Welcome to City-Data.com Forum!
U.S. CitiesCity-Data Forum Index
Go Back   City-Data Forum > U.S. Forums > Minnesota
 [Register]
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
View detailed profile (Advanced) or search
site with Google Custom Search

Search Forums  (Advanced)
Thread summary:

Minnesota real estate market, advice on buying and selling home, no perfect time to buy or sell home, buyers cannot get financed, buyers market, sellers market

Reply Start New Thread
 
Old 09-15-2007, 01:16 PM
 
Location: Lakeville, MN - 4th nicest place in the nation to raise a family
285 posts, read 1,175,552 times
Reputation: 104

Advertisements

It has been awhile since I last posted here - hello all!

Several things are going on in the Minnesotan housing market right now and I have some blanket advice for everyone who lives in a house in Minnesota - period.

First: There's no such thing as a 'good' market and a 'bad' market. Good and bad are qualitative terms that aren't very descriptive. Try this on for size: property values go up and down. When someone asks me how the real estate market is doing, I typically reply: "Homes prices have dropped (or increased) XX% over the past XX months/years." The percentages and timespans vary according to their request.

If you're a seller right now - yes, you could be inclined to think of things as a 'bad' market. In truth, your property values are lower. To a buyer on the other hand, this market is fantastic - sort of.

Second: Buyers cannot get loans. Remember those headlines about the 'subprime' market? Over the past few years, banks have loaned money to pretty much anyone with a pulse. Now, the banks are reaping the rewards of their poor lending practices. This means that people actually need to have income and a good credit rating to get financing. That's where all the buyers have gone. Of the past 10 first-time homebuyers I've worked with this past week, about 8 of them had disqualifying credit. There are good ways to fix it and bad ways to fix it. That's another post entirely unto itself.

Third (I saved the best for last): Here in the snowy north (and pretty much every where else), you will never pick the perfect moment to buy or sell. This is worth repeating: YOU WILL ***NEVER*** pick the perfect moment. Part of the housing glut affecting the MN home market is thousands of people who missed the boat by waiting for the *perfect* moment. Now, they're in a state of permanent denial as their listings languish on the market for months and years... They waited, and now they're paying.

There are times which are generally good to sell and there are times that are generally good to buy. Waiting for the perfect moment (or the right sucker) is stupid. Right now - it is generally a good time to buy. That's it.

______________________

Moment of clarity - if you're selling and buying a home in this market, don't despair. Yes, you will take a beatin' on the sale of your home (no matter how magical the Realtor). You know who else is taking a beatin'? The guy you're buying your next house from. Your financial position is maximized is you're buying a more expensive house, it is minimized if you're downsizing.

Perhaps we should split this post into chapters with line numbers - iambic pentameter notwithstanding...

Enjoy, people who live in houses (I have to specify that because my last client was a well-to-do guy who lived in a tent - seriously).

Robert
Reply With Quote Quick reply to this message

 
Old 09-15-2007, 04:50 PM
 
90 posts, read 358,021 times
Reputation: 44
Quote:
Originally Posted by Robert P Stewart View Post
It has been awhile since I last posted here - hello all!

Several things are going on in the Minnesotan housing market right now and I have some blanket advice for everyone who lives in a house in Minnesota - period.

First: There's no such thing as a 'good' market and a 'bad' market. Good and bad are qualitative terms that aren't very descriptive. Try this on for size: property values go up and down. When someone asks me how the real estate market is doing, I typically reply: "Homes prices have dropped (or increased) XX% over the past XX months/years." The percentages and timespans vary according to their request.

If you're a seller right now - yes, you could be inclined to think of things as a 'bad' market. In truth, your property values are lower. To a buyer on the other hand, this market is fantastic - sort of.

Second: Buyers cannot get loans. Remember those headlines about the 'subprime' market? Over the past few years, banks have loaned money to pretty much anyone with a pulse. Now, the banks are reaping the rewards of their poor lending practices. This means that people actually need to have income and a good credit rating to get financing. That's where all the buyers have gone. Of the past 10 first-time homebuyers I've worked with this past week, about 8 of them had disqualifying credit. There are good ways to fix it and bad ways to fix it. That's another post entirely unto itself.

Third (I saved the best for last): Here in the snowy north (and pretty much every where else), you will never pick the perfect moment to buy or sell. This is worth repeating: YOU WILL ***NEVER*** pick the perfect moment. Part of the housing glut affecting the MN home market is thousands of people who missed the boat by waiting for the *perfect* moment. Now, they're in a state of permanent denial as their listings languish on the market for months and years... They waited, and now they're paying.

There are times which are generally good to sell and there are times that are generally good to buy. Waiting for the perfect moment (or the right sucker) is stupid. Right now - it is generally a good time to buy. That's it.

______________________

Moment of clarity - if you're selling and buying a home in this market, don't despair. Yes, you will take a beatin' on the sale of your home (no matter how magical the Realtor). You know who else is taking a beatin'? The guy you're buying your next house from. Your financial position is maximized is you're buying a more expensive house, it is minimized if you're downsizing.

