Information from Regional Multiple Listing Service of Minnesota, Inc.
MLS 302 (Downtown Minneapolis), January 1 –December 31, 2008

341
resales (previously owned homes) sold in 2008, a 6% decrease from 363 in 2007

271
newly-built (including conversions) homes sold in 2008, a 35% decrease from 336 sold in 2007

$288,646
average sale price in 2008 of previously owned homes, a 5% decrease from 2007

$398,233
average sale price of new construction homes in 2008, a 13% increase from 2007

$217
average cost per square foot for previously owned homes, down from $222 in 2007

$273
average cost per square foot for new construction in 2007, slightly down from $275 in 2007

57%
percent of all homes sold cost less than $300,000

12
Downtown homes sold over $1 million in 2008

$495
average cost per sq ft for homes over $1 million

28
Downtown homes sold over $750,000, 5.0% of all sales, averaging $443 per sq ft

$69
lowest paid cost per sq ft: @ The Sexton, 1 bd, 1 ba, 1,150 sq ft

$854
highest paid cost per sq ft: @ Stone Arch Lofts, 3 bd, 3 ba, 3,220 sq ft

$70,000
lowest sale price: @ City Heights, 431 sq ft studio

$2.75 million
highest list price sold: @ Stone Arch Lofts, 3 bd, 3 ba, 3,220+ sq ft

183
average cumulative days on market in 2008, up from 164 days in 2007

94.9%
percent of list price received for previously-owned homes, down from 96.2% in 2007

46
average number of homes sold per month in 2008

10.1
months of active resale inventory, known as absorption rate

At the beginning of 2009, there are ninety-five buildings in Downtown Minneapolis with over 8,500 condos, lofts & townhomes finished and livable. The building boom of the past decade has increased the Downtown housing stock by 167% (from 3,200).

Amid gloomy economic and housing news – there’s good news in Downtown Minneapolis: of the sixty or so new residential projects in and around Downtown, over 90% of the units are sold – and still selling.

There were some casualties. By my count, developers scrapped plans for 13 projects and turned two others into rental buildings (2,700 units) – nine of those never even started a sales effort.

There is still hope. Developers have plans for five new projects (approx. 1,800+ units), including big plans near Target Field, North Loop Green, and across the river around the Pillsbury ‘A’ Mill, East Bank Mills.

Winners in 2008:

The biggest winners of the year have to be those developments that…

SOLD OUT! The Groveland: Steven Scott Mgmt, Loring Park, average $338,300 @ $247/ft

                13 resales, average $287,200 @ $238/ft

SOLD OUT! 212 Lofts: Shamrock Development Co., North Loop, average $339,400 @ $182/ft

                3 resales, average $330,900 @ $208/ft

SOLD OUT! Tower Lofts: Tower Lofts LLC, North Loop, average $284,400 @ $210/ft

SOLD OUT! The Falls & Pinnacle: Crescent Heights, East Bank

SOLD OUT! Rock Island Lofts: Shamrock Development Co., North Loop, average $365,000 @ $220/ft

                1  resale, $415,000 @ $206/ft

Not yet sold out, but still selling well:

Bridgewater (Shamrock Development Co., new construction on 10th Ave South @ Washington, Mill District) was the biggest seller of the year with 52 sold homes at an average sale price of $500,450 @ about $284/ft. A convenient, picturesque location and large spaces seem to be a big draw. About 100 remain for sale.

Skyscape (Tandem Development, new construction on Portland @ 10^th, Elliot Park) sold a surprising 30 homes in 2008 (including one resale), $332,000 average price @ $285/ft. Flexibility on price was a successful strategy last year and should help sell out this building in 2009. About 25 units remain for sale, including the viewed-endowed penthouses.

5^th Avenue Lofts (Shamrock Development Co., new construction on 2^nd Street No @ 5^th Ave, North Loop) is looking to sell out since finishing construction in 2005. At one point in 2008, the developer offered $50,000 discounts. It worked – 16 units sold (with 3 additional resales) at an average price of $418,000 @ $227/ft. About 14 units remain.

