Rochester MN Real Estate Market Blog

We didn’t see the broad swings in interest rates this week as were experience in weeks past.  With little new economic news for the week rates settled in for a slightly lower average then last week.

Ecnomic news was mixed for the week. The Fed is forecasting that with the recent rate cuts and the government stimulus packages will lead to faster economic growth for the remainder of the year. On the other side of the fence, the Pending Home Sales index fell more then expected in January and the index was down marginally from a year ago.  Pending Home Sales is the leading indicators for the future direction of the housing market and NAR (National Association of REALTORS) is predicting flat home sales for the next several months.

There are currently 1232 homes for sale in Rochester, Minnesota, with an average list price of $235,552 and an average of 155 days on the market.

Last week (March 31 to April 6, 2008) 46 homes went under contract.  Average list price for those homes was $166,823, with an average market time of 81 days.  There were 78 new listings (average list price $218,649) and 12 homes that came back on the market (average of $202,425 and 260 days on the market).  Twenty-one listings expired, eight canceled.

The 39 homes that sold last week closed at 98.1% of the list price, 93.8% of the original list price.  The average sold price was $159,900; average number of days on the market was 141 days.

WASHINGTON, D.C.

• Federal Reserve maps show key areas of concern

• What color is your state?

• Scroll down to the bottom for the website link

The Federal Reserve System now has a set of dynamic maps and data online that illustrate sub prime and alt-A mortgage loan conditions across the United States. The maps display regional variation in the condition of securitized, owner-occupied sub prime, and alt-A mortgage loans. The more intense the color, the bigger the problem or potential problem. Monthly updates are planned. The maps and data can be used to assist in the identification of existing and potential foreclosure hotspots, the Fed says. (Click on the link below to see the maps. Be advised that the site loads slowly, apparently affected by demand.)

The maps show the following information for sub prime and alt-A loans for each state and most of the counties and zip codes in the United States:

• Loans per 1,000 housing units

• Loans in foreclosure per 1,000 housing units

• Loans real estate owned (REO) per 1,000 housing units

• Share of loans that are adjustable rate mortgages (ARMs)

• Share of loans for which payments are current

• Share of loans that are 90-plus days delinquent

• Share of loans in foreclosure

• Median combined loan-to-value ratio (LTV) at origination

• Share of loans with low credit score (FICO) and high LTV at origination

• Share of loans with low- or no documentation

• Share of ARMs with initial reset in the next 12 months

• Share of loans with a late payment in the past 12 months

The maps are maintained by the Federal Reserve Bank of New York.

To access the data visit: http://www2.newyorkfed.org/mortgagemaps/

There were 1231 homes for sale last week in Rochester Minnesota, with an average list price of $231,205 and an average of 157 days on the market.  This includes 85 new listings (average list price of $198,308) and 17 listings coming back on the market (average list price of $211,494 and 249 days on the market). 

Last week 58 listings went to pending (under contract); average list price was $206,284 and average of 125 days on the market.  Thirty-four homes sold, with selling price 90.74% of the list price ($221,196 and $243,775 respectively).

 There are currently 1200 homes for sale.  The average list price for these properties is $233,284; average market time is 158 days.

After two weeks of nice declines, mortgage rates rose during the week, back to the levels seen at the end of February. March was an extremely volatile month, with large daily swings a common occurrence. Investors bought mortgage backed securities during periods of increased concern about the stability of the credit markets. Just as quickly, they sold mortgage backed securities when the fears eased. Last week, investors generally felt that the Fed’s rate cuts and other actions were sufficient to combat the difficulties in credit markets, demand for mortgage investments fell, and mortgage rates rose. Mortgage rates were also hurt last week by a series of Fed officials who talked tough about inflation. Higher inflation is bad news for mortgage markets, as investors require a higher yield to offset the inflation. With all the attention on inflation, Friday’s release of the Fed’s preferred inflation indicator was highly anticipated. The February Core PCE price index rose at a 2.0% annual rate, as expected, which was at the upper boundary of the Fed’s perceived comfort zone. In the housing sector, the news was somewhat encouraging. February Existing Home Sales came in stronger than expected. The inventory of unsold homes declined modestly, while median prices fell. Sales activity has held in a narrow range since September, and the chief economist of the National Association of Realtors (NAR) suggested that the data was “another sign that the market is stabilizing”. February New Home Sales also came in a little higher than the consensus. Separately, the government’s OFHEO housing index showed that January prices were down 3% from one year earlier.  

The Rochester, Minnesota area housing market had 87 new residential listings last week (March 10 to 16, 2008) with an average list price of $202,287.  Eleven residential properties came back onto the market with an average list price of $235,590 and average market time of 261 days.

 There were 44 homes going under contract (to pending) last week; average list price for these properties was $186,734.  At 89 days, the average time on the market from listing to pending was about three months.

