Weekly Market Report

For the week ending March 21, pending sales in the Twin Cities were 13.0 percent higher than the same week last year, while the number of new listings on the market was basically flat. Over the last three months, there have been approximately 1,200 more signed purchase agreements than there were a year ago and 3,000 fewer new listings. During this time, 58.1 percent of pending sales have been lender-mediated foreclosures and short sales, while 37.1 percent of new listings have been lender-mediated. The fact that the share of lender-mediated sales easily exceeds the share of new lender-mediated listings is a hopeful sign.

New buyers entering this market will be met with strong affordability but will have less to choose from compared to previous years. There are currently 26,064 homes for sale in the metro area, which is down 15.7 percent and 4,840 units from this time in 2008.

Frequently Asked Questions about the $8,000 Real Estate Tax Credit

I'm getting lots of requests for this. Here are the most frequently asked questions about the $8,000 tax credit. Please call or write if you have any other questions not answered here or if you just want to see how you can take advantage. bakruse@cbburnet.com / 612-237-6853


In 2008, Congress enacted a $7500 tax credit designed to be an incentive for first-time homebuyers to purchase a home. The credit was designed as a mechanism to decrease the over-supply of homes for sale. For 2009, Congress has increased the credit to $8000 and made several additional improvements. This revised $8000 tax credit applies to purchases on or after January 1, 2009 and before December 1, 2009. Tax Credits -- The Basics

1. What’s this new homebuyer tax incentive for 2009?
The 2008 $7500, repayable credit is increased to $8000 and the repayment feature is eliminated for 2009 purchasers. Any home that is purchased for $80,000 or more qualifies for the full $8000 amount. If the house costs less than $80,000, the credit will be 10% of the cost. Thus, if an individual purchased a home for $75,000, the credit would be $7500. It is available for the purchase of a principal residence on or after January 1, 2009 and before December 1, 2009.

2. Who is eligible?
Only first-time homebuyers are eligible. A person is considered a first-time buyer if he/she has not had any ownership interest in a home in the three years previous to the day of the 2009 purchase.

3. How does a tax credit work?
Every dollar of a tax credit reduces income taxes by a dollar. Credits are claimed on an individual’s income tax return. Thus, a qualified purchaser would figure out all the income items and exemptions and make all the calculations required to figure out his/her total tax due. Then, once the total tax owed has been computed, tax credits are applied to reduce the total tax bill. So, if before taking any credits on a tax return a person has total tax liability of $9500, an $8000 credit would wipe out all but $1500 of the tax due. ($9,500 - $8000 = $1500)

4. So what happens if the purchaser is eligible for an $8000 credit but their entire income tax liability for the year is only $6000?
This tax credit is what’s called “refundable” credit. Thus, if the eligible purchaser’s total tax liability was $6000, the IRS would send the purchaser a check for $2000. The refundable amount is the difference
FIRST-TIME HOMEBUYER TAX CREDIT
between $8000 credit amount and the amount of tax liability. ($8000 - $6000 = $2000) Most taxpayers determine their tax liability by referring to tables that the IRS prepares each year.

5. How does withholding affect my tax credit and my refund?
A few examples are provided at the end of this document. There are several steps in this calculation, but most income tax software programs are equipped to make that determination.

6. Is there an income restriction?
Yes. The income restriction is based on the tax filing status the purchaser claims when filing his/her income tax return. Individuals filing Form 1040 as Single (or Head of Household) are eligible for the credit if their income is no more than $75,000. Married couples who file a Joint return may have income of no more than $150,000.

7. How is my “income” determined?
For most individuals, income is defined and calculated in the same manner as their Adjusted Gross Income (AGI) on their 1040 income tax return. AGI includes items like wages, salaries, interest and dividends, pension and retirement earnings, rental income and a host of other elements. AGI is the final number that appears on the bottom line of the front page of an IRS Form 1040.

8. What if I worked abroad for part of the year?
Some individuals have earned income and/or receive housing allowances while working outside the US. Their income will be adjusted to reflect those items to measure Modified Adjusted Gross Income (MAGI). Their eligibility for the credit will be based on their MAGI.

