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Wednesday, April 29, 2009
Weekly Market Report
Low mortgage rates, high affordability and government programs designed to encourage home purchases are continuing to spur home sales this spring despite an iffy economy. The week ending April 18 was the fourth consecutive week of pending sales activity that was more than 20 percent higher than during the same week in 2008. There were 1,083 pending sales for the week, up 21.3 percent from this time last year. It was also the third consecutive week of 1,000-plus unit sales, a first-time occurrence since 2006.
All these sales are quickly whisking inventory off the market at a time when new listing inventory is not growing at its typically robust spring rate. The number of total homes for sale is down 18.4 percent from a year ago at 26,318. As a result, the gap between this year's supply of homes and that of previous years continues to grow.
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All these sales are quickly whisking inventory off the market at a time when new listing inventory is not growing at its typically robust spring rate. The number of total homes for sale is down 18.4 percent from a year ago at 26,318. As a result, the gap between this year's supply of homes and that of previous years continues to grow.
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Thursday, April 23, 2009
Wednesday, April 22, 2009
Foreclosure Market in the Twin Cities / 1st Quarter Update
Foreclosures and short sales
in the Twin Cities Housing Market
Q1 2009 Update
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in the Twin Cities Housing Market
Q1 2009 Update
Click Here To See The Full Report
Tuesday, April 21, 2009
Weekly Market Report
Weekly Market Activity Report
Hopeful signs of a Twin Cities housing market recovery carry on thanks to a combination of no growth in the spring supply of homes for sale and still-improving sales figures.
Helping to keep inventory down is slow new listing activity, a metric that has been sluggish all year. For the week ending April 11, there were 20.7 percent fewer new listings than there were during the same week in 2008. Pending sales are still trending in the opposite direction, up 21.9 percent in year-over-year numbers to 1,046 for the week. That's only the second week of 1,000-plus pending sales or more since May 2007. If these two metrics persist, the market could be in for some serious re-balancing.
With the Housing Affordability Index reaching 218—an increase of 40.8 percent over last year—it seems to be an awfully good time for buyers to get off the wall and on the dance floor...being mindful that 29.1 percent of the dance partners are lender-mediated.
If you own a home in Minnesota YOU MUST READ THIS NOW!!! (potential tax implications)
Dear Minnesota REALTOR® and REALTOR® Clients,
On Monday, the Minnesota House of Representatives Tax Committee released a "delete all amendment" to HF2323 and added provisions that are negative for real estate in the Omnibus Tax Bill. Authored by DFL Representative Ann Lenczewski, it contains a number of tax law modifications that hurt all Minnesota home owners. We need you to review and distribute this "Call to Action" to your clients, customers and sphere of influence.
BACKGROUND: The Minnesota legislature and many other state governments find themselves in a situation familiar to many Minnesota households – their expenses have outpaced their revenue. Whether it is your family budget, a business budget or government budget, when expenses are higher than income you have to make choices. Since 1992, even with all of the Budget Shortfalls Minnesota has faced, the spending has increased each and every year. In fact, Minnesota State spending has gone from $14.5 billion in 1992/93 to $34.6 billion in 2008/09 – that’s a whopping 138 percent increase.
To resolve the budget shortfall, legislators have a number of options: 1) raise taxes to cover the government spending; 2) reduce spending to equalize the revenue projected; 3) raise revenue and reduce spending. The House/Senate DFL plans focus on option 3 – raise taxes and reduce spending. Governor Pawlenty has proposed a plan focused on reducing spending and raising revenue without raising taxes.
HOUSE TAX BILL HURTS REAL ESTATE. The DFL House Tax Plan raises revenue by cutting a number of income tax deductions. Of significant concern to Minnesota REALTORS® and homeowners, the DFL House plan eliminates two major real estate tax deductions: the Mortgage Interest Deduction and Real Estate Property Taxes. The bill also eliminates provisions of the Relative Homestead Tax.
