Things are cooling off fast in the Sub-Prime mortgage business.
Several companies who were in the vanguard of lending to homebuyers with
iffy credit ratings are closing their doors. Others are desperately
looking for buyers who will take the firms off their hands.
Default rates on these loans has jumped dramatically, and realistic
people are expecting more defaults as low-interest and interest-only
Adjustable Rate Mortgages (ARMs) reset to their permanent higher
interest rate. Those reset dates are just starting to fall due, and can
raise payments by hundreds of dollars a month.
Of course, this is leading borrowers to scramble for refinancing, as
their reset dates approach. Sadly, fewer and fewer loan outfits are
ready to refinance a loan for someone with a questionable credit
history, so it's getting harder and harder for the homeowner, soon to be
beset with a house payment he or she can't afford.
This problem is affecting even huge banks and other corporations,
which buy these loans from the loan brokers and other finance companies.
It's getting scary out there for the deep pocket folks, who have been
planning on nice profits when the higher rates kick in on these loans.
The problem is made worse by the flat or falling housing market in
many areas, including the Twin Cities. In some cases, homebuyers have
purchased homes with 0% down payment, creatively financing the entire
purchase price of their home with one of these ARMs. They figured that
they'd just refinance before the resetting of the interest rate. Trouble
is, they now owe more on their existing mortgage than the home is
currently worth. They're upside down on their loan.
Typically, such borrowers don't have much cash on hand to make up the
difference between what they owe on the home and what lenders are
willing to loan them. Worse, the fancy-schmancy mortgages with the
adjustable rates and the 100% financing are just about drying up out
there. You can still get one, maybe, if you're not too much
upside down and your FICA credit score is over 700, but it'll take some
hunting. If your credit score is around 650, you can just forget about
it right now. Nobody's going to want to talk to you, especially if you
have no equity in your home or are upside down on your mortgage. If your
credit score is over 750 or so, you'll have no problem, but you're
probably not in this situation anyhow.
Lots of folks are going to do what lots of folks have already
done...walk away from the home and let the foreclosure happen. That's
already starting, with foreclosure rates jumping like Mexican jumping
beans. They'll go back to renting again, and the home will be on the
market, joining the glut of homes already out there. That will drive
prices for existing homes lower, making the problem even worse. The
rental market will do well, and rents will rise, due to the increased
demand, making life even tougher for folks living on the margin.
Worse, homebuilders are going to be hit hard, since a glut in the
home marketplace makes it tough to sell all those new homes they want to
build. Many builders have already cut back on their future plans for
developments, and have had to offer deep discounts to get buyers into
the homes they've already built.
What to do? Well, if you own a home with a traditional mortgage and
you've built up equity, don't worry about it. Just keep making the
payments. If you have a home with little or no equity, an ARM that will
reset soon, then worry a lot. Start making phone calls to see if you can
line up a refinance now, even if your ARM doesn't reset for quite a
while. If you're upside down on your loan, meaning that you owe more
than your house is currently worth, worry even more. Try to find a way
to raise as much cash as possible, with the goal being to wipe out the
difference between the home's value and the amount you owe on it. If you
can do that, you'll be more appealing in a refinance.
If you're in a bad spot and have a poor credit score,
then your worrying is more than justified. Given the current nervous
state of lenders, you'll have a very difficult time getting a new loan,
particularly if you have no equity or negative equity. You need to talk
to a credit counselor who is not a loan broker and see if there's a
solution for you. It could be a tough spot.
Long term? I have no idea. You'd be amazed at which major banks and
corporations are tied up in this potentially disastrous situation. Wells
Fargo, CitiGroup, Wachovia...all have their fingers deep in the subprime
mortgage pie. Even General Motors, which just spun off its GMAC
division, which had tons of money in the subprime mortgage business, may
have to take a hit of almost $1 Billion in writeoffs. That's not good,
given its current weak position in the automotive marketplace.
One thing's certain: This is just the beginning of a financial crisis
in the residential real estate business. It's not looking good out
there.
