Lakeshore Lot Sales. Alexandria, MN

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Just checking the record this morning…doing my job to keep you up to date on the market.  I know lake lot sales have been very, very slow.  Doing what I do every day, I’m a street guy.  I work the pavement, helping as many people as I can with their real estate needs.  The business of lakeshore lot sales has taken an extreme downturn from it’s most recent highs.

Currently, there are 17 closed lake lot sales in our local MLS system for Douglas County since the first of the year.  I will produce more data on this later as the year ends, just so you have some idea of where the market WAS.  To understand what these sales mean, I will take you back to 1995:

Lakeshore Lot Closed Sales in Douglas County are as follows:

  • 1995                28
  • 1996               37
  • 1997               27
  • 1998               59
  • 1999               70
  • 2000              54
  • 2001              67
  • 2002              66
  • 2003              59
  • 2004              76
  • 2005              56
  • 2006              64
  • 2007              64
  • 2008              28
  • 2009              (17 so far)

If you have ever wanted to buy lakeshore, now could be the best time.  With no significant sales in this arena makes for a tough analysis of value.  I don’t believe that it will get any worse, so therefore, it can only go up from here.  Time will tell.

Source:  Greater Alexandria Area Association of Realtors Multiple Listing Service.

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National News…from Alexandria, MN

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I have been tracking this since 2006.  Read July 29, 2008 blog.  In July 2006 we had, 571,000+ new homes built in this country that were unsold and unoccupied.  In reading the Wells Fargo Securities report this morning, it had this to say:  “Inventory levels of unsold homes have continued to improve and have reached levels not seen since the early 1980’s with just 251,000 units on the market in September.  If sales regain footing, the sustained low levels of inventory suggest a pick up in new construction in coming months.”

On the new home building front…not so good news yet…”We expect new home sales likely fell three percent in October to an annual pace of 390,000.”  These levels are unprecedented, but whatever the market currently is…just wait, it will change.

ON CONSUMER CONFIDENCE…My favorite subject…Consumer Confidence rose 0.8 points in November to 49.5.

Source:  Consumer Confidence Board and Wells Fargo Securities, LLC

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Will Retiring Baby Boomers Cause a Market Meltdown?

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I picked this out of a Bremer Investment Management Update 4thQ 09.

“Green shoots continued to emerge during the third quarter, indicating the recession is over and the world economies are on the mend.  However, we believe the headwinds of high unemployment and a cautious comsumer will lead to tepid growth for the foreseeable future.  Markets continued to rally around the globe, driven by optimistic growth, low interest rates and high levels of liquidity.  Despite uncertainty over the shape of the recovery, investors drove stocks higher during the third quarter.  The S&P 500 rose 15%, registering the best quarter on record since 1998.  International stocks fared even better, returning over 19%.

The baby boomer generation includes those born between 1946 and 1960, during the post World War II population explosion.  As the first of the baby boomers turn 65 in 2011, there will begin to be a massive shift from those who are accumulating assets to those who are selling assets to fund their life in retirement.  This demographic shift has the potential to impact financial markets and the demand for risky assets, such as stocks.

Many believe that previous asset booms were due to baby boomers accumulating assets for retirement, giving rise to concerns that a sell-off or market “meldown” would occur as those baby boomers aged.  Because this is the first massive demographic to make its way through the financial markets, the potential effect on stock returnsis unknown.  But certain factors suggest the market impact could be minimal.  Certainly, if all boomers sold their stocks immediately upon retirement, the dramatic decline in asset demand would lead to falling stock prices.   However, there is a lot of evidence that suggest that boomers won’t deplete their nest eggs too fast.  Here are some reasons why:

1.  Withdrawals will happen gradually over time.  Data generally shows that among retired households, assets are depleted modestly, if at all.  A key reason for asset retention is the highly concentrated nature of wealth in the United States.  Most retirees have relatively little asset wealth to sell, and those who do, typically aren’t likely to sell much in retirement.  For instance, more than two-thirds of boomer savings is held by the wealthiest 10%, who will likely be able to support themselves from sources such as dividends without selling assets.  On the flip side, about a third of boomers have no financial assets to sell.

2.  Cautious Retirees.  The households that do have substantial wealth are typically more cautious about selling assets to finance consumption.  Many will hold onto their assets with the intention of leaving a bequest.

3.  Retirees continue to hold stocks.  Although traditional investment advice says that retirees should reduce their equity holdings, retirees continue to hold a substantial amount of their wealth in stocks.  In fact, households headed by those over the age of 70 had roughly an average of 60% of their financial assets invested in stocks.

