Residential Inventory is still up: Alexandria, MN!

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I was hoping that the inventory would start to show some let up but the residential number is now 620 listings in our mls.  That’s a new high for the year.  I’m hoping that the 3rd quarter sales statistics will show some signs of improvement.  I did see some big sales come through though this past month.  I’ll give my report soon.

 

Source:  Greater Alexandria Area Association of Realtors Multiple Listing Service

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Consumer Confidence Falls 1.4 Points

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Consumer confidence fell 1.4 points to 53.1 in September, reflecting ongoing concerns about employment.  Plans for buying cars and homes also declined, suggesting the boost from tax incentives has passed.

 

Source:  The Conference Board, US Dept of Labor and Wells Fargo Securities, LLC

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Clunkernomics: Motor Vehicle Sales Set to Boost Real GDP

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The numbers are in and the cash-for-clunkers program gave motor vehicle sales their biggest lift in three years.  Sales jumped to 14.1 million unit pace in August, with small cars accounting for most of the increase.

CLUNKERS JUST MIGHT PAVE THE WAY TO RECOVERY.  Motor vehicle sales surged in August to a 14.1 million annual unit pace boosted by the cash-for-clunkers program.  This is the larges gain on a year over year basis since 2006.  Dealers submitted 690,114 transactions, exhausting nearly all of the $3 billion supplementary appropriation far ahead of the expiration date.  According to the U.S. Department of Transportation, 84 percent of the trade-ins were trucks and 59 percent of new vehicles purchased were cars.

The impact from the program can be seen across a host of economic indicators, including industrial production, inventories and retail sales.  The vault in vehicle production and manufacturer sales will likely help boost GDP to around a 3.8 percent annual rate in the third quarter.  Outside the auto sector the economy is simply getting less bad.  While final demand is showing some improvement, income remains under pressure, suggesting the third quarter rebound will likely give way later this year.  So after an initial jolt, growth will likely settle back down to a 2 percent pace…

Many consumers moved up new car purchases to take advantage of temporary rebates, essentially borrowing sales from the future.  New vehicle sales will likely tumble in coming months.  Moreover, the majority of clunkers traded in probably were owned outright and replaced with new vehicles and a payment book.  Now these car buyers will have less discretionary dollars to spend or save, which may take a toll on spending this holiday season.  Car repair shops also came out on the short end of clunkernomics, effectively losing current and future sales to the scrap heap.

 

 

 

Source:  U.S. Department of Commerce and Wells Fargo Securities, LLC

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Market Potpourri

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Lots of stuff here: 

  • Existing Home sales in August nationally came in at 5.10 million annual rate.    This includes single-family, townhomes, condos and co-ops – declined 2.7 percent in August from a pace of 5.24 million in July, but remain 3.4 percent above the 4.93 million-unit level in August 2008.  In the previous four months, sales had risen a total of 15.2 percent.  Despite this months dip, there is improvement expected through the fall.
  • Fallout from the collapse of the housing bubble is still being felt, however, as the National Association of Realtors noted that distressed properties accounted for nearly one-third of all sales.
  • Single-Family sales slowed in August and were responsible for most of the decline, while multi-family sales stayed relatively constant.    Single family home sales fell 2.8 percent to a seasonally adjusted annual rate of 4.48 million August from a level of 4.61 million in July, but are 2.5 percent higher than the 4.37 million-unit pace in August 2008.  The median existing single-family home price was $177,500 in August, down 12.1 percent from a year ago.   A single month volatility does not change the underlying trend; the housing market is gaining strength.
  • Total housing inventory at the end of August fell 10.8 percent to 3.62 million existing  homes available for sale, which represents an 8.5 months supply at the current sales pace, down from a 9.3 month supply in July.  Unsold inventory totals are 16.4 percent lower than a year ago.  Stronger sales helped bring the national supply down to 8.5 months, the lowest reading since before the recession began.  Falling inventories will eventually help justify new building.
  • According to Freddie Mac, the national average commitment rate for a 30 year conventional, fixed-rate mortgage fell to 5.19 percent in  August from 5.22 percent in July; the rate was 6.48 in August 2008.
  • Existing-home sales in the Midwest fell 6.6 percent in August to a level of 1.14 million but are unchanged from a year ago.  The median price in the Midwest was $149,000, down 10.4 percent from August 2008.
  • Weekly first-time unemployment claims fell more than expected, dropping 21,000 to 530,000.