9. Do individuals with incomes higher than the $75,000 or $150,000 limits lose all the benefit of the credit?
Not always. The credit phases-out between $75,000 - $95,000 for singles and $150,000 - $170,000 for married filing joint. The closer a buyer comes to the maximum phase-out amount, the smaller the credit will be. The law provides a formula to gradually withdraw the credit. Thus, the credit will disappear after an individual’s income reaches $95,000 (single return) or $170,000 (joint return). For example, if a married couple had income of $165,000, their credit would be reduced by 75% as shown: Couple’s income $165,000 Income limit 150,000 Excess income $15,000 The excess income amount ($15,000 in this example) is used to form a fraction. The numerator of the fraction is the excess income amount ($15,000). The denominator is $20,000 (specified by the statute).
In this example, the disallowed portion of the credit is 75% of $8000, or $6000 ($15,000/$20,000 = 75% x $8000 = $6000) Stated another way, only 25% of the credit amount would be allowed. In this example, the allowable credit would be $2000 (25% x $8000 = $2000)

10. What’s the definition of “principal residence?”
Generally, a principal residence is the home where an individual spends most of his/her time (generally defined as more than 50%). It is also defined as “owner-occupied” housing. The term includes single-family detached housing, condos or co-ops, townhouses or any similar type of new or existing dwelling. Even some houseboats or manufactured homes count as principal residences.

11. Are there restrictions on the location of the property?
Yes. The home must be located in the United States. Property located outside the US is not eligible for the credit.

12. Are there restrictions related to the financing for the mortgage on the property?
In 2009, most financing arrangements are acceptable and will not affect eligibility for the credit. Congress eliminated the financing restriction that applied in 2008. (In 2008, purchasers were ineligible for the $7500 credit if the financing was obtained by means of mortgage revenue bonds.) Now, mortgage-revenue bond financing will not disqualify an otherwise-eligible purchaser. (Mortgage revenue bonds are tax-exempt bonds issued by a state housing agency. Proceeds from the bonds must be used for below market loans to qualified buyers.)

13. Do I have to repay the 2009 tax credit?
NO. There is no repayment for 2009 tax credits.

14. Do 2008 purchasers still have to repay their tax credit?
YES. The $7500 credit in 2008 was more like an interest-free loan. All eligible purchasers who claimed the 2008 credit will still be required to repay it over 15 years, starting with their 2010 tax return. Some Practical Questions

15. How do I apply for the credit?
There is no pre-purchase authorization, application or similar approval process. All eligible purchasers simply claim the credit on their IRS Form 1040 tax return. The credit will be reflected on a new Form 5405 that will be attached to the 1040. Form 5405 can be found at www.irs.gov.

16. So I can’t use the credit amount as part of my downpayment?
No. Congress tried hard to devise a mechanism that would make the funds available for closing costs, but found that pre-funding would require cumbersome processes that would, in effect, bring the IRS into the purchase and settlement phase of the transaction.

17. So there’s no way to get any cash flow benefits before I file my tax return?
Yes, there is. Any first-time homebuyers who believe they are eligible for all or part of the credit can modify their income tax withholding (through their employers) or adjust their quarterly estimated tax payments. Individuals subject to income tax withholding would get an IRS Form W-4 from their employer, follow the instructions on the schedules provided and give the completed Form W-4 back to the employer. In many cases their withholding would decrease and their take-home pay would increase. Those who make estimated tax payments would make similar adjustments. Some “Real World” Examples

18. What if I purchase later this year but can’t get to settlement before December 1?
The credit is available for purchases before December 1, 2009. A home is considered as “purchased” when all events have occurred that transfer the title from the seller to the new purchaser. Thus, closings must occur before December 1, 2009 for purchases to be eligible for the credit.

19. I haven’t even filed my 2008 tax return yet. If I buy in 2009, do I have to wait until next year to get the benefit of the credit?
You’ll have a helpful choice that might speed up the process. Eligible homebuyers who make their purchase between January 1, 2009 and December 1, 2009 can treat the purchase as if it had occurred on December 31, 2008. Thus, they can claim the credit on their 2008 tax return that is due on April 15, 2009. They actually have three filing options. If they purchase between January 1, 2009 and April 15, 2009, they can claim the $8000 credit on the 2008 return due on April 15. They can extend their 2008 income-tax filing until as late as October 15, 2009. (The IRS grants automatic extensions, but the taxpayer must file for the extension. See www.irs.gov for instructions on how to obtain an extension.) If they have filed their 2008 return before they purchase the home, they may file an amended 2008 tax return on Form 1040X. (Form 1040X is available at www.irs.gov)
Of course, 2009 purchasers will always have the option of claiming the credit for the 2009 purchase on their 2009 return. Their 2009 tax return is due on April 15, 2010.

