St. Paul Real Estate

Foreclosure Alley

In some St. Paul neighborhoods the foreclosure rates are high and in others they are low, but with in the neighborhoods with the highest foreclosure rates  there are pockets here and there that have been devastated by foreclosures.  Entire blocks where 40 to 70% of the houses are boarded up and vacant.  Most of these homes are not on the market and many of them are those registered vacant buildings  l write about.  That means they need a lot of work. Many of these homes were rental properties.  The vacancy rate for rental properties is at the highest it has been in 30 years and is at around 8%, and rental rates have gone down. 

These homes are not really counted anywhere so I don't know how many there are. It is often hard to determine who owns them. Some that have been on and off the market.  In some cases they were purchased by an investor who never made a payment on them. 

This home on Forbes street in St. Paul has been vacant for a couple of years. It sits next to four other homes that have the blue notices on the door. Just down the street there are more. There is one that isn't on a list anywhere that has been on the market most of the time since early 2006.  It sits vacant and has for a long time.  It is a huge house all chopped up into apartments and one of the few vacant homes that I have been in that creeped me out.  Mostly because of the small rooms and dark hallways.  The insides of some of these homes are such a mess that they would have to be gutted to be rehabbed and in some cases I suspect that it might be best to tear them down and start over.

When these homes were turned into rentals they used loads of paneling and put it in from floor to ceiling and covered the old floors with vinyl tile and cheap carpeting and painted everything that wasn't vinyl, cheap or paneling white.  Now they are what I call urban blight. 

The city attached a lot of rules to the category 2 and 3 registered vacant buildings, they are held to a much higher standard than the homes that most of us live in.  I doubt if many would have the funds to rehab them and even if they did the homes would be worth less than the amount of money that would have to go into them.

 

Better News . . worse news

I don't want to say good news, it is better news, at least for now.  In September of 2008 there were 2031 registered vacant buildings in St. Paul.  Most were homes. Now some fourteen months later the number has dropped to 1633.  That is still a big number and it doesn't count all of the vacant homes just those that have to be registered with the city of St. Paul.   In most cases those are buildings that are unoccupied for a year or unoccupied with code violations.

Having fewer vacant properties in St. Paul is a good thing. I drove by some that were on the list last summer and they have been fixed up and some have been sold to new owners. The home in the photo is on E. 3rd street and is looking much better and doesn't have the notice in the window anymore. I will keep watching the list. I hope that it continues to go down. 

The number of foreclosures on the market has gone down and continues to decline each month but should go back up again when the next wave of foreclosures hits.  These foreclosures will be caused by job loss and ARM (adjustable rate mortgage) resets. According to reports from the Mortgages Bankers Association  delinquencies on FHA and conventional mortgages have been rising and delinquency rates and foreclosure rates will continue to worsen before they improve.  I will go ahead and predict it will also drive up the number of vacant homes in St. Paul too.

Be more Humane

People seem to either love cats or hate them. This is my cat.  They do sleep 23 hours a day and then spend an hour looking for a place to sleep, and then there is the thing with the litter box.  At any rate they are popular pets.

Sometimes when people lose their homes they leave their cat behind. I have written about that before and I really don't want to write it again. 

Recently I encountered two situations where ther was a cat in an abandoned house. In both cases the animals had food and water but neither of them were happy.  One was injured or maybe sick and hiding in the basement.  I made some phone calls and understand that the situation has been taken care of. The other cat I found was starved for attention and kept trying to bite us. It sounded like it was crying when we entered the house.

I know my cat gets mighty upset if I am gone all day. She is a companion animal. She doesn't like to be left alone, even though she does sleep 23 hours a day.

Please don't leave your cat in your vacant house. Either bring it with or maybe a friend or family member can take care of it for you. 

Also see Domestic murderers

Can you really buy a house for . . .

