Monthly Archives: August 2011

S&P Rates Subprime Mortgages Higher Than U.S.

Do you suppose that the Subprime Mortgages are less risky now or is the U.S. in that bad of shape?


Standard & Poor’s is giving a higher rating to securities backed by subprime home loans, the same type of investments that led to the worst financial crisis since the Great Depression, than it assigns the U.S. government.

Read Full Article from Bloomberg

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CoreLogics Home Price Index, how Minnesota ranks nationally July 2011

CoreLogic released their July Report for their Home Price Index.  The Lead on their report is July Home Price Index Shows Fourth Consecutive Month-Over-Month Increase.  Except for Minnesota…

Excluding distressed sales, the five states with the greatest depreciation were: Nevada (-9.6 percent), Arizona (-8.1 percent), Delaware (-6.5 percent), Minnesota (-5.7 percent), and Michigan (-4.7 percent).  

Including distressed sales, the five states with the greatest depreciation were: Nevada (-12.2 percent), Arizona (-11.9 percent), Illinois (-10.0 percent) Minnesota (-8.6 percent), and Idaho (-7.8 percent).

CoreLogic Home Price Index July 2011

I believe our region has something else going on other than the mortgage collapse and housing bubble.  If you look at this data, and other data comparing us nationally we are not doing well at all.  Our unemployment rate is better than nationally, however we are still losing jobs.  We are also losing households in the 7 county metro region, which has a big impact. 

The funny things about these reports is the true meaning of the data gets lost in translation.  For example, regionally our median and average home prices are way down.  That doesn’t mean that all home prices are down by that percentage, it is more reflective the price ranges that are selling bringing the average and median price down.  That is part of this, but I would assume that would be the same in other markets but maybe not.

Now it may also be that we are the market that is actually correcting quicker so it looks bad right now, but in the long-term is a healthier market.  This is a theory I don’t know how to prove other than with 20/20 hindsight.  In other words, time will tell.

(Or for another perspective on this, check out A Cold Detroit post.)

Look how we make the top 5 list…                   (view CoreLogic’s  full report).

CoreLogic HPI July 2011 (including distressed sales)

CoreLogic HPI July 2011 Excluding Distressed Sales


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Homes By Architects Tour

The fourth annual AIA MN Home By Architects Tour will be held Saturday, September 17 and Sunday, September 18, 2011 from 10 a.m. until 5 p.m. each day. The tour will feature over a dozen new and remodeled homes located throughout the Twin Cities and greater Minnesota, all designed by registered architect members of the American Institute of Architects Minnesota (AIA MN).

#6. 4713 Townes Road, Edina, MN 55424 Rehkamp Larson Architects

The fourth annual AIA MN Home By Architects Tour will be held
Saturday, September 17 and Sunday, September 18, 2011 from 10 a.m. until 5 p.m. each day. The tour will feature over a dozen new and remodeled homes located throughout the Twin Cities and greater Minnesota, all designed by registered architect members of the American Institute of  Architects Minnesota (AIA MN).
Visitors to the AIA Homes By Architects Tour can meet the architect and learn firsthand about the design process. Each of the homes on this tour is a unique reflection of the architect homeowner relationship.
From Stillwater to South Minneapolis, Monticello to Minnetonka and many stops in-between, the homes on this year’s tour are both newly constructed and remodeled properties in a range of
design styles and techniques.
The homeowners on this tour researched firms and met with many architects to find the one which matched their visions. The homes showcase the talents of local architects and how the diverse and collaborative visions of homeowners and architects can play out in home design.  Tickets are available online through 4 p.m. on Friday, September 16 for $15.  Tickets are available during the tour at any home for $20.  Single home tickets are available only during the tour for $10.
The 2011 Homes By Architects Tour is supported by Marvin Windows, Warners’ Stellian, Streeter/Elevation Homes, Landscape Renovations and Mattson Macdonald Young. For more information or to purchase tickets, please visit


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Local Architect wins Marvin Windows & Doors annual Challenge

Every year Marvin Windows & Doors has a contest recognizing the best architecture internationally.  This year a local architect, Jeff Murphy of Murphy & Co. Design, Buffalo, MN won for their design of Hunting Barn in Highcroft – Wayzata, MN.

Hunting Barn, Highcroft, Wayzata, MN Architect: Murphy & Co Design Buffalo, MN

 To see more on the Murphy & Co Design’s winning project, visit their website and search for Highcroft Hunting Barn. They have a lot of great designs.