20. I purchased my home in early 2009 before the stimulus bill was enacted. I claimed a $7500 tax credit on my 2008 return as prior law had permitted. Am I restricted to just a $7500 credit?
No, you would qualify for the $8000 credit. Eligible purchasers who have already claimed the $7500 credit on a 2008 return for a 2009 purchase may file an amended return (IRS Form 1040X) for the 2008 tax year. This amended return will enable them to obtain the additional $500 credit amount.

21. If I claim my 2009 $8000 credit on my 2008 tax return, will I have to repay the credit just as the 2008 credits are repaid?
No. Congress anticipated this confusion and has made specific provision so that there would be no repayment of 2009 credits that are claimed on 2008 returns.

22. I made an eligible purchase of a principal residence in May 2008 and claimed the $7500 credit on my 2008 tax return. My brother, who has never owned a home, wishes to purchase a partial interest in the home this spring and move in. Will he qualify for the $8000 credit, as well? No. Any purchase of a principal residence (or interest in a principal residence) from a related party such as a sibling, parent, grandparent, aunt or uncle is ineligible for the tax credit. Since you and your brother are related in this way, he cannot qualify for the credit on any portion of the home that he purchases from you, even if he is a first-time homebuyer.

23. I live in the District of Columbia. If I qualify as a first-time homebuyer, can I use both the $5000 DC credit and the $8000 credit?
No; double dipping is not allowed. You would be eligible for only the $8000 credit. This will be an advantage because of the higher credit amount, plus the eligibility requirements for the $8000 credit are somewhat more easily satisfied than the DC credit.

24. I know there is no repayment requirement for the $8000 credit. Will I ever have to repay any of the credit back to the government?
One situation does require a recapture payment back to the government. If you claim the credit but then sell the property within 3 years of the date of purchase, you are required to pay back the full amount of any credit, including any refund you received from it. A few exceptions apply. (See below, #24). Note that this same 3-year recapture rule applies, as well, to the $7500 credit available for 2008. This provision is designed as an anti-flipping rule.

25. What if I die or get divorced or my property is ruined in a natural disaster within the 3 years?
The repayment rules are eased for many circumstances. If the homeowner who used the credit dies within the first three years of ownership, there is no recapture. Special rules make adjustments for people who sell homes as part of a divorce settlement, as well. Similarly, adjustments are made in the case of a home that is part of an involuntary conversion (property is destroyed in a natural disaster or subject to condemnation by eminent domain by an authorized agency) within the first three years.

26. I have a home under construction. Am I eligible for the credit?
Yes, so long as you actually occupy the home before December 1, 2009. WITHHOLDING EXAMPLES: Note: The impact of estimated tax payments would be the same. Situation 1: Sally plans her withholding so that her withholding is as close as possible to what she anticipates as her income tax liability for the year. When she fills out her 1040, her liability is $6000. She has had $6000 withheld from her paycheck. She also qualifies for the $8000 homebuyer credit. Result: Sally’s withholding satisfies her tax liability and reduces it to zero. She will receive a refund of the full $8000. Situation 2: Nick and Nora file a joint return. Nick is self-employed and makes estimated payments; Nora has taxes withheld from her salary. When they compute their taxes, their combined withholding and estimated tax payments are $11,000. Their income tax liability is $9800. They also qualified as first-time homebuyers and are eligible for the $8000 refundable tax credit. Result: Ordinarily, their combined estimated tax payments and withholding would make them eligible for a refund of $1200 ($11,000 - $9800 = $1200). Because they are eligible for the refundable tax credit as well, they will receive a refund of $9200 ($1200 income tax refund + $8000 refundable tax credit = $9200) Situation 3: Cesar and LuzMaria both have income taxes withheld from their salaries and file a joint return. When they file their income tax return, their combined withholding is $5000. However, their total tax liability is $7200, generating an additional income tax liability of $2200 ($7200 - $5000). They also qualify for the $8000 first-time homebuyer tax credit. Result: Cesar and LuzMaria have been under-withheld by $2200. Ordinarily, they would be required to pay the additional $2200 they owe (plus any applicable interest and penalties). Because they are eligible for the refundable homebuyer tax credit, the credit will cover the $2200 additional liability. In addition, they will receive an income tax refund of $5800 ($8000 - $2200 = $5800). If they owed penalties and/or interest, that amount would reduce the refund.

