The Saint Paul Condo Blog

Well it's signed, and it's a much better Tax Credit this time around!

Here are the differences from the previous plan to the current one.

Feature	Tax Credit as created July 2008 applies to all qualified purchases on or after April 9, 2008	Revised Tax Credit Effective for purchases on or after January 1, 2009 and before December 1, 2009
Amount of Credit	Lesser 10% of cost of home or $7500	Maximum credit amount increased to $8000
Eligible Property	Any single family residence (including condos, co-ops, townhouses) that will be used as a principal residence	NO CHANGE
Refundable	Yes, Reduces (or can eliminate) income tax liability for the year of the purchase.  Any unused amount of tax credit refunded to purchaser.	NO CHANGE
Income Limit	Yes, Full amount of credit available for individuals with adjusted gross income of no more than $75,000 ($150,000 on a joint return.)  Phases out above those caps ($95,000 and $170,000)	NO CHANGE
First-time homebuyer only	Yes, Purchaser (and purchaser's spouse) may not have owned a principal residence in 3 years previous to purchase	NO CHANGE
Revenue Bond Financing	No credit allowed if home financed with state/local bond financing	Purchaser who utilizes revenue bond financing can now use the credit
Repayment	Yes. Portion (6.67% of credit or $500) to be repaid each year for 15 years, starting with 2010 tax filing	No repayment for purchases on or after Jan 1, 2009 and before Dec 1, 2009
Recapture	If home sold before 15 year repayment period ends, then outstanding balance of repayment amount recaptured on sale	If home is sold within three years of purchase, entire amount of credit is recaptured on sale.  Applies only to home purchased in 2009
Termination	July 1, 2009	December 1, 2009
Effective Date	Purchases on or after April 9, 2008 and before January 1, 2009.  Repayment to begin for 2010 tax year	All revisions are effective as of January 1, 2009

If you want to get in touch with a loan officer to find out how this tax credit will effect you, drop me a line and I will get you in touch with Doreen Drake with PHH Mortgage.

There seems to be a few distinct pricing categories in Downtown right now.  I thought it would be fun for me to comically break them down into five sections.  Enjoy!

2005 Priced homes.  Otherwise known as pie in the sky prices.  These tend to come from listers that can't deal with the current reality of what the market is doing.  Chance of sale - 1%

Fair Market Value.  This is where most of the homes that are on the market are priced right now.  Not over priced, but definitely not under priced.  On the long haul, purchasing one of these will be seen as a good deal.  Chance of sale - 40%

Investor Owned.  These are units that are not owned by corporations, banks, or government agencies.  These are typically units that were purchased for future gains and were rented out in the mean time.  Pricing on the investor owned properties seem to be pretty fickle.  Some seem to line up with the 2005'ers and others closer to the Bank Owned places.  Chance of sale - 50%

Short Sale Pricing.  Run, run as fast as you can from these.  Rarely will you see a short sale home actually result in a sale.  A short sale is kind of a pre-foreclosure.  The home owner is trying to sell the place for less than their current mortgage.  By doing so, they need the bank's approval before they can actually close.  Banks take weeks to respond to offers, and half the time, the bank will counter for higher than the listed price!  Very frustrating to deal with, you really need a zen-like attitude to try and purchase one of these.  Chance of sale - .00000001%

Bank Owned.  AKA REO Property.  These are typically priced drastically below market and typically sell quickly.  You will know it's a good deal when it's already too late.  Fence sitters be warned.  Chance of sale 100%

Commentary by Mike Parker:

”Those who do not study history are condemned to repeat it.” So spoke Sir John Buchan, the First Baron of Tweedsmuir, back in the mists of time often referred to as “the good old days.”

Well, I may not be as old as the Baron, but I did live through President James Earl Carter, 21% prime interest rates, 20% inflation, Paul Volker and his attempt to strangle inflation by strangling the money supply, and that famous “WIN (Whip Inflation NOW!)” button the White House handed out. The period I am referring to was in the 1970s and early 1980s, and it effectively reduced the purchasing power and the true value of the dollar forever.

