The people in Minnesota seem to be playing it safe this day and age. Big Companies are terrified to new help even though they can afford it. Politics are scared to talk about certain subjects, for the reason it may cost them a future election. Minnesota home buyers are too nervous about buying a home right now, for the reason there will be a better bargain down the road. Minnesota people are playing it safe.

            Playing it safe is not always the best option. Many of our great presidents did not play it safe, and that’s why we have our freedom and independence. With some risk there can be astonishing results such as Martin Luther King JR.  

            When buying a first home or a bigger home it was be very nerve racking. There are many financial responsibilities for Minnesota buyers. Many people families are growing and they need to move into a home with more space. You should not let fear take the best of you, and do what is right for your family.

            Many companies, Minnesota home Buyer’s and politics have to get back into doing what is right even if some risk is involved. Minnesota has always been a state if you put the work into it you will get the results you want to see.

Minnesota Home buyer’s NEED to Cover your assets

 When lenders assess mortgage borrowers, they look at four things: income (the ability to repay), credit (the willingness to repay), collateral (appraised value and property condition) and assets (cash in the deal and cash reserves after closing, mostly). Of the “four legs of the table”, assets are the least discussed, and yet may be the most important.

What do we mean when we talk about assets?

Monies needed for the down payment (the difference between the purchase price and the loan amount which may or may not be the same as the money deposit at contract signing)

Monies needed for closing costs (fees to the lender and third parties for things like appraisals, title insurance, settlement services, and so on)

Monies needed for Pre-Paid’s (homeowners insurance, flood insurance, real estate taxes, etc.) and establishing escrow accounts for upcoming payments

Monies for Reserves- the money you still have left after closing. Monies that would be available, if a problem were to come about.

Why do we care about covering your assets?

Assets may be the correct reflection of a borrower’s financial strength. Their ability to save and properly budget could be a significant indicator to their future paying habits.

The source of the assets is important. Savings? Gift or inheritance? Lottery victory? Insurance settlement? Sale of a baseball card collection? Each reflects differently on the borrower.

Many people don’t show all their income on their tax returns. Undocumented income can’t be used to qualify; however, often assets become a correct representation of a borrower ability to pay than their 1040s.

Reserves are a concern. A Minnesota buyer with $50 in the bank after closing is riskier than one with $50,000. Also, clients who have money in the bank but have some irregular late payments on their credit are looked at differently than those who didn’t have the money to make the payments.

Common Asset Problems in Mortgage Packages:

Large deposits (defined as those which are excessive for the income level) raise an financier’s eyebrows. Where did the money come from? Maybe the borrower took a loan that doesn’t yet show up on their credit report.

Cash deposits are another red flag. In this day and age, people keep their money in the bank, not under their mattress. Where did the cash come from?

Gift monies and seller’s concessions, while considered as borrowers assets when doing calculations, will give an underwriter pause when assessing the borrower’s real ability to repay.

Guidelines have stiffened. When borrowers are paying off credit cards to get their ratios in line, lenders are asking where that money came from now. That act has nothing to do with the home purchase, but may be a sign of something delicate in the borrower’s financial make up.

The best advice is to consult a Minnesota loan professional to discuss the proper way to position your assets and the timing of it that will put you in the most promising light.

Should Minnesota Buyer’s be LOCKING their Loans?

 Should Mr. Minnesota Buyer lock in the interest rate on your mortgage?

 A couple of things to consider:

1. While I am confident that the Debt Maximum Debate will be settled (whether it’s for six months or a year), my greater fear is the growing belief that the ratings agencies are looking at downgrading our government’s bonds from our AAA status.  By lowering the credit rating of the bonds being presented to the Minnesota housing market, the confidence of those who buy our bonds will be stunned.  In order to overcome the risk of lower rated bonds, we will need to offer greater rates of returns on our bonds.  THAT will result in a rise in mortgage rates because mortgages are what make up the bonds.  This will disturb virtually every conforming loan limit Minnesota home buyer, whether they have conventional or government (FHA/VA) financing.

2. The pending lowering of the maximum loan amounts (slated for October 1st) that can be sold to FannieMae, FreddieMac and GinnieMae (in high cost areas from $729,250 to $625,500 for single family homes) will create more “Jumbo Loans”.  Jumbo loans have historically been .25% to .375% higher than conforming loans; however, industry insiders are hinting at a much greater spread (.75% or more).  Granted, this will not impact most Minnesota home buyers, but it is worth stating.