Taken From NAR

American Recovery and Reinvestment Act of 2009

American Recovery and Reinvestment Act of 2009


H.R. 1, the “American Recovery and Reinvestment Act of 2009,” passed the House on February 13, 2009, by a vote of 246 - 184. Later that day, the Senate also passed the bill by a vote of 60 - 38. The President signed the bill on February 17, 2009. The bill is a $780 billion package, with roughly 35% of the package devoted to tax cuts (mostly for 2009) and the rest to spending intended to occur in 2009 and 2010.


The mix of provisions of interest to REALTORS® changed frequently throughout the legislative process, with changes continuing to be made just hours before the measure was released prior to the vote. In the end, the elements of NAR’s housing agenda were included. Congress and the President have announced that a finance and housing package (including tax provisions) will be the next “big” initiative, so Congress has by no means finished its work as it affects the housing industry and REALTORS®.

The bill includes the following provisions:

Homebuyer Tax Credit

FHA, Fannie Mae and Freddie Mac Loan Limits

Neighborhood Stabilization

Commercial Real Estate

Rural Housing Service

Low Income-Housing Grants

Tax Exempt Housing Bonds

Energy Efficient Housing Tax Credits & Grants

Transportation Investments

Broadband Deployment

Homebuyer Tax Credit – The bill provides for a $8,000 tax credit that would be available to first-time home buyers for the purchase of a principal residence on or after January 1, 2009 and before December 1, 2009. The credit does not require repayment. Most of the mechanics of the credit will be the same as under the 2008 rules: the credit will be claimed on a tax return to reduce the purchaser's income tax liability. If any credit amount remains unused, then the unused amount will be refunded as a check to the purchaser.




FHA, Fannie Mae and Freddie Mac Loan Limits -The bill reinstates last year's 2008 loan limits for FHA, Freddie Mac, and Fannie Mae loans. These limits were equal to the greater of 125% of the 2008 local area median home price or $271,050 for FHA and $417,000 for Fannie and Freddie, with an overall maximum cap of $729,750. For the few areas where the 2009 limits were higher, the higher limits will apply. In addition, the bill includes language providing the HUD Secretary with the discretion, if warranted, to increase the loan limit for any “sub-area”, i.e.an area smaller than a county. The Secretary's discretion is again limited by the $729,750 cap. These 2009 limits will expire December 31, 2009.

The inclusion of these loan limit provisions in the final bill is a victory for homeowners, buyers and Realtors. While these new limits were included in version of the original stimulus bill approved by the House, the bill first approved by the Senate did not. NAR's Call for Action to both the House and the Senate prior to the final vote advocated strongly for the provisions which were then included in the final bill approved by both Chambers.


Neighborhood Stabilization – Division A, Title XII of the bill provides $2,000,000,000 in additional funding for the Neighborhood Stabilization Program (NSP). The NSP was created by the Housing and Economic Recovery Act of 2008 (Public Law 110–289) to provide grants through the Community Development Block Grant program (CDBG) to states and localities to address the problems that can be created when whole neighborhoods are decimated by foreclosures. The funds can be used to purchase, manage, repair and resell foreclosed and abandoned properties. In addition, the funds can also be used by states and localities to establish financing methods for the purchase and redevelopment of foreclosed properties. After purchase the homes must be used to assist individuals and families with incomes at or below 120% of area median income. Twenty-five percent of funds must be used for households with incomes at or below 50% of area median income. By leveraging their expertise in partnership with others from both the public and private sector, Realtors® in many communities have been making important contributions to their local communities’ neighborhood stabilization programs.


Commercial Real Estate - Commercial real estate is impacted primarily through those provisions of the bill focused on green building and energy efficiency as well as business tax incentives. H.R. 1 provides significant funds for state energy programs, which could be used to support commerical property owners' investment in energy efficiency upgrades while commercial property owners seeking to invest in alternative energy systems for onsite power generation would benefit from the Department of Energy Renewable Energy Loan Guarantees Program. Of particular benefit to small businesses would be certain provisions of the bill that provide tax relief in the area of bonus depreciation and capital expenditures, as well as the 5-Year carryback of net operating losses for small businesses.