Perhaps we should split this post into chapters with line numbers - iambic pentameter notwithstanding...

Enjoy, people who live in houses (I have to specify that because my last client was a well-to-do guy who lived in a tent - seriously).

Robert
People still have not taken the beating that they should. I believe prices will continue to fall, as a plug of people who thought they could wait out the market sell-side realize that we are not returning to 2004.

I've seen so many houses in the $500k+ range just sit there, and sit there, and sit there. It's like these people are in denial that they aren't going to get the 200% return they expected on the house they bought back in 2002.

I understand why people are nervous. It is one thing to say that you can't time the market. It is another to look at fundamental metrics like median income to median houseprice, and see how out of whack they are with history.

People keep talking about the lack of buyers as if they are trying to maximize the killing. In my case, I'd be perfectly fine buying if I thought I might lose a couple of percent. I'm looking for a house to live in, not an investment.

I do not (and I think this is the position most others are in as well) want to be the sucker who buys right before the dam finally breaks and lose 20-30% (or more).
Reply With Quote Quick reply to this message
 
Old 09-16-2007, 06:33 AM
 
Location: Las Vegas
14,229 posts, read 29,948,042 times
Reputation: 27685
Did you sell a house to the guy who lived in a tent? Bet he wanted to close before winter. He sold HIS house in 2004 and was waiting for the worm to turn!

Realistically, how much more should I expect to lose? I've already lost 50K and it's still on the market for less than appraised value in 2000. We're talking about 8 years appreciation totally gone. Probably more than that because it hasn't sold yet. I guess we need to start debating taking it off the market for winter again. At least I wouldn't have to clean for nothing every day.

Slyfrog, I am thinking you are very young? Median home price has never had anything to do with median income. Buying a home has historically been a real stretch for people of average means. It took me 7 years to save up my first 20% down payment and closing costs. 7 years of no Starbucks, no cable, no trips, no eating out. I went into my first home debt free with savings to cover 6 months expenses. Seems to me these financial problems have been caused by people wanting the home but not the suffering associated with saving to buy.
After they got the home with the 80/20 arm it was time to refi for the boat. They became used to relying on plastic, carrying huge debt, and making minimum payments. In some ways, it's good those days are over. But I do feel sorry for all the people who will need decades to recover.
Reply With Quote Quick reply to this message
 
Old 09-16-2007, 09:26 AM
 
90 posts, read 358,021 times
Reputation: 44
Quote:
Originally Posted by yellowsnow View Post
Realistically, how much more should I expect to lose? I've already lost 50K and it's still on the market for less than appraised value in 2000. We're talking about 8 years appreciation totally gone. Probably more than that because it hasn't sold yet. I guess we need to start debating taking it off the market for winter again. At least I wouldn't have to clean for nothing every day.
Trying to say this with out offending, but to be blunt, economically, how much you have to lose doesn't matter. The house is worth what it is worth.

Think of it this way, do you think someone who bought into a dot.com in 1998 was saying, "How much do I have to lose, this is unfair," in 2002? If you have a massively inflated run up in price over 10 years, you are not really "losing" anything that was yours to begin with.

Quote:
Slyfrog, I am thinking you are very young? Median home price has never had anything to do with median income. Buying a home has historically been a real stretch for people of average means.
Old enough to know better, with enough finance and economics experience to know better.

What you said is just patently wrong. Take a look at the numerous articles discussing the median income to median homeprice ratio, and how it is skewed way out of proportion to what it has ever been historically.

Hell, just go here:

NAHB/Wells Fargo Housing Opportunity Index (HOI)

If you have a copy of Excel, click on: The NAHB/Wells Fargo Housing Opportunity Index: Complete History by Metropolitan Area (1991-Current).

Notice what the median income compared to home price was back in the early 90s. Notice what it is now (easily compared by the "Opportunity Index," but I like to see the actual numbers and compare the ratio).

Your point about people borrowing and not saving is correct, but it actually argues against your main point. The reason why housing prices have gotten so out of whack (in part) is exactly because people do not have to put any skin in the game. They artificially generated a huge price uptick because everyone and their brother was buying with those no money down, liar loans. Far from helping your case, it only shows what happens when a market receives a flood of people with cheap money (at least for a few years, until the variable rates kick in). They went out and bid housing prices up to historically insane levels.
Reply With Quote Quick reply to this message
 
Old 09-16-2007, 06:56 PM
 
Location: Minnesota
987 posts, read 3,808,414 times
Reputation: 372
But if you're selling your home and purchasing another it all evens out doesn't it?
Reply With Quote Quick reply to this message
 
Old 09-16-2007, 07:56 PM
 
Location: Las Vegas
14,229 posts, read 29,948,042 times
Reputation: 27685
Quote:
Originally Posted by kuan View Post
But if you're selling your home and purchasing another it all evens out doesn't it?
You can eat your losses the easiest if you are relocating to an area with cheaper housing and moving into a larger home. I am downsizing and moving to an area of more expensive housing. The worst case scenario!
Reply With Quote Quick reply to this message
 
