For example, if one bought a house for $400,000 in 2006 and similar properties are selling for $325,000 in your neighborhood now, contacting your county tax assessors office and having your tax assessed value redetermined makes sense.

 Usually the assessed value is only recalculated on the sale of the home and then increased according to the % scale being used by the county for that assessment period, which is set by law by the Minnesota State Legislature.

 By doing a quick search of homes in your neighborhood at our website, you can find out the comparable prices in your neighborhood and see if a reassessment makes sense.

Unfortunately for those of us with rather old houses or poorly built foundations, yesterday was the day that the snow melt seeped into our basements. My house was build in 1908 and consequently the foundation has a few defects. Hence, this morning I woke up to a basement filled with water which had soaked into the carpets. I am running dehumidifiers and fans to deal with the water, but ultimately I am going to have to invest in some water abatement or basement water fixes.

While there are many companies promising basement water fixes, a simple tile job with a few sump pumps is not enough. What I really need is a full blown water removal and humidity solution to ensure that mold doesn’t overtake the crevices in the concrete and the walls.

Because banks have been bitten recently with balance sheets full of junk loans written on inflated properties, there is now pressure on appraisers to deflate the prices of homes. Of course, banks only want to protect themselves from the current situation in which homeowners find themselves owing more on their house than it is currently estimated to be worth. These loan holders comprise the large majority of people just abandoning their homes to foreclosure.

The pressure to deflate homes and protect the banks is so strong that one major bank has downgraded the entire State of California for home loans.

 For anyone considering buying a house now, the way to avoid this situation is to buy quality. In real estate quality is always and only defined by one thing– location. But, what about the house itself. Well, in the short term the house itself may matter, but in the long term the only thing that matters in real estate is the property itself, the location, location, location.

]]> http://www.igotrealestate.com/blog/appraisal-pressure/feed/ 0 http://www.igotrealestate.com/blog/housing-interest-rates-and-mortgages/ http://www.igotrealestate.com/blog/housing-interest-rates-and-mortgages/#comments Thu, 31 Jan 2008 17:46:33 +0000 admin http://www.igotrealestate.com/blog/housing-interest-rates-and-mortgages/ Minneapolis and St. Paul real estate maintained their market value pretty well during the recent downturn because of the strength of the Minnesota economy. Now with the recent 1% reduction in the Fed Funds Rate, real estate in the Twin Cities is poised to make a complete recovery.

Single family foreclosure rates are up in the Twin Cities, but that is to be expected after the excesses of the Subprime lending boom. To quote Alan Greenspan, “irrational exhuberance” can’t last for ever. So now we are left with financially healthy buyers and sellers in a more rationalized market where values are more closely to tied to actual attributes of the underlying asset, rather than prices being artificially inflated by an unsustainable increase in demand.

Ultimately Minneapolis real estate benefits from this pruning of excess demand, because rationalized asset values benefit long term investors and traditional home owners and penalize flippers and others looking to make a quick buck in real estate.

The easiest way to analyze any market is to look at supply and demand. Right now in the Twin Cities, supplies are certainly higher than they were last year at this time. Sept 2006 supply/demand ratio was around 8.3, this year it was 12.2 in September. The good news is that projected November ratio is 11.2, meaning that sales are starting to clear out some of the backed up inventory.

Falling mortgage rates are another strong sign for Twin Cities Real Estate. With cheaper money available to finance low risk buyers and the end of the artificial inflation of the market by cheap subprime loans, market balance arrives naturally.

The National Association of Realtors reports that widening credit availability will help home sales rebound. Foreclosures have peaked so housing appears poised to come back.

Consumers are becoming more savvy to the long term costs of a mortgage and as such are returning to traditional loans, which will help the recovery. Lawrence Yun, NAR senior economist, says “Conforming loans are abundantly available at historically favorable mortgage rates. Pricing has steadily improved on jumbo mortgages since the August credit crunch, and FHA loans are replacing subprime mortgages,”This past week the Mortgage Bankers Association reported mortgage loan activity increasing 2.4 percent over the week before.Treasury Secretary Henry Paulson spearheaded the formation of a mortgage industry coalition composed of the top 10 mortgage lenders to help consumers with at risk loans. The consortium has about 60 percent market share and whatever form the help takes, such as restructuring, debt forgiveness, interest rate discounts—any little bit should help take the bite out of the current downturn.