I can't even put the word dollar in the title because if I do my phone will ring off the hook.  For months people have been calling because they want to buy a house for a dollar.  Some are responding to homes that are listed in the MLS for a dollar. Those homes are usually sold at auction and there is no set price on them but the MLS requires a price so they just list them for a dollar. The auctions are almost always minimum bid auctions and the bidding always starts off for much more than a dollar and the home is not always sold to the highest bidder, if the bids are too low it doesn't get sold at all.

Think about it.  It may be possible to buy a house for a dollar.  There is a program through the city right now,  called the fourth street preservation project, and it is a good program. The problem is that the homes cost much more than a dollar and it is plainly stated on the city web site that the homes need repairs and that the buyer must qualify for a fix up loan of between $150,000 and $190,000.  The cities advertising of the homes is a bit misleading. "A Vacant Home for $1.00 Means a New Beginning for an Historic Saint Paul Neighborhood"  For arguments sake lets say that the home is acquired for a dollar, and then $150,000 is needed to fix it up.  That means that a total of $151,000 will be spent.  Looking over the list on the city web site I only see two homes that are actually listed for $1.00, again this seems to be a bit misleading. I hope their phones are ringing as often as mine is.

The program  will work best for buyers who really care about historic preservation and who plan on living in the homes for a very long time. Buyers should make sure that the home will be worth as much money as they put into it after re-hab, in case they have to sell after a couple of years.

In the interest of transparency the city should also disclose that registered vacant properties are held to a higher standard than comparable homes in St. Paul that are of the same age and that those standards cost extra.  No other previously owned home in St. Paul has to be brought up to code before it can change hands.  Since codes change yearly they won't always be up to code.

Yes there are people out there who just see the one dollar and want to buy now.  It is hard to believe that so many people do believe that they can buy a house for a dollar. Maybe they also think they can buy a car for a nickle and that there is such a thing as a free lunch.

A home that can be lived in and has indoor plumbing, a roof and a working furnace can not be had for $1.00.   Please read the fine print, and don't be mislead by the catchy headlines. I could say that all  of my listings are available for $1.00 + anywhere between 218K and 364K depending upon the value of the home, but I wouldn't because ti would be misleading.   

To get more information about the eleven homes that the city is selling please see their web site:  Fourth Street Preservation Project.

Case-Shiller = Fun!

by G. Sax

I read this blog's comments. Most are interesting and expand upon the conversation. In yesterday's post about porches, there was a comment from a reader named "Bubble_Up" about local housing prices.

The comment didn't have anything to do with porches, but it was cool to see something about Case-Shiller. We have an informed community here, which is good for those of us who like to contribute to the conversation.

So I thought I'd shelve my quirky, neighborhoody banter this week in favor of a chat about the S&P/Case-Shiller Index, the de facto national housing report that reporters flock to.

I'm not interested in debunking Case-Shiller, which some real estatees try to do, including the National Association of REALTORS®. Case-Shiller isn't the real estate devil. It provides a decent snapshot of the American housing market.

The indices were developed by economists Karl Case and Robert Shiller. The 20 largest metro areas are measured using a repeat sales pricing technique to create data pairs; data is collected on single-family home re-sales. The report is produced by Fiserv Lending Services, and many of the indices are managed by Standard & Poor's. (click here to view them)

The Twin Cities took a media beating because of Case-Shiller yesterday. Bubble_Up brought this to our attention with a quote from the St. Paul Pioneer Press: "The report found that home prices in the [Twin Cities] metro area plunged 6.1 percent between February and March, falling back to a level not seen locally since September 2000, according to Case-Shiller." (read full article)

I work in real estate PR, so I took a bunch of calls on Case-Shiller yesterday. The report got the basics right...prices are down here, there and everywhere.

But the increase in Twin Cities foreclosure and short sales activity over the last year wasn't really noted in the first wave of media reports. As the day wore on, we were given a chance to explain our "record decline." More than half of all home sales in the Twin Cities in the first quarter of 2009 involved banks. In April, banks were still in on 46 percent of sales activity, often at deep discounts in already-low price ranges. This drags regional median prices down.

