Looking for bargain priced foreclosures?

I have talked to a few people who are waiting for foreclosures to hit the market. There are a few out there but even though the pandemic caused job loss homeowners are getting caught up

home
Home

on mortgages and there are forbearance programs that extend the length of the mortgage.

This isn’t like the last recession or like the housing market crash. There are a few differences. Most importantly more homeowners have a lot more equity. That means people who are behind on payments may even be able to sell before they go into foreclosure.  Home prices are going up.

During the great recession, home prices went down and there were many people who could not make payments but the value of their home was going down and they ended up owing more money on it than they could sell it for.

The foreclosures I have seen are not what I would consider “bargains”.

I don’t think the pandemic will result in a foreclosure crisis at least not in owner-occupied residential real estate.

There is a glut of commercial real estate and I am starting to notice more rental properties coming on the market.  It is possible that being a landlord isn’t as attractive as it once was due to various eviction moratoriums and in St. Paul, there are stricter standards for evicting tenants.

Rental property owners also have equity and now is a great time to sell any type of residential real estate.

Quick home sales continue this spring

About 19% of the homes listed for sale in St. Paul this year were on the market for less than two days before the seller accepted an offer. About a third of those were on the market for zero days.

Many of the homes were listed as “coming soon”, which gives potential buyers a chance to drive by and to look at photos of the property. Over the Easter holiday weekend, a small affordable house in the North End neighborhood got 18 offers after two days on the market and it appears that at least one of those offers was for about 15% more than the asking price.

We are seeing instances where the house appraises for less than what the buyer offered.  As part of the mortgage approval process, the buyer’s lender orders an appraisal. In some cases, the buyer proceeds with the purchase and kicks in some more cash, and in other cases, the sale price is re-negotiated.

My gut hunch is that a buyer can pay too much for a house. If the buyer can stay in the house for many years it probably doesn’t matter much.  If for some reason the buyer needs to sell in a few years and interest rates go up slightly the buyer may have trouble even breaking even after selling.

This is a wonderful time for homeowners who wish to sell a house. Houses in the cities and in the suburbs in most price ranges are selling quickly and for top dollar.  Homebuyers can expect to pay a premium and face a lot of competition. Buyers who pay cash or who have large down payments have an advantage.

 

National real estate trends

Cash is still king. According to Realtor®.com reporting, 36 percent of home sales across the nation were cash sales last year which is about a 3% increase from 2019. 

Remote workers are moving further away from work. Like 50 miles away. I have been watching this trend for a year. It will be interesting to see how it all works out when people change jobs or when employers decide they want to open offices again.

There is also a trend of using tiny houses as offices. A tiny house may have 100 to 500 square feet of living space. My own office is about the size of a small tiny house with 144 square feet of space. Personally, I like the idea of using a tiny house as a she shed.

Accessory dwelling Units or ADU’s as they are called are allowed in St. Paul and they would make great offices assuming they can be adequately heated during our annual polar vortex.

Maybe vaccinations will help the housing market

If you are a homeowner who wants to sell the housing market is amazing. If you plan on buying a house this year the market isn’t so great. The prices are high and the competition is fierce. The low number of houses on the market is a nationwide challenge and here in the metro area, this is year 7 of a strong seller’s market.

It is possible that more people will want to sell after they have been vaccinated for Covid-19. However, home sellers will still have a hard time finding a house to buy.

Here is a look at the national housing market curtesy of the National Association of Realtors.

Locally new listings were down by 12% in February with prices at all-time highs and rising

Houses for sale

 

New regulations for landlords

A new ordinance went into effect in St. Paul at the beginning of the month. Here is ab outline of the new rules. There are pages and pages of words in the new ordinance, which can be found on the StPaul.gov website on the S.A.F.E housing page.

Rowhouse

Here are some of the new rules:

Tenant Screening Guidelines
The Tenant Screening Guidelines policy ensures fair access to housing by creating uniform guidelines related to the use of rental, criminal and credit history in applicant screening.
Security Deposit Limitations
The Security Deposit Limitation policy ensures equitable access to housing by limiting the upfront charges related to Security Deposits and Prepaid Rent.
Just Cause Notice Policy
The Just Cause Notice policy improves housing stability by ensuring owners establish one (1) of ten (10) Just Causes and provide renters with written Just Cause Notice when nonrenewing a renter’s Lease.
Advance Notice Policy
The Advance Notice policy supports the preservation of affordable housing and addresses the displacement pressures renters may face during ownership changes by ensuring that current owners provide notice of proposed sale to the City of Saint Paul and renters before an *Affordable Housing Building is placed on the market and new owners provide a notice of sale after the transfer of ownership occurs, coupled with a Tenant Protection period.

Here is a list of reasons tenants can be evicted under the new rules:

Non-payment of rent, Repeated late payment of rent, Material non-compliance, Refusal to renew, Occupancy by property owner or family member, Building demolishment and dwelling unit conversion, Rehab and renovation 8. Complying with a government order to vacate, Occupancy conditioned on employment, Exceeding Occupancy 

Also, see St. Paul has more renters than owners

Looking back to March 2020

I wrote this last year about open houses. Open houses at houses for sale were held throughout the pandemic. There was a brief period where real estate agents were strongly discouraged from having them.

As long as homeowners allowed them agents had them and people showed up. We know that open houses are not needed to sell a house but so that real estate agents can meet people and prospects.

There are homeowners and real estate agents who are still mostly staying home and waiting for their turn for a vaccination.

It probably has to do with age. Older people are more likely to die of COVID-19 and that probably makes them less likely to have an open house or go to one or put their house on the market.

This is what I wrote at this time last year:

Some local real estate companies said that open houses are safe because their agents got special training. Other real estate companies said no more open houses. My attitude about it is that if the people who work in the local restaurants do not get to go to work I shouldn’t disrespect them by having open houses. We really are all in this together.

Open houses are advertised in our MLS and the MLS notified us that:

“Effective immediately and until further notice, the scheduling of Open Houses in NorthstarMLS has been suspended. Also, any currently scheduled Open Houses in the NorthstarMLS system have been canceled and removed from the MLS. This action will remove the publication of Open House dates from IDX feeds and syndication to public-facing websites, as well.”

It all has to do with us keeping our distance from each other so that we don’t all get sick at once and flood hospitals with people who can’t breathe.

The good news is houses are still selling. At least for now. I think it is because of pent-up demand and low-interest rates. That demand will weaken as jobs are lost. Right now we don’t know how many people will be laid off.

 It is hard for me to imagine having an open house before anyone was wearing masks in March of 2020 and before we fully understood that sanitizing doorknobs didn’t do much.  Open houses were small COVID-19 spreader events and probably still are.