"We Bailed OURSELVES Out??"

"We" Minus the "Us"; or,
More Pronoun Confusion

The bailout and stimulus that we have administered to ourselves have left us without much cushion. There may be room, and even necessity, for a little more stimulus. But we have to get this moment right."

--Thomas Friedman, "Got to Get This Right"; The New York Times (11/27/2010)

I suppose if you're in London or Berlin or Beijing or wherever Thomas Friedman writes most of his dispatches, it looks like the United States bailed itself out.

However, here in Friedman's hometown of Minneapolis (actually, next-door St. Louis Park), the "we" he refers to looks decidedly more like a "them."

"Them," of course, being the same Wall Street actors whose reckless bets and insane leverage caused the mess in the first place.

It's hard to see how "we can get this moment right" if "we" can't even get our pronouns right.

What's Selling: Cedar Lake

Acing the "Ooh!" and "Aaah!" Factor

Where: 2700 Chowen Ave. South in Minneapolis' Sunset Gables subdivision (just south of Cedar Lake)

What: Moderne-style Art Deco with 5 Bedrooms and 5 Baths, and 3,800 finished square feet

How much: listed for $875,000; sold for $823,050 (94% of asking price, and more than $35,000 over the tax assessed value).

When: less than 3 months on the market; closed Friday (Oct. 22).

Who: listed by Ross Kaplan, Edina Realty City Lakes; selling agent Paul Larson, Coldwell Banker Burnet

What's selling in a tough market, especially for upper bracket homes?

Trophy properties like 2700 Chowen Ave. South, just south of Cedar Lake in Minneapolis.

This historically designated home probably generated more "ooh's" and "aaah's" than any other home I've listed, for good reason: prospective Buyers salivated over the original fresco above the Fireplace, the custom millwork and period Art Deco light fixtures, and all the space and light.

The clincher?

A $200k-plus first-floor addition (2004) complete with its own washer dryer and private, courtyard entrance.

Turnover & Older Neighborhoods

Renewal vs. Decline

It happens to every neighborhood fortunate to get old enough (at least in the family-friendly Midwest): the original owners raise their kids, become empty-nesters, and downsize.

All at once -- or at least it can seem that way -- the block is for sale.

Is that an opportunity for Buyers?

Like so many things, it all depends.

Potential Upside

Probably the biggest benefit for prospective Buyers is the discount associated with buying a dated home.

Instead of paying more for a home in mint condition, Buyers can use the savings to update and decorate to their taste.

When multiple Buyers all put significant money into upgrading their homes, over time the block and surrounding area can appreciate significantly.

Something much like this happened to Minneapolis' Bryn Mawr neighborhood -- located just west of downtown -- in the '90's.

In the span of less than a decade, that neighborhood went from tired and old to young and hip. In a Twin Cities market that went up 75% in that period, Bryn Mawr prices appreciated almost twice as much.

Less obviously, there's a social benefit to buying on a block experiencing significant turnover: when everyone on the block is a newcomer, it can be easier to fit in.

Risks

Perhaps the biggest negative buying on a block experiencing generational turnover is short-term re-sale value.

When a lot of dated homes hit the market in a relatively short period of time, a "double-whammy" can result: Buyers discount the homes once for condition, and a second time because there's a lot of (competing) supply.

Longer term, there's also the risk that if your new neighbors can't or won't improve their (dated) homes, the neighborhood can gradually slide from "dated" to "deteriorating."

Really Long Run

Ultimately, the key to any neighborhood's viability is whether successive generations of owners have the financial wherewithal and motivation to update the housing stock.

In the Twin Cities' healthiest neighborhoods, such transitions take place seamlessly -- and repeatedly.

P.S.: note that nowhere in this post did I use the term "gentrification." Gentrification occurs when more affluent homeowners move into a deteriorating area and displace poorer residents.

Short Sale . . . Long Odds

Short Sale Multiple Choice

My client made an offer November 17 on a South Minneapolis short sale (the lender(s) must agree to accept less than the outstanding mortgage balance). When did he hear back from the listing agent (representing the Seller)?

a. November 29
b. December 3
c. December 21
d. January 23

Answer: none of the above.

Incredibly, my client is now approaching three months without a response to his offer. Buyers who've made offers typically start twisting after 24 hours without hearing back; imagine waiting indefinitely.

What's going on?

According to the listing agent, not all of the lenders have agreed to the short sale (apparently, there are more than a dozen who each have a slice). In addition, so much time has now elapsed that the lender(s) are asking for updated financial information from the owner, documenting his inability to make good on the entire mortgage.

What's next? Two-thirds of the time, short sales don't pan out for precisely these kinds of reasons, and the property proceeds to foreclosure.

What's It Worth?

2445 Portland Ave. So.

Minneapolis

Asking Price: $132,905
Assessed Tax Value: $505,500
Property Taxes (2009): $8,216
Last Sale: $480,000 (3/1/2007)

This 5,200 FSF, Brick Four-plex came (back) on the market late Friday afternoon. A quick look at its selling history indicates that it's been on and off the market, at ever lower prices, since July, 2005.

What it actually sells for is anyone's guess (I haven't been inside). But it's a safe bet that it's worth a fraction of the $505,500 the city says it is. Bet #2: it would sell faster without an $8,216 annual property tax bill attached -- more than the next owner's likely mortgage payments. (You'd further guess that those taxes haven't been paid in quite awhile, leaving a big, fat lien against the property.)

Such out-of-whack tax bills are one of the reasons many foreclosures languish on the market.

Mpls . . . Banking Capital of U.S.?

Name the Country's *Banking Capital

See you how do on this quick financial quiz:

In order of total market cap ("capitalization," or entity value), calculated as of today (1/14/09), rank the following pairs of banks and their headquarters cities:

--Citigroup and JP Morgan (New York City)
--Bank of America and Wachovia (Charlotte)
--Wells Fargo and U.S. Bank (Minneapolis)

Answer: 1) Minneapolis; 2) New York City; 3) Charlotte.

Not convinced? Check out this video, "Minnesota rises as Citi Sleeps," on the (London) Financial Times' web site today.

*Note: although Wells Fargo technically is now based in SF, its predecessor, Norwest, was originally based in Minneapolis and maintains much of its operations and staff here.