3/9/07
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An elderly woman died in a fire in Saint Paul last night. Her body
was found just feet from her front door. She was holding the key needed
to unlock the deadbolt. This was a needless tragedy, and every resident
of this city and the entire Metro needs to think about this.
If you are in your home, and must exit it quickly due to a fire or
other emergency, a inside-keyed deadbolt could be the cause of your
death, as it was for this unfortunate woman.
Check your main and alternate entry door. If a key is required to
unlock the deadbolt from inside, arrange immediately to have that
deadbolt replaced with a simple non-keyed interior handle. It's not
expensive.
Inside-keyed deadbolts are worthless as a security measure, and have
proven deadly in many cases around the country. They are simply a bad
idea, and should be banned, nationwide.
Until you can have that unkeyed inside deadbolt replaced, put a key
in the keyway and leave it there. It could save your life.
1/5/07
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The security management company of an apartment building in New
Brighton has an idea. It wants to institute a dress code for residents
there that will apply anytime residents are on the property but not in
their apartments.
No low-hanging baggy pants, sideways baseball caps, or bandanas will
be allowed. Offenders will be sent back to their apartments to don more
suitable clothing. If they refuse, they can be evicted from their
apartment.
Some folks have called this plan racist, and perhaps it is.
Still...it's not such a bad idea, overall, I think. Indeed, I think it
should be expanded. Instead of simply banning clothing that is possibly
indicative of gang affiliations, I think all clothing in bad taste
should be banned, and thing this should apply to all rental housing in
the Metro area.
For example, men who wear shorts with white socks and shoes should
have to return to their dwellings and change, so as not to offend more
sensible dressers. Similarly, young women displaying "muffin
tops" over their low-rise jeans should be forced to put on more
suitable attire.
Men with expansive abdomens must not wear T-shirts that ride up and
expose their hairy pot bellies. Surely they should be forced to return
to their apartments. Buttcracks are right out, too, in all cases.
Women of a certain age who don red hats as a symbol of their defiance
should be evicted if they refuse to remove those "gang" signs,
and middle-aged white guys wearing baseball caps bearing the logo of any
farm supply store would be considered to be offenders, as well.
Since some Twin Citians support other football teams than the
Vikings, any wearing of Packers logos on clothing could be taken as a
provocation and disallowed by security personnel. Sports logo clothing,
in general, should probably be disallowed altogether, since it has gang
ties, and promotes ugly arguments in local watering holes.
Indeed, I believe that a dress code should be established that will
offend nobody. Men must wear slacks, shirt, and tie, plus polished shoes
and a jacket anytime they are outdoors. An exception can be granted if
the man is on his way to go fishing or hunting, of course, but men
dressed in sporting attire can spend no more than 5 minutes outdoors
within view of neighbors.
For women, well-tailored pants suits would be marginally acceptable,
but dresses or skirts and blouses are preferred. Women with body mass
indices over the threshold of being overweight would not be allowed to
wear shorts or any clothing containing spandex at any time. With the
exception of attractive, thin young women, bare midriffs would be
grounds for immediate eviction.
Applied throughout the Metro, this new policy would certainly prevent
all manner of criminal and unsociable activity. Let's campaign for this
today. Call your local city council member at once!
12/06/06
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The controversial Saint Paul Bridges project is off the books for
now. Jerry Trooien has withdrawn his plans for the huge project, which
was to have been built across the river from downtown, near the Robert
Street Bridge.
The Saint Paul Planning Commission put the kibosh on zoning changes
needed for the monster project, and Trooien cut his losses by
withdrawing the project before a skeptical City Council had a chance to
vote it down, too.
Where does Trooien go from here? Who knows. He says he'll be back
with a new plan, but any new plan is going to have to look a lot
different from the original if there's any chance it'll get past the
conservative City Council.
The thing is that the Council pretty much doesn't want anything
across the river that might compete with the already flagging downtown
business district. Current zoning limits building heights in the area
where the Bridges project was to be built to 55 feet. That's roughly the
height of a 5-story building.
So, for now, the area will continue to be empty parking lots. I guess
that's a nicer view than a bunch of new buildings, but I'm not sure.
Harriet Island Park is a nice thing to look at from the high-rises
downtown, to be sure, but the ugly area near the Robert Street bridge
really isn't all that attractive.
