Hennepin County has put together foreclosure prevention workshops and now has posted it online… take a look!
Roseville, MN (January 12, 2009) – December permit statistics are a clear indication that regional builders were more than ready to close the books on 2008. Planned units dropped to just six more than the year’s monthly
low in February, and and down 60 percent compared to December 2007. Multi-family units made up just 36 percent of the month’s total, a drop from the 50 to 70 percent each month since July.
According to statistics compiled by the Keystone Report for the Builders Association of the Twin Cities (BATC), there were 223 units permitted during the month of December 2008, down from the 420 units permitted in November 2008. Housing activity ended the year 40 percent below 2007. A total of 5,397 units were permitted in 2008, compared to 8,961 units permitted last year.
The housing sector has borne the brunt of this economic downturn, losing an estimated three million jobs since the peak of housing expansion in 2005.
“Housing traditionally accounts for 15 cents of every dollar spent in the United States,” says BATC President Mike Swanson. “Therefore housing must be a centerpiece of any recovery plan.”
“The housing industry, spearheaded by the National Assocition of Home Builders’ Fix Housing First Coalition, is urging Congress to take action that includes ensuring below-market mortgage rates and expanded home buyer tax credits,” explains Swanson. “These measures will help to stablize home prices, prevent future foreclosures, restore consumer confidence and start creating jobs.”
Hudson, WI led the metro in building activity for the month with 29 units permitted in December. Woodbury followed with 19 units permitted, Maple Grove was next with 18 units permitted, followed by Blaine with 15 and Hugo at 12.
The Builders Association of the Twin Cities has contracted with Keystone Report, a local research firm, to maintain a database with information about new residential construction permits around the metropolitan area. After a builder has picked up the permit from a city, Keystone Report compiles and updates weekly residential housing permits by city for 70 percent of the metropolitan- area municipalities in the greater 13-county region. Planned units are the total number of housing units planned to be built under the permits issued (one permits is issued per building which may include more than one housing unit). Permit value does not include the land/lot costs.
Star Tribune has an article discussing how Sheriff’s Sales in Minneapolis might be peaking. The article gives several possible reasons for the peak in activity and discusses some of the things that are being done to help address the problem.
We’re far from through this crisis, but it seems like every few weeks there is a new data point that shows we’re finding fundamental levels and once we know where are boundaries are, I believe we’ll all feel more comfortable with the future of the housing markt.
The Minnesota Home Ownership Center publishes a regular newsletter on foreclosure prevention and I wanted to share the latest version with you:
June 24, 2008
|Legislative Update on Foreclosures
|Workshops for Homeowners
Free, confidential foreclosure informationThe Minnesota Home Ownership Center continues to offer free workshops for homeowners who are worried about making upcoming mortgage payments, are already facing foreclosure or for anyone interested in learning more about foreclosure. These are open-house events. Participants are encouraged to come any time that is convenient during the workshop hours. The workshop will provide information on what happens during foreclosures, homeowners’ rights, and solutions for long-term housing needs. Participants will be able to ask questions and get free advice – confidentially – from mortgage lending and foreclosure specialists. No RSVP is needed. For more information call the Minnesota Home Ownership Center at (651) 659-9336.
|Workshops for Professionals
Information and Referral Workshops
The Minnesota Home Ownership Center is offering a series of free training workshops to provide information on how to help distressed homeowners. The trainings will provide an overview of the foreclosure process, where to refer homeowners and how to prepare them to talk with a housing counselor or loan servicer. The training is specifically designed for staff from public, private, and non-profit organizations that come in contact with distressed homeowners – but who do not normally work with mortgage foreclosure as part of their job. Upcoming training workshops:
The foreclosure process in Minnesota is a long one… often consuming an entire year from when the borrower first misses a payment until the time that the bank assumes control of the home. The Minnesota Home Ownership Center has put together a great flyer on the process and an average timeline.
Right now the Minnesota Legislature is considering a bill to “defer” the foreclosure process for up to an additional year if the borrower of an owner-occupied home makes partial payments (65% of principal and interest amount due). If this bill is signed by Governor Pawlenty, Minnesota could potentially have a 24 month disposition window for some foreclosures.
A lot can happen to a home in the 12 months from the date the borrower stops making payments. In many cases, the homes fall into disrepair as the borrower knows that any investment of time or money on the property will ultimately be lost when the bank assumes possession. Property taxes and municipal bills are also often neglected… I have seen delinquent water & sewer bills for a foreclosed property above $1000 and delinquent property taxes above $5000. These are all bills that will have to be assumed/paid for by the mortgage company. Also, often times there is a significant amount of trash/debris left by the borrower… it is not uncommon to see a large dumpster in front of these properties full to the brim. Add to all of that the year of non-payment of the loan and the legal expenses to the lender to complete the foreclosure process and it is likely that a lender already has a $10,000 – $20,000+ loss at the time they repossess it.
