Coming Around the Bend…(my 2010 wrap-up from Alexandria, MN.)

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As 2010 draws to a close, we start a new chapter in a matter of days. It appears that the recession of 2008/2009 is formally behind us and the lessons that we learned from that experience are monumental. The old adage, “cash is king” sure rang true. Walking into an economic downturn in one’s life without money in the bank is devastating. So with that, savings rates have increased to near 6% in America, all time highs for this generation. Americans are dumping debt at the rate of ten billion dollars a month, another good thing. As an economy spirals up, all sense seems to be lost on the moment. Until it spirals down do we find out what we did wrong (or maybe did right), in the sense of our own personal economic management. Warren Buffet said it best when addressing the Berkshire Hathaway shareholders at an annual meeting, “you always find out who’s not wearing a swimsuit when the tide goes out”. Well put.

But teaching someone on saving money and managing debt are two things that are not taught in the schools and you will learn them somehow. The best book I ever read about that is “The Richest Man in Babylon” by George Clason. Check it out; it nails the principles of money.

The talk of recovery is senseless. There will not be a recovery as we will not go back to the high debt and low cash position of yesterday. We are about to enter a new economy and the question is; what will the NEW economy look like? Let me know when you figure that out. I believe that the economy of the future will be better than all of those we left behind. There will still be market cycles, time them and you will profit.

In terms of real estate, and more exact…Alexandria real estate, I have my own thoughts and opinions. I think that history will show that 2009/2010 will be the bottom of this market. The data is already starting to show that trend. When the market converted to a Buyers market almost 5 years ago, the buyers have enjoyed a rather healthy feast of the marketplace. They may enjoy the feed for a little while yet, but as all things change, so will this market. The sellers will settle into a reality checkpoint (many listings are still overpriced and should not be offered for sale at prices that cannot be obtained) as is already being done and sales are transpiring. There is still way too much inventory at unrealistic prices and 2011 may finally eliminate this practice. Market Price is Market Price! If sellers do not like the price at this time, DO NOT list your property for sale at the higher price…hoping to get it! We set a record this year for amount of inventory here in Alexandria. When supply reaches unprecedented proportions and sales are flat (or declining), prices go down. That is Economics 101. Listing property at prices that are unobtainable only further erodes your value by saturating the marketplace with inventory. This is known as deflation, and your listing only adds to it. If we were able to eliminate half of the inventory from the marketplace, prices would immediately stabilize. For sellers that are realistic in their expectations, they are finding a price point that this market offers at this time.

On another note, if you drive down Broadway Street (read my blog of December 7th, 2010) you will notice two for rent signs from 3M to Big Ole. I don’t know when I recall that the town was that full up with retail. The Viking Plaza Mall is 100%+ occupied. What does this signal for the marketplace? In talking with Lynn Timm at the Alexandria Building Department, the City of Alexandria had 22 new homes built in 2009 and 29 new homes built in 2010 (we had over 200 in 2003). The building permits declined for a number of years, but it appears that the bottom may have been. If you read my blog of August 17th, you will find Housing Starts in this country since 1959. In that report, you will see that 2009/2010 is the lowest point ever for housing starts. If you believe that it will go lower, then bottom has not yet been reached. If you believe that the market (number of housing starts) will go up from here, then the market has stabilized and is moving upward.

There are a lot of “green shoots” out there (the Dow was over 11,400 this morning, the Ag sector is having it’s glory day…have you checked out corn and soybean prices lately/), real estate and housing will be one of the “green shoots” before long.

I believe that the abyss is behind us, better days are ahead…can you see what the future may look like? What do you see as we Come Around the Bend?

Best Wishes to All of You from All of Us at Randy Fischer Real Estate

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National Housing Data.New Home Sales

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New home sales rose 5.5 percent in November, but sales continue to rise from historically low levels. Prior month’s data were revised downward with August setting a historic low at a pace of 274,000 units.

The overall inventory of new homes fell to 197,000 units, the lowest level since 1968. The pipeline of new housing also remains at depressed levels with only 86,000 new homes currently under construction and 28,000 homes not started yet. Builders remain reluctant to increase inventories as the oversupply of existing homes continues to compete with new home sales. The housing recovery will be agonizingly slow.

Source: US Department of Commerce, NAHB and Wells Fargo Securities

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Alexandria, MN: City Hall’s Sprinkler Ordinance

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I have yet to see the benefit from the sprinkler ordinance imposed on this community by Alexandria’s City Council. I live on the streets of Alexandria everyday and work with business owners in that routine. Numerous times, I have had owners state that they do not want to expand the size of their facility because of triggering a sprinkler installation…not only on the addition but on the current existing facility. It is just too much money. Every existing building that I touch, is tainted because it probably does not have a sprinkler. It’s value has eroded because a sprinkler wasn’t required when it was built, but now it is…at a very significant cost to someone. That usually means a nick in the price, or shall I say the Alexandria property owner’s equity. Good thing that the taxes are so low, or people would be really mad.

