According to market statistics for July released by the Minneapolis Area Association of Realtors (MAAR) this week, new listings continue to decline and closed sales continue to increase. They reported that "for the fifth consecutive week and ninth of the last twelve, there were more purchase agreements written on homes than one year previous".
That continued decrease in new listings and increase in closed sales also mean that our total housing supply is down, 19.8% below last year. Although still higher than last year, the absorption rate (the number of months it would take to sell the number of available homes based on the number of home sold) continues to drift downward.
Average sale price inched up again and days on the market inched down, both good signs.
Click here for links to full reports for the combined metro and 125 different Twin Cities communities.
It will be interesting to see the effects of the Housing and Ecomonic Recovery Act in the coming months as down payment assistance programs go away and the new home-buyer tax credit takes effect for homes purchased by first-time homebuyers between April 9, 2008 and July 1, 2009. This ‘tax credit’ is really more like an interest free $7,500 loan for people who haven’t owned a home in the last three years. It is payable back to the federal government at $500 per year for 15 years, or in full when the property is sold.
The last time Congress passed legislation like this in the 1970’s the housing market saw a significant increase in activity and some believe it could result in a 10% increase in number of homes sold. I hope they are right. Today’s market is different from the 1970’s, when buyers usually needed a 20% down payment…today’s buyers have become accustomed to financing with little or no money down. If that isn’t available they may just choose to rent instead of buy because it’s easier…the passion to own a home isn’t as strong in today’s society where people have become mobile.
I hope the promise of future tax savings will be enough, it will be great for some. I wouldn’t be surprised to see an increase in family down-payment assistance for first-time homebuyers, to be offset by the new ‘tax credit’. However, there will be some first-time homebuyers for whom the ‘tax credit’ becomes a dangling, unreachable carrot because with the demise of down payment assistance programs they simply won’t have access to funds needed to purchase.