We're backtracking on price, but you're not likely to get a traditional home sale (one with a real person behind the sale and not a bank) at 2000 or even 2002 prices. We're still in tricky waters, for sure, but the situation is more complicated and more localized than Case-Shiller covers.

Foreclosures are selling rapidly and inventory is shrinking. Next year at this time, Case-Shiller may be reporting that we've had record month-over-month increases. And we may be explaining that the increases are statistical anomalies.

In closing, I'm a big fan of porches. I look forward to many summer nights on my front porch listening to Twins games on the radio, waving at neighbors, and watching the sunset wash the Cathedral in shiny orange pinks. All in screened-in luxury!

It really is too good to be true

I have written a few posts on this subject. There are homes listed on our MLS for $1.00 and people think that they can actually be purchased for a dollar. It doesn't work that way. Most are up for auction and the minimum bid is set at a number much greater than a dollar. The reason the home is listed for $1.00 is because our MLS requires that all listings have a price.

There are some foreclosures listed for 10K. Yes these are really listed for 10K and there isn't an auction.  Wow! being able to buy a home for 10K, how cool is that.  I guess it is way cool if the buyer has at least another 100K to make the necessary repairs or enough money to demolish it and build a new home on the lot.  In some cases the property doesn't need 100K worth of work, in those cases often someone else makes an offer on the home for much more than 10k and ends up getting it.  The buyer who only has 10K to spend is left out of these deals. 

In recent weeks there have been numerous instances of multiple offers on the lowest priced home. I have heard rumors that there were 40 offers on one home. The banks lower the prices and the games begin. My phone rings off the hook with buyers wanting to buy 50K homes. If the plan is to find a place to live and to buy it for 50K don't plan on it. Housing prices have gone down in the twin cities but it still takes more than 50K to buy a home. With rare exception it will take at least 100K by the time it closes and the buyer gets the keys. Cash buyers have a big advantage in this market. Many of the very lowest priced homes are difficult to finance because of the repairs they need.Some repairs are truly needed and in other cases they are needed because of the way the city of St. Paul treats vacant buildings. Either way they need work.

If it looks too good to be true it probably is but I know you will call and ask anyway.

Have you noticed?

The number of registered vacant buildings in St. Paul is now 1990.  It is an alarming number but it is lower than it has been.  Last September I wrote about 2031 opportunities because that is how many buildings were on the list. It makes me wonder if there are fewer vacant homes in St. Paul or if fewer of them are registered or if the city just lost track.  Maybe for now I will just assume that the number of registered vacant buildings is going down. I am also noticing that some of the vacant homes are being repaired. That is something that I love to see. We talk about "green building" fixing up an old house is like recycling.

One Less Vacant House in St. Paul

447 Smith Avenue, St. Paul, MN.  It was a registered category 2 vacant property.  Category 2 properties need repairs.

The Other Side of the River

by G. Sax

I was going to promote the 2009 Minneapolis & St. Paul Home Tour this week, but something even more timely came up that nudged the MSP tour to the epilogue. I'll give the tour some love at the end of my regular weekly Wednesday rant here at the SPREB. Spreb? I don't know if I like that. Sounds like a sound I would make if I were coughing with water in my mouth. Note to self: Acronyming the St. Paul Real Estate Blog is a bad idea.

Yesterday I was hanging out with the mayor of Minneapolis, R.T. Rybak, in an empty house with an assortment of wild-eyed strangers. Well, we weren't exactly hanging out. It was an arranged press conference, and Rybak and several other Minneapolis mucky-mucks—including Minneapolis City Council President Barbara Johnson, Minneapolis City Council Member Don Samuels, and others—unleashed a PR flurry about Minneapolis Advantage, a city-funded home mortgage loan program that provides $10,000 forgivable loans for 200 homeowners eager to live in designated program neighborhoods hardest hit by foreclosure.