Now when you dissect the insanity of the sprinkler ordinance that currently exists you really begin to become frustrated with Council’s decision making. When a building’s size is expanded, that usually means more people will be working inside that building. That means more jobs to the area. In economic times such as they are…and usually are, why does the City Council stifle job growth? Why can’t the ordinance become a little more business friendly so expansion wouldn’t be sidelined? I have stated to council members previously that this ordinance has done little to protect property and lives…it may have done more to devalue and disrupt.

Alexandria has become a feast for out-of-town sprinkler installers. Business investment dollars being sent out of the community that could be used for business expansion and job growth…thank you very much City Council.

You have no idea how upset this ordinance makes me and most commercial property owners in this town. I think that those people that pushed for it’s passing and voted for it should do a sales job on the commercial property owners in this town and explain to them why they are so benefited from their wisdom and leadership in making this decision. If it is so great of a benefit for all, then I am sure that this meeting will be met with applause and accolades for the leadership that have crammed this ordinance down our throat.

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2010 Census Report to the President

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2010 Census Report

In the U.S. Census Bureau report yesterday to the President of the United States, 10 days before the deadline, it showed that as of April 1, 2010, the resident population of the United States was 308,745,538 people. The resident population represented a 9.7 percent increase over the 2000 U.S. resident population of 281,421,906 people. For the full report, click on the link attached to this blog.

Source: U.S. Census Bureau

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What Makes A Recession (as defined by NBER)

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Recession Article.pg2Recession Article.pg1I had saved this article this spring and thought that I would share it. I kind of knew but now I have it posted in my blog so that I always have access to “WHAT MAKES A RECESSION?” This is from the Minnesota Association of Realtors magazine this spring.

Source: Minnesota Association of Realtors

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Dawn of a New Day

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Reading reports this morning, all fairly upbeat. Unemployment will drag in 2011, Deficit spending by the Government…it looks like it’s up to the private sector to clean up the mess. Don’t tax the hell out of us and we can get it done. Here’s what I am reading:
“…Once the details(extending Bush-era tax cuts, payroll tax rductions and renew emergency unemployment benefits) are ironed out and some semblance of the package passes, most economists agree that GDP growth should get a slight boost in the coming year. This is indeed good news as the pullback in federal government spending next year was one of the major challenges for economic growth. We now expect real GDP to grow at a 2.6 percent annual pace in 2011.”
“not enough to bring the unemployment rate significantly lower. The unemployment rate should remain stubbornly above 9 percent well into 2012…While an obstinately high unemployment rate seems daunting, there are clear signs employment is improving.”

On Housing starts:
“We expect housing starts increased slightly to 540,000 in November due to continued low mortgage rates and some payback from the disappointing levels observed last month. Our forecast continues to indicate that housing starts have bottomed out, but new starts are estimated to total only 560,000 in the fourth quarter of this year.”

“Despite the challenges that face us, we have put the most arduous portion of our journey behind us. We have turned the corner, and for the year ahead, we believe sustained growth will reflect the influence of continued improvements in consumer
and business investment as well as the turnaround in residential and commercial construction. We anticipate a change in the composition of growth with less inventory gains and federal spending and greater support for growth from final private demand. Over the next two years, we expect the U.S. economy to grow by 2.6 percent and 3.3 percent in 2012.”

Source: Wells Fargo Securities 12.10.10

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Keep Your Eye On The Pendulum!

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Annual Economic Outlook.Dec 2011
On Page 4, second half of the page…check that out.
On Page 5, more optimism
On Page 9, worth reading
On Page 10, I love this stuff
On Page 11, Inflation versus Deflation…?
On Page 13, more questions about Inflation
On Page 15, Keep Your Eye on the Pendulum
I suggest reading the full report…lot of optimism

Source: Wells Fargo

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Alexandria, MN’s Economy is “smoking”!

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You know, I have been selling real estate here in Alexandria for 28+ years now. As I drive down Broadway Street from 3M to Big Ole, I see two rent signs for retail, one at the Daily Grind location and one at the Quizno’s building. Going up 3rd Avenue to the East to Nokomis street, I see one rent sign at the old Color-Rite spot next to Zion Lutheran Church. I don’t know if I can ever recall this much space occupied with little or no vacancy. Couldn’t this be classified as one of the best ever as far as the economy goes for broadway?
I have seen a lot worse on this main drag as time has went. Keep your eye on the pendulum.

Source: Windshield of 2008 Chevrolet Avalanche

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