parents (primarily female heads of household). Minnesota projects that by 2015, the number of people living alone will exceed 88,000, and the number of married couples without kids (including empty nesters) will reach nearly 120,500, compared to a 24,500 decline in the number of traditional married households with children. The implications of these changes will create some interesting opportunities for our housing market.

It was also interesting to visualize the charts on how home prices affect mortgage delinquency rates. Between January 2004 and January 2006, home prices peaked. This peak directly corresponded with the drop in mortgage delinquency rates during the same time period. Many people used creative financing to get into homes and were already living very "tightly". Once home prices dropped, the option to sell as a means to solve a financial issue became problematic, because mortgages far exceeded values. Furthermore, some used their homes as an ATM of sorts, cashing out home equity to finance vacations, cars and other non-appreciating assets.

In summary, while far more was discussed than I can highlight here, the class illustrated some thought-provoking data that will produce some results that we 'll be monitoring as time goes on. Meanwhile, the West Savage area continues to be a great place to live and raise a family, and it is everyone's job to maintain the desirability of our community.

By Sara Huebener

I am always excited to promote Ron Covert over at STCAR and the Southern Twin Cities Association of Realtors (STCAR) any time I can. Ron and our local Realtor Association are offering the following scholarship. If you know a high school student that would be a good candidate, please send them this information!

If you have a child who is a senior in high school and is planning on attending a 2 or 4 year college, community college, university, or trade school beginning in the fall of 2009, they may apply for a $2500 scholarship. The scholarship is offered through the Southern Twin Cities REALTORS® Charitable Foundation. This scholarship is available to seniors who reside in Scott, Dakota, Goodhue or Rice County. Please have your child check with their Guidance Counselor for the scholarship application or click here for a copy of the application. The completed application with all required enclosures must be submitted by March 13, 2009. If you have any questions regarding this scholarship, please contact Ron Covert at 651-452-6611.

By Sara Huebener

I was excited to find that on Wednesday morning, David Crook, a national real estate expert, was featured on the KQRS morning show. Mr. Crook wrote a book, of which an excerpt was published in the January 18 Star Tribune. After listening to Mr. Crook and reading the excerpt, I have two comments: 1. He had some valid points, and 2. He is truly what he claimed to be - a national housing expert.

I admit I have not read his book. Based on the KQ broadcast and the excerpt, one thing I do not recall Mr. Crook illustrating is that housing is local.

Mr. Crook states that "today's problems do clearly signal that home owning can no longer serve one of the roles it has had for the last 60 years - as American's principal means of building wealth". He admits that for the foreseeable future home prices are likely to remain stagnant or continue declining. While I agree with the latter statement about the stagnancy of home pricing, at least for a period of a few more years, I question the rationale in his statement about homeownership failing to be the primary means of building wealth for Americans.

It all begins with a glance at the modern consumer. Many American consumers have unquestionably developed a need for instant gratification. Many homeowners experienced rapid appreciation in their homes, and used the anticipated equity as a virtual ATM. People bought boats, cars, financed vacations and pulled out cash, reliant upon the expected appreciation of their home as an eventual means to finance these non-appreciating items. The unexpected downturn in the housing market left many upside-down on their mortgages.

Consequently, I disagree with Mr. Crook's philosophy that housing will no longer serve as American's principal means of building wealth. Regardless of home prices and values, Americans cannot build wealth if they cannot live within their means and if they fail to keep spending in check. I understand that the housing price issue is far more complex, but this is an important point regarding using housing to build wealth.

Mr. Crook discusses that this could be the greatest buyers market in U.S. history. I concur, and for additional reasons than alluded to in the excerpt. Absolutely, the baby boomers will leave buyers with an ample supply of housing inventory as they begin to downsize. Additionally, the creative lending strategies imposed by lenders in recent years left hundreds of homeowners in foreclosure, which has driven down home pricing in local markets. I'm not sure I agree with his statement that buyers have years in which to save money "before home prices start to tick up". In stating such, Mr. Crook is predicting a continuing decline in housing for decades to come. And this is a claim that neither he nor I can make.

I could write all night about the excerpt from Mr. Crook's book, and the parts that I agree and disagree with. But I have one parting thought, going back to my earlier comment. Housing is local. Mr. Crook tells first time home buyers to take 25% off the price they paid for their homes and to count on this hit when they attempt to sell their homes. Housing is local. Every pocket of the Twin Cities housing market is seeing different rates of depreciation, if any. 25% is highly arbitrary. It may be higher in other areas, and lower in yet others. Edina is seeing virtually no depreciation, for example.

To wrap up, don't let the media, including the national "experts", scare you. Pending sales in Savage are on pace and higher than they were in the winter of 2007. Furthermore, this is January in Minnesota. Instead of selling a home, Minnesotans are thinking about Netflix, a good pot of chili, and the spring market. If you are thinking about buying or selling and/or concerned about the value of your home, consult a local Realtor. Far too much news about the housing market is spewed to the national audience without regard to what is happening on a local scale.

By Sara Huebener

I would like to share some general housing stats that point towards housing recovery. With that, I have some a couple tidbits existing homeowners should keep in their back pockets for when and if they need to sell.

Inventory in the Twin Cities is first and foremost. In July of 2007, when our market was at one of its lowest dips, housing inventory sat at 36,000 homes. Today, inventory is down to 26,000 homes. That 28% drop is GOOD NEWS! Tie that in with an 18% increase in pending sales in the past four months and we see signs of recovery on the horizon. 2009 promises to be a year to "watch". Even if growth is minuscule, any growth at this time is good news for our market.

Now for more..... Interest rates on a 30-year fixed mortgage are just 4-7/8%. WOW. Rates have not been that low in years. A 15-year fixed mortgage hovers around 4.5% - also very good. If you are a homeowner, not moving, and paying 6% or higher on your mortgage, refinance NOW.

If you are selling now, keep this in mind. You can buy down a buyer's interest rate from the existing 4-7/8 to a 4% (or lower rate). This is a great selling tool to offer a potential buyer and incent a purchase.

For homeowners who are currently financed FHA, keep in mind that a buyer can assume your mortgage if they qualify. What this means for you as an FHA-financed homeowner now is this: Down the road, if you choose to sell, and interest rates go up to 7% or 8% for example, a qualifying buyer could assume your lower interest rate mortgage. This is a little nugget that FHA-financed homeowners need to keep in their backk pockets.

Finally, I can't say it enough. The federal $7,500 tax credit for first-time buyers is incredible.

Low interest rates. Tax credits. Increases in pending sales. Drops in inventory. There is a lot of GOOD to be found in this market. The signs of housing recovery are everywhere. Keep watching and we'll keep sharing them with you.