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Correspondence DiscussionCORRESPONDENCE DISCUSSION • StarTribune article dated July 28, 2011 —"July building construction up from a year ago, down from June" • StarTribune article dated July 30, 2011 —"Pockets of recovery" Format Dynamics:: C1eanPrint :: http: / /www. startribune .com /business /126341238.html Page 1 of 2 July building construction up from a year ago, down from June Article by: MARISSA EVANS , Star Tribune Updated: July 28, 2011 - 9:12 PM Residential construction permits skyrocketed 40 percent in July from a year ago but were down slightly from the number in June, according to a Builders Association of the Twin Cities report released Thursday. In July 257 permits were issued for 370 units, down from June's 260 permits for 385 units. Despite wavering consumer confidence as the state shut down over the budget impasse, recent studies have "confirmed that Americans still want to own their own home," association president Rich Riemersma said in a statement. "And July's permits seem to bear that out." Owning a home, long part of the American dream, has taken hits the past few years as the housing crisis pushed many Americans into foreclosure or saddled them with a house they could barely afford but couldn't sell_ But a study released earlier this month by the National Association of Home Builders found 75 percent of respondents believed owning a home is worth the risk of the housing market fluctuations. About 95 percent of home owners said they're happy with their decision to own a home, while 73 percent of non- homeowners said buying a house was a goal. In a poll conducted by the New York Times and CBS, nearly 90 percent of Americans still feel that homeownership is essential to the American dream and want it to stay that way for themselves and others. Mike Swanson, division vice president for Rottlund Homes, said the state shutdown during July that had been expected to have an adverse effect on home builders seeking state electrical inspections wasn't as bad as they had feared. "The situation is most of the larger suburbs have their own in -house inspectors, so t hose cities were not impacted," Swanson said. "The metro areas went to their city attorney and found a way to contract around the state and have electrical inspection by Advertisement TRACE A,Dm#NS SEPMM 30 O AU CASWO • NOT I&4 LKO ClpMled b,11-csra tw&a r!" ysficllak�e.co Print: Powered By . i�3rnrni httn : / /www. startribune .com /temniates /fdcn?uniaue =131 1952955023 7/29/2011 Format Dynamics :: C1eanPrint :: http: / /www.startribune .com/business /126341238.html StarTrolbune Page 2 of 2 working with neighboring cities." However, Swanson said numbers are still much lower than they should be. "The debt ceiling could hold back our anemic growth because things are picking up a little bit here," Swanson said. "The economy just needs to continue moving forward." Farmington topped the list this month with permits to build 71 units; next highest were Blaine, Chanhassen, Plymouth and Shakopee. Sheryl Kempster, a real estate agent with Stone Cottage Construction in Apple Valley, said Farmington's new high school and affordable homes have helped fuel increased construction in the area. The economic downturn caused many lots in the area to go back to banks, but now construction companies have been able to buy these same lots for 40 percent to 60 percent lower than the original price. "Right now it's attractive for buyers to come and purchase a new - construction home with amenities buyers are wanting and still be under the [$300,000] price range," Kempster said. "This is not a doom and gloom like they're reporting -- we just saw pending sales are way up, and we can't build them fast enough." Marissa Evans • 612- 673 -4211 Advertisement httn: / /www.s tarty ibune.com /temnlates /fdcn ?unioue =131 1952955023 7/29/2011 StarTribune.com Pockets of recovery Article by: , Star Tribune , Jpd lec<': july 30 2011 - 8:54 e'M Brett and Heather Edelson aren't looking for anything out of the ordinary: a four - bedroom house in Edina with a big yard and a finished basement. They've been shopping since March and still no deal. "We thought it would be a buyers' market," said Brett. "We're surprised at how few houses there are to look at." He had reason to think he'd be in the driver's seat. Since the housing crash began in 2005, home prices appeared to hit bottom just before the $8,000 federal home buyer's tax credit helped boost prices early last year. The credit expired in April 2010, causing sales to slow and prices to fall again. Home prices in the metro area have fallen another 10.2 percent since the credit expired. Not so in Edina, however, and in about 15 percent of metro -area communities where prices have defied gravity by actually rising in this sustained housing downturn. Signs of recovery? Perhaps. While rising prices are a positive indicator in a market that has had little to celebrate, it's too soon to tell whether prices will continue to climb in those areas. "The answer is a lot more complicated than a simple number at the end of an equation," said Aaron Dickinson, a Twin Cities sales agent who provides analytical support for the Minneapolis Area Association of Realtors. "You have to peel back more layers of the onion to get a feel for it." While increases in sale prices have helped boost confidence in the market, data prepared for the Star Tribune by the Minneapolis Area Association of Realtors suggest that many of these pockets of recovery -- about 20 -- still face significant challenges, including too many listings, high levels of foreclosures and slow sales. "Whether this is the bottom is something we won't know for another year or two," Dickinson said. Herb Tousley, director of the Shenehon School of Real Estate at the University of St. Thomas, said that while a recovery is "going to take some time," it's promising to see rising prices in at least a handful of communities. "They'll hopefully lead the whole market out, assuming that the economy keeps improving and employment and consumer confidence keep increasing." Here's a look at communities that are showing some signs of life -- and why. 4 910 Advertisement wa EARN BASTE POINTS AND YOULL RECEIVE A SLEW OF KITCHEN SLJPPLIES! COMPLETE DETAJ S A VMLA:BLE AT MYSTICLAiKE',COM. � � '� � 1 & K E ONEIDA FRYING PANS CASINO - HOT IZL t Print Powered By d ' Dynamics - 1 - L th M=-, I im,MA-1 " 04 One of the best indicators of a stable market is a low foreclosure rate. Edina has it. During the first six months of the year only 19 percent of all sales were foreclosures or short sales, compared with nearly half of all sales for the metro area. At the same time inventory is getting low. By the end of June there was just a six -month supply of listings, in line with a general rule that a market is balanced with a five- to six -month supply of houses on the market. Those numbers are no surprise to John Wanninger of Coldwell Banker Burnet Realty, who has sensed for several months that the housing market in Edina has been on the verge of a big shift, in part because he's getting calls from agents asking if he has listings not yet on the market. The numbers confirm his instincts. From peak (2006) to valley (2009) the median sale price has fallen only 16.7 percent in Edina. From that valley prices are up 4.6 percent to $340,000. The correlation between low foreclosure rates and rising prices is true, as well, in St. Paul's Highland Park neighborhood, where distressed sales constitute only 18.5 percent of sales so far this year and the median sale price of $234,000 is only 5.4 percent above the low point in 2009. In Chanhassen foreclosures and short sales represented 29 percent of the market and prices are up 7.7 percent from the bottom. All three communities largely escaped the first wave of fraud - riddled foreclosures, and with their relatively higher incomes, have escaped the second wave caused by unemployment - related defaults as Advertisement �� KS, �� � �� the economy went south. In Edina, demand has remained constant because parents like the Edelsons, who now live in south Minneapolis, want their kids to attend schools in Edina. With developable land in short supply, there's also strong demand for moderately priced houses that can be torn down and replaced with much bigger ones. "We have multiple bidders chasing tear -down sites faster than they can get deals together," Wanninger said. Recently, a $365,000 house got five offers the day it went on the market. The same happened late last year when a house hit the market for $849,000 and, driven up by multiple offers, sold for $899,000. Such deals give prospective buyers confidence, Wanninger said. "There's a sense that it's a safe place to invest," he said. NORTH MINNEAPOLIS Contrary to what's happening in Edina, extremely high levels of foreclosures have also helped drive a price recovery in other markets. For example, in a corner of north Minneapolis more than 65 percent of all sales so far this year were foreclosures and short sales. After hitting bottom in 2010, the median sale price has risen 9.4 percent to $42,000. The market, just west of the Mississippi River and bordered by Lowry Avenue on the north and Glenwood Avenue on the south, is known for its SAVE �a 64 0 � Plus, get 3 FREE Gibs Print Powered By Dynamics -2- historic houses. The neighborhood, part of the larger Near North community, and other inner -city neighborhoods became magnets for mortgage fraud, leading to unusually high levels of foreclosures and values that plummeted. Those fire -sale prices have drawn investors such as Jennifer Olstad, who left her full -time job to buy and renovate houses on the North Side. She competes with other investors on properties, causing inventory to be tight. "I've got buyers, but I can't find product," said Sarah Huss, a sales agent with Edina Realty, who lives and works on the North Side. She said that while prices on the North Side fell fast and hard, they've recovered just as quickly. Prices have also been propped up by millions of dollars from the federal Neighborhood Stabilization Program. That funds the Twin Cities Community Land Bank, which works with private developers to rehab foreclosures that are resold to owners who plan to occupy them. The neighborhood also has a high percentage of contracts for deed, house sales that are privately financed and not always supported by professional appraisals, meaning that sale prices on some houses might be artificially high. A similar phenomenon is true in East Bethel, where 73 percent of all sales so far this year are distressed. Prices there fell 47 percent from their peak since 2005. The median sale price now is $154,000, up 2.4 percent from the bottom. St. Michael, a rural suburb in Wright County, has seen a similar trend. FOREST LAKE Low inventory levels are almost always an indicator of strong demand and rising prices. And the converse is often true, too. But in Forest Lake, there was a 12.5 -month supply of listings on the market last month, almost twice the metro -wide average. Despite that glut of listings and the fact that about half of all sales this year were distressed, sale prices so far this year there have increased more than almost every other market since the low point in 2010. They could use the gains. Prices there peaked at more than $250,000 before falling more than 50 percent. The median sale price so far this year is $155,000 in the Washington County city, 14 percent higher than last year when the median sale price hit a post -crash bottom. Agents who work the market are at a loss to describe the dramatic swings. One theory is that the declines were led by an oversupply of listings, especially new construction. Sheryl Craven, general manager at ERA Muske Co. in Forest Lake, said that despite high inventory, prices are now so low that buyers now see serious value. In contrast, Little Canada, which experienced a Advertisement 1►E0.�'ft.A�tTy SAVE�o64� Plus, get 3 FREE Gifts Print Powered By f _ p, i Dynamics -3- S tarTribu nex o m similar 50 percent -plus decline in prices, a 23.8 percent increase in prices since last year has been accompanied by unusually low inventory. Agents in Forest Lake say that the city is becoming popular with move -up buyers who are taking advantage of low prices on the area's Lakeshore properties. Buyers are also drawn by the area's highly rated schools. Debbie Discher, a sales agent with Coldwell Banker Burnet in Forest Lake, said that during the past three months she's been busy enough to work around the clock. "I haven't seen it like this since I first got into real estate in the late '90s," she said. Jim Buchta • 612 - 673 -7376 Advertisement KEpRIt- �rry SAVE �o G4 °� Plus, get 3 FRIEE Gifts Print Powered By ` Dynamics -4-