 

 

Source:  National Association of Realtors and Wells Fargo Securities, LLC

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Alexandria, MN Light and Power…rising energy costs?

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Just got this newsletter from ALP.   I will transmit the article from the general managers desk, Al Crowser, that is written in the newsletter:

Where are electrical energy costs going and what can we do?  Over the years ALP has had reasonable electric rates and good reliability.  Our power supply costs have been low and we have been able to invest in adequate system improvements to keep the lights on.  However, the costs of power supply are increasing.

About 80% of ALP’s electrical department budget is the wholesale purchase of electricity.  These purchases come from two wholesalers.  One is the Federal Department of Energy’s hydroelectric system on the Missouri River (35%).  The other is Missouri River Energy Services and the energy comes mostly from fossil fueled plants (65%).  In recent years  both power suppliers have significantly increased their rates.  This has certainly provided upward pressure on our retail rates and we have been raising our rates accordingly.  (In 2010 we expect a modest rate increase.)

Unfortunately, there is another external force that will likely be driving up costs.  That is the cap and trade legislation pending in the Senate which deals with Carbon Dioxide emissions.  The estimated cost increase to ALP would be 25%.  The actual impact depends upon what is eventually passed by Congress. 

In the face of these rising energy costs, what can we do?  Traditionally most of us have not been very good at using energy wisely.  I suspect that as rates increase our behavior will change.  Conservation on the part of customers is good for ALP and our customers in that it reduces the amount of electricity they both need to purchase.

There are cost effective ways in which both residents and businesses can conserve electricity and I would encourage everyone to do so.  One good resource to help you do so is our website www.alputilities.comAlso, you are always welcome to visit…

 

ALP CUSTOMER INFORMATION

YEARS——————————————–2000——————-2009

  • Electric Customers                                   8,100                          9,400       
  • Energy Used – kWhs                        225,000,000                 272,000,000
  • Water Customers                                       2,700                             3,600
  • Water Used (M Gallons)                       396,000                           565,000

Keep an eye on energy costs, it may be our next big crisis.  Although, living in Alexandria, MN…we never do get those psychotic swings that some of the larger metro areas get.  Alexandria, MN…why live anywhere else?

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Housing Inventory in Alexandria, MN

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It appears that the inventory is starting to go into it’s fall hibernation.  One of the most interesting statistics about 2009 is the beginning of the decline in inventory.   If you read back in my blog, you will find the peak inventory numbers going back to 2005 for residential listings in our mls system.  But, I will save you the time and print them here.  These numbers are the highest numbers of inventory recorded that year on that date.

  • 2005:  9.25.05/482 Residential Homes Listed – 10.6.05/233 Lakehomes Listed
  • 2006:  6.30.06/657 Residential Homes Listed – 7.26.06/375 Lakehomes Listed
  • 2007:  7.13.07/663 Residential Homes Listed – 7.30.07/417 Lakehomes Listed – 8.29.07/531 Lakelots Listed
  • 2008:  8.28.08/658 Residential Homes Listed – 8.13.08/402 Lakehomes Listed – 7.22.08/459 Lakelots Listed
  • 2009:  8.28.09/616 Residential Homes Listed – 7.24.09/405 Lakehomes Listed – 7.24.09/420 Lakelots Listed

These numbers show total inventory in the Local Mls system.  It gives a good read that the total inventory declined by over 6% this year from last year.  That’s good news for sellers/owners of real estate (economics 101-supply and demand).   It may start and turn the corner into a sellers market from this point forward.