730 Lofts (Schafer Richardson, new construction on North 4th St, North Loop) is the third of a trilogy of SR buildings near the new ballpark. Closings started in January last year. Twelve units sold in 2008 at an average price of $241,407 @ $263/ft. Under 40 units remain.

Flour Sack Flats (Lupe Development, new construction on 2^nd Street SE @ 5^th Ave SE, East Bank) is nearly sold out, with only a couple units remaining. 2008 saw 11 units sell, average sale price $331,800 @ $274/ft.

A number of projects sold 9-10 units in 2008, including:

Harvester Lofts: Sand Companies, renovated warehouse, North Loop, average $342,900 @ $311/ft

SO+HO: Master Development, renovated warehouse, North Loop, average $224,400 @ $206/ft

Phoenix on the River: Schafer Richardson, new construction, East Bank, average $713,700 @ $390/ft

Honorable mentions for 2008 must include

The Ivy: closings started in 2008! – new construction with Hotel Ivy and Ivy Spa Club on 11^th Street So @ 2^nd Ave So, near Convention Center, average $743,700 @ $417/ft

The Zenith: closings started! – 45 units sold, 20 to go. Shermann & Associates, new construction, Mill District, average $339,900 @ $322/ft

There were grinders in 2008. There were losers in 2008. More on them later.

Small print: All data from Regional Multiple Listing Service of Minnesota

It’s been a while now since a new condo project launched. As a matter of fact, 2008 saw the last two recent projects under construction close their first sales.

I’ll get to the winners and losers of the year later this week. In the meantime, check out the count.

Before the recent building boom, Downtown Minneapolis had about 3,200 homes in 33 residences. Including new buildings around the downtown core, we now have over 8,500 homes in over 90 residences – and we’re not counting small, 4-10 unit buildings just south of the freeway.

For those who like the idea of living Downtown, there are options.

Back in February I wrote a post called “2008 Outlook.” Was I right? Through September, the answer is little yes and a little no.

Here’s what I thought, and how it’s been:

“- There will be more properties for sale than buyers to buy them.”

It wasn’t quite going out on a limb on this one. Yes, there are still more properties on the market than buyers that have come forward this year.

According to Mplsguy.com, there were over 800 condos for sale in February. (source: Mplsguy.com February Condo Count). In the first nine months of 2008, 485 have gone Pending.

August Downtown Minneapolis Coundo Count

“- There will, however, be fewer listings in 2008 – for the 3rd consecutive year.”

Again, not a stretch for this to be true. No new buildings were launched this year, and buyers found great value as they continued to buy inventory.

Resale inventory has been down as well (a really good thing):

1,192 resale listings in 2007

799 resale listings in 2008

“ – We expect the number of sold properties to be flat or a few percentage points above 2007.”

Yes and no.

Through September, more resale condos and lofts sold in 2008 than 2007; 303 and 291 units respectively.

Over the same time, new construction sales have slowed – for one really good reason: with less inventory, there is less choice. The average price paid for a newly-build Downtown Minneapolis condo or loft is not in as many first-time homebuyers’ budget (next predication…).

“- We expect the average price to appreciate modestly (2-3%).”

Yes and no.

Average (mean) sold price of resale listings in 2008 is currently 4.4% lower than 2007; $289,980 in 2008 vs. $303,344 in 2007 for a 1-2 bedroom, 1,280-square-foot Downtown home.

Average (mean) price of a new-construction condo in 2008 is currently 10.8% higher than 2007; $389,094 in 2008 vs. $351,205 in 2007 for a never-lived-in 1-2 bedroom, 1,450-square-foot Downtown home.

“Today’s market conditions favor buyers.”

They did, and still do.

“Two buildings remain under construction, Phoenix on the River and Zenith - accounting for less than 200 homes. The result – fewer new homes added to a bloated but shrinking inventory.”

Phoenix on the River has begun closings, and new residents are living in the new building across the street from the Pillsbury A Mill on the East Bank. The Phoenix is a gorgeous residence that sets a new standard for elegance and luxury. The Zenith, across the street from the Guthrie and Gold Medal Park, and attached to the swanky new aLoft Hotel, will begin closings soon.