To read about other winners around the world, check out this article from Minneapolis St Paul Business Journal.

The contest run by Warroad-based Marvin recognizes the best architecture in the U.S., Canada, Ireland, Israel, Japan, Spain and the United Kingdom. One of the winners this year was a four-story villa overlooking the Mediterranean Sea in Sotogrande, Spain.

“These winning projects are an inspiring display of architecture,” Brett Boyum, Marvin’s director of marketing, said in a news release. “Whether a faithful historic restoration or a completely original creation, these architects show what’s possible with inspiration and a focus on quality.”


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Twin Cities Weekly Market Update (week ending Aug 20, 2011)

This market update was put on the back-burner on getting posted because the Quarterly Case Shiller Index came out this morning.  This one should not be overlooked, because this is actually a leading indicator to the Case Shiller Index for our area. 

Minneapolis Area Association of Realtor released their Market Update.  We are experiencing positive signs in the market, we have inventory shrinking and pending sales picking up.  Ultimately these 2 factors will converge into stabilizing then increasing prices. (simple supply and demand) Pending Sales were up 53.3%, that is outstanding!  Inventory shrunk by 20%, another astonishing figure.   Now we have  a trend going, the average of the last 3 months have been a 15% decrease in inventory and 44.2% increase in pending sales.  We are now down to 2005/2006 inventory levels!    Prices should begin stabilizing at this inventory level and sales activity, assuming these levels continue. 

Week Ending 8/20/2011 Inventory of Homes (Twin Cities)

Week Ending 8/20/2011 Pending Sales Twin Cities

Now the really cool thing is that the Affordability Index is really high.  The Median household  income is 234% of what is required to qualify for the median-priced home under current interest rates.  Right now it is cheaper to own a home than it is to rent.  This should  attract more buyers back into the home market, fueling added demand – stabilizing prices.  (* my traditional disclaimer, assuming we add employment to the region…)
Housing Affordability Index 8/20/2011 Twin Cities


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S&P Case Shiller Home Price Index 2nd Qtr 2011, Minneapolis vs Composite 20

There are some bright spots on the horizon from the 2nd Quarter report from Case Shiller Home Price Index.  Nationally we are up 3.6% back getting back to 2003 price levels.  A little bit of bad news, Minneapolis has led the decline by double digits posting a -10.8% year over year decline in values.  On the surface this sounds bad, but from my perspective I believe this is a good sign;  This number is partially reflective of the lower price points are selling in the Twin Cities which drops the overall Median and Average price, I don’t believe everyone’s home values dropped by 10.8% this year (maybe in some neighborhoods..)  Our inventory levels are shrinking and our pending sales are up 43% from last year, so we are in the recovery mode starting with the lower price points which will work its way up.  While the composite 20 is boasting “back to 2003 levels” for pricing, the Minneapolis region is still bouncing around 2001 pricing.   It sounds bad, but I believe this is the initial pain involved with healing our market.  To summarize, I believe our region has going through the painful correction quicker than the other areas and is poised for quicker recovery.  Our inventories are down, our prices are down making our affordability favorable to buyers – our current market activity is strong so pricing should be stabilizing if not increasing soon.  Of course, this theory could be wrong if our region doesn’t start producing jobs…

Data through June 2011, released today by S&P Indices for its S&P/Case-Shiller1 Home Price Indices, the leading measure of U.S. home prices, show that the U.S. National Home Price Index increased by 3.6% in the second quarter of 2011, after having fallen 4.1% in the first quarter of 2011. With the second quarter’s data, the National Index recovered from its firstquarter low, but still posted an annual decline of 5.9% versus the second quarter of 2010. Nationally, home prices are back to their early 2003 levels.

As of June 2011, 19 of the 20 MSAs covered by S&P/Case-Shiller Home Price Indices and both monthly composites were up versus May – Portland was flat. However, they were all down compared to June
2010. Twelve of the 20 MSAs and both Composites have now increased for three consecutive months, a sign of the seasonal strength in the housing market. None of the markets posted new lows with June’s report. Minneapolis posted a double-digit 10.8% annual decline; Portland is not far behind at -9.6%.  Thirteen of the cities and both composites saw improvements in their annual rates; however; they all are in negative territory and have been so for three consecutive months.

Case Shiller Composite 20 vs Minneapolis August 30, 2011


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Real Estate investment as hedge against inflation

Gold Key, weighing one kilogram is used to acc...