Rural Housing Service

Rural Housing Service – The bill provides an additional $500 million to existing USDA Rural Housing programs. The RHS provides both a guaranteed loan program and a direct housing loan program for those meeting the program’s eligibility criteria. The direct loan program will receive $270 million while $230 million will be allocated for unsubsidized guaranteed loans. It has been reported that this level of funding would provide for an additional 192,000 homeowners.



Low Income Housing Grants - Allow states to trade in a portion of their 2009 low-income housing tax credits for Treasury grants to finance the construction or acquisition and rehabilitation of low-income housing, including those with or without tax credit allocations.



Tax-Exempt Housing Bonds - Tax-exempt interest earned on specified state and local bonds issued during 2009 and 2010 will not be subject to the Alternative Minimum Tax (AMT). In addition, financial institutions will have greater capacity to purchase tax-exempt state and local bonds.



Energy Efficient Housing Tax Credits & Grants - To promote green jobs and energy independence, ARRA invests significantly in efforts to make homes and buildings more energy efficient. The bill provides state and local governments with $6 billion in energy efficiency and conservation grants for energy audits, retrofits and financial incentives. Through 2010, homeowners will be able to claim a 30% tax credit (up from 10%) for purchases of new furnaces, windows and insulation. Another $5 billion will be available to modernize the nation’s electricity grid and install smart meters on homes that help to save consumers money. There is also $5 billion for weatherization assistance for low income households and $2 billion for federally assisted housing (section 8) efficiency efforts.



Transportation Investments - The bill provides $46.7 billion to states and localities for capital investment for surface transportation projects including highways, bridges, transit, and rail projects. NAR policy supports increased spending on the types of transportation infrastructure addressed in the bill with the exception of Amtrak and high-speed inter-city rail where NAR has no policy. These investments will tend to moderate traffic congestion and support a variety of transportation alternatives which will improve the quality of life of American communities and bolster the value of real estate.



Broadband Deployment - The bill creates $7.2 billion in grants to promote broadband deployment in unserved and underserved areas and for mapping the availability of broadband service in the U.S. Any entity is eligible to apply for a grant including municipalities, public/private partnerships and private companies as long as they comply with the grant conditions. The grants are subject to “network neutrality” requirements to ensure that broadband networks be free of restrictions on content, sites, or platforms, on the kinds of equipment that may be attached, and on the modes of communication allowed.

The bill also charges the FCC is with developing a national broadband plan that shall seek to ensure that all Americans have access to broadband capability and shall establish benchmarks for meeting that goal.

These provisions are important victories for REALTORS because increased broadband access promotes economic growth and expands opportunities for home sales. A 2006 Commerce Department report determined that property values are 6% higher in communities where broadband is available.

Supply Down in the Twin Cities Real Estate Market / $8,000 tax credit helping.

Supply of Homes Continues to Draw Back

We released our monthly stats news release last week. Here's what we said:

The Twin Cities housing market's oversupply of homes for sale is being reigned in at an accelerated pace. The number of new listings in February was 6,648, down 19.4 percent from February 2008. That's the 14th month of the last 15 to feature fewer new listings than the same month one year prior.

Alongside the jump in sales seen over the last nine months, this decline in new listings has brought the total inventory of homes for sale down to 25,825—a drop of 13.5 percent and 4,017 units from this time last year. Given the current rate of sales, this amounts to 7.8 months of supply, down from 9.2 months a year ago.

This is all good news for what has been an oversupplied market.

There were 3,314 pending sales in February, up 7.4 percent from last year. That's the ninth consecutive month of year-over-year increase. Of these newly signed purchase agreements, 60.5 percent were lender-mediated foreclosures or short sales. Closed sales finished at 2,070, up 3.0 percent.

The overall February median sales price of $150,000 is 23.1 percent lower than last February. Traditional properties, which exclude foreclosures and short sales, had a February median sales price of $205,875, down 5.2 percent from last year. For the same year-over-year comparison, lender-mediated homes had a median sales price of $125,000, down 20.6 percent.

With mortgage rates still down in the low 5 percent range, improved affordability and the recent announcement of a $8,000 tax credit for first-time home buyers who purchase a home in 2009, the stage is set for continued absorption of Twin Cities housing inventory in 2009.

Weekly Market Report for the Twin Cities

Has everyone remembered to "spring" forward? It looks like the Twin Cities Housing Market certainly has, as the new season has brought in an uptick in sales along with the warm weather. The market can only hope that "spring" fever is more than just a figure of speech.