“Completed new buildings ready for new owners include 730 Lofts, Harvester Lofts, The Ivy, and Bridgewater Lofts. The result – great selection of never-lived-in homes sold by motivated developers.”

All three buildings are occupied and continuing to sell well. For a bunch of lofts, the three buildings offer a great selection of neighborhood, price, space and style. The Ivy is set to begin closings mid October.

Back in February, I thought this year’s challenges would be negative press, stricter lending guidelines and economic uncertainty. They have been. All three will continue to provide a stiff challenge as we see how the Wall Street rescue actually works.

The things I thought would help the market: continued erosion of record-high inventory.
fewer resale listings, amazingly-low mortgage interest rates, and motivated sellers & developers.

Fewer listings would provide more balance in most markets, but the uncertainty in the market has finally wedged itself into many would-be buyers’ minds. Thus, fewer actual buyers. The good news is that qualified buyers are continuing to take advantage of historically-low interest rates and good value for money from motivated sellers. See above: “Today’s market conditions favor buyers.”

Winners this year have been The Phoenix, Bridgewater Lofts, Skyscape, Harvester Lofts, 730 Lofts, Bookmen Stacks and Flour Sack Flats.

Three buildings have sold out this year: The Groveland, 212 Lofts, and Tower Lofts.

Coming later this year, a reprise to the most-read post on Mplsguy.com:

Downtown Minneapolis Condos and Lofts: 2008 Winners and Losers.

Legislation doesn’t move quickly. Seems to me we might have been overly optimistic to think a bill to keep the financial systems moving could be written and passed in a week. It might have been extra-overly optimistic in an election year.

I have faith Congress will do something. And none of us know if it’ll work, whatever it turns out to be. Questions of how many taxpayer dollars to risk, how they’re administered, with what oversight, how much return for the risk, and most importantly – for how much bounce in the polls – are all good things to consider.

Let’s assume Congress answers all of those questions correctly. Then what? The experts who rightfully pin the credit crunch on the problems in the mortgage market have also demonstrated an underlying problem is the current housing market.

The underlying problem in the housing market? Too much inventory, and too much REO inventory.

In today’s real estate market, it’s a painful experience to buy REO property. There are buyers out there trying, but it seems the banks have so much inventory that they don’t know how to sell it. A few recent stories are the best way to illustrate:

A property in St. Louis Park was listed for $155,000. A buyer submitted an offer at list price. The bank countered at $225,000. Not surprisingly, the buyer couldn’t qualify for an additional $70,000. The property is still on the market.

A buyer submitted an offer on a property in Minnetonka. They were told it could be two to four weeks to get a response. After four weeks we called and were told it was in the system, they’d get back to us. Again a couple weeks later, and another week later – continued brush-offs. After ten weeks, the loan officer called and learned that the file had been lost. The buyer was disillusioned and didn’t re-submit. The property is still on the market.

A short-sale listing in Minneapolis home was on the market for 30 days, listed for $325,000. A buyer wrote a low offer, and after negotiations agreed on a sale price of $310,000. After the contract was signed (subject to bank approval), the bank ordered an appraisal. The appraisal came in much higher than the market had agreed to pay – so the bank refused to sell because they have a “rule” that they won’t take an offer less than 95% of appraised value. In this case, they wouldn’t sell the property for less than $345,000 – $20,000 more than the list price. The property is still on the market.

On another short-sale listing in Minneapolis: the bank refused consider a short sale because the homeowner had been paying their mortgage on time. To get out of an unaffordable situation, the homeowner stopped paying the mortgage and listed their home. Along came a buyer, offering less than the bank wanted to accept. The homeowner, after not paying their mortgage for eight months, had plenty of cash on hand and offered $10,000 to their bank on top of the buyer’s offer. Their bank said no. The property is still on the market.

Whether we call new legislation a bailout or a buy-in, it’s my hope someone with power starts to understand what nearly every real estate agent deals with daily: too much foreclosure and short-sale inventory owned or controlled by banks who show no motivation to get it off of their books.

Congress isn’t talking about it. The National Association of Realtors, state Realtor associations, and local Realtor associations are either completely ineffectual or absent.

What’s the next step after Congress spends billions more of our money?

