Tuesday, December 29, 2009

A Tale of Two Otsegos

June 16th, 2007
A Tale of Two Otsegos

Otsego is located northwest of the Twin Cities on the I-94 Corridor in
Wright County. But there are really TWO Otsegos.

EAST Otsego is accessed by 101 just north of Rogers, south of Elk River.
This is a great corridor. Yet another Target is being built in Otsego (plus
the Target in Rogers and Elk River). Lots of other retail between Rogers and
Elk River. And by next year 101 will be a full freeway with stop lights
eliminated from Rogers to Elk River.

There is so little lot inventory left in East Otsego that two major builders
are bringing on new projects this summer: Rottlund Homes with the 254 unit
Wildflower Meadows, just east of 101. And Boulder Creek by Hans Hagen Homes
with 183 units.

West Otsego is a different story. Access is tough, having to navigate the
maze by the Albertville Outlot mall to even get to West Otsego. Developments
under or around $200,000 are doing well. Over $250,000 hardly any activity
at all.

Two developments in West Otsego SEEMED like they were booming: Otsego
Preserve and Sunray Farms. SEEMED like is the operative word.

I was engaged by a client to do a new housing inventory study in Otsego. So
a got a list of active subdivisions and then examined the tax records for
each one to determine the sales. I tossed out sales to builders because
these lots are still out there in inventory. I also tossed out any sales to
builder finance companies because these aren't true sales either.

I considered a property "sold" when the completed home was sold to the
family that would live there.

When you buy a house and go to a closing the closing agent always asks you
"What address do you want your property tax statements to go to?" If its
your residence you're going to tell them the address of the house you just
bought. If you're buying the house for investment you tell the closer your
business or home address for the tax statements.

So that's the data I examine to determine if a house is really "sold". I did
see some sales in West Otsego to investors and saw some of these houses show
up in a website of Homes For Rent. The advertised rents were $1,300-$1,700
per month. I question the viability of the market supporting over a hundred
rental houses in Otsego in this rent range. I believe almost all of these
sales will be either resold or foreclosed and then resold. Especially when I
saw multiple sales by the same buyers. So these sales I excluded from my
"sold" count.

Two developments by the same developer in West Otsego really caught my eye:

Sunray Farms had 65 recorded homes sales from November 2004 to now. I could
only confirm that 52 were actual home buyers.

The real shocker was Otsego Preserve! 70 recorded home sales from April 27th
, 2005 till now in the $300,000 range. Way outperforming similar
developments in this price range in West Otsego.

Otsego Preserve must be a lonely neighborhood to live in:

I could only confirm 5 sales of the 70 were actual residents.

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