Elimination of Mortgage Interest Deduction (MID)– a feature of the tax code since 1933, the MID has helped numerous generations achieve the American Dream of owning a home. A significant public policy objective for decades, homeownership stabilizes families, neighborhoods and communities. The House DFL Tax Bill eliminates the MID for homeowners and replaces it with a "housing credit" for qualified homeowners. The maximum credit is $420, which is equal to 7 percent (7%) of up to $6,000 of mortgage interest paid during the taxable year. However, no credit is applied to the first $4,000 of interest paid. Therefore, a homeowner must pay at least $10,000 in MID in order to receive the full $420 credit. As an example, if a homeowner has mortgage interest of $8,000 in the tax year, the credit equals $280. ($8,000 - $4,000 = $4,000 x 7% = $280).
This provision hurts young families disproportionately because mortgage debt loads are highest when people are establishing their households. This provision changes the financial plans numerous families have made when purchasing a home and increases the financial difficulties many are facing during this economic downturn. At a time when housing is finally getting a financial foothold why eliminate a tax provision that has helped millions of families achieve the "American Dream?"
Real Estate Property Tax Deductibility–This public policy provision has been included in the tax code since 1933 and allows taxpayers to deduct property taxes paid from their income. The House DFL Tax Bill eliminates the deductibility of real estate property taxes at a time when local property taxes continue to increase faster than Minnesotan’s income.
Relative Homestead – If you own identical houses, with identical values, with identical tax rates you would assume you would pay identical taxes – Right? Not if the House DFL Tax Bill becomes law. In a provision of the bill, authored by a DFL legislator, families that provide housing to other family members will pay more taxes on the second home. The goal of the provision, as stated by the legislator, is to stop parents from buying homes for their college students. MNAR pointed out that this is a small piece of the overall program and instead the proposal will be hurting families trying to assist other family members who may have gone through job loss, divorce or other financial difficulties. Isn’t it better to have families provide for families instead of government?
These provisions have been designed according to the author to make the Minnesota tax system more progressive and to raise revenue to fill the state’s pending budget shortfall. Because real estate related public policy provisions of the tax code benefit the upper 50% of tax payers – Top 50% begins at $40,061 according to the Tax Incidence Study (http://www.taxes.state.mn.us/legal_policy/other_supporting_content/2009_tax_incidence_study_links.pdf ). At a time when the housing market is beginning to stabilize, this House DFL sponsored proposal sends the wrong message to struggling Minnesota households.
The Minnesota Association of REALTORS® has a long and respected position that government, at all levels, needs to "Live Within Your Means." Just like families sitting around the kitchen table trying to make ends, Minnesota's legislative body should not be adding to the long-term financial burden of Minnesota homeowners. The House DFL Tax Bill penalizes families who have invested in the American Dream and provide for the backbone for stable communities.
ACTION REQUEST: To fight this unbelievable proposal we are asking that you take three steps:
Please contact your legislator and let them know how you feel about this proposal. Please find attached a list with legislator contact information or use this link: http://www.leg.state.mn.us/leg/Districtfinder.asp
Forward this email to your clients, customers and friends. Let them know what is being proposed and give them the web address above to review the bill.
Go the extra mile and CALL your legislator about this tax bill. Let him/her know your concerns and how it will impact your clients, your family and your business. Let your Representative know that it is time for our elected officials to "LIVE WITHIN YOUR MEANS" by prioritizing spending and not raising taxes.
You can access the bill summary (48 pages) at: http://www.house.leg.state.mn.us/hrd/bs/86/HF2323.html
Thank you in advance for all of your assistance,
Chris Galler, Christine Berger and Heather Mavencamp
On Monday, the Minnesota House of Representatives Tax Committee released a "delete all amendment" to HF2323 and added provisions that are negative for real estate in the Omnibus Tax Bill. Authored by DFL Representative Ann Lenczewski, it contains a number of tax law modifications that hurt all Minnesota home owners. We need you to review and distribute this "Call to Action" to your clients, customers and sphere of influence.