Now, it is possible that neither item becomes effective.  Let’s keep our fingers crossed.  Yet, what is the benefit of NOT locking.  Maybe rates could go down an eighth or a quarter of a percent.  Is that worth the risk of a rate increase that would be hasty and dramatic of a half of a percent or more?

The safe bet is to LOCK to protect yourself……my mother always said, “better safe than sorry”.

Selling Your House in Minnesota? Waiting May Not Be Logical

 There have been some bright spots in the Minnesota residential real estate market over the last couple of months. Several price guides have reported a balance of prices and some regions have even shown small levels of appreciation. This has led some to believe that we may have reached a bottom for home values. We must understand that what we are actually experiencing is a ‘window of opportunity’ as the banks are delayed in bringing certain inventories of troubled properties to the Minnesota Housing market. Let’s look at what others are reporting:

Bloomberg Businessweek

“The core of Simon’s analysis is that the loose lending practices seen during the housing bubble allowed 5 million renters to become homeowners, and that the market is in the long-drawn-out process of removing this group. He believes housing prices will decline 6 percent to 8 percent nationally, with 6 million to 7 million more foreclosures yet to come.”

Yahoo Finance

“The struggle with the Minnesota real estate market remains additional inventory. Based on Shilling’s research, there are 2 million to 2.5 million surplus homes in the country — a supply that will take 4-5 years to work-off. The result: Minnesota Housing prices will fall another 20% and flooded mortgages will balloon from 23% to 40%, he says.” 

Housing Wire

“Both warmer weather and the drop in concerned sales percentage have contributed to recent Minnesota home price improvements. However, given the disappointing pace in Minnesota housing demand recovery, both factors may turn against us in the coming winter and push house values lower again…

 This supply-demand imbalance affirmed JPMorgan analysts’ estimate of a further 4% drop in Minnesota home prices from the first quarter of 2011 to a new bottom next year.”

 DS News

“Home prices have gotten a little bit of a boost in recent months thanks to a seasonal uptick in Minnesota Housing market activity. Most experts, however, expect further declines to characterize the later part of the year and possibly extend into next year, largely because of the huge supply of foreclosures on the market.”

 Bottom Line

If you are thinking of selling in the next twelve months, you would perhaps do much better if you sold your house sooner rather than later.

5 Minnesota Real Estate Headlines for the next 6 Months of 2011

            Making predictions can be the “kiss-of-death” for a blog. Even if we get four out of five correct which is 80%, there are those in the Minnesota Housing Market who will slaughter us on the one thing we got wrong. We believe strongly that when making a Minnesota Real Estate decision for you and your family you must look forward and take into concern how the housing market may change.

            For this reason, we are willing to take on the possible wrath of our counterparts by sticking out our necks and predicting these will be the major Minnesota real estate headlines from now until the end of the year.

Interest Rates Rise

Many, including us, have been astonished that rates have not risen already. However, the next few months are going to see three distinct changes that will push rates upward.

1.     As the government starts to leave the mortgages market, private industry will step in. Private industry demands higher rate of return on their investments. Mortgages will be no different. Studies have exposed that 30 year mortgage rates could increase by 1 to 3 % over the current rate.

2.     In many higher priced markets, rolling back Conforming Loan Limits means that rates for the mortgages on these properties will resort back to the rates on private gigantic loans and gigantic-conforming mortgages has varied between about ½ and ¾ of a percentage point.

3.     As the economy gets better (and we trust it will), the pressue to keep rates low to inspire growth will end.

Some Loan Requirements Tighten but More Can Now Get a Loan

Lending organizations have already started to introduce harsher mortgage guidelines. Whether the Quality Residential Mortgage (QRM) requirements are introduced as originally proposed or eased somewhat, there is no disbelief that guidelines will continue to stiffen as we work through the year. However, we believe the private sector will again start introducing alternate mortgage financing but at a greater expense to the consumer. You WILL be able to get a mortgage. It will just cost you more.

Minnesota Housing Sales Increase

Contracted sales have shown reliable progress over the last six months and we feel this will continue and actually begin gaining even greater motion. We trust there is a ‘pent-up’ buying demand caused by the volatility of the market over the last several years. When interest rates start to move upward and alternative financing becomes more available, these buyers will start to jump off the fence. We believe there will be a major pick-up in Minnesota Housing sales over the next six months.

