Once again we hear reports about the hot real estate market. Watch the video and you will see that “the market” does look great overall. Up 6.3% over last year. But watch as I click through some selections that drill down to what is going on for a segment that may fit your situation. Traditional sale (no short sale or foreclosure), previously owned, single family, top quartile (over $289,000).
Twin City median prices are up this year!
The focus here is on traditional sale transactions because they represent fair market value, not discounted short sale or bank owned properties.
The December 2013 single family median price was $225,000. December 2014 is up 6.4% to $239,500. This is good news, but it is too general to know your specific situation. As an example, there is very little change in the upper quartile from $390,000 to $390,978.
Condos are up 6.7% from $149,000 to $160,000. Townhouses are up 2.9% from $165,000 to $169,900.
Again, this is just a general comment on the market as a whole. For specific questions, give me a call at 612 810-3491.
I was recently asked to reconsider my opinion of value on a “low” appraisal. The house was listed at $239,900 and came under contract at $239,000 with 3% seller paid closing costs, meaning that the seller was receiving $231,830. My opinion was $232,000.
The contract was based on a 5% down mortgage. My client, the lender, ordered the appraisal to evaluate their risk in lending 95% of the purchase price.
I’m not a banker, but it makes sense that they would be very concerned about the value they are lending against. If it were 50% down, the borrower would not be likely to walk away, and if they did, they could absorb the costs of selling the house and still get their money back. But at 5% down the collateral becomes very important.
Lenders want to see proof that the collateral is worth enough to support the loan.
They want to see what the most similar houses are selling for, in case they become a seller. They are thinking about size, distance, time, age, BR count, bath count, age, etc. In practice, guidelines have been established so that when they are processing a loan, appraisals that do not conform to these guidelines get extra scrutiny. They want to make sure the appraiser is not just hitting a number to get a deal done.
As they read the appraisal, they are looking for something called bracketing. This means that there is at least one comparable that is equal or inferior in measurables like GLA (above grade square footage not including basement or porch), above grade BR count and above grade bath count. Secondary features like basement finish, garage stalls, fireplaces etc should also be good matches.
Things that make them nervous are values based on new appliances (try financing appliances for 30 years), landscaping, décor, anything that will depreciate quickly with time or fashion.
When I was asked to reconsider value, I asked the agent to send me at least one example of a house that is smaller that sold for more money. The closest one was over 4 miles away. The distance may not be important to a particular buyer, but it does raise the question of how the appraisal could be low if there was nothing smaller nearby that sold for more.
The Minneapolis St Paul metro real estate market is usually strongest in the spring. This year appears to be no exception with attractive rates and welcome end to snow and cold. People who have been thinking about entering the market are out looking at houses.
The chart below looks back at the most recent 12 month periods. The dramatic increases are mostly due to the absorption of distressed properties, but we are clearly in recovery.
It is time to look back and see how the Minneapolis / St Paul residential real estate market performed in 2013.
What did you read in the press? That the market is strong with double digit gains in median price? Every story I read in the news media said the same thing. Median prices are up. Take a look. The chart below shows a gain of 14.4%!!
But what does it mean to you? It depends on many factors. If you are a bank with foreclosure properties you would like to sell, the market has been very good. The next chart shows a gain of 12.7%.
If you are a rehabber who buys foreclosures, things may be getting tight because your acquisition costs are 12.7% higher, but the Traditional retail market is up by only 5.4%.
If you are a homeowner with equity, you need to know your price range to understand how you are doing. The third chart breaks out the numbers by quartile. The low end, below $140,000, had a gain of 4.8%. The high end, above $300,000, saw a slight decline.
If you are faced with decisions about Minneapolis / St Paul residential real estate, I would be happy help.
Happy New Year.
Last time we saw that the 15% median price increase we hear in the news is really only about 8% when considering the mix of sales. Fewer distressed (discounted) properties in the mix make the median price rise. This time, let’s look at median price, traditional sales only, by price range. Houses above $300,000 have increased less than 1% over last year. They are essentially the same as 2 years ago: $396,050 vs $395,000. Houses in the $140,000 to $200,000 range are up 2% compared to last year, which was even with the year before. Here is my point: if you need your property appraised for reasons like divorce, estate or asset division, please call an experienced appraiser who can sort things out for you.
The prior post showed that the market is in recovery, with news accounts and MLS data agreeing that median price is up about 15%. The question asked last time was “what accounts for the dramatic increase? Is it low rates? Better job market? Buyer confidence? All three?”.
The following chart uses the same data as the previous one and points to an overlooked reason behind the recovery. Maybe the low rates, better job market etc. were the influences that changed the mix of sales, but it seems to me that the increase in median is largely due to fewer distressed properties in the sample. Looking at the change in median price for traditional properties alone, the increase is more like 9%. But how does this relate to you? It all depends on the price range. Stay tuned for more…..
The news media is packed with stories about the recovery of the housing market. “Prices are up 15% compared to last year”.
On the surface, this is true. This chart was pulled from Minneapolis St Paul Metro MLS on August 15, 2013 and shows Median Sales Price for three time periods: the most recent 12 months, one year ago and two years ago.
Determining the total value of an estate is an important part of estate administration. Real estate is often the primary asset of an estate, making its reported value a crucial variable in determining the amount of state or federal estate taxes owed, if any. The reported value of real estate also has significant tax implications for the person or entity to whom the property passes.
While the estate administrator can use the assessed value of the real estate at the date of death, this approach has its drawbacks. First, no two pieces of real estate are identical. Assessments do not take into account all the specifics of the property. This means that the decedent’s real estate could be overvalued. Second, every federal estate tax return (known as the form 706) is reviewed by the IRS. If the estate must file an estate tax return, comprehensive and detailed documentation of real estate valuation can help avoid hitches in the review process.
A wise approach to the stories of life from an icon in broadcasting. Also a wise approach to the questions of real estate values. The following chart shows median price for the Twin Cities Region, Single-Family, broken out by price range. Seasonal variation is controlled by looking at December only for 2010, 2011 and 2012. If you are in the upper middle price range, $200,000 to $300,000, values have changed very little. Just a guess, but I would say this range of value has fewer distressed sales in the mix than the lower ranges, and fewer new construction properties than the upper quartile. So the bottom of the market is showing the most improvement, and pent-up demand for new construction, combined with low interest rates, is driving the high end. Just my $.02 worth, which is a true bargain considering it is free to my readers.