BACKGROUND: The Minnesota legislature and many other state governments find themselves in a situation familiar to many Minnesota households – their expenses have outpaced their revenue. Whether it is your family budget, a business budget or government budget, when expenses are higher than income you have to make choices. Since 1992, even with all of the Budget Shortfalls Minnesota has faced, the spending has increased each and every year. In fact, Minnesota State spending has gone from $14.5 billion in 1992/93 to $34.6 billion in 2008/09 – that’s a whopping 138 percent increase.
To resolve the budget shortfall, legislators have a number of options: 1) raise taxes to cover the government spending; 2) reduce spending to equalize the revenue projected; 3) raise revenue and reduce spending. The House/Senate DFL plans focus on option 3 – raise taxes and reduce spending. Governor Pawlenty has proposed a plan focused on reducing spending and raising revenue without raising taxes.
HOUSE TAX BILL HURTS REAL ESTATE. The DFL House Tax Plan raises revenue by cutting a number of income tax deductions. Of significant concern to Minnesota REALTORS® and homeowners, the DFL House plan eliminates two major real estate tax deductions: the Mortgage Interest Deduction and Real Estate Property Taxes. The bill also eliminates provisions of the Relative Homestead Tax.
Elimination of Mortgage Interest Deduction (MID)– a feature of the tax code since 1933, the MID has helped numerous generations achieve the American Dream of owning a home. A significant public policy objective for decades, homeownership stabilizes families, neighborhoods and communities. The House DFL Tax Bill eliminates the MID for homeowners and replaces it with a "housing credit" for qualified homeowners. The maximum credit is $420, which is equal to 7 percent (7%) of up to $6,000 of mortgage interest paid during the taxable year. However, no credit is applied to the first $4,000 of interest paid. Therefore, a homeowner must pay at least $10,000 in MID in order to receive the full $420 credit. As an example, if a homeowner has mortgage interest of $8,000 in the tax year, the credit equals $280. ($8,000 - $4,000 = $4,000 x 7% = $280).
This provision hurts young families disproportionately because mortgage debt loads are highest when people are establishing their households. This provision changes the financial plans numerous families have made when purchasing a home and increases the financial difficulties many are facing during this economic downturn. At a time when housing is finally getting a financial foothold why eliminate a tax provision that has helped millions of families achieve the "American Dream?"
Real Estate Property Tax Deductibility–This public policy provision has been included in the tax code since 1933 and allows taxpayers to deduct property taxes paid from their income. The House DFL Tax Bill eliminates the deductibility of real estate property taxes at a time when local property taxes continue to increase faster than Minnesotan’s income.
Relative Homestead – If you own identical houses, with identical values, with identical tax rates you would assume you would pay identical taxes – Right? Not if the House DFL Tax Bill becomes law. In a provision of the bill, authored by a DFL legislator, families that provide housing to other family members will pay more taxes on the second home. The goal of the provision, as stated by the legislator, is to stop parents from buying homes for their college students. MNAR pointed out that this is a small piece of the overall program and instead the proposal will be hurting families trying to assist other family members who may have gone through job loss, divorce or other financial difficulties. Isn’t it better to have families provide for families instead of government?
These provisions have been designed according to the author to make the Minnesota tax system more progressive and to raise revenue to fill the state’s pending budget shortfall. Because real estate related public policy provisions of the tax code benefit the upper 50% of tax payers – Top 50% begins at $40,061 according to the Tax Incidence Study (http://www.taxes.state.mn.us/legal_policy/other_supporting_content/2009_tax_incidence_study_links.pdf ). At a time when the housing market is beginning to stabilize, this House DFL sponsored proposal sends the wrong message to struggling Minnesota households.
The Minnesota Association of REALTORS® has a long and respected position that government, at all levels, needs to "Live Within Your Means." Just like families sitting around the kitchen table trying to make ends, Minnesota's legislative body should not be adding to the long-term financial burden of Minnesota homeowners. The House DFL Tax Bill penalizes families who have invested in the American Dream and provide for the backbone for stable communities.
