John Murphy’s MEDINA REAL ESTATE REPORT

According to the story in the Star Tribune this weekend, the U.S. Senate has finally approved the bill that will keep the IRS from taxing home owners who receive debt relief from their banks when they have a short sale. (For more information about short sales, see my earlier post here).
For example, let’s say a seller is granted a short sale of $75,000 from his/her mortgage company.  The bank then issues a 1099 stating they have given this seller $75,000 in debt relief.  The IRS gets this information and then considers it income for the seller.  Typically they would be hit with a $15,000 - $20,000 tax bill.

The U.S. Senate has been sitting on this bill for months.  Now that the election year of 2008 is here, they decided to okay this bill.  The final details still need to be hammered out between the House and Senate before it can be sent to President Bush.  But it looks to me like this will become law soon….likely before the President’s State of the Union address in late January.

The Minneapolis Association of Realtors just released the latest on Twin Cities housing sales:

As the year winds to a close, the supply of homes for sale remains plentiful, with 28,651 homes on the market in the region—an increase of 14.5 percent over this time last year. For the week ending December 15, there were 1,213 new listings added to the market, approximately half of which are re-lists that have already been placed on the market at least once in 2007. This is an increase of 8.0 percent in new listing activity compared to the same week last year; newly signed purchase agreements (pending sales) were 27.0 percent behind.

While much of America was out shopping and returning gifts the day after Christmas, Standard and Poors decided to release the highly watched S&P/Case-Schiller home price index which clearly shows declining housing prices across the country. For the Twin Cities, they state that while we’re off 5.5% which is not nearly as bad as we’ve seen in other markets across the country.

Click here for the 3-page pdf press release. It contains statistics for the 20 cities covered in the S&P/Case-Schiller index.

On behalf of my wife, Janet, and our children, Brenna, Jack, Elizabeth, Katherine, Patrick and Ned, we’d like to wish everyone a very Merry Christmas!

Mary Ann Milbourne from the Mortgage Insider posted this article about what you should do in the event your mortgage company, or mortgage servicing company, goes out of business.  The FTC has a number of recommendations.

Fair Isaac Corporation, which is the maker of the FICO scores so critical for home purchasers, is changing their closely held methodology in computing individual credit scores.  The Wall Street Journal ran this story explaining the ramifications for those seeking credit.

The National Association of Home Builders reported their monthly confidence levels report. It remains at a reading of 19 which is the same level it’s been for the past three consecutive months and it’s the lowest reading since the NAHB started this survey in 1985.

Here’s the press release from the NAHB.

Calculated Risk ran this report on the story. They provide a much better graphical depiction of the builders confidence levels than does the table provided by the NAHB.

In the Star Tribune article published on Saturday, Jim Buchta wrote:

However, the supply of new houses on the market is finally beginning to fall. Earlier this week the Builders Association of the Twin Cities said 380 permits were issued in November to build 615 new units. That’s a 22.8 percent decline in permits and a 29 percent decline in new units. So far this year, there has been a 30 percent decline in the total number of new units.

We are indeed finally starting to see some significant declines in builder inventory.  This needed to happen first in order for this market to have any hope of turning around.

The Minneapolis Association of Realtors has published this week’s market activity report. 

The Twin Cities housing market is well into its annual winter holiday pause. New listings have been minimal, yet total inventory of homes for sale remains at record levels and the number of sellers continues to far outweigh the number of buyers. Conservative lending standards and decreased consumer confidence seem to be keeping home buyers away despite low mortgage rates, motivated sellers, improved housing affordability and great housing stock.

Over the last three months, newly signed purchase agreements have declined by 20.0 percent from the same period in 2006 and 34.3 percent since 2005. Meanwhile, new listings have declined by only 1.8 percent. The number of homes for sale has dropped 5,000 units in the last 12 weeks but remains 12.9 percent higher than this time last year.

If you look at this detailed report that the association published, it’s interesting to note as you go through the 17 page pdf that the inventory is rising fastest and the sales are slowing the greatest in the lower end of the market.  Inventory is rising very rapidly in the $150,000 - $350,000 range.  This is likey due to the difficulty many are having with being either upside down on their home, or they get can’t financing to purchase because the subprime market has evaporated.

I’ve heard through the grapevine that the Minnetonka police have set up heavy duty police traps to catch speeders along the heavily traveled roads in Minnetonka.   I’ve been told to watch out for 394/494, Highway 7, and the Crosstown or 62.

BTW, it’s easy to be tricked…remember, the speed limit is a ridiculous 55 MPH east of 494 on 394…i.e. the Ridgedale area.  The speed limit is 65 MPH west of 494 on 394.  It’s 60 MPH traveling north and south on 494.  On Highway 7, the speed limit fluctuates from 45-50 MPH.
Perhaps the budget’s a little tight as we come in to year end and they need to generate a little cashflow before the year is out?

United Properties is getting ready to develop the 3.4 acre parcel on the southwest corner of Highway 55 and Sioux Drive in Hamel, MN.  It looks like there will be a credit union along with a coffee shop and room for a small professional services office or perhaps some retail.  The word is Starbuck’s will open a store in this development.

United Properties has an excellent web site describing the plans complete with the site plans, traffic numbers, demographics etc.  Click here to see all the details.