It wasn’t that long ago that we lived in a different economy altogether
Americans often affectionately remember the 50s, when Ike was president, America was the benefactor of the world, and life was so simple. Then, a man making $10,000 annually was quite successful. Then, a home might cost $13,000. A nice Ford or Chevy might cost $2,300; New and gleaming and using 22 cent-a-gallon gasoline.

But it was only in 1971 that I bought my first home for $33,690 in Chelmsford, MA; the same year I purchased a new 454 Corvette Roadster for $5,100 out the door. Then, $50,000 a year was the equal of my dad’s $10,000 in earning power.

I remember how excited I was when I finally had $100,000 in savings-I was wealthy, I thought, and my future seemed assured. When the pardon of Richard Nixon jolted America into changing administrations, the Peanut Farmer, James Earl Carter of Plains, Georgia, was elected to the Presidency of the United States. The wreckage his administration presided over made it possible for “The Great Communicator” to be elected in 1981; and by the time that happened, houses were $300,000 and cars cost about $30,000.

Personally, I wasn’t noticing the effects of inflation, yet-after all, we sold that original home and moved into a beautiful new home that cost $86,000 just as President Carter took office. Although I sold that home for north of $200,000 a mere five years later, it never occurred to me that our currency was being debased; no, I thought I was a brilliant investor!

Whatever happens, the stage is set for inflation to come back with a vengeance.  Discounts abound, but prices of durable goods are increasing.

In the 1970s those gurus of the Federal Reserve told us that “M1 (an arcane measurement referring to the ‘money supply’-the total number of dollars in circulation), was the most key statistic to watch, for if the money supply grew too quickly, inflation would persist and continue.” We then became a nation of M1 watchers, and the Fed attempted to control the most complex economy in the world by watching that one statistic and throttling the economy with interest rate surges that brought about disintermediation, the death of the savings bank industry and that set the stage for the rise of Merrill Lynch and Wall Street to replace banks and savings and loans as purveyors of the American mortgage.

Interest rates were so high banks couldn’t keep deposits because they were subject to interest rate restrictions. “Let them compete-take the shackles off the banking industry” Washington thundered, and so the Garn-St. Germaine banking act was passed, allowing the community bank ‘to compete’ with Merrill Lynch.
Predictably, Merrill Lynch won. King Pyrrhus couldn’t have put it better: “One more such ‘victory’ and I am undone.” We are all paying for that ‘victory’ today.

The savings and loan industry abandoned 50 years of thrift and sound banking practices and put insured deposits into junk bonds sold by that ever-smiling Michael Milliken and his henchmen instead of local mortgages. When the dust cleared, there was no mortgage expertise left, no savings and loan industry recognizable to anyone left, and Wall Street had achieved their goal of displacing the community bank and becoming the “one stop shop” for all things financial (See; Sanford Weil, Citigroup, et al).

In any case there can be no debate that the trillions of dollars about to be pumped into the economy-while they will save us-will also bring inflation back; unless-of course-all that stuff about M1 and the money supply, and all those pronouncements by Paul Volcker, then-Chairman of the Fed, were mistaken . Since Mr. Volcker has now returned in a quasi-official capacity to advise the President’s team, I’d guess we’re in for inflation, now, and part of his mission is to try to minimize it.

Good luck Tim Geithner.

Our new secretary of treasury is reportedly a brilliant man– perhaps a little forgetful about taxes, but nonetheless, brilliant, by all accounts. Together with the rest of the Obama team, he will need every bit of that intelligence and brilliance to help this great country of ours avert total meltdown, but I believe that the team will indeed accomplish that and we will make a recovery, led in part by housing. It’s never smart to bet against the United States of America.

But when the money supply is increased by an amount equivalent to 20 or 30% of Gross Domestic Product or more-naturally or unnaturally, inflation must result. That means that prices of all fixed assets rise to keep pace with the devaluation of the currency. We won’t be taking the wheelbarrow to the market full of dollar bills to buy a loaf of bread, as happened in Germany after WWI, but we will be going on a pretty thrilling ride for a while.

Now, what is going to happen to home prices over the next few years?