From 2005, our inventory spiked upward almost 27%.  From 2004, it’s probably between 40-50% (I don’t have the peak inventory numbers from 2004).  This mad dash to sell created the bubble even here in Alexandria.  Thank God for our corporations that have kept everyone employed.

Once folks find out what their home will really sell for in this market, they may be less inclined to list and we may see some more inventory reductions in the future.   The market has definitely taken it’s toll on one’s equity.  There ain’t no White Knight going to save you.  This is a SERIOUS market…if you don’t HAVE to sell, my advice is to stay out of the marketplace.  If you have to sell, be prepared to list at a price that will make it sell.  Otherwise your wasting your time…and adding frustration to your life…and your agent’s. 

This market will turn around into a SELLERS market.  The Buyers are in firm control for the moment.  This won’t last much longer.  The Buyers have had a grip since 2005, I can sense that grip starting to loosen.   It might take another year or two (maybe longer), but it will happen.   But for now, the Buyers will tell you what they are willing to pay for it.  Not the Seller and Not the Agent.  The Real Estate Agent is supposed to know what Buyers will pay for a piece of property in a reasonable length of time (180 days or less?) and then advise their client on what that is.  The Sellers then only need to decide if they are going to sell it or not.  Picking an arbitrary unrealistic number is not smart on anyone’s part.  Sometimes the agents fall victim to their seller client (I know that I have) and we let the client tell the agent and the Buyer what the Buyers are going to pay.  Henceforth, the back log in inventory and the declining sales.

I do believe that 2010 will be a lot smarter year.  I think all of us Americans have learned a lot from this decline.  What will the new economy look like with this new found knowledge?

Statistical information provided from the Greater Alexandria Area Association of Realtors Multiple Listing Service.

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Commercial Sales Activity in Alexandria, MN

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We currently are showing 5 good sales here in Alexandria since the first of the year.  A good sale is one where it is “arms length”; neither party are related or have a vested interest in the property (i.e. rented…), it is not a foreclosed or bank owned, you get the picture.     As of 9.22.09, the city assesor is showing 15 sales with only 5 being “good”.  Those sales are:

  • 3705 Hwy 29 South.  #63-3109-000. $210,000
  • 613 Broadway. #63-1008-000.  $252,000
  • 508 Twin Blvd. #63-3104-850.   $985,000
  • 106 Donovan Drive.  #63-0405-000.  $1,750.000
  • 302 N.Nokomis.  #63-0501-000.  $265,000

Last year there were 28 sales at the same time, with only 3 good.  So unless a lot of sales come in the next week, we are on track for half as many sales but a few more good sales.

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Energy Costs Will Rise

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I predict that energy will be one of the next big crisis’s that we have to deal with after we finish with the economic crisis.  Before that it was the housing crisis.  Before that it was Iraq.  Before that it was 9-11.  These events affect all of us, some more deeply than others.  The catastrophe’s that have the loss of human life are the greatest of all.  However, it is just so apparent with the discussion of wind and solar to see where energy is going.  Have you looked at the cost of wind or solar to see how you can justify it?  You can’t.  Government involvement…I guess I am not in favor of the taxpayers funding this endeavor.  The private sector will figure out a way as the technology becomes more advanced.    So with that, I just can’t see how we can sustain the prices that we are currently paying for all of our energy usage.  The cost to build more production is very expensive.  I was reading my Clearwater-Polk Electric Cooperative newsletter and it seemed to concur with my thoughts all along.  Here’s a brief rendition:

“The economic downturn in the United States has contributed greatly to a significant 2009 revenue loss at Minnkota Power Cooperative…A major reason is that demand for electricity is significantly less this year than in recent years.  Since the regional wholesale energy market is driven, in large part, by demand for electricity, the market has been extremely low for most of 2009-about 2 cents per kilowatt-hour less than normal…For instance, Minnkota is expected to sell approximately 1.4 billion kWh of surplus energy in 2009.  Since Minnkota is receiving nearly 2 cents per kWh less than expected for our surplus wholesale energy, Minnkota will likely receive $28 million less surplus energy sales revenue than expected…An $8 million reduction in the expected cost of energy purchased from the market for off-peak loads and replacement energy will partially offset the shortfall-but, even with that offset, it still leaves a $20 million net shortfall.”