Distressed Properties Increase Markedly 

More people are paying their mortgage on time and that is amazing news for housing in the long term. However, the numbers of distressed properties currently in the foreclosure process is still very enlarged. These properties will begin coming to the market in the second half of the year as short sales and foreclosures. The numbers will be shocking in some areas.

Prices Continue to Soften in Most Minnesota Markets 

The current Minnesota housing inventory for sale and the distressed properties about to come on the market will enormously outnumber the increased supply of purchasers we will see over the next six months. There will be more Minnesota houses for sale then there will be buyers purchasing them. That oversupply will continue to put downward pressure on prices through the rest of this year and into 2012.

You now know what we believe will take place in Minnesota real estate between now and the end of the year.

Minnesota Housing Top 5 Headlines in the first 6 months of 2011

We have reached the midway point of the year. Today, we want to look back over the first six months and give you what we believe were the 5 items that have had the biggest impact on the Minnesota real estate industry so far this year.

The government Wants Out of the Mortgage Business

From the outline of the Dodd-Frank regulations to the talk of closing Fannie Mae and Freddie Mac to the projected Quality Residential Mortgage (QRM) guidelines, the government has made it very clear that they want to dramatically limit their involvement in the mortgage industry. What will come of this? Will private industry step up and fill the void created? What will be the increased cost to the Minnesota consumer? Only time will tell. 

Despite Early Headlines, Sales are on the Upraise

Headlines earlier in the year announced the total breakdown of the Minnesota housing market. To those in the know, it was clear that comparing sales numbers in the first month of this year to the same period last year made completely no sense. Large numbers of transactions were dragged forward last year so Minnesota buyers could take benefit of the credit. Pending Minnesota home sales (transactions going into contract) on the other hand have done quite nicely and many organizations such as (Fannie Mae, Freddie Mac, NAR and Moody Analytics) are projecting good sales numbers throughout the rest of the year.

Among Warnings of a “Double-Dip”, Prices Began to Stabilize

Prices continued to retreat for the first few months of the year and brought the bears out. Some called for another major fall is prices (15-20%) and almost all recalculated their projections to show continued depreciation. Just as these new projections were made available, some pricing indices announced that values actually increased (though by a rather minimal percentage.)

Foreclosures Were Delayed Longer Than Originally Projected

Distressed properties (foreclosures and short sales) have a major impact on the Minnesota housing market. Because of paperwork challenges, the flow of these properties to the Minnesota market was virtually shut off.  At the beginning of the year, most Minnesota real estate experts like Jason Walgrave believed the banks would correct these challenges by the end of the first quarter. That didn’t happen and therefore many of these properties were delayed coming to the market. This is a major reason why prices seemed to recover: there were fewer discounted properties available for sale. Most now believe that the banks are within 60-90 days of releasing this inventory and that prices will again begin to soften.

Main Stream Media Begins to Announce “Now Is the Time to BUY!”

With prices and interest rates at historic lows and the chance that mortgages will become more costly as the private sector steps in, many in the main stream media are announcing that buying a home now makes sense. In the last 45 days, the Wall Street  Journal, Forbes Magazine, National Public Radio  (NPR) and CBS Money Watch have all ran articles calling for the readership to consider buying now!

Next Week we will have the top 5 Minnesota Headlines for the next 6 months of 2011.

Minnesota Home Prices Through 2015

                Everyone seems to have an opinion on where house prices are headed. Some positive Minnesota Real Estate Housing experts like Jason Walgrave say prices may start rebounding as early as later this year. Some other Real Estate agents say that prices may still drop another 10-15%. What actually is going to happen? No one knows for certain.  

                Yet, Macro Markets, a financial technology company, actually surveyed 108 economists, real estate experts like Jason Walgrave, and investment and market strategists for their June 2011 Home Price Expectations Survey. They then averaged all 108 opinions. Here is what the report said about Minnesota housing prices over the next 5 years:

Ø  2011:  MN housing prices will depreciate 3.52%

Ø  2012: MN housing prices will appreciate .46%

Ø  2013: MN housing prices will appreciate 2.18%

Ø  2014: MN housing prices will appreciate 2.92%

Ø  2015: MN housing prices will appreciate 3.47%

Accumulative appreciation including this year’s projected depreciation will stand at 5.71% in 2015.

Conclusion

Minnesota Real Estates experts like Jason Walgrave say prices will begin to see appreciation next year and return to historic levels of annual appreciation by 2015.