The Minneapolis Real Estate Blog: Minnesota: Minneapolis

If you are looking for a place to view fall color around the state of Minnesota, a great place to check out is the Minnesota Department of Natural Resources (DNR) website. They update what is happening around the state, and give a lot of information on how/what causes the leaves to change color. Typical peak color for the Twin Cities area is Late September to Mid October.

Taken from Lake of the Isles, just minutes from Downtown Minneapolis.

One of my favorite places in Minneapolis.

Last night I took the chance to photograph the fireworks show in downtown Minneapolis for the annual Aquatennial celebration. It was my first time shooting fireworks so it was actually pretty fun trying to time the bursts. Out of 100 shots, I probably have five photos that are worthy of keeping.

I know many of you won't believe this, but the dirty little secret that the local media isn't reporting is that homes in the lower price range are flying off the racks. Yep...just like a bridal store having a super cheap sale on gowns with women knocking each other out of the way as they try to snatch up the latest deal, so too are investors and first time home buyers trying their best to win that little cottage home, out doing each other with above list price offers.

Like I said, you don't believe me, do you?

Last month I experienced this phenomenon first hand with a duplex I listed. With-in five days, I had five offers, all above asking price. There must have been some telepathy in the air because almost all of them were around the same price. I actually had to tell them to resubmit their "highest and best" offer. Who ever did the best, gets the house. Let me tell you, it was competitive bidding and I was truly surprised at how high some of the offers got.

Even better, I know an investor couple who are snatching up dilapidated foreclosures and rehabbing them to flip. Not only do they have to bid against other offers each time they find a home, but when it comes time to sell the property, they have to deal with multiple offers from first time home buyers. (They do fantastic rehab work by the way!)

So yes Virginia, there are some segments of the real estate market that are doing quite well. Multiple offers do exist and are getting more common.

It makes is hard to explain to a buyer why they need to offer above listing price if they want to get a home, especially when all they hear about is how cheap homes are. But if you want to purchase a home in decent shape and at a great price, be prepared to pay for it because in this market you'll be just like those brides you see on television...pushing and yelling your way to that perfect find.

One of my favorite spots to visit in Minneapolis is Minnehaha Falls. A few weeks ago, I took the camera out on a cloudy day and was able to capture this silky effect of the waterfall.

Recently the Minnesota Association of Realtors has made its members aware of current legislation being proposed by the Minnesota House of Representatives that will greatly affect Minnesota homeowners in a negative way. On Monday, the 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 all know that the state of Minnesota, as well as numerous states across the country, are hurting financially. They find themselves with a growing budget, but no way to fund the increased expenses. Instead of finding ways to cut within the government, many politicians choose to look to the tax payer for "relief". The only solution in their eyes is raise taxes or take away tax incentives.  Minnesota State spending, for the record, has gone from $14.5 billion in 1992/93 to $34.6 billion in 2008