Despite these stats many friends, family and customers are starting to have optimism about the economy and housing.  The economy is starting to show slight improvements (or at least it doesn’t appear to be getting worse).  These improvements are expected to be gradual starting with confidence first and real numbers second.  If you have been thinking about when it may be time to buy that house you always wanted, now is the time.  While no one has any magic 8 ball to predict the future, many experts are predicting that housing will stabilize later this year and interest rates will rise.

So, if you are wanting to move out of the apartment (or your parent’s basement), now is the time to start looking.  If you can sell your home without incuring a loss, it may be worth moving up to a larger one now, which could be up to 40% cheaper than it was just 5 years ago.  Since there is no way to predict the absolute bottom of the market, don’t try.  If you find the house that you love and want to stay there for 5 years, no additional dip in the market really matters.  It is just paper equity.

Sellers, both banks and individuals, are motivated.  Many have already discounted their houses immensely and will even take larger cuts to unload the property.  You can scoop up your dream house for prices you never dreamed of.  Take a look through the MLS for Saint Paul houses that you may enjoy.

So how do you get started?  What do you do first?  Here are some tips to finding that Saint Paul dream home:

• The Saint Paul real estate market is vast and diverse.  The homes in Lowertown are drastically different than the ones in Phalen.  The neighborhood around Summit Avenue is much different than around Frogtown.  I recommend that first ask around and talk to people that live in Saint Paul.  Get their recommendations on what areas they like and why.  Then get out and drive around those areas.  Stop in a local restaurant and have lunch.  Does this neighborhood feel comfortable to you?  Can you see yourself eating lunch here often?  Drive around and look at the houses.  Saint Paul houses have over 100 years between the oldest and newest.  Which do you like?  You must figure out where you want to live (and this may be 2-3 places you like), before you proceed.
• Once you find a couple areas that you like, you need to find a Saint Paul Realtor that specializes in these areas.  Since many agents specialize in just one area, you may need to interview several to find the one that you like the best.  Remember that typically a buyer’s agent is paid by the seller of the home.  You are getting this agent’s help for free.  Make sure you trust him or her and that  you want to spend time with them.  The agent should be very knowledgeable about all parts of Saint Paul and be able to give you the differences off the top of her head.
• If you are looking at purchasing a foreclosure, you should be aware of the different requirements and regulations that St. Paul imposes on vacant houses.  They have various vacant building categories that will have varying levels of code compliance that must be done to bring a home back up to livable condition.  If you have concerns about this process, find a contractor that works in Saint Paul that can help you navigate this process and give you a bid to get the work done.  You do not want to take on some of these Category 2 houses with their code compliance as a weekend project or your first home.  They require too much experience to navigate all the inspections and code issues.
• Have your Realtor build a MLS search for you that will send your emails when a property falls into your criteria.  This will be an invaluable way for you to keep track of the changes in the market as well as spotting those great house deals that go fast.  Discipline yourself to check this email as soon as you receive it so that you can jump on any opportunities that may have just hit the real estate market.
• Once you find a home and have an accepted offer, it is important to get a home inspection done.  Most buyers and real estate agents are not housing experts.  They are also not typically crawling in the attic and poking holes in the foundation.  Most inspectors have a certification from training they have taken.  They will spend 2-3 hours combing through a house to find any issues that exist or could develop.  While this inspection is not meant to scare you away, it will identify an issues that are larger than you are prepared to undertake once you own the house.

Finding your Saint Paul dream home can be a fun and exciting process if you do your homework up front.

The Department of Safety and Inspections is responsible for managing the vacant building list.  The City of Saint Paul requires that property owners register a vacant and unoccupied property within 30 days of the property also having one of the following issues:

• Unsecured
• Boarded or secured by other than normal means
• A danger to life and limb
• Condemned
• Has multiple Building Code violations
• I unoccupied for more than 1 year and at least 1 nuisance correction order has been issued.

