More on the MN Foreclosure Mediation Plan

You know from reading our post last week on the Attorney General's Mandatory Mediation plan for fixing the foreclosure crisis is basically a foreclosure moratorium under separate cover. You also know that it is based, in part, on a plan used to halt Farm foreclosures in the 1980's. 

So, in the interest of identifying possible unintended consequences of such an action, we asked a few MN banking veterans (grizzled enough to remember the original program,) what they thought.

The following comment, from a 30+ year veteran of banking who shall remain nameless, was too good not to share:

[Attorney General Swanson] should do more research on the farm bill from the 80's.  What happened when they passed the farm foreclosure act was that banks quit lending on farms completely until they rescinded it.  It's where we got the 10 acre minimum.  Anything over 10 acres had a moratorium on foreclosure.

...we have to quit calling renters homeowners.  Until that happens this won't be fixed.

The last, absolute last, thing that we need is for lending to clamp down further based on the vagaries of "helpful" programs launched by aspirational politicians.  This is sounding more and more like a bad idea.

11/24/08 at 01:59 PM Permalink | Comments (1) | TrackBack (0)
Filed Under: Foreclosures, Housing Market Politics, Twin Cities

Rumor Mill: Wensmann Homes Shut Down?

We'll file this in the un-substantiated rumor bin for now, but Wensmann Homes has apparently ceased operations as of last Friday, a tipster reports.

We've managed to confirm the Star-tribune is working on a story, so there's definitely some sort of fire beneath the smoke. 

What's unclear as we write this is whether Wensmann has indeed shuttered, or filed bankruptcy, or in some other version of operational life support, or they've simply hit a rough patch and will continue operations in some form.

Wensmann homes, founded in 1968, was the 12th largest builder (by revenue) in the Twin Cities as recently as 2005.

Anyone with specific knowledge of the situation, drop us a line: alex [a] alexstenback.com

11/11/08 at 02:03 PM Permalink | Comments (6) | TrackBack (0)
Filed Under: Twin Cities

Report: Lender-Mediated Homes 34.5% of Twin Cities Sales

Please amuse yourselves be geeking out on the updated Foreclosures and Short Sales in the Twin Cities Housing Market report (pdf) from the Minneapolis Area Association of Realtors.  Lots of great data and insight, and here's one graphic that stuck out (click to biggify):

Lender-Mediated of course being the catch-all phrase for short sales, foreclosures, et al.

Also, don't confuse this:  34.5% of sales are lender mediated.  That does not mean that 34.5% of homes in the Twin Cities are in some stage of foreclosure.

Despite the fact that every media outlet likes to shout the F Word, foreclosures, short sales, and the like remain a very small percentage of overall housing stock - perhaps 1-3%.
PDF: Foreclosures and Short Sales in the TC Market [MAAR]

10/17/08 at 01:39 PM Permalink | Comments (0) | TrackBack (0)
Filed Under: Foreclosures, Reports & Research, Short Sales, Twin Cities

Behind The Numbers: Understanding the Local Spike in Pending Sales

This months *Skinny Video unpacks the recent surge in pending sales in detail.  To wit:

There are factors at work that are exacerbating the appearance of this rebound and slightly tempering this good news. First, the sales slowdown in August and September of last year was historically extreme; current activity seems extraterrestially high, compared to 2007, but is actually only slightly above the pace of 2006. In addition, there is likely a short-term increase in sales activity as home buyers act now to take advantage of sunsetting seller-funded downpayment assistance on FHA mortgages. This program is currently the only zero-down loan option still available and is disappearing as of October 1, subject to a congressional rescue.

Weekly Market Activity Report 9.15.08 [MAAR/Skinny]
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*If you aren't following the Minneapolis Area Association of Realtors research blog, The Skinny, you are missing out on some great content.

09/18/08 at 10:48 AM Permalink | Comments (0) | TrackBack (0)
Filed Under: Twin Cities

How a Weak Dollar May Strengthen Our Real Estate Market

I prefer a strong dollar for eternity, but right now I feel about the dollar what St. Augustine felt about chastity. To paraphrase his notorious prayer, "Lord, make our dollar strong, but not just yet." - Bob McTeer, former President of Dallas Federal Reserve Bank

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Do you want a stronger dollar, or a weaker dollar? 

If you ask that question to the next three people you see, chances are they'll say (perhaps emphatically,) "Stronger." After all, it's the Greenback, and we instinctively equate a strong dollar with a strong nation.

And mostly, over the long haul, a strong dollar is a good thing.  It helps keep interest rates low, is a sign of a strong economy, and something worth rooting for.

But right now, a weaker dollar may be just the thing that helps lead us out of the real estate wilderness, and is probably what you should be rooting for.

That's because a weak dollar helps manufacturing and other industries that export goods and services by making the cost of their goods cheaper, relatively, than those of foreign competitors. 

In other words, a weak dollar drives up foreign demand for our products and services, so it's a boon to exports.

You might remember last weeks post on the Beige Book, which higlighted manufacturing as of the few bright spots in our local economy.  This was driven by, you guessed it:

"Business is booming due to exports," commented a Minnesota metal fabricator.

So when the dollar falls, Minnesota based exporters get a boost - hopefully large enough to make up for or exceed sputtering domestic demand, and cause them to add jobs and expand operations.  All sorts of good things flow from that.

Why this Matters to our local real estate market:
The recovery of our real estate market, and more importantly, it's long term health, is about not about ARM's adjusting, foreclosures, or the legacy of subprime and the real estate boom. 

It is about jobs and the local economy.  The stonger our local economy and job market, the quicker the recovery.