ACTION REQUEST: To fight this unbelievable proposal we are asking that you take three steps:
Please contact your legislator and let them know how you feel about this proposal. Please find attached a list with legislator contact information or use this link: http://www.leg.state.mn.us/leg/Districtfinder.asp
Forward this email to your clients, customers and friends. Let them know what is being proposed and give them the web address above to review the bill.
Go the extra mile and CALL your legislator about this tax bill. Let him/her know your concerns and how it will impact your clients, your family and your business. Let your Representative know that it is time for our elected officials to "LIVE WITHIN YOUR MEANS" by prioritizing spending and not raising taxes.
You can access the bill summary (48 pages) at: http://www.house.leg.state.mn.us/hrd/bs/86/HF2323.html
Thank you in advance for all of your assistance,
Chris Galler, Christine Berger and Heather Mavencamp
Friday, April 17, 2009
Tuesday, April 14, 2009
Home Sales Heat Up
Home Sales Heat Up
We released our March 2009 stats news release last Friday. Here's what we said:
Twin Cities home sales kicked into a whole new gear in March, and this appears to be more than just a seasonal shift. The 4,407 pending sales in March 2009 were up 21.3 percent from March 2008. That's ten consecutive months of year-over-year increases in pending sales and the largest such increase since December—another month in which mortgage rates dropped precipitously. First quarter pending sales are up 13.7 percent from 2008, a jump of 1,267 units.
Of the month's pending sales, 53.5 percent were lender-mediated foreclosures and short sales—down from the last two months. The median sales price for all properties of $154,125 in March is down 22.9 percent from a year ago, skewed heavily downward by the increased prevalence of foreclosures and short sales. The median March sales price of traditional homes was $215,000, down 2.3 percent from a year ago. Lender-mediated homes posted a March figure of $122,000, down 23.0 percent from a year ago.
Three key barometers of market recovery showed signs of hope in March:
The March Average Days on Market Until Sale is 9.0 percent lower than a year ago.
The March Percent of Original List Price Received at Sale is 0.6 percent higher than a year ago.
The April Supply-Demand Ratio, which measures the number of houses for sale per buyer, is 23.5 percent lower than a year ago.
An uptick in sales over the last ten months has combined with a decline in new listings to draw down the total number of houses for sale. There are 26,104 homes for sale in the Twin Cities, down 14.8 percent and 4,548 units from one year ago. -MAAR
Weekly Market Report
It's becoming a wild and active spring for the Twin Cities housing market. First, pending sales ought to give REALTORS® some joy in their Easter baskets, with 1,004 reported for the week ending April 4—a 28.7 percent increase over last year and the best single week since May 2007. New listings went skyward compared to last week with 2,055 for the week ending April 4, but they remain 11.2 percent behind the same week a year ago.The recent jump in sales is bringing the supply of available homes down even further. There are currently 26,085 homes on the market in the region—17.5 percent below this time last year and good for 7.7 months of supply.
Finally, like Warren Robinett in Adventure, this week's WMAR has its own Easter egg tucked away. The Housing Affordability Index for April has grown to 218, which means the median family income is 218 percent of what's necessary to qualify for the median priced home. For those of you scoring at home, that's a 40.8 percent increase over where we stood last year at this time and is 77.3 percent over our low point of 123 in July 2006. We have to bear in mind that increased lender-mediated activity makes that number supernaturally high.
All in all, dropping prices, low mortgage rates and government incentive programs for home buyers are making this a spring to remember. -MAAR
Thursday, April 2, 2009
Wednesday, April 1, 2009
Great Wall Street Journal Real Estate Article
By JAMES R. HAGERTY
The Federal Reserve is going to extraordinary lengths to push down long-term interest rates, including home-mortgage rates. But those hoping mortgage rates will fall sharply from current levels, already historically low, may be disappointed.