Then there's the district between the river and West Saint Paul. That
part of the city is one I like very much, and it would be drastically
changed were the Bridges project to have been built as planned.
What will happen? Heck, I don't know. I'm just a blogger.
11/2/06
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An editorial in today's Star-Tribune recommends that the city of
Saint Paul deny a zoning change that would move the controversial
Bridges project along in its quest to build just across the river from
downtown St. Paul.
I have mixed feelings about the Bridges project, but question the
Strib's editorial. As a resident of Saint Paul, I'm more than aware of
the STrib's spotty coverage of Saint Paul news and events. It's almost a
joke, really. Thank goodness we have the Pioneer Press, or happenings in
Saint Paul would be almost invisible.
So, for the STrib's editorial staff to write regarding the Bridges
proposal and to recommend what the City of Saint Paul should do about it
seems just a bit specious to me. They recommend that the zoning be
denied, on the grounds that the project would harm the downtown area of
Saint Paul. Like they care. How often do the editors of the STrib even
bother to visit Saint Paul? Do they dine in our downtown
restaurants?
Rather, I suspect that their concern is not for the health of Saint
Paul's downtown but, rather, for the health of all those high-end condo
projects over in big-time Minneapolis. The Bridges project would create
a lively condo, shopping, and entertainment center in Saint Paul.
Naturally, this would cut down on the number of trips Saint Paulites
would make across the river to visit Minneapolis hot spots. Some folks
might even buy a condo on the river over here on the right side of the
river, instead of spending their dough in Minneapolis. Can't have
that....can we?
Nope, for the STrib to ignore Saint Paul in its daily news coverage,
then stick its high-altitude nose into the business of Saint Paul, seems
just a bit suspect. Butt out, boys. We've got our own city, our own
newspaper, and our own plans. Good old Saint Paul is doing just fine
without your advice. Our crime rate is way lower than yours. Our police
actually patrol, and show up in force when there's a problem. We're
doing OK without the STrib's help, thank you very much. Simple as we are
over here on the other side of the river, we'll muddle through this
decision.
10/18/06
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Real estate watchers have been expecting this. A few thousand brand
new homes in the Metro area are unsold, and they're competing with many
thousands of older homes on the market. This has led to a drop of almost
50% in the number of building permits issued in September of this year,
compared to last year.
Prices are still holding pretty steady on both new and
previously-owned homes, but that's about to change. As we move into the
cold weather months, sales slip even further, since fewer prospective
buyers are in the market.
Worse, Adjustable Rate Mortgages and subprime, interest only or
negative amortization loans are about to reset for thousands of recent
home buyers, and the results are going to be even more homes on the
market as some of these buyers are forced to sell if they cannot
refinance at a rate that will allow them to make the payments.
If you're in the market for a home buy, my advice to you is to hold
off just a bit, until the current glut of homes on the market becomes
critical. Expect savings of at least 10% and possibly even more in early
Spring, 2007.
If you're thinking of selling...well...don't. Hang in there, if you
can. This will all turn around at some point, but right now is not the
time to be selling a home.
10/8/06
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If you're on the hunt for a home in the city, either Saint Paul or
Minneapolis, you've got to be concerned about crime. With Minneapolis
suffering a huge increase in its murder rate, and Saint Paul having some
worrisome neighborhoods, you need to make good decisions before you even
begin looking for that dream house. You won't hear about these
statistics from your realtor...they're not in the business of scaring
you away from a sale, but you can get the info for yourself.
Fortunately, both cities make it easy for you. Saint Paul offers
maps, broken down into very small blocks, showing crime frequency for
the most serious crimes. You can look at them on a month to month basis
for the current year, or on an annual basis for previous years. They're
incredibly easy to understand, and you can pinpoint areas with very
little crime along with areas you might do well to avoid. To access
these excellent maps, just Click
Here. You'll need Adobe Reader to read the .PDF files, but almost
everyone has a copy installed already. If not, you can Click
Here to download a free copy.