In another part of the newsletter, the manager Bruce Bjerke had this to say:  “As Congress continues to address climate change, we’re starting to hear a wide range of estimates on what the decisions of lawmakers will cost American consumers.  The Congressional Budget Office, a non-partisan arm of Congress that prepares fiscal estimates and budgets, claims the increase in energy costs will be about the same as a postage stamp a day for the average homeowner.  Other estimates are much higher – which makes me worry.  I would rather be telling you that your electric bills won’t be going up at all, even if the cost is equivalent to a stamp a day.  But as you can see by reading the article on Minnkota’s revenue shortfall along with climate change legislation that will not be the case…At Clearwater-Polk we’re committed to keeping your rates as low and affordable as possible.  Our region still boasts the lowest electric rates (Blog note: I paid $.077/kWh at Clearwater-Polk this month) in the nation.  New England states come in with the highest at an average of $.18/kWh…”

When I first started selling real estate in 1982, ALP was around $.045/kWh and REA was around $.054/kWh.  Currently, they are running around the 9-10 cents/kWh range.  That’s a doubling in 25 years or so.  I think that I would be naive to not believe that it will double again, in say_______years?

Why do I bring this up?  Only for you to consider the future…where are you going to live?  How are you going to live?  What are your housing needs?  How many people will be living with you?  How much room does your business need?   How much energy will this home use?  Some things we can’t control, like energy costs.  But we can make informed decisions on topics that stay with us a very long time, like housing.

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Figuring Out the Economy…Corporate Strategy in an Era of Uncertainy

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Now there’s a mouthful.  Reading my Wells Fargo report from Friday, I thought it beared repeating, so here goes:

“Since World War II, the pace and character of consumer spending has defined the U.S. economy.  Going forward, will this all change and what are the implications?  What about housing?  Finally, has the era of California/Florida dreaming coming to an end?

If the American consumer has truly changed her spots and become a greater saving, less credit-using, more bargain hunting species, then what will be the character of this recovery and the longer-run pace of economic growth?  With consumer spending approximately 70 percent of the economy, this issue is in the forefront of corporate strategy discussions as the annual review of corporate directions begins this time each year…

Despite improvement in home sales and new construction, the question of the pace of housing construction if/when the Federal programs are removed remains.  Historically, housing has helped lead the economy out of recession as sharply lower interest rates attracted buyers.  Moreover, if household expectations for home price appreciation are permanently downshifted, and with the rise in sales and income taxes reducing disposable personal income, then the demand for both housing and remodeling will likely be permanently downshifted.

Dreams of endless summers in California and luxurious retirement in Florida now appear to be under a cloud of home price depreciation and wealth losses on retirement funds.  In addition, the limits of congestion, water supply and high baseline housing costs are likely to change the patterns of in-migration.  For corporate strategy making, the straight-line prosperity forecasts for both states are likely a relic of the past.”

 

In another part of the report, there were these questions that I thought also beared repeating:

U.S. REVIEW  Economics as Framework for Corporate Strategy in 2010. 

  • Despite all the news we receive, there are four economic issues that must be addressed before a corporate strategy can be rationally formulated.  For the real economy, the challenge is the post-recovery pace of consumer spending and housing.
  • From the regional perspective, has the end of California/Florida dreaming come to an end?
  • Finally, what are the Federal Reserve’s and the Obama Administration’s exit strategies for monetary and fiscal policy?