Image via Wikipedia

If you have fears of inflation but believe Gold is over priced.  You may want to consider Real Estate.  I have believed this for a long time, real estate has historically paced inflation.

I found this article from the Danville Patch that I thought illustrated this very well:

Using Zimbabwe as an example, where inflation was once 98 percent, if you could purchase a bottle of water for one penny on August 1, by August 31, it would cost $10.6 million.

And bringing the point home, for all of us that are saving money so that we can one day retire comfortably — imagine if your life savings turned out to be only enough for the next day’s groceries?

We’ve had low inflation, as high as 6 percent in the early 90’s, but Habib warned that it can creep up on us before we know it and can be hard to contain. 

However, he is optimistic, and thinks we can contain it if we see it coming.

But for people looking to hedge against inflation, Habib suggests real estate and gold are the two best bets. Historically, he points out, gold leads the way and real estate follows. Habib sees the recent rise in gold pointing to a strong real estate market to come.

Especially, considering the fact that most people stay in their homes for 13 years — that’s the average. Sure, everyone wants to buy at the “bottom of the market,” but the exact bottom will be hard to gauge.

If it’s near the bottom, is it better to buy on the way down or on the way up? Habib makes the point that, you can get a better deal on the way down, when sellers are fearful, and there’s more inventory. Once prices begin to rise, the seller’s fear turns to greed: they want more for their home and there are fewer homes to choose from.

Habib stated that we are close to bottom and already there in some markets. He reminded us, sitting at the Roundhill Country Club, that 30 years ago, the homes in the neighborhood sold for around $37,000.

Historically, real estate appreciates at about 6 percent a year — but this is not along a straight line. There are ups and downs along the way.

Consider how long you plan to keep the home. If the answer is six months or a year, well then, this may not be the time to buy. But if you plan to stay in the home for the average of 13 years, Habib convinced me that this is a great time to buy.

Read Full Article


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Everyone’s a Winner in CNN’s Best Place to Live


Image via Wikipedia

Everyone’s a Winner in CNN”s Money Magazine Best Places to Live.  I was really impressed when the City of Plymouth won this, then every year after that it seems like a new town/city in Minneapolis wins the award.  This year Chanhassen won 10th Place for best place to live along with Arden Hills in 14th place.

See the ranking for Minnesota:

Do you believe CNN’ Money Magazine’s Best Places to live list means anything anymore?  I am curious on perceptions of this list, please take the anonymous poll.  It’s not scientific, so have some fun with it.

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Minneapolis St Paul Building Permits and Housing Starts

I just posted the Building Permits and Housing Starts for the State of Minnesota, and now I see they just released the Minneapolis/St Paul charts.  This is what counts for us, not the national stats or State stats – although they are a good barometer.

As you can see we are “bouncing along the bottom” still.  I wish we had data going back further to see how this compares to other recession periods.  Housing Starts and Building Permits will continue to bounce along the bottom until the region starts creating more jobs, supporting additional population (immigration and natural birth).  We need to keep a close eye on the employment figures, see chart following the permits and starts below:

These were released today (8/25/2011) from the US Department of Commerce: Census Bureau. 

Mpls/St Paul 1 Unit Housing StartsMpls/St Paul Housing Units Authorized 8/25/2011


Minneapolis/St Paul Region Employment/Labor Force July 2011

 As you can see with this chart, we have growing spread between employment and the labor force. (what the unemployment rate tracks).  This shows us we have approx 122,728 unemployed in the labor force in the Twin Cities 7 County region.  Assuming we could get to full employment, that is a lot of demand for housing.  But let’s just calculate the difference between Jan 2005 and Jan 2011, that is approx 55,259 additional unemployed workers in the Twin Cities 7 County metro region.  Not all of them will buy or rent housing, but a lot of them will.  Keep in mind, we have approx 26,000 properties for sale in the Twin Cities metro region…  If we use the old ratio of 1 housing unit to every 2 jobs (a number I pulled out of thin air..) we end up with demand for approx 27,629 housing units more than depleting our all of our supply. (double-check my math! I might have miscalculated on the back of a napkin here..)  If  that were to happen, builders would need to build approx 20,000 housing units to allow for immigration, new household formations, and move-up buyers.   If employment turns around quickly, we could end up with a housing shortage.  Not that we should be holding our breath right now, doesn’t look like anything promising that direction on the horizon yet..
Increasing employment is the only way this market will recover…



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