I am not as formally schooled in such matters as our current leaders are. I’m just a guy who has seen this movie, too. It is my belief that a side effect to saving America’s economy will be a robust increase in inflation. I believe that Inflation will regain all the “value” we lost in housing over the past two years, and that it will regain it in five years or less. Simply put, to put the brakes on inflation, government must inhibit the recovery. The people in power aren’t going to do that. Inflation is a necessary evil compared to a full scale depression and an acceptable trade off for most of us. (And oil won’t stay at about $40 a barrel too long, either!)

So, tell your clients the truth: Interest rates will never be this low again in their lifetimes. Home prices won’t be this low again in their lifetimes. This is the perfect storm economically, but it also the perfect time to buy a home; provided that you buy it as a home and not a piggy bank. It’s just a nice side benefit that five years from now, the home you bought today will have appreciated so much that you’ll be thinking (just like I did in 1979): “What a smart investor I am!”

This just happens to be the perfect confluence of opportunity and necessity: we must fix the economy and we’re going to, whatever it takes. Inflation is an unavoidable side effect. Buy that house this year!

Last week, my wife and I had the honor of being invited to the grand opening of 413 on Wacouta.  It's a new event center located in the historic Gilbert building, across the street from River Park Lofts.  If you are looking to do an urban wedding, THIS is your spot!  Weddings already take place with some frequency at Mears Park, but now couples will have a trendy event center to complement the beautiful park.

Is your company looking for a cool space for their annual party?  Another great use for the space.  The owners of 413 on Wacouta are downtown residents as well and they really have a vision for a better St Paul, it is great to see someone so positive about our city.

413 on Wacouta also has some great vendor partners, including the St Paul Hotel, Macy's, D' Amico Catering, Cossetta Eventi, and many more!

Check them out online at www.413onWacouta.com

With nearly a trillion dollars flowing out of our pockets for pet projects around the country, maybe we should lobby for bailout money for some of our troubled projects.

From what I can tell, the government is looking for shovel ready projects.  So let's see what we have available here is Saint Paul that is shovel ready...

The Penfield.  Has full city approval, would provide construction jobs for a few years, and would provide 200+ apartments, a new hotel, and a Lund's grocery store.  Word on the street is the Penfield is looking to secure financing from HUD since, no one is really lending money for constructions projects right now, especially real estate related.

Farmers Market Flats.  City approval?  Heck, the hole is already dug!  This would only provide jobs for about a year and a half, but the city would gain an indoor farmers' market, and about 48 units of housing.  I've heard that the city is a little embarrassed about the project, and wants to fill in the hole.  Maybe we should build it instead?

West Side Flats.  Similar to FMF, this project has been fully approved by the city, all it needs is some loving from Uncle Sam.

ADC Building.  Opus had grand plans for this site, right on the river.  Mostly office/hotel, but this would be a great addition to the city.  As far as being shovel ready, I think this one is a long shot.

I've heard from two different people now that River Park is having issues with the roof and a water infiltration problem.  Personally, I would rate water as the number one issue any condo building has to deal with.  Water likes to make its way to the ground, and the taller the building, the bigger the issue.  River Park Lofts fortunately is only 7 stories tall, so the water doesn't have far to go.  But if the problem isn't dealt with in an efficient manner, it can become a lasting problem.

I have no doubt that the management company takes water issues seriously and this time of year makes it difficult to trace leaks to their source.  With that being said, from the people that I have talked to, it sounds like an issue related to the decks that are installed on the roof, and where they meet the rubber membrane.

It's a sad day in Downtown, as I learned that we lost one our best city boosters on February 5th.  John was previously the director at CapitolRiver Council, and more recently, he started “The Exchange Group”.  John wanted to see Saint Paul be the vibrant, energetic city he knew it could be.

John has left us entirely too early and his family is in my thoughts in this difficult time.

John, you will be missed by many.

With Aeon's purchase of the Renaissance Box in the Wacouta Commons neighborhood complete, they have now teamed up with the University of Minnesota’s Center for Sustainable Building Research and the Green Institute.  Not to the level of LEED certified, but many green principles will be incorporated into the design on the apartment building.  Aeon plans to have the building as affordable one and two bedroom homes, much like the Crane/Ordway building they operate now.

The smaller building that is attached to the west side of the main building will be removed and green space added.  As progress moves along, I will post an update.