Weather and the Minnesota Housing Market

Of Skating Rinks & Steep Driveways

There are brilliant, sunny days, when every listing shows great, and the home's physical setting and views are shown off to their best effect.

And then there are days like today.

If you're reading this blog outside Minnesota, the Twin Cities awoke to a freezing rain and roads that resembled skating rinks.

For Sellers with steep driveways, it may be a good day to skip showings (or, back up a salt truck).

Global Warming & the (MN) Housing Market

Minnesota: Global Warming Winner

As Minnesotans enjoy a record-warm early November, one can at least daydream about what shorter, milder winters might mean for the local housing market (local farmers can already attest to the delayed frosts and earlier thaws -- this year's first hard freeze in the Twin Cities was late October!).

Here are three foreseeable, long-term consequences:

One. Busier January's, and less seasonality generally.

Traditionally, the Spring market -- liberally defined as February - May locally -- is by far the most active time for the Twin Cities housing market.

Some of that is due to the dominance -- or at least preponderance -- of family home buyers, who like to buy in Spring, then close in Summer with enough time left over to be ready for Labor Day and the beginning of school.

However, at least some of Spring's pop is due to demand pent up by the preceding frigid weather.

Two. Higher population growth due to in-migration.

If Minnesota ever loses its reputation for bone-chilling winters, people fleeing so-called "sand states" (FL, CA, AZ) may start considering it.

Three. Fewer Minnesota "snowbirds."

The flip side of higher immigration is less emigration -- specifically, older, more affluent Minnesotans who now spend part of the year in warmer climates (and tend to move away permanently as they age).

Who wants to bake in Florida or Arizona heat when Minnesota is increasingly temperate?

P.S.: with a mean elevation of 1,200 feet, and more than 1,000 miles from the closest ocean, Minnesota isn't exactly threatened by rising sea levels.

December Drop in Home Sales

Crying Wolf About April 30?

Sales of existing homes in December fell 16.7 percent from November to a seasonally adjusted annual rate of 5.45 million units, the National Association of Realtors said Monday.

--"Existing Home Sales Drop More Than Forecast"; The New York Times (1/25/2010)

My take is that a big chunk of the drop is explained by the (then) Nov. 30 deadline for qualifying for the first-time home buyer tax credit.

As you may recall, at the 11th hour, Congress extended and expanded the credit.

The new expiration date is April 30 (deals actually have another 60 days to close).

And no, I don't expect a flurry of transactions ahead of the new deadline -- at least not more than would normally occur in what is otherwise a seasonally very busy time for the housing market (at least in Minnesota).

3rd Wave of Defaults

"Safe" Mortgage Pain Spreads to MN

In the latest phase of the nation’s real estate disaster, the locus of trouble has shifted from subprime loans — those extended to home buyers with troubled credit — to the far more numerous prime loans issued to those with decent financial histories . . . Economists refer to the current surge of foreclosures as the third wave, distinct from the initial spike when speculators gave up property because of plunging real estate prices, and the secondary shock, when borrowers’ introductory interest rates expired and were reset higher.

Peter S. Goodman and Jack Healy, "Job Losses Push Safer Mortgages to Foreclosure"; The New York Times (5/25/09)

What's eye-catching about today's NYT story isn't the phenomenon of foreclosures spreading to formerly solid borrowers now falling behind due to job losses; in the worst recession in decades, such "metastasis" is hardly a surprise.

Rather, it's the local angle: the two families profiled, both deep in the hole on their mortgages, are right here in Minnesota (one is in Woodbury, the other is in Babbit, up north).

According to the nonprofit Minnesota Home Ownership Center, three of every five Minnesota borrowers seeking foreclosure counseling now have a prime loan.

So much for "it can't happen here."

Unfortunately, it already is.