4.  Putting off retirement.  The demand for assets will likely remain high as boomers push back the timing of their retirement due to the “Great Recession”.  Many boomers will continue to work past the traditional retirement age, decreasing the demand to sell off assets.  A recent study at the University of Michigan found the 57% of older workers say they expect to work full time after age 65 compared to only 47% a year ago.  An increase in income earning years would decrease the need to spend down assets.

5.  Demand for risky assets will come from other sources.  Increased foreign demand for U.S. assets could potentially offset lower domestic demand for equities.  Savings in emerging market countries continues to grow rapidly as their local supply of quality assets is sometimes limited by political  and soci-economic constraints.  As a result, emerging market asset demand is channeled into developed market assets – such as those in the United States.  In addition, Generation Y (those born in the 80’s and 90s) is a population cohort that is almost as large as the boomer population, and they will be an increasingly larger purchaser of boomer assets as they enter their peak earning years.

The looming retirement of baby boomers is not likely to lead to a large market sell-off caused by lack of demand for risky assets.  However, baby boomers may affect stock market returns through broader macroeconomic means.  Generally speaking, capital becomes more productive  with more and better quality labor to use  that capital.  Because the growth rate of the U.S. labor supply is expected to fall, return on capital may fall without significant productivity increases.  In addition, (4.5 workers/ retiree in 2005,  approximately 2 workers/retiree in 2035.  Source: United Nations Statistics Division) younger workers will have to bear a much larger burden iin the future in order to support the increasing number of retirees.  Given the political influence that seniors have, an increase in payroll taxes to support the needs of the boomers in the future seems plausible.  Such an increase could represent a significant drag on U.S. economic growth.”

I though that this was interesting brain food to store for the future.  All of this has an impact on real estate.

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Good Morning Alexandria, MN!

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No hard data this morning.  Just want to get a report in.  Been hunting a lot, leaving today again for the big piney woods.   We have a cabin north of Itasca State Park.   Got a 5 point buck last weekend.

The market has been very good this quarter.  If you have been reading my blog for the year, I had reported that it was speculated that 4th quarter would be the best one for the year.  This is contradictory to the weather patterns here in Alexandria.  I have brokered 64 closings for the year and have 18 pending sales in escrow.  So overall, we will do fine for 2009.  My spin however has been that the pricing has come down to realistic market pricing.  Not a big drop as in some areas, but a correction nonetheless. 

“It’s a Fine Time to Buy in 2009″…my slogan next year is going to be (I think) “Build Equity Again in 2010”.

Keep having fun…every day is a gift!

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Current Inventory in Alexandria, MN

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Just to give you an update on our current inventory status:

Residential:   Total of all listings currently is 574 in the MLS.  The highest known peak ever was 663 listings on July 3, 2007.  So as you can see the inventory has not subsided much.  Typically, this time of year the inventory would/should have fallen more.  The  highest inventory number for the year (2009) was 617, recorded on September 30, 2009.  So it appears that  sales have been lackluster and inventory is down.  I think that next year, Sellers and agents will become more realistic about pricing of property.  With that, there should be less of a rush to sell, hence, less listings.  The supply side starts to lessen, demand stays the same-or maybe goes up a little, pricing shores up.  Over time, appreciation returns.  And they live happily ever after.

A further breakdown of the inventory, you may want to record this for future reference.   Residential Listings Only (No Listings with any acreage): 429 listings, 200 are in Douglas County and 145 of those have an Alexandria address.             Residential With Acreage Listings:  145 listings,  of which 71 are in Douglas County and 28 of thouse have an Alexandria address.

LAKEHOMES:  Currently there are 303 lake homes in the MLS.  We had a high number this year of 413 listings on August 26th.  The highest ever recorded was 417 on July 30, 2007.   A breakdown of the current inventory shows 175 of the 303 are in Douglas County and 110 of those have an Alexandria address.

CONDO/TOWNHOME:  Currently we have 105 listings in the MLS.   The condo/townhome section has two categories, lake and residential.  In the Residential section there are 76 listings.  Of the 76, 70 of them are in Douglas County and 61 have an Alexandria address.   The Lake section has 29 listings.  Of the 29, 23 are in Douglas County and these 23 have an Alexandria address.  My data collection on the condo/townhome market is not as detailed as the other sectors.   I will have better data in the future.

COMMERCIAL:  Currently there are 107 listings in the Commercial section.  These are buildings only (once in awhile, you may see a land listing in there, but they have a different section under Lots/Acreage).  Of the 107, 72 are in Douglas County and 60 have an Alexandria address.    My main focus has been to watch the sales in my market.  I have very detailed and accurate accounting of that info.

Source:  Greater Alexandria Area Association of Realtors Multiple Listing Service.

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