Granted, the consortium of lenders is not doing this out of charity, by bolstering the real estate market they are protecting their existing portfolio of loans from massive depreciation. A sector wide decrease in housing prices would hurt all lenders, not just sub-primes. “Although sales are off from an unsustainable peak in 2005, there is a historically high level of home sales taking place this year — a lot of people are, in fact, buying homes,” says Yun of the NAR. “One out of 16 American households is buying a home this year. The speculative excesses have been removed from the market and home sales are returning to fundamentally healthy levels, while prices remain near record highs, reflecting favorable mortgage rates and positive job gains.”

NAR forecasts:

• the 30-year fixed-rate mortgage is expected to average 6.4 percent for the next two quarters and reach the 6.6 percent range in the second half 2008.

• growth in the U.S. gross domestic product (GDP) is estimated at 2.0 percent this year, below the 2.9 percent growth rate in 2006; GDP is likely to grow 2.7 percent in 2008.
• the unemployment rate is forecast to average 4.6 percent this year, unchanged from 2006.
• the median new-home price should drop 2.1 percent to $241,400 this year, and then increase 1.0 percent in 2008 to $243,900.
• that existing-home prices will probably slip 1.3 percent to a median of $219,000 in 2007 before rising 1.3 percent next year to $221,800.

Economy wide inflationi is a concern, reports the NAR.

 Currently the Consumer Price Index, is expected to be 2.8 percent in 2007, compared with 3.2 percent last year. Inflation-adjusted disposable personal income will probably increase 3.6 percent in 2007, up from 3.1 percent last year, says NAR.  However, concerns about inflation have been hounding the US economy for at least the last 15 years, and have never materialized. Many economists were taught that inflation was a huge risk, but with increasing globalization, specialization and trade, inflation has not materialized, even in the face of record high oil prices.

The year 2007 will be the fifth highest ever for existing-home sales if the trend continues to total 5.78 million in 2007 and then rise to 6.12 million in 2008, which is still down from 6.48 million in 2006.

The bottom line is that sound home buying decisions with traditionally structured loans will continue to be the best way for Americans to save and invest. Peaks and valleys come and go, and some people got burned in this last boom, but most Americans who bought a place to live, rather than a lottery ticket mortgage, will earn a substantial return on their investment while continuing to benefit from the interest rate write off on their taxes.

The robust economy that Minnesota characterized by increasing industrial output, financial sector expansion, dynamic retail sector driven by leaders like Best Buy and Target and overall healthy economic expansion is providing a great cushion for owners of homes in Minnesota. Minneapolis and St Paul are still showing strong demand for homes as people continue to relocate to the state and gravitate towards our high standard of living.

 Minnesota has always been a leader in education and our strong public school system driven by performance standards is an attractive benefit for families considering relocating.  Minnesota environmental protections also protect our high standard of living and attract highly-skilled educated workers to our state.

 Smart home buyers are shopping diligently, looking at a lot of properties, talking to their realtors and finding out what kind of values are out there. One of the ways that your realtor can help you with getting the most out of your housing dollars is to tell you historical sales price data about the house. Historical sales price data is not available to the public and must be obtained by a licensed Realtor.

Virtually every person out there has heard about the subprime mortgage crisis and the possible spreading of the difficulties to higher rated mortgages. Couple that with the current downturn in housing prices and you have all the ingredients for panic. But wait, hold the phone, the sky is not falling yet.

Housing prices are not yet falling in the Minneapolis area, they are just flat. Which is actually a good thing if you are looking to buy a house. However, if you were hoping to buy more house than you could realistically afford, well those days are over. The time of ARMs, interest only loans and other dangerous mortgage practices has come to an end.

Right now real estate is trending back to a more conservative pricing and lending model, one which has served the US home owner well for many years. Just because you feel like you may have missed out on the latest real estate boom, it doesn’t mean that a home isn’t a great investment. Real estate is still the best investment for most people, for the simple reason that it is the only way to turn an expense into an asset. By shifting from paying rent to paying a mortgage one is actually taking an expense and converting it into an investment.

Right now a savvy home buyer can cash in on the chaos of the subprime crisis and buy a house at a distressed price, just make sure that you are not buying more house than you can realistically afford.

Mold is a serious issue not just for resale value and esthetics, but for health reasons too. Many people are super sensitive and allergic to mold. Mold infestation has caused diseases from asthma to chronic fatigue and death.

 Please contact a mold specialist before buying or selling a moldy house.

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