Minneapolis does it a bit differently, mapping criminal activity on a
weekly basis, but by precinct. You can Click
Here to access the page with the maps. To find out which precinct an
area of interest is in, Click
Here. Scroll down for a map of the city showing the precinct numbers
for each area of Minneapolis.
For other cities and county areas, Google cityname crime
report. Not every city or county has reports as easy to read as
Minneapolis and Saint Paul, but you'll be able to find some information.
7/19/06
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Figures for May are now in in the Twin Cities, and the news isn't so
good for home sellers. According to a story in Minneapolis Saint Paul
Business Journal (read
it), May showed over 30,000 homes in the available inventory. That's
up over 40% from the same month last year. The inventory just keeps
growing, putting additional pressure on sellers to lower prices.
Sales, on the other hand, are down, and down smartly, with only just
over 5000 closed sales in May, down 9.3% from last year. Pending sales
in May were at about 5,750, down 14.5% from the previous year. The trend
is down on sales.
For the moment, the median price in the Metro is holding fairly
steady, but that may not last. Driving around, I see a lot of
"Price Reduced" banners on yard signs, and that may well
increase through the summer.
The bottom line here is that a rising inventory puts sellers at a
disadvantage, for obvious reasons: buyers have more homes to look at,
and can take their sweet time in deciding which one to buy. Realtors are
getting wary of owner's plans to reap a rich reward from their home, and
are counseling sellers to lower their expectations.
There are lots of reasons for all this, but that's a topic for
another article. The bottom line is that it's getting to be more and
more a buyer's market in the Twin Cities Metro. Watch for services like
home staging, landscape beautification, and general fixing up services
to benefit from this increased inventory.
No more can seller's count on eager buyers overlooking that old paint
or wallpaper, or that carpeting that really needs to be replaced. You
really need to sharpen up your home if you expect to sell it in a
reasonable time for a good price.
Also, with so many homes in the inventory, realtors can be a little
more picky about the ones they really push to potential buyers. Why
should an agent sit in a tough house to sell on Open House days? They
won't. They're in the business of getting houses sold so they can get
their commission.
The same phenomenon is going to hurt the FSBO seller, too. It's going
to take every trick in the book to move your home quickly, and you're
going to have to get flexible and creative with your marketing strategy.
I expect this trend to last into the Fall. This is prime selling
time...right now...with buyers wanting to get into their new home before
school starts. By August, it's too late for that.
Watch for prices to begin dropping significantly around August. If
you're a buyer, things are going to get very interesting in the next few
months. If you're a seller...well...flexibility is going to be key.
7/13/06
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There are lots of times when you might want to know who owns a house
or other real estate. For example, you might have a vacant house near
you that is overgrown with weeds. Or, you might see a house you're
interested in, even if it's not currently for sale. Or, renters in your
neighborhood are causing a problem and you want to contact the owner of
the house to complain.
It's not that simple to get this information, but it's possible, and
you can do it right on the internet, by using a little trick. Here's
how:
Ramsey County
- Click the link at the bottom of these directions.
- Fill in the street number, then the street name in the form that
appears, and click Submit. Follow the directions closely, and don't
add "St." or "Ave." or any such suffixes to the
street name.
- On the next screen, You'll see the P.I.N. or Property
Identification Number for that address. Click the P.I.N. number.
- Next, you'll see some information on assessed valuation, property
tax amount, and other information on the home. Scroll down to near
the bottom of that screen. On the left, you'll see a link for Payment
Stubs. Click that, and you'll see the current year's property
tax payment stubs for that property, which includes the name and
address of the official owner of the property. That should be enough
to enable you to contact the owner. Note: The stubs are .pdf files,
so you'll need Adobe Reader to view them.
- Here's that link:
http://rrinfo.co.ramsey.mn.us/public/characteristic/index.pasp
Hennepin County
-
Click the link at the bottom of these directions to
open the Property Search form..
-
Fill in the address, then the street name, in the
form that appears, then click Search. Do not add "St." or
"Ave." or any other suffixes to the street hame.
-
On the next screen, if more than one address
appears, click the one that interests you.
-
The next screen will display the owner's name and
address.