Last week 8 homes closed in Rochester.  At $137,401, the average sold price was 97.1 percent of the average list price ($141,499).  These homes had an average of 81 days on the market.

Ten listings expired, nine canceled and 7 were withdrawn.

There are currently 1,141 homes for sale in Rochester, Minn with an average list price of $234,517 and average market time of 165 days.

Tuesday, the Fed’s surprise announcement of a new $200 billion lending facility led to a 400 plus point rally in the Dow, the biggest one day percentage gain since March 2003. The effect on mortgage rates was also favorable. The newly available funds will make it more appealing for financial institutions to borrow money from the Fed, which is expected to increase the demand for mortgage backed securities. Mortgage markets should benefit, and the spread between mortgage rates and Treasury yields narrowed significantly, reversing the trend from the prior week.

Later in the week, sentiment turned sour, however. Investors were reminded on Thursday that the problems in credit markets were not yet over. Carlyle Capital, a large hedge fund, defaulted on $16.6 billion of its debt, and the collateral was mostly mortgage backed securities. An even bigger jolt hit the markets on Friday. Bear Stearns, a major Wall Street investment bank, announced that they would receive financing to address liquidity problems. The repercussions of losses at financial institutions continued to be felt, and investors responded to the uncertainty by shifting out of the stock market and into the relative safety of fixed income investments including mortgage backed securities. Mortgage rates fell significantly during the week, reversing a similar sized rise the prior week. That said, not all areas of the mortgage market benefited equally last week. Demand for securities backed by Adjustable Rate Mortgages (ARMs) dropped sharply, and ARMs rates did not share in the declines seen in fixed rate mortgages. The Jumbo Mortgage sector experienced liquidity issues very similar to last August as sellers far out numbered buyers in this arena driving Jumbo interest rates significantly upward.

The economic data released last week was favorable for mortgage markets. Notably, the closely watched Consumer Price Index (CPI) inflation data came in much lower than expected. The core rate was still running higher than the Fed would like, but investors were prepared for worse news. In addition, the Retail Sales data fell far short of the consensus forecast. Slower economic growth typically means lower future inflation, and mortgage markets reacted positively to both economic reports.

There are currently 1,115 active listings for sale in the Rochester, Minnesota residential real estate with an average list price of $236,404 and an average of 168 days on the market.

Last week (March 3 through 9, 2008) there were 98 new listings with an average asking price of $215,831, and 17 listings came back onto the market last week; average list price for these properties was $302,098 and average market time was 268 days. The 40 listings that went under contract (to pending) had an average list price $172,787 and market time of 125 days. There were 7 expired listings in Rochester and 8 canceled.

Nineteen properties sold last week with an average list price of $175,382 and 126 days on the market, and an average sold price of $172,776.

In a week packed with major economic news, the biggest story for mortgage markets was the widening spread between mortgage backed securities and Treasury bonds. Issued by the US government, Treasury bonds are generally considered to be the benchmark for a “safe” security, since the risk of default is extremely low. During the week, the economic news was mixed, and Treasury rates barely changed. Mortgage rates, however, jumped by about half a point. Investors are demanding a higher return from mortgage backed securities, and the result is higher mortgage rates. In another unusual reversal, the mortgage market has been more volatile than the Treasury market, and wide swings in mortgage rates have become a daily occurrence. This past 30 day window could be the most volatile period of daily pricing movements the mortgage markets have ever experienced.

On the economic front, the highly anticipated Employment report failed to meet even Wall Street’s reduced forecast. Against expectations for a gain of 25K new jobs, the economy lost -63K jobs in February, and the figures for January and December were revised lower as well. This marked the largest monthly decline since March 2003. The Unemployment Rate surprisingly fell to 4.8%, but that reflects a large number of people who stopped looking for a job last month, meaning that they officially left the labor pool. Once again, the manufacturing and construction sectors showed the greatest weakness. Until November, the service sector had been steadily producing job gains of 100K or more per month, but even that sector barely produced any new jobs in February.

Big news came out from the Department of Housing and Urban Development (HUD). In accordance with the new legislation passed a couple of weeks ago, HUD released the new loan limits for FHA, Fannie Mae, and Freddie Mac, and they did it a week earlier than expected. The new minimum for FHA is $271,050 nationally and many Metro Markets received increases. In the Midwest, Minneapolis/St.Paul Metro area FHA limit was raised to $365,000 and the Chicago Metro area FHA limit increased to $410,000. The Fannie/Freddie minimum remained unchanged at $417,000 throughout the Midwest.. The formula is based on 125% of each region’s median price within the posted limits. As a practical matter, it will still take some time for Fannie Mae, Freddie Mac, and FHA to prepare their systems and implement the changes.