Real estate market at its peak?

First-time home buyers possess many advantages that increase their buying power today, despite the otherwise bleak environment and outlook in the real estate industry. The ups and downs of the past few years have yielded historically high housing inventory levels. Interest rates have been hovering around six percent, and lower, since 2006. In 2007, the low turnover of homes resulted in sellers slashing their prices. The downward spiral of the mortgage industry that began last year struck heavy blows to banks and lenders. All this has laid the groundwork for favorable conditions for those families and individuals who have the resources to purchase now.

“It is a brand new phenomena,” says Irene Levy, sales manager & Realtor with Coldwell Banker Burnet in Eden Prairie. ”The market conditions today have never all been in play at the same time in the recorded history of real estate. It is a very exciting time to be in real estate and first time home buyers are definitely in a good position to take advantage of some great values in the market.”

Today’s buyers are coming in at rock bottom prices. For the first time in years, selling prices are at a realistic level. First-time buyers have no baggage to unload: they need not worry about selling a current home at a fair and reasonable profit, while juggling the timing of sale and purchase. When negotiating, buyers have the upper hand. If a seller hesitates to reduce his or her price, buyers can easily walk away, because there are thousands of other owners ready and willing to showcase their homes.

MHOC affiliated agencies: MPLS/Hennepin- Strickland Associates- 952-933-3105 PRG Inc. 612-721-7556 ext 72 African Development Center 612-333-4772 Community Action Partnership of Suburban Hennepin 952-933-9639 ext 281 St. Paul/Ramsey American Dream Services 651-774-9200 Neighborhood Development Alliance- 651-292-0131 ext 221 Community Neighborhood Housing Service 651-292-8710 Washington County HRA 651-458-0936 Dakota County CDA- 651-675-4471 Carver County CDA 952-448-7715 Anoka County Community Action Program 763-783-4747 There are other locations throughout the state & metro. More info can be found on www.hocmn.org Additional resources Minnesota Housing City Living Home Programs-Minneapolis City Living Home Programs-St. Paul Minneapolis Area Association of Realtors– 952-933-9020 St. Paul Area Association of Realtors– 651-776-6000

The Minnesota Home Ownership Center, a non-profit intermediary organization based in St. Paul, offers help for first-time home buyers. The MHOC supports a network of agencies dedicated to serving the needs of Minnesota home buyers, and funds programs and information for prospective homeowners.

“There are many excellent lending tools available for first time buyers,” says Julie Gugin, Executive Director of the MHOC. “The idea is to empower consumers with information as they embark on their journey to homeownership.”

The MHOC offers two important tools to prospective homeowners. Their Home Stretch workshops, held at MHOC-affiliated agencies throughout the state, are eight-hour classroom programs taught by certified trainers. According to MHOC, studies conducted by the Family Housing Fund and the University of North Carolina demonstrate that home owners who participate in pre-purchase programs such as Home Stretch, are far less likely to face delinquency or foreclosure in the future. Home Stretch workshops provide learners with a certificate of completion. In today’s volatile environment, some lenders require the certificate as a prerequisite to obtain lower-cost mortgage products.

The second tool offered by MHOC is one-on-one counseling, tailored to individual needs. (MHOC maintains a list of designated providers.) Training is now available in English, Spanish and Hmong. The MHOC also partners with the African Development Center, which offers translating services, so African immigrant communities can also access the Center’s information. Currently, translation services are focused in the metro area. Except for the Home Stretch Workshop, which averages less than $50, all MHOC services are free of charge, and available to all income levels. Information can be obtained at all stages of the buying process.

