The latest report on declines in existing home salesduring January is just one of several indicators suggesting that the house market is slowing, raising concerns about the health of the market. Here's one perspective on that topic from a well-known national source, Jonathan Smoke, who is chief economist at Metrostudy:
"Economists were expecting a 4 percent decline in existing home sales released this morning by the National Association of Realtors (NAR), but the decline was worse at 5.1 percent. Some are saying that weather likely was responsible for at least 1 percent of the decline. Regardless of whether or not you buy into the weather causing some of the decline, the existing home market is looking healthier and healthier. Put another way—I’m not worried about the year ahead based on this data. We have more of a cushion going into the spring selling season than the US Women’s Hockey Team had in the final minutes of the third period yesterday. NAR has data on single family existing sales back for more than 45 years, and that long-term average is a monthly annualized rate of 3.52 million; January’s rate is 15 percent over that level. The abnormal level of investor activity is roughly 10 percent of the volume, so take away that and we still would be at least 5 percent above average in volume. A key underlying trend is that the existing home market continues to move towards a healthier mix as non-distressed, regular resales gain market share. Resales gained 10 percent in share over the course of 2013, rising from 66 percent of total existing home transactions to 72 percent at the end of the year as both foreclosures and subsequent REO sales declined. 2014 is seeing that trend continue as non-distressed regular resales now make up 74 percent of all existing home sales. Even if volumes decline with investors retreating, prices will get support from fewer and fewer heavily discounted distressed sales. When I couple that mix trend with demand shifting towards more established buyers and therefore higher price points, I wouldn’t bet on prices declining. And what did the January report tell us? Median existing home prices were up almost 11 percent over January 2013. When the decline in volume is mainly in the type of transactions you don’t want (distress), the decline is a good thing. Also, please resist the temptation to make the lazy observation that rising mortgage rates have hurt the housing market. I continue to believe that the rise in mortgage rates we have experienced is not having an outsized negative impact. Higher rates and continued tight credit, now potentially worse due to QM implementation, is no doubt limiting demand by shifting more of the market towards higher income and older buyers away from first time and entry level. But, remember this shift is going on while sales remain well above historical standards. The 30 year rate is up a full percentage point over last year, but the bulk of the increase came last spring and summer in fear of the taper. Since the taper actually began, the 30 year rate essentially hasn’t moved. What has moved? A higher share of home purchases made in cash and a higher share of mortgages with an adjustable rate. This shift to more adjustable mortgages combined with a profile of increasingly more credit-worthy, established buyers supports the finding that actual average mortgage rates on home purchases are up only 10 basis points over last year. So much for the headline 30 year rate rise wreaking havoc.
Today the Mortgage Bankers Association’s (MBA) National Delinquency Survey showed that the percentage of loans in foreclosure nationwide has fallen for the seventh consecutive quarter to just 2.86 percent - the lowest level in six years.
Last week I reported that in Minnesota the foreclosure rate had fallen to the lowest level since 2005, accoridng to the Minnesota Homeownership Center. That's great news, but there are still parts of the state are still suffering mightily - especially some of the counties along the northern fringe of the 13-county metro. Here's a list of the top 5 counties - those with the highest percentage of foreclosures - over the past three years:
Sherburne Mille Lacs
Brad Fisher will succeed Greg Mason as president of Edina Realty Title. Mason was recently named president and CEO of Edina Realty Home Services. Fisher has been been the long-time manager of the Edina Realty Plymouth office and has been in the business two decades, including stints in sales, management and training. He signed up with Edina Realty in 1995 as an agent with the Wayzata office, and became manager of the Buffalo, Monticello and Delano offices in 1996.
“I’m very excited for the opportunity to lead Edina Realty Title as we continue to grow our market share,” said Fisher “Our customers can really benefit from the wealth of top-notch products and services offered by the Edina Realty family of companies.”
Fisher served a two-year term as president of the Minneapolis Area Association of Realtors and has been a member of the Professional Standards Committee of the Minnesota Association of Realtors since 2010. Fisher graduated from the University of Minnesota with a bachelor’s degree in economics, and was born in Minneapolis and grew up in several Twin Cities area suburbs. He's lived in Independence for 22 years with his wife and son, where he serves on the Independence city council and as a member of the planning commission.
Mortenson Development said construction began on Wednesday of a new 211-room Hampton Inn & Suites over by the First Avenue nightclub in Minneapolis. It's now a surface parking lot.
The nine-story, $37 million project is slated for completion in the first quarter of 2015. Located at First Avenue and Eighth Street, the new hotel will be near Target Field, Target Center, the city's entertainment district and will be connected to the skyway system.
Construction of the new hotel property is being managed by Mortenson Construction, and designed by ESG Architects in Minneapolis. It will be the first Hampton Inn & Suites in the city of Minneapolis.
“The vibrancy of the downtown Minneapolis market is evident everywhere you look," said Tom Lander, vice president of Mortenson Development. "This property will be ideally located near major attractions and will provide tremendous accessibility to the downtown core, at an affordable price point, for the city’s guests.”
Here's what you need to know about a handful of interesting mixed-use projects at various stages of development in Minneapolis:
After fierce opposition from Twin Cities home builders, an administrative law judge recently ruled that the Department of Labor and Industry has the power to require sprinklers in some new houses as part of an amended residential building code that’s expected to be adopted sometime next year. Here's a link to that ruling.
That ruling follows a year-long debate over the issue (I last wrote about the debate in May 2012), which would require home builders in most of the state to install automatic fire sprinklers in new single-family houses that exceed 4,500 square feet.
Builders have fought the rule because they say it is unnecessary and could add thousands of dollars to the cost of a new home. Though the square footage requirement is limited to those houses with more than 4,500 square feet, the rule applies to all conditioned space, includes most lower levels and bonus rooms even if the space is unfinished.
Eric Lipman, the administrative law judge who issued the ruling, wrote that “...the proposed rules are needed and reasonable.” James Vagle, public policy director for the Builders Association of the Twin Cities, said that the organization is considering its options. “We are continuing to seek ways to avoid imposing this unnecessary mandate on homeowners as this process continues he said.
The rule has received the support of fire officials who have argued that it will save lives and homes. The decision by the administrative law judge comes several weeks after a hearing to discuss the issue, which has been the subject of debate for several years. In both 2011 and 2012, the state legislature approved measures that would have forbidden the DLI from revising the state code to require installation of sprinkiers, but both measures were vetoed by Governor Dayton.
Here's part of Dayton's response: “I take very seriously the concerns which fire safety professionals have expressed about the safety of home residents, their properties and the lives of the men and women who courageously risk their lives to fight those fires.”
The measure could be implemented sometime later this year. Do you agree with Lipman's decision?