In order to comply with the vacant building registration, a Saint Paul home owner must do the following:

• Submit a Vacant Building Registration Form within 30 days with a detailed plan for renovating or demolishing the property.
• Disclose all ownership details
• Disclose all lien holders
• Disclose any Truth in Housing reports
• Pay the vacant building fee of $1100
• Allow Saint Paul house inspectors access to the property to perform inspections

Complying with these regulations is not difficult.  Many of the people at the city will help you through the process.

Saint Paul homes sales for existing homes rose significantly in the last quarter of 2009 due mainly to first time buyers taking advantage of the tax credit. With the deadline rapidly approaching many potential buyers made the commitment between September and December which of course led to an anticipated slump at the end of December, but again the overall 2009 sales report was an improvement from the preceding year. The 2009 existing home sales in St. Paul were up by almost five percent from 2008 and is the only significant increase in home sales since 2005.

The Saint Paul housing market has been called a swinging market controlled by tax credits and has actually shown in the short term that the tax credit has been effective in boosting the housing market. With the extended tax credit for first time buyers coming up again in spring of 2010 another rise in sales is expected and buyers are predicted to act quickly, many have been watching properties in anticipation of the extended credit. First time buyers rushing to close before the deadline will again create a surge in buying but even after the housing market stabilizes as predicted in the summer, the market is expected to rise overall for 2010 and that is good news in any economy.

In years past, when an investor was looking to buy a new rental property, they typically would look at multi-family properties.  With the large inventory of single family homes that are currently in foreclosure or going through short sales, many of these properties are now becoming rental homes.  This increase in single family rentals is changing the landscape of Saint Paul real estate in many ways:

• Townhouses, side by side duplexes, and condos were previously the top of the food chain (in a matter of speaking) for tenants.  These were often seen as the last stop before buying a property of their own.  Most of these were larger, gave you less neighbors, and more amenities than an apartment.  As more single family houses have become available to the average renter, these other properties have been affected.  The non-single family rental is experiencing lower rent amounts, higher vacancy, and less rental demand.  Where once you would have tenants fighting over a nice 2 bedroom side by side duplex unit with hardwood floors for $1000, now you are struggling to find a tenant that will pay $875.  Tenants are realizing that they can spend the same amount of money (as just a couple years ago) and now rent an entire house.
• Unfortunately, landlords that have owned single family houses several years are also feeling the squeeze from the foreclosure market.  They may have paid 25-50% more for the same property in the same area than the investor today.  This makes the old owners operating costs (ie:  mortgage) much higher and their operating income much lower.  A new investor can undercut the old investor’s rent amount on a like property, while maintaining a good cash flow/profit margin.
• There is also an increasing type of tenant that we have not seen in large quantities previously.  These are previous homeowners that have lost their house to foreclosure or short sale.  They may have had a job loss or illness that affected their financial situation, resulting in the loss of their home.  Many of these new tenants have good jobs with solid and steady income.  They simply hit a pothole in their financial road.  This type of tenant is not going to move into an apartment building and may not even be interested in a connected (condo, townhouse, side by side) living situation.  They previously owned a home and want to stay in that type of property.
• Lastly, we are seeing many Saint Paul houses coming into the rental pool that previously have never been rented.  Many are middle to upper end homes.  These are the result of the current owners being unable to sell the property, but unfortunately still needing to move out for one reason or another.  They are actually being quickly rented up by the above tenants that were used to a larger mortgage payment and want a larger home.  Rent amounts of $2000-$4000 are common.

Whether you are a new investor or have owned some property in Saint Paul for many years, this changing rental landscape is important to understand.

The report sites the 4.5 million mortgages that are either currently in foreclosure or have missed at least one payment (and are most likely headed into foreclosure). As the banks work through that large number of properties, most will not qualify for mortgage modifications, which have less than a 10% success rate. When these additional properties hit the already flooded foreclosure market, it will surely put downward pressures on REO and retail properties alike.

Additionally, the Federal Reserve has committed to stop buying up mortgage backed securities in March, which will push interest rates higher. That coupled with the end of the $8,000 buyer’s credit in June, will push demand for homes lower and prices lower with it.