In Minnesota, we have 5 months of average low temperatures below freezing. If a home in foreclosure is vacated during these months, often the utilities are shut off before the bank secures the property and the home’s plumbing ends up freezing and pipes burst. In good circumstances the water was shut off at the meter or the street (sometimes done by the city from non-payment of the water bill) so that only the pipes need to be repaired, which could cost as little as a few hundred dollars or climb to several thousand, depending on the location and extent of pipe damage. In bad circumstances the water can literally fill the house and cause near complete destruction of the interior of the homes, which then become great incubators for mold when they thaw in the spring. In a house profiled by the Star Tribune, one house once worth nearly $700,000 was resold at auction for only $280,000… a loss of over $400,000… about 60% of the value of the home.
Once the bank has possession of the property, the previous owner has vacated, and any debris has been removed from the property, the bank can go about listing the home for sale. Based on a sample of homes sold in Plymouth and Maple Grove in the last 10 months, when the bank resells the property they will lose 23.4% from the value at the previous sale. All told, banks lose $10’s of thousands of dollars on the average property… and on some, $100’s of thousands!
While the banks are already overloaded with the huge numbers of foreclosures they have been taking on and are even more buried in their short-sale departments, where responses to offers can take months, the more proactive a bank can be with their defaulted borrowers, the more likely it is that they can recover a larger share of their investment.
Regulatory and industry efforts to create work-out agreements between lenders and borrowers has met limited success and while without these programs foreclosures would be higher, the number of foreclosures today and in the near future are still substantial.
The mortgage lenders are trying to ramp-up staffing for their short sale and foreclosure departments, but these efforts are not proactive, but rather reactive.
While it is in the banks’ best interests to work with their borrowers to modify the loan terms and keep the borrower in the home, there are many circumstances where no reasonable workout can be made. Instead of the banks letting these homes go through the foreclosure process, they should attempt to work with the borrower to get the home sold directly from the borrower to a new buyer, with the bank accepting a sales price that only returns a portion of what they lent back to them, which is called a “short sale.”
The approval of a short sale is a long and difficult process that can take a lender 60-90 days to approve once an offer has been submitted. The largest problem with short sales is that many buyers simply do not have the time nor the patience to wait 2-3 months for a response. Further, the process is not the most appealing for sellers either, since they receive no monetary gain from the sale, many borrowers see little value in the enterprise. These short sales are seller-initiated and more than 1/2 of the listings never close.
A New Way to Handle Foreclosures
Lenders can be more proactive with their defaulted borrowers by initiating a short sale process when the probability of foreclosure is high and the likelihood that a lender-negotiated loan modification that will allow the borrower to become current on their mortgage is low.
Based upon my analysis of sales in Maple Grove and Plymouth in the last 10 months, bank owned properties on average sold for 23.4% less than their previous sale but short sale properties sold for only 16.4% less than their previous sale. Taking into account many of the other costs I mentioned earlier in this article, the savings to lenders could easily be in the 10’s of thousands of dollars vs. letting the home go through the standard foreclosure process.
Here’s the overview of the concept:
To discuss a new way to handle foreclosures is not helpful if it ignores the realities in the market. Here are the biggest hurdles (as I see them) that could make such a plan difficult to implement:
Until these properties cycle through the system and are resold to new buyers they cast a negative effect on neighborhoods, other homes for sale, and other foreclosures too. Waiting for defaulted borrowers to complete the foreclosure cycle when it is all but a sure-thing earlier on in the process is not the best way to protect the investment but rather employing a proactive approach is something can benefit all parties involved and the housing market in general.
A debate recently in my office between another agent and I focused on whether foreclosures and short sale properties really should be used for comparables for “normal” sales.
My esteemed colleague believes that since foreclosures and short sales are sold under “distressed” situations, they are not good comparables for other homes for sale. My counter is that many foreclosures and short sale properties are not in bad condition and so they should sell at a fair market price regardless of their “distressed” situation.
When it comes down to it, foreclosure and short sale listings most often do sell at a discount to regular listings and should have that taken into consideration, but even in a slow market houses priced appropriately are selling quickly, so those are market prices.
What we do find is a substantial disparity on how much of an impact those foreclosures have on the houses around them. In areas with low numbers of foreclosure and short sale properties, we find that those properties have little effect on the market as a whole. Where there are a high number of these properties in a single area, we find the the impact is more like an exponential impact: the higher the number, the more substantial the impact each additional listing has.
A client of mine found information via MNDOT regarding the traffic levels of train tracks throughout Minnesota, including the Twin Cities. Unfortunately it does not show the train times but it does give an approximate count of the number of trains per day and the speed at which they travel: http://www.dot.state.mn.us/ofrw/freightData.html
Pretty cool information… thanks Lisa & Jason!