Speaking of pending sales, while they have tapered off during the week ending March 14, there is no denying that since the new year began pending sales have steadily outperformed last year’s numbers. In fact, even with almost no increase in pending sales activity the 870 pending sales for the week are still 14.9 percent higher than last March at this time.

Total active listings are another story. While new listings for this period are only 13.9 percent lower than last year, active listings are down nearly 14.7 percent. This can be looked at in a positive light, however if you consider that pending sales, decreasing inventory and higher HAI (Housing Affordability Index) are all helping to get more people into homes throughout the new spring season. This coupled with the federal government’s tax credit efforts could give the Twin Cities housing market the added boost it needs to awaken and to realize the potential that is out there.

There are many other events that coincide with spring: spring training, spring fever, spring boards… ok, that last one isn't technically associated with the season. But with the Month’s Supply of Inventory for March down 15.2 percent over last year, agents across the Twin Cities can assist buyers in diving right into the market now that conditions are beginning to warm.

The Monthly Skinny Video Update

$8,000 Tax Credit / First Time Homebuyer Class

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New Homeowner Affordability and Stability Plan Designed to Help Up to Nine Million Households and Protect Home Values

New Homeowner Affordability and Stability Plan Designed to Help Up to Nine Million Households and Protect Home Values

The U.S. Treasury Department recently released details of the new Homeowner Affordability and Stability Plan, which is designed to help between seven and nine million households avoid foreclosure and stay in their homes at affordable mortgage rates. The plan also is designed to reduce housing inventory, preserve home values from further decline, and protect communities across the country.

The primary provisions of the plan are as follows:

Low-Cost Refinancing

The refinancing provision will help eligible homeowners who took out a conforming loan owned or guaranteed by Fannie Mae or Freddie Mac, who haven’t missed a payment, but whose loans are larger than the value of their home. Eligible homeowners will be able to refinance at a lower interest rate, which could reduce their mortgage payments by thousands of dollars a year. Borrowers can’t owe more than 105 percent of their home’s current value on their first mortgage, the property must be owner-occupied, and the homeowner must have enough income to make payments on the refinanced loan. This program starts immediately and is scheduled to end June 2010.


Loan Modifications

The loan modification program is available for homeowner occupants of single-family homes who are delinquent on their loan or at risk of default and who have loans at or below $729,750. A loan modification, unlike a refinance, changes the terms of the existing loan without writing a new one and can include a reduction in the interest rate or principal, an extension of the term of the loan, or a combination.

The program provides incentives to lenders to participate and to borrowers to pay their monthly balances on time. Lenders must agree to reduce the loan payments to no more than 38 percent of the homeowner’s monthly income. After that, the U.S. Treasury Department and lender would split the cost of reducing the monthly payment to 31 percent of the homeowner’s monthly income. This program, which begins immediately and ends Dec. 31, 2012, allows homeowners to have their loan modified once.


Lower Mortgage Rates through Fannie Mae and Freddie Mac

Using funds already authorized by Congress in 2008, the Treasury Department is increasing its funding commitment—from $100 billion to $200 billion—to Fannie Mae and Freddie Mac. The Treasury Department also will increase the size of Fannie Mae’s and Freddie Mac’s retained mortgage portfolios by $50 billion to $900 billion. This program is designed to help lower interest rates, spur more borrowing, and help ensure the strength and security of the mortgage market.

The National Association of REALTORS® (NAR) praised the Homeowner Affordability and Stability Plan. NAR President Charles McMillan said, “Allowing eligible homeowners to refinance or modify their loans will help millions of families avoid foreclosure. This, in turn, will support the housing recovery by slowing the growth in inventory due to foreclosures. Lowering unsold inventory will help stabilize home prices and values…Housing stabilization must be the key component of any federal recovery plan. Helping families keep their homes is critical to this effort and for the health of our economy and communities across the country.” -Coldwell Banker Burnet Hot Wire

Letter from Coldwell Banker Burnet President Robin Peterson

Our Spring Market Offers Great Opportunities for Home Buyers and Sellers
By Robin Peterson, President


As the days get longer and the temperatures become milder, we are all looking forward to the spring home buying and selling season. This is the time of the year when more interested buyers are out looking and we’re busier than ever. It is important to inform your customers of the benefits of entering the market now.