Mortgage firms Thursday were quoting rates averaging 4.75% on 30-year fixed-rate mortgages, according to Zillow.com, a real-estate information service. That is down from more than 5% two days ago and about 6% in mid-November. But further big declines will be hard to achieve, partly because the mortgage-lending market has grown less competitive in the past year as hundreds of small banks and independent mortgage lenders have collapsed. The big banks that dominate the market are eager to boost their profits margins, not give deeper bargains to consumers.
Rates for borrowers with the strongest credit are likely to be in a range of roughly 4.5% to 4.75% for the rest of this year, says Mahesh Swaminathan, a mortgage strategist at Credit Suisse in New York.
Others say that is too optimistic. Assuming no big change in government policy, Walter Schmidt, an analyst at FTN Financial Capital Markets, sees a range of 4.75% to 5.5% for most of this year.
The Fed began driving mortgage rates down in late November when it announced plans to buy as much as $500 billion of mortgage securities this year. On Wednesday, the Fed expanded that program, saying it will spend as much as $1.25 trillion on such securities in 2009. That is enough to provide funding for more than half of all home-mortgage loans likely to be made in the U.S. this year.
The Fed also is buying long-term Treasury bonds to drive down rates on those securities, whose pricing affects mortgage rates.
By historical standards, rates look incredibly low. Until recently, 30-year fixed-rate mortgages hadn't been below 5% since the 1950s. For the past couple of months, rates have been bobbing between about 5% and 5.25%. The 30-year rate averaged 4.98% in the week ended March 19, down from 5.03% the prior week, according to Freddie Mac's survey. Fifteen-year fixed-rate mortgages averaged 4.61%, down from 4.64%.
One reason mortgage rates often tick back up after a decline is that a rush of people seeking to refinance quickly causes backlogs at lenders, which frequently don't have enough employees to process all of the applications.
"If lenders are working people overtime to close loans, they don't have an incentive to compete too hard on price," says Arthur Frank, who heads research on mortgage securities at Deutsche Bank in New York.
The situation highlights a conundrum for the government. It wants low rates to spur the housing market, but also wants the banks to make profits on loans so they can return to financial health.
Many of the small mortgage banks that remain are struggling. Mortgage banks, often small, family-owned companies, aren't licensed to take deposits and so lack that source of money for their loans. Instead, they typically borrow money for short periods from so-called warehouse lenders. They use this short-term credit to make loans to their customers and then pay back the warehouse lenders after selling the loans to bigger banks or to government-backed mortgage investors Fannie Mae and Freddie Mac.
But this warehouse credit is much harder to obtain than it was a year or two ago because many of the big banks and Wall Street firms that used to provide it have exited that business.
Despite these constraints, the Fed's action is "going to be a plus" for the housing market, says Thomas Lawler, an economist in Leesburg, Va. Lower rates make it more likely that home prices will hit bottom in many parts of the country later this year, Mr. Lawler says. The recovery, though, is likely to be gradual, partly because rising unemployment reduces housing demand.
Christopher J. Mayer, a real-estate professor at Columbia Business School in New York, says the Fed's moves to cut rates are "helping to put a floor under the housing market." But he worries that the Fed could face huge losses on the mortgage securities if inflation fears eventually push interest rates much higher.
Still, the consumers who need these low rates the most aren't likely to get much help. Many people can't qualify for these low rates because their credit scores aren't high enough or they can't afford a down payment of 20% or more on a home purchase. Such people will be socked with fees that can drive up their housing costs considerably. Banks also have become far pickier about appraisals and are nixing many purchases as a result.
Others can't qualify for a refinancing because they owe far more on their homes than the estimated current market values. Fannie Mae and Freddie Mac have new refinancing programs that will let some borrowers refinance into lower rates even if they owe as much as 105% of the home value, but only for current loans owned or guaranteed by Fannie or Freddie.
Write to James R. Hagerty at bob.hagerty@wsj.com
Printed in The Wall Street Journal, page C1
The Federal Reserve is going to extraordinary lengths to push down long-term interest rates, including home-mortgage rates. But those hoping mortgage rates will fall sharply from current levels, already historically low, may be disappointed.