Real estate market at its peak? by Patricia Webb-de la Cadena The phrase, “It’s a buyer’s market,” has never been more apt. Christina Scipioni bought her first home with her fiancée in April in Eden Prairie. In a new development, they offered $40,000 less than the asking price; the construction company owner accepted. Christina doesn’t think they could have afforded their home a few years ago; they did their homework on the neighborhood and discovered markedly higher selling prices in the recent past. She initially believed they didn’t qualify for an FHA loan (Federal Housing Authority). However, they worked through the MHOC, with the Community Action Partnership of Suburban Hennepin, and completed Home Stretch. As a result, their counselor steered them to FHA financing, which enabled the couple to purchase the home. Without the MHOC involvement, they would have been unaware of their eligibility. In its haste to secure buyers with the cash needed to finance, the mortgage industry’s liberal lending practices of the past few years inadvertently contributed to today’s downfall. Lenders issued mortgages to unemployed individuals, those with poor credit; and sometimes, no credit histories. Others who re-financed now owe more money on their homes than they’re currently worth. Those who jumped on 2% adjustable rates face significantly higher interest today, and current conditions make it harder for them to refinance. Job cuts and layoffs have strapped families with houses they can no longer afford to pay for, let alone maintain. The lending leniency has disappeared, and Freddie Mac and Fannie Mae are now enforcing tighter regulations. Many banks have withdrawn from the condo market entirely. On the upside, recent activity indicates that the market already witnessed its lowest point, and is starting to stabilize. Realtor Irene Levy sees more sellers willing to price for the competitive environment. Homes that are priced right, and in mint condition, are receiving multiple offers. Within two to three years, appreciation levels should be back to average rates. New buyers today won’t see the high return experienced in the early 2000s, but appreciation rates will eventually even out at normal, single digit increases. As with any sales transaction, home seekers should abide the Buyer Beware rule. Foreclosures and auctions seem like easy, highly profitable channels for your purchase. But the mantra of the MHOC is: If it’s too good to be true….it’s too good to be true. Buying foreclosed property means dealing with a complex, limiting bureaucracy, and a longer road to travel than the standard real estate transaction. The buyer could inherit a myriad of problems: vandalized vacant houses, homes not maintained due to owner’s inability to pay for repairs, resistant banks. Auctions fuel the public perception that the houses offered are dirt cheap, but auctioneers set a fixed price for these properties. If that threshold isn’t met, usually they won’t sell them. All the experts agree several factors are key in making the right choices. First, find a reputable lender. Says Karen Gajeski with Bremer Bank, “Shop around. You shop around for furniture and cars; you should do the same with this, your biggest and most important investment in life.” Avoid anything that seems predatory. Today, most lenders are recommending 30 year fixed mortgages. Secondly, work with a good realtor. The intricacies of the easiest transactions are beyond most people’s scope of knowledge. Get referrals, check with the State Realtor Association. Finally, ALWAYS have the house inspected by a 3rd party. This protects the buyer’s earnest money, and provides the peace of mind that their dream home is a safe and sound abode.

Bremer Bank, a mortgage lender that teams with the MHOC, covers Minnesota, North Dakota and Wisconsin. Karen Gajeski, Senior VP with Bremer Bank, agrees that Home Stretch not only equips the potential buyer with the information needed to make an educated purchase, but also supplies them with knowledge required to maintain and hold onto their home farther down the road.

The Community Land Trust program also offers assistance to new buyers. In the five and one-half years since its inception, the City of Lakes Community Land Trust (CLCLT) has enabled more than 70 families to acquire homes in Minneapolis.

As a non-profit organization, the CLCLT works to place families into affordable homes and to sustain permanently attainable real estate for future buyers. They aim to procure homes for families seeking to build a life, not for investors looking to make a quick buck. Land Trust programs are available throughout most of the state.

The CLCLT funds a percentage of the total home cost. For example, if a family can only secure a $150,000 mortgage for a $200,000 property, the land trust will provide the $50,000 difference. If in 10 years the owner wants to sell, and the property is paid off, for a $240,000 closing cost, owners will receive 100% return on their equity, plus 25% of the $40,000 appreciation. This arms them with the cash needed to secure their next home, and in turn, the community trust uses its 75% share of the appreciation to help finance the new buyer. So, 10 years later, instead of funding $50,000, now the trust can contribute $80,000 for the same home. Condominium purchases follow the same formula.

In Minneapolis, buyers must have an income of less than 80 percent of the area’s median average income to be eligible for CLCLT assistance. In Minneapolis, for a family of four, currently this equates to $61,500 or less. Land Trust programs focus on fostering a healthy, thriving community.

The MHOC held several free “Opportunity Knocking” forums in June in a pilot program, co-sponsored with Bremer Bank and Freddie Mac. The forums were held in Roseville, Richfield and Brooklyn Center. These forums were attended by mostly white, single women under 40, but there were some couples and people of color in attendance. The locations were chosen based on convenience and easy access within the Twin Cities area, rather than a desire to reach a designated group. The goal was to be accessible to as many people as possible. If successful, the MHOC plans to host more of these events, perhaps in Minneapolis & St. Paul.

The cities of Minneapolis and St. Paul hosted a homeownership seminar in St. Paul May 17. The first part of the seminar was designed for professionals in the real estate industry, while the second provided workshops for first-time home buyers as well counseling for families in foreclosure or teetering close to it. About 150 people of diverse backgrounds and ages attended. Minnesota Housing plans to sponsor a similar event in April 2009. perhaps in Minneapolis, though the final decision on location will not be made until September.

Jennifer Anderson, one of the potential buyers, is a single woman renting in uptown Minneapolis, who has been considering a home purchase for about six months. She is looking mainly in the western suburbs: Golden Valley, St. Louis Park, Richfield.

“These are places that may have been unattainable for me a year or two ago, but in today’s market, are now within my means,” she said.

Jennifer has been shopping around for mortgages and houses. The Federal Housing Authority can provide her with some funding, but she seeks a conventional mortgage, which will afford her a longer term and more cash down. She definitely plans to utilize the Home Stretch program. “It pays to be educated about what you’re getting yourself into.”

Patricia Webb-de la Cadena is an Account Executive but prefers writing. This New Jersey native resides in the Twin Cities with her husband.