Almost 20 years ago already, local advertising powerhouse Fallon McElligott produced a campaign for Rolling Stone magazine. It was powerful but simple, like much of their work at the time. It showed two images side by side – one made you think of 60s counter culture, the other was current and not counter culture-ish at all.

Under the first image was the word perception; under the second, reality. Think of a tie-dyed shirt next to a starched button-down. Rolling Stone and their readers had grown up over the years, and two guys at Fallon conceived hundreds of different pairings to convince advertisers to spend their money there again.

Perception isn’t always reality. Fallon & Rolling Stone did a nice job of illustrating that simple fact.

When it comes to the value of your home, or your neighbor’s condo, a new study shows that perception and reality aren’t always aligned.

From an MPR story yesterday: “The U.S. Census Bureau has released numbers on median home values for 2007. The statistics are part of the American Community Survey, an annual checkup that seeks to present how Americans are living. Usually, census numbers focus on demographic figures and the ethnic makeup of our population. But census researcher also get what are called soft numbers, by asking people what they think about some factors.”

In 2006, the survey showed the median home price in Minneapolis to be about $230,000. Actual sales data showed the homeowner survey to be $7,000 too high. Apparently Minneapolis residents like to read the paper, because amid all the doom & gloom a year later, the 2007 survey numbers showed the median price to be $20,000 less than actual data.

Real estate agents fight a daily battle over value. The majority of sellers really want their home to be worth more than the market is paying currently. Most want to have a great story to tell about how much money they made when they sold. Me too.

Before driving to meet a potential seller after work, real estate professionals like to get prepared. We look at the market: we compare sale prices of similar homes, we compare prices of homes currently on the market, we compare prices of pending sales, and we compare prices of homes that have been rejected by the market. We look at a lot of data to establish a price range where a reasonable (objective) person would expect a home to sell.

A list price is always the homeowner’s choice – the sale price, however, will be limited to what buyer is willing to pay. It can be a difficult conversation when we compare actual data, reality - to a strong belief, perception.

 “I just KNOW it’s worth $245,000,” a homeowner once told me after I presented overwhelming data showing nothing like it sold for more than $210,000 in the previous 12 months. (They insisted on over-pricing the home, and it didn’t garner any offers.)

If you plan to sell, please consider the data provided by a Realtor. Interview more than one. Good agents are selling homes now, have a feel for the market, and can help with the difference between perception and reality.

One of the metrics we use to compare prices of condos & lofts is price per square foot. After the crazy market of just a few years ago, I thought I’d take a look at where we’ve been – and where we are today.

[ NOTE: all statistics based on information from Regional Multiple Listing Service of Minnesota for closed sales of previously-owned homes; new construction is not included ]

Over the years, the breakdown looks like this:

       *2008 numbers are incomplete: January 1 thru September 30.

So there you have it, data. Here’s some more data (difference in numbers will be due to “closed” vs “pending” AND “closed” on link)

Without looking including all of the newly built condos and lofts it’s certainly incomplete. For those looking to buy or sell a Downtown condo or loft today, it’s interesting.

Looking at price per foot, we’ve lost some value since the height of the market in 2005, when people were sleeping out to reserve condos based on a couple pretty renderings and a floor plan. It was a year of excess. We paid too much because the market demanded it.

The seven-year snapshot, however, provides a picture different than one might think if they get their information from the papers. We should end this year with over 300 sold homes – for the 7^th straight year.

As buyers continue to absorb the inventory of newly-built homes, we should naturally see resale prices begin to bounce back.

Update to the post Citibank Screws Buyer:

We left off in April, when a bank refused to comply with the terms of the contract they signed – and held a buyer’s earnest money without reason.

At the end of July, we received a check for $1,000 made out to our buyer. It was a bit strange. We had to look at the check a few times to figure out what it was – there was neither a call nor a written explanation.

True to his word, the buyer had cleared up the complications with his loan – and two days after receiving his refund, re-submitted his offer. The terms of his offer included his intention to finance via an FHA insured loan. The listing stated clearly that FHA was an acceptable form of finance for this property.