Mortgage firms Thursday were quoting rates averaging 4.75% on 30-year fixed-rate mortgages, according to Zillow.com, a real-estate information service. That is down from more than 5% two days ago and about 6% in mid-November. But further big declines will be hard to achieve, partly because the mortgage-lending market has grown less competitive in the past year as hundreds of small banks and independent mortgage lenders have collapsed. The big banks that dominate the market are eager to boost their profits margins, not give deeper bargains to consumers.
Rates for borrowers with the strongest credit are likely to be in a range of roughly 4.5% to 4.75% for the rest of this year, says Mahesh Swaminathan, a mortgage strategist at Credit Suisse in New York.
Others say that is too optimistic. Assuming no big change in government policy, Walter Schmidt, an analyst at FTN Financial Capital Markets, sees a range of 4.75% to 5.5% for most of this year.
The Fed began driving mortgage rates down in late November when it announced plans to buy as much as $500 billion of mortgage securities this year. On Wednesday, the Fed expanded that program, saying it will spend as much as $1.25 trillion on such securities in 2009. That is enough to provide funding for more than half of all home-mortgage loans likely to be made in the U.S. this year.
The Fed also is buying long-term Treasury bonds to drive down rates on those securities, whose pricing affects mortgage rates.
By historical standards, rates look incredibly low. Until recently, 30-year fixed-rate mortgages hadn't been below 5% since the 1950s. For the past couple of months, rates have been bobbing between about 5% and 5.25%. The 30-year rate averaged 4.98% in the week ended March 19, down from 5.03% the prior week, according to Freddie Mac's survey. Fifteen-year fixed-rate mortgages averaged 4.61%, down from 4.64%.
One reason mortgage rates often tick back up after a decline is that a rush of people seeking to refinance quickly causes backlogs at lenders, which frequently don't have enough employees to process all of the applications.
"If lenders are working people overtime to close loans, they don't have an incentive to compete too hard on price," says Arthur Frank, who heads research on mortgage securities at Deutsche Bank in New York.
The situation highlights a conundrum for the government. It wants low rates to spur the housing market, but also wants the banks to make profits on loans so they can return to financial health.
Many of the small mortgage banks that remain are struggling. Mortgage banks, often small, family-owned companies, aren't licensed to take deposits and so lack that source of money for their loans. Instead, they typically borrow money for short periods from so-called warehouse lenders. They use this short-term credit to make loans to their customers and then pay back the warehouse lenders after selling the loans to bigger banks or to government-backed mortgage investors Fannie Mae and Freddie Mac.
But this warehouse credit is much harder to obtain than it was a year or two ago because many of the big banks and Wall Street firms that used to provide it have exited that business.
Despite these constraints, the Fed's action is "going to be a plus" for the housing market, says Thomas Lawler, an economist in Leesburg, Va. Lower rates make it more likely that home prices will hit bottom in many parts of the country later this year, Mr. Lawler says. The recovery, though, is likely to be gradual, partly because rising unemployment reduces housing demand.
Christopher J. Mayer, a real-estate professor at Columbia Business School in New York, says the Fed's moves to cut rates are "helping to put a floor under the housing market." But he worries that the Fed could face huge losses on the mortgage securities if inflation fears eventually push interest rates much higher.
Still, the consumers who need these low rates the most aren't likely to get much help. Many people can't qualify for these low rates because their credit scores aren't high enough or they can't afford a down payment of 20% or more on a home purchase. Such people will be socked with fees that can drive up their housing costs considerably. Banks also have become far pickier about appraisals and are nixing many purchases as a result.
Others can't qualify for a refinancing because they owe far more on their homes than the estimated current market values. Fannie Mae and Freddie Mac have new refinancing programs that will let some borrowers refinance into lower rates even if they owe as much as 105% of the home value, but only for current loans owned or guaranteed by Fannie or Freddie.
Write to James R. Hagerty at bob.hagerty@wsj.com
Printed in The Wall Street Journal, page C1
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