Old 09-16-2007, 07:58 PM
 
90 posts, read 358,021 times
Reputation: 44
Quote:
Originally Posted by yellowsnow View Post
You can eat your losses the easiest if you are relocating to an area with cheaper housing and moving into a larger home. I am downsizing and moving to an area of more expensive housing. The worst case scenario!
By the way, I do feel bad for you. I just disagree with you. But I hope your house sells.
Reply With Quote Quick reply to this message
 
Old 09-16-2007, 07:59 PM
 
Location: Minnesota
987 posts, read 3,808,414 times
Reputation: 372
Quote:
Originally Posted by yellowsnow View Post
You can eat your losses the easiest if you are relocating to an area with cheaper housing and moving into a larger home. I am downsizing and moving to an area of more expensive housing. The worst case scenario!
The more expensive house would be a bargain then compared to what it would have been a year or two ago. So you get a more expensive house but also a bigger bargain right?
Reply With Quote Quick reply to this message
 
Old 09-16-2007, 08:43 PM
 
Location: Las Vegas
14,229 posts, read 29,948,042 times
Reputation: 27685
Quote:
Originally Posted by SlyFrog View Post
Trying to say this with out offending, but to be blunt, economically, how much you have to lose doesn't matter. The house is worth what it is worth.

Think of it this way, do you think someone who bought into a dot.com in 1998 was saying, "How much do I have to lose, this is unfair," in 2002? If you have a massively inflated run up in price over 10 years, you are not really "losing" anything that was yours to begin with.



Old enough to know better, with enough finance and economics experience to know better.

What you said is just patently wrong. Take a look at the numerous articles discussing the median income to median homeprice ratio, and how it is skewed way out of proportion to what it has ever been historically.

Hell, just go here:

NAHB/Wells Fargo Housing Opportunity Index (HOI)

If you have a copy of Excel, click on: The NAHB/Wells Fargo Housing Opportunity Index: Complete History by Metropolitan Area (1991-Current).

Notice what the median income compared to home price was back in the early 90s. Notice what it is now (easily compared by the "Opportunity Index," but I like to see the actual numbers and compare the ratio).

Your point about people borrowing and not saving is correct, but it actually argues against your main point. The reason why housing prices have gotten so out of whack (in part) is exactly because people do not have to put any skin in the game. They artificially generated a huge price uptick because everyone and their brother was buying with those no money down, liar loans. Far from helping your case, it only shows what happens when a market receives a flood of people with cheap money (at least for a few years, until the variable rates kick in). They went out and bid housing prices up to historically insane levels.
Life isn't fair and who is left that expects fair? Surely not me.

The real lesson to be learned here is that as soon as whatever boom gets to the point where an average person can make some money; it's time to get out. RE and tech are 2 stellar examples.

I feel bad for anyone who comes out on the losing side of this equation. Everyone tends to plan their future based on what they have today. When the value of what you have today decreases by 30 or 40%, it hurts. Doesn't matter if it's stocks, a house, or a savings account. Most people work hard to get and maintain what they have. I know I do.

You are absolutely right that a house is only worth what someone will pay for it. Now if I could just find out what it's worth. Right now, no one knows. And that includes the appraiser I paid last June. I priced it according to what he said and it won't sell for that either. That includes my RE agent as well. I might as well hire a psychic. Or buy an 8 Ball!

I hope you as a buyer learn from this. Buy only what you can afford and what you like. Know that even if you do everything right, you may end up losing. A lot!
Reply With Quote Quick reply to this message
 
Old 09-18-2007, 10:10 PM
 
Location: Twin Cities, MN
638 posts, read 3,117,246 times
Reputation: 302
We bought our house back in 1993. I remember that the realtor at the time told us taht based on our credit scores and our incomes; we could afford to buy a house worth about twice what I felt comfortable with. We ended up buying a house that was just a bit above what I felt we could afford back then. It wasn't a castle, but it also wasn't a dump: it's a very solid mid 1950's 3 BR rambler. We bought this house to live in and not as an investment. And it's been a decent house for us. According to the market, it is now worth 2.5 times what we paid for it. Do I expect to get that price for it? Probably not.

We didn't buy it as "an investment," but rather as a place in which to live. I think that these two factors are also part of this equation: people who listened to someone who told them that they could buy more house than they really could afford; and viewing a house as an investment instead of an abode.
Reply With Quote Quick reply to this message
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.

Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.


Reply
Please update this thread with any new information or opinions. This open thread is still read by thousands of people, so we encourage all additional points of view.

Quick Reply
Message:


Settings
X
Data:
Loading data...
Based on 2000-2020 data
Loading data...

123
Hide US histogram

Over $104,000 in prizes was already given out to active posters on our forum and additional giveaways are planned!

Go Back   City-Data Forum > U.S. Forums > Minnesota
View detailed profiles of:

All times are GMT -6. The time now is 05:39 AM.

© 2005-2024, Advameg, Inc. · Please obey Forum Rules · Terms of Use and Privacy Policy · Bug Bounty

City-Data.com - Contact Us - Archive 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35, 36, 37 - Top