Report from Wells Fargo Securities Weekly Report of 9.18.09.

 

These questions and their subsequent answers will all play a part in the real estate environment here in Alexandria.   All of us get to answer these questions and make our decisions on the information and the desires that we have.   But nonetheless, I have said it in earlier blogs that there won’t be a “recovery”, just a different economy.    So if you can answer those questions correctly, then there are some very powerful corporations that would like to hire you.  For me, having a view of the future is very beneficial to the business of real estate here in little old Alexandria.  That’s why I keep such a close eye on all the numbers here.  Try to spot trends, if I can.  What are folks doing at the moment?   Usually, though I fall back on the best advice I ever got back in 1982…Don’t Wait to Buy Real Estate, Buy Real Estate and Wait!

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Alexandria, MN City…Sales Down, Inventory Up, Foreclosures…Not Good

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I was reading this letter to West Side Residents from a local real estate agent that said existing home purchases are up, inventory is declining and foreclosures are down so I thought I’d better check the data.

SALES: In our MLS from 1.1.08 to 9.17.08 we had 91 closed sales in Area 1 (Alexandria, MN City limits).  From 1.1.09 to 9.17.09 we had 69 closed sales in the same area.  That’s about a 25% drop in sales.

I communicated with the city assessor and here’s the Assessor’s data.  For 1.1.09 to 9.4.09, he shows 117 sales; compared to 151 sales for 1.1.08 to 9.4.08, which is a drop of 23%.

The sales for Douglas County in the residential section of our mls showed 161 sales since the first of the year to today.  Same period last year showed 196 sales which represents a 17.9% decrease in sales this year over last year.

INVENTORY we had on April 20th of this year showed 267 homes for sale in Douglas County.  As of this morning we had 305 homes for sale in Douglas County.  The overall MLS inventory is down about 8% from it’s high of last year, but it doesn’t seem to be showing much sign of letting up as the inventory has steadily risen in Douglas County this year.

FORECLOSURES:  I haven’t reported on this topic yet for the 2009 year.  I have kept a pretty close eye on this, but I thought that we would probably peak out this year with a new all-time high.  If you “search” foreclosures on my blog site, you will see what I wrote about the statistics.  On August 1, 2008 we had recorded 62 foreclosures for the year.  As of today (9.17.09) we have recorded 99 foreclosure sales (per Sara from the Douglas County Sherrif’s Office) and they have served 186 notices.  You will see in my past articles on foreclosures that it does not appear that they will subside in 2009, but probably peak.

City Foreclosures:  from the city assessor’s office, “Foreclosures for the same period (10.1.08 to 9.4.09) are 21 compare to 17(same dates only one year earlier), so that number is up, but most of those occurred early in the period, i.e.,  Fall-early Winter 2008-09.  That number has definitely leveled off.  So while the total is still high compared to our historic average, it’s not spiking anymore and for the last six months the rate has been almost back to our historic average.”  So it appears that the city may see a leveling of the foreclosures, but the number will stand as being up over last year for the moment.

Again, as I have said before, that 2009 would probably be the trough of the housing market, but only time will tell.  I have no data to show that sales are up or that foreclosures are down as was reported.  But, we all know that there is always a bottom…I think that we will all see sales rebound next year or possibly the following (if this market goes further down).  But at some point, it will turn around.  It is hard to determine if the $8,000 Tax Credit had any benefit or impact to the sales in this market.   We will never know the answer to that as the Tax Credit was given to us by the Federal Government (You get to pay it back later with interest) in hopes that it would move the housing market.  Would the market have moved positively without it?  Maybe.  We’ll never know.

This country has always shown great resilience towards catastrophy and strife.  Let’s hope that in these economic times, that they don’t tax the American people beyond the point that it deters their spirit to want to work.  Our capitalistic nature has always propelled us out of any black spot we entered. 

Statistical information provided by the Greater Alexandria Area Association of Realtors Multiple Listing Service.

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