Buyer Benefits
Following are four compelling reasons why consumers should seriously consider buying a house this year:

The Economic Stimulus Plan Offers Great Incentives to Home Buyers

Under the American Recovery and Reinvestment Act of 2009, first-time home buyers can receive a tax credit for 10 percent of the value of a home, up to $8,000. This credit applies to consumers who purchase a home between Jan. 1 and Dec. 1 of this year, and they don’t have to pay it back unless they sell their home within three years. The ink has barely dried on this new legislation, and we’re already hearing from excited first-time buyers who want to take advantage of this opportunity.

There’s also good news for prospective buyers who are interested in obtaining financing through FHA, Fannie Mae or Freddie Mac. The bill reinstates the higher loan limits that were introduced last year for FHA, Fannie Mae and Freddie Mac. This makes these loans even more affordable for consumers, even in high-cost areas of the country.

There’s a Great Selection of Housing Options

There is still an excellent supply of homes for sale in all price ranges and styles. Buyers can choose from new construction, existing homes, starter homes, luxury properties, condominiums, co-ops, townhomes, and lofts.

Mortgage Rates Are At Historic Low

Our affordability is excellent because of the combination of moderating home prices and low mortgage interest rates. As of early March, the following rates were available: 30-year fixed-rate loans in the low 5 percent range and 15-year fixed-rate loans in the high 4 percent range. These rates are amazing, especially when you compare them to the 1970s when interest rates averaged 9 percent, and the 1980s when the average rate was 13 percent and went as high as 18 percent in 1984.

Affordability Is At a Record High

The Minneapolis Area Association of REALTORS® (MAAR) just reported that the Housing Affordability Index, which looks at home prices, interest rates and consumer income, increased significantly to 202—the best it’s ever been since MAAR began tracking affordability in 1990. This means that the current median income in our area is 202 percent of what’s necessary to qualify for the median-priced home. This affordability number is 35.4 percent higher than a year ago.


Seller Benefits
For homeowners who have been thinking about selling their home, now is a good time to put your house on the market.

Buyers are Motivated

The positive home buying environment is convincing more and more consumers to get off the sidelines and start seriously looking for a good home deal. In fact, buyers are more motivated than they’ve been for quite some time. In addition, the excellent affordability level and tax credit will allow many more first-time home buyers to enter the market, enjoy the benefits of home ownership, and stimulate the move-up market.

We’re seeing strong evidence of this increased buyer interest at the local level. In the last three months in the Twin Cities metro area, pending sales increased more than 16 percent compared to the same three-month period of 2008, according to MAAR.

There’s Less Seller Competition

Another good sign for prospective home sellers is the welcome moderation of the supply demand ratio, which means there’s fewer homes on the market and less competition among sellers. As of early March, the supply demand ratio was 6.38, or 6.38 houses for sale for every buyer. This is 21.8 percent lower than the 8.16 supply demand ratio posted a year earlier.


Position Yourself Well on Your Next Home

Some homeowners may be concerned that they may have to sell for less than they would have received a year ago. However, sellers should be well aware that they’ll have a beneficial outcome by purchasing in today’s pricing environment.

Combine all of these benefits and it’s clear that our housing market offers great opportunities for both buyers and sellers.

Why Buy Now

Top10 things Homebuyers Should know

Weekly Market Report

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Brr! Did the last snowstorm convince you that winter has not loosened its icy grip on the Twin Cities quite yet? It seems assured that March will lion in and lamb out, but the Twin Cities housing market is not expected to show the same pattern, as sales continue to climb upward when compared to last year's numbers.

Since December 2008, pending sales for the Twin Cities housing market have continued to outperform the same week for the prior year. For the week ending February 21, pending sales are up 12.4 percent vs. last year at this time. Deep freeze or not, buyers are showing a willingness to brave the temperatures for a deal.

New listings checked in at 1,558, which is 15 percent below 2008. Active listings are off from last year by about 4,000 (or 13.7 percent fewer) homes. Warmer weather tends to coincide with more activity, so we'll be watching new and active listings with much interest over the next few months.

Another number to watch is the Supply-Demand Ratio (SDR). This figure, representing how many homes are available per buyer, is down 21.8 percent to 6.38 homes per buyer compared to last year. That's now nine months in a row of lowered year-over-year SDR. With fewer active listings and a shrinking SDR, sellers may begin to feel some easement from the buyer's market wedge. It's too early to tell, but as many of our REALTOR® members are telling us, the increase in foot traffic is palpable