To elaborate, we point you to a piece from Yesterday's Wall Street Journal on the impact of exports on local economies. See also the cool interactive graphic (screenshot above):

Export-driven growth marks a dramatic shift in an economy that has relied heavily on consumer spending. That has slowed in recent months as Americans, nervous about job losses, teetering banks, falling home values, and rising gasoline and food prices, have tightened spending. Against that background, exports have emerged as a powerful motor...

It's a badly needed tonic for the beleaguered U.S. economy.

To be sure, Minnesota is far from the largest "net exporter," so we'll need more than just weak-dollar driven exports to pave the road to recovery, but for now, we'll take any help we can get.

09/12/08 at 10:48 AM Permalink | Comments (2) | TrackBack (0)
Filed Under: Economy, Twin Cities

Beige Book Twin Cities: Weak, Sluggish, Not Strong

One of the ways we earn our keep around here is by reading things like the "Beige Book," so you don't have to.  Here's a summary of the none too pretty picture painted in our very own 9th Federal Reserve District:

Summary: "Ninth District economic activity was stagnant since the last report. Decreased activity was noted in consumer spending and services, while residential construction and real estate remained slow."
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Consumer Spending: "Consumer spending decreased slightly in some areas."
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Residential Real Estate: Residential real estate remained slow. Second-quarter home sales in central Minnesota were down 14 percent from a year earlier.
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Manufacturing: "Overall manufacturing activity was up since the last report"..."Business is booming due to exports," commented a Minnesota metal fabricator.
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Employment and Prices: "Labor markets loosened somewhat since the last report...Wage increases were moderate...Prices for many commodities and energy have decreased since mid July, but remain at relatively high levels."

More than anything else, a healthy real estate market is about a strong local economy with ready access to employment.  Something we still have, by all indications.  But perhaps not for long - though this report is not without bright spots, it seems to paint a picture of an economy in a real estate and banking led slowdown. 

Sure, home prices are starting to look relatively attractive, pending sales are stringing together some YOY gains, and interest rates remain anchored in the low 6% range.  But the bigger economic picture put forth in the Beige Book is not exactly the stuff of a housing market turnaround.

09/03/08 at 04:29 PM Permalink | Comments (1) | TrackBack (0)
Filed Under: Economy, Twin Cities

Bloomington Based Rescap to cut 5,000 jobs, Streamline Operations

We covered the first round of cuts at ResCap, GMAC's wholly owned real estate finance subsidiary, and now it looks like some, if not all, of the 600 some odd positions remaining at the Bloomington based financial services outfit may be in Jeopardy.  From the Strib:

As part of the cutbacks announced today, ResCap said it would close all 200 of its GMAC Mortgage offices, stop originations through its Homecomings wholesale broker channel and cut back on business lending. ResCap is also "evaluating strategic alternatives" -- a phrase that often means a sale is being considered -- for its GMAC Home Services business.

Stark evidence that the pain in the mortgage industry, and by extension the real estate industry, is far from over, from the press release:

"Conditions in the mortgage and credit markets have not abated and, therefore, we need to respond aggressively by further reducing both operating costs and business risk."

No word yet on whether the atrocious Ditech (also a ResCap property, natch) billboards will come down, but we can dream.

09/03/08 at 03:40 PM Permalink | Comments (1) | TrackBack (0)
Filed Under: Twin Cities

All Real Estate Is Local: Best and Worst Zip Codes

Felix Salmon has up a great little graphic (via Jake at Econompic Data) based on a Businessweek comparison of the best and worst performing zip codes in major metropolitan areas.

A very simple way of pressing home the point that despite the general negativity in the real estate market, some areas continue to appreciate, (and these areas tend to be of the long established and higher-priced ilk.)

In the Twin Cities, North Oaks nabbed the top spot, marking 15% appreciation.  South Minneapolis's 55409 (basically the Kingield neighborhood and other areas east of Uptown near 35W) zip code saw a 24% drop.

08/04/08 at 10:54 AM Permalink | Comments (0) | TrackBack (0)
Filed Under: Market Stats, Minneapolis, Reports & Research, Twin Cities

Foreclosures: Heating Up in the West Metro

Graphic via Strib

Steve Brandt at the Star Tribune with an interesting find:

Foreclosure data for the first half of 2008 show that the number of sheriff's sales jumped 59 percent in suburban Hennepin, compared with the same period last year.

But the number of sales is up only 20 percent so far this year in Minneapolis, and there are indications they are leveling off on the North Side, which has been the epicenter of the state's foreclosure crisis.

Pure speculation on our part, but it seems that many of the foreclosures in Minneapolis, and especially North Minneapolis were of the more toxic variety, and simply went bad more quickly.

There was fraud in the burbs, to be sure, but the declining real estate market will take its toll, resulting in more "natural" foreclosures (job loss, divorce, speculation) in addition to those of the shady and toxic strain. It may simply take longer for the foreclosure numbers to build in these areas.

07/31/08 at 05:46 AM Permalink | Comments (0) | TrackBack (0)
Filed Under: Foreclosures, Minneapolis, Twin Cities, Western Burb's

Strib Skips Debt Payments

The Star-Tribune, citing sagging revenues from print advertising run-off, has declined to make payments on some junior debt - the business equivalent of second mortgage.  Chief executive Chris Harte had this to say:

"If we can restructure this debt, we still have a very viable [business],"

No kidding Chris!  Many homeowners feel exactly the same way, just replace "business" with household budget.

Noticeably absent is any moralistic intonation about obligations to repay debts as agreed - that attidude is apparently reserved for private citizens.  For businesses, periodic delinquency is just business as usual.

07/02/08 at 10:15 AM Permalink | Comments (0) | TrackBack (0)
Filed Under: Twin Cities