Market Update

Well, the federal home buyer tax credit we've been talking about for the last 18 months has finally expired. All good (or bad, depending on your opinion) things must come to an end. Unfortunately, we won't have definitive evidence of how wild the final days of the credit were for another week as we wait for activity to be recorded in the MLS system.

In the meantime, we can still see that home sellers were far more active than home buyers for the week ending April 24, continuing a recent trend. There were 2,147 new listings during the week, an increase of 19.1 percent from a year ago. That's the seventh week of the last eight to show double-digit percentage increases in new listings.

Signed purchase agreements were also up but in a less extreme fashion. The 1,184 pending sales for the week were a 9.8 percent increase from a year ago.

As a result of the growth in new listings, we're projecting that the Supply-Demand Ratio for May 2010 will be 5.69 homes per buyer, a healthy balanced number but a smidge higher than the 5.23 mark of May 2009. Why point out such a subtle difference? Because that would be the first time we have seen a year-over-year increase since June 2008.

Time for The Tax Fights to Begin

There was a time when real estate values where on an endless escalation, household net worth was expanding, government coffers were getting fat, and all had no income restraints… or so it seemed.
Well, that was then and now is now. Consumers and homeowners know the reality of today but government is just now waking to reality.
One of the first skirmishes is about to begin on a local level - city and county sales and property tax bases. Sales and property taxes are the base line of local governments' budgets. Historically, local government has had little difficulty in meeting budgets. If they needed money they could just raise taxes, thus even if they were short this year their bonds were golden in the credit markets. But, oops something happened.
Their budget base lines increased with the property tax valuations of real property during the boom years. Many of these entities increased their sales taxes to cover expansion and debt service at the same time and now their baseline is falling faster than low tide at full moon.

SALES TAX

The first income stream to fall off is sales taxes… consumers who are losing income and net worth through job loss or shrinking home equity are not able or willing to spend as freely now as during boom times, so sales tax income is shrinking.

PROPERTY TAX

Secondly, the housing boom came to a screeching halt and values began to recede. Real Property tax income is tied to property values as the sale is recorded, triggering a reassessment of tax for that property. Thus, government spending increased in line with the increase tax valuation of properties and commitments were made against anticipated higher income streams.
While lower sale tax revenues are felt immediately. Property taxes revenues can lag for several months or even years, but they will also shrink. The tax revenue is tied to either the sale of a property or a reassessment is triggered by property owners who feel the values are lower than the earlier value used.
If the property value has truly fallen then it will benefit the owner to appeal the assessment with the appropriate agency and reduce their property tax bill. Sufficient time, nationally three to four years, has elapsed to establish a lower value for many property owners and the wave of appeals is about to begin.
This will further exacerbate the financial conditions of government and this time they cannot resort to raising property or sales taxes to raise revenue. We will soon be seeing the effects of cut spending, raising "fees" and the skirmishes in the property tax arena.

Market Activity

As winter continues its streak of cold and snow, sales activity in the Twin Cities housing market is moving along at a pace you'd expect for the season and at about the same pace as a year ago. Pending sales for the week ending January 30 came in at 650, down very slightly from the mark of 673 seen during the same week last year. Over the last three months, there have been 7,038 signed purchase agreements, up a sliver-sized 0.7 percent from a year ago.

Despite the tax credit being made available to current homeowners, new listing activity has yet to show any noticeable jump. The 1,584 new listings for the most recent reporting week represent a dip of 3.1 percent from a year ago. Total inventory of available homes is still down from last year by 16.5 percent.

In related news, Days on Market Until Sale is still dropping while the Percent of Original List Price Received at Sale is still growing. While that's good news on both fronts for home sellers in general, different price points and neighborhoods are experiencing dramatically different market conditions.

The Skinny on the Twin Cities Real Estate Market

Get up to the minute information on the Minneapolis & St. Paul Real Estate Market right here:
http://bit.ly/bD7Zw7

New Home Buyer Credit Form Released

If you were a new home buyer and are looking where to go to get the forms for your tax credit, go here: http://bit.ly/9TXpVe

Tax Credit Extension is Approved!

Here is everything you need to know about the $8000 & $6500 Tax Credits Now Available: http://www.edina-realestate.com/Nav.aspx/Page=Http://www.edinarealty.com%2fContent%2fContent.aspx%3fContentID%3d522920

Extension Passed For 1st Time Buyers

Here is a nice comparison between the old & new tax credit:
http://www.realtor.org/fedistrk.nsf/files/government_affairs_tax_credit_ext_chart_110409.pdf/$FILE/government_affairs_tax_credit_ext_chart_110409.pdf