-
Here's that link:
http://www2.co.hennepin.mn.us/pins/addrsrch.jsp
Other Counties
Google the name of your county, then look on that
county's official web site for access to property information. Systems
vary, so you may have to use a variation of one of the two procedures
listed above.
7/7/06
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Me!
According to a story in the St. Paul Pioneer Press (Link),
housing foreclosures were up in 2005 by 31% over the 2004 rate. Worse,
2006 foreclosures so far this year are up even more. The same phenomenon
is happening all over the country, and it's got everyone from Realtors
and lenders to homeowners and prospective buyers worried. And well they
might be.
A lot of good folks bought homes in the past few years by borrowing
with "Creative Financing," and it hasn't worked out that well
for them. Once their interest-only or deferred payment loan resets to
today's much higher interest rates, they're discovering that they got
into more home than they could afford. Prices have dropped in our market
a bit, so many people are now finding themselves upside down on their
mortgage. They owe more than the house is worth, so they have negative
equity. That means they're having problems with refinancing and are
stuck with a much, much higher mortgage payment, once their loan resets.
Is it the infamous "Housing Bubble?" I don't know, and
neither does anyone else, but it's definitely not a good sign. It's
especially not such a good sign for sellers. The number of unsold homes
on the market is going up, and homes are taking longer to sell. Drive
around. You'll see lots of "Price Reduced" signs out there.
This phenomenon has led to a true "buyer's market" in the Twin
Cities and the surrounding Metro area.
Sellers are getting creative to try to make their homes more
attractive to buyers. They're hiring "stagers" to redecorate
their home so it shows better. Some are lowering their price, gritting
their teeth the entire time. Still others are taking over the
presentation of their home from the Real Estate agents and brokers, and
coming up with novel ways to present their homes to prospective buyers.
Web sites with lots of high-quality photos and descriptive text are one
way to get those buyers motivated before they ever see your home in
person.
5/30/06
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Me!
A lot of prospective homebuyers skip over the East Side of Saint Paul
in their housing search. By doing that, they miss some really excellent
opportunities. Yes, there are many neighborhoods in the East Side that
are less than ideal for the typical homebuyer, but, there's one area
that shouldn't be overlooked by anyone looking for an affordable home
inside the city.
Bounded on the south by Maryland Avenue, and on the west by White
Bear Ave. N., you'll find a group of small, almost unknown
neighborhoods, from Hayden Heights to Hillcrest. The Eastern border
street is McKnight Road and the northern border is Larpenteur Avenue.
The streets are quiet, the homes are well-maintained, and, best of all,
the prices are lower than you'd expect.
Home ownership statistics are high in this part of Saint Paul, and
crime statistics are low. The feel of the neighborhoods is suburban,
rather than urban. Maplewood is just north, with excellent shopping and
dining options. Access to I-94 is fast, via McKnight, and Highway 36 is
also easily accessible, as is I-494. If you work in downtown Saint Paul,
the fastest route is Seventh Ave. E., which is almost traffic free, even
at rush hour, and is just south of these neighborhoods off White Bear
Ave.
Home prices range upward from about $180,000 in these neighborhoods
and peak around $300,000. Much of the housing was built in the 1950s,
during a rash of subdivision and building, but there are earlier and
later homes in the area. You'll find lots of three bedroom ramblers, to
be sure, most there long enough to have fully finished basements.
Construction quality is high for these 1950's ramblers, if aesthetics
and amenities are not up to modern standards. Still, there are many
sleepers in this part of Saint Paul, and many of the homes have been
heavily upgraded.
Well-manicured lawns are a mark of the area, and mature trees add a
stately touch, along with much needed cooling shade in the summer.
Another outdoors phenomenon that will seem unfamiliar to many today is
children playing outside any time the weather is good. It's reminiscent
of the 1950s neighborhood I grew up in back when the homes were brand
new. Just south of this area is another pleasant subdivision, just West
of McKnight Rd. It contains Beaver Lake Park, with lots of recreation
possibilities.
With high gasoline prices creeping ever higher, perhaps it's time to
consider a closer-in alternative for your family. Saint Paul's Northeast
corner is worth a look.
5/18/06
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