Applicants must occupy the loan-encouraged Minneapolis home for at least five years in order to get the $10K clean-slated. The bulk of the eligible neighborhoods are in North Minneapolis and near-South Minneapolis. If you're serious about setting roots in a neighborhood that could use your passion, this isn't a bad gig. Combine this money and the $8,000 federal tax credit for first-time home buyers, and you've got yourself a real nice start toward homeownership in Minneapolis.

So, of course, being a St. Pauli Boy, I was curious...does St. Paul have such a program? It's not quite a free $10,000 (neither is the Minneapolis offering), but St. Paul's CityLiving Home Programs have special assistance loans available for qualified home buyers to buy and for homeowners to make improvements. Now, I admit, I haven't dug journalistically deep into the CityLiving programs, but they seem sweet enough to make some links to: City Living | City Living A

There was a lot of rah-rah at the Minneapolis press conference, complete with invocation of the American Dream and a special thanks for REALTORS®, "our salespeople on the streets." Some of it bordered on soupy (as in sales), but when Advantage loan recipients and long-time North Side residents started speaking at the podium alongside the mayor, awesomeness ensued.

Takeaway: A positive response to the Twin Cities foreclosure problem and urban cavities is underway. It takes a village (or two).

Gossip: The mayor said he put his house on the market today.

Epilogue: The free, self-guided Minneapolis & St. Paul Home Tour, which will feature 60 open, interesting homes in lively, interesting city neighborhoods—39 in Minneapolis and 21 in Saint Paul—opens Saturday, April 25, 10:00 a.m.–5:00 p.m., and Sunday, April 26, 1:00 p.m.–5:00 p.m. regardless of weather conditions. Cost: Free. More Info: www.MSPHomeTour.com.

How does the foreclosure next door affect the value of your home?

In the last couple of months home owners have been asking what kind of an effect the foreclosures are having on their property values.

Most property values have gone down from last year.  Homes owned by banks have lost the most value. It is kind of like buying a brand new watch. I know not many people wear watches but I do.  If I bought my watch in the morning and paid,  $200 dollars for it at a jewelry store but wanted to sell it in the afternoon on Craig's list or on ebay, it would be very hard to get $200 dollars for it. I might be able to get $125, even if I never opened the box.

The shoppers on both sites don't want to pay full retail and are looking for a bargain. I could take it back to the store and get my money back and the retailer could sell it again for $200.

It is the same with homes.  As soon as they become a foreclosure they are worth less money.  No one will pay market value for them . . they just won't. I have seen it happen over and over again. The bank owned homes sell for less than homes sold by the traditional seller. Buyers won't buy them until the prices hit bottom.

All homes are affected by the foreclosure market.  In some cases there are homes in new developments that are almost identical but one home is a foreclosure and the other is not. If the bank lowers the price for a quick sale it will have an impact.  The traditional owner will have a harder time selling.  The bank has to lower the price because buyers won't pay as much for a foreclosure.

When people look for homes they go shopping and comparing prices is part of that process. They will notice the low priced foreclosures and it seems to make them unwilling to pay top dollar for any home. Today's buyers are bargain hunters.

When a Realtor or an appraiser looks at the market value of a home we look for three comparable homes that are nearby and have sold in the last year.  We generally don't use any homes that were bank owned as comparable homes because that will not give us an accurate market value. Homes that are not bank owned sell for more.  

If the home next door is a foreclosure, and it sells for almost nothing that doesn't mean that the value of your home dropped like a rock.

In the neighborhoods that have been hardest hit by the foreclosures the prices seem to have hit bottom and average sale prices are now higher than average list prices. 

Vacant homes do have an impact on the value of the homes nearby. While buyers are interested in purchasing bank owned homes they don't seem to interested in having one next door.