When the offer was submitted, the bank replied saying they did not like FHA loans, and would not accept the offer. (FHA loans require a stringent appraisal process to ensure the property condition meets FHA standards.)

Our agent, having anticipated such a response, included as part of the offer the buyer’s intention to pay for a pre-inspection to identify what would need to be repaired to pass an FHA appraisal. The offer also stated that the buyer would be willing to make all necessary repairs prior to the FHA appraisal, at the buyer’s expense, without expectation of reimbursement in the event the sale didn’t close – for any reason.

A generous offer. A risky offer.

The bank agreed that if the buyer took all the risk, they would accept the FHA financing and the deal. We waited for them to return the signed purchase agreement documents.

After getting bumped from the Asset Manager to upper management at the bank to another layer of management, and then another layer of management for approval, the docs arrived two weeks later – with one change: the bank reserved the right of first refusal, meaning that if another offer for the property came in before closing they could accept it and bump our guy from the property.

After long discussion, the buyer decided to accept the changed contract and proceeded to pay for the pre-inspection. He then made the repairs, which came at a cost of approximately $1,000 and included:

Replaced two windows
Cleaned mold in the home and applied mold-retardant paint
Adjusted the grading around the home with new dirt to alleviate future water intrusion
Scraped all peeling paint, primed and re-painted
Replaced rotted window sills
Installed handrails where required
Repaired plumbing leaks and replaced plumbing where necessary

The property passed FHA appraisal and the closing date was set for September 17.

On the day, the buyer and our agent arrived at the title company for closing. No listing agent. No bank representative. No call. No show.

The closing agent (who charges a fee, who the bank required the buyer use) informed us, among other things, that their client the bank failed to send the deed. There was no closing.

Without warning, the deed showed up the next day – so we scheduled another closing for the following day. Were we naive to think the second time would be the charm?

Yep – the bank neglected to sign the HUD-1 settlement statement, a required document. Instead of walking away angry - again – the buyer proceeded with a dry closing (no money changed hands/most documents were signed).

A bit of irony: the new loan was already purchased by… wait for it… CitiMortgage.

As it turned out, the wire with the funds from the new lender expired at 6:00 PM on a day within a week, at which time the buyer had given notice that he was walking away to leave the bank to conduct their business badly with some other sucker. The necessary document showed up at 5:45 that day.

The deal is done and we hope our buyer enjoys owning the property. We hope the banks who own a lot of property they don’t want will become honorable business partners for the buyers we hope continue to be willing to ride the ups and downs of acquiring foreclosed property.

It’s been a while since I’ve posted anything. It’s been an interesting summer, with changes coming daily – in the market, in lending guidelines, in the mortgage market, new law, etc…

One thing has remained constant, and will remain constant. People are continuing to move – and not everyone has believed everything they’ve read about the Downtown Minneapols condo & loft market. We’re still selling new homes, and new construction inventory continues to be interesting to a lot of buyers.

Here’s the latest count to the best of my knowledge. If you see something off, please post a comment.

a08downtowncondocnt

As I get back at the blog, look for another Downtown Minneapolis condo & loft Winners & Losers so far in 2008; an update to the Citibank story; some inside the biz info about mortgage changes; and other things…

It’s a simple question. Based on what I see in the market and what clients in our office are saying – most buyers would think we’d be crazy to suggest it.

Another way to ask the question is, are you willing to pay a fair price for a good home that fits your lifestyle needs and wants? If so, what if the perfect home for you is priced fairly? Will you automatically offer $20,000 less?

It’s understandable that we don’t want to put more money on the table that we have to. The seller’s market of the early half of this decade made most buyers (pardon me) bend over and take whatever the seller wanted. The memory of multiple offers on every home still lingers – and stings some homeowners who paid $15,000 over list five years ago and are now looking at the potential of low-ball offers.

This weekend, a client wanted to see eight homes listed for sale Downtown. From the time the client and agent chose those eight and the time the agent called to schedule showings, half were sold – 50%.

Multiple offers are happening every week.

We all want a good deal, whether it’s for a new home or a new laptop. So maybe the question should be, “what’s a good deal to you?” Is it an automatic reduction of list price or a fair price for a home that fits the needs of your lifestyle?