Fortunately, according to CNNMoney.com, the Saint Paul Real Estate market (in fact, the entire Twin Cites market) will experience a smaller decline of 0.9% from September 2010 to September 2011. This is lower than the expected national average.  If the employment market improves, this may counter act the drop in housing prices.

We will wait and see!

The City is trying to enhance the rivers appeal and access.  Currently it is not possible to see the river or gain access to the river along much of where it winds through Saint Paul.  Proposals include extending the network of parkways to the river to create more green space and places for walk, bike, run, and simply view the river.  With the resurgence in living in the city, especially Saint Paul Condos and Lofts, this work is really past due to highlight the natural beauty that St. Paul and the river have to offer.

If the green ways are extended and access to the river is enhanced, we should see a positive affect on Saint Paul real estate prices.  With the population expected to grow by 40,000 people by 2030, adding these enhancements will allow Saint Paul more space to infill with new housing developments that rival other cities.  This will be especially important in the West Seventh Street area, which is by the river, but unfortunately has some of the oldest and most neglected housing stock in Saint Paul.  With the city tearing down many of these older properties, the new river access should help encourage developers to build new housing stock on those lots.

The master plan will be completed in 2011 with several opportunities for Saint Paul residents to voice their concerns or opinions at public meetings.  Once completed, it will be used as a road map for all future real estate development in St. Paul for the years to come.

1. Category 1-A homeowner must register a unoccupied home within 30 days or face a fine.  To remove it from the list requires only a $50 fee and any outstanding orders for legal occupancy (which may be as simple as shoveling the snow).
2. Category 2-Homes can be moved to Category 2 within 30 days of hitting the Saint Paul vacant building list.  This is a typical state for most Saint Paul Foreclosures.  These properties are condemned or have multiple housing violations.  They are legally considered uninhabitable.  They will require a licensed contractor to submit a schedule and sworn construction statement to complete the work.  The buy may need to escrow money to complete some repairs.  If you jump through all the hoops, you can buy these properties and rehab them.
3. Category 3-These properties are slated for demolishing.  Almost nothing can save them from the wrecking ball.

Previously, when you submitted a plan to renovate a Category 2 property, you would simply submit the proper paperwork to the city.  Maybe you would need to meet an inspector on-site to discuss certain issues.  Not a big deal.

Starting January 1, 2010, Saint Paul is adding a new fee called a “Sales Requirement Fee”.  This $275 fee is required at the time you submit your rehab plan for the Category 2 home.  It must be paid for the city to review how you are going to the repair the home you are buying.  This review process can take up to 4 weeks and the property can NOT be sold until the city approves the buyer’s plan.

Just one more way to get money out of Saint Paul Home buyers and slow down the process.  Keep this in mind!

The Minnesota Home Ownership Center is pleased to announce a new pilot program that may assist families AFTER the foreclosure of their home with up to $2,500 to relocate and secure alternative housing.  Funding for this pilot program has been provided by the Saint Paul Foundation Community Economic Relief Fund.

For now, homeowners being displaced must have owned in Dakota, Ramsey or Washington Counties during this pilot program.  Depending on need, and availability of future funding, the program may be expanded.

Funds may be used for:

• Moving expenses
• Security deposits
• Up to half of monthly rent for first three months
• Utilities (gas, electric, water)

A fact sheet with additional program details and information, is available here.

Homeowners should contact the foreclosure counselors at the following organizations:

Dakota County: Dakota County CDA
Ramsey County: City of Saint Paul PED
Washington County: Washington County HRA
Spanish-Speaking homeowners (In the three counties): Neighborhood Development Alliance

Due to limited funding… these grants are available on a first-come, first-served basis.  Thank you to Saint Paul Foundation Community Economic Relief Fund for helping former owners of Saint Paul Homes to overcome this difficult life change.

Home values changes for the fourth quarter 2008 in Saint Paul Neighborhoods are:

The above numbers are from Zillow and are defined as: The % change for the Zillow Home Value Index over the prior quarter (3 months).

These statistics show that housing values in these areas are still dropping.  I am amazed when I meet homeowners that won’t admit that we are in a recession and still are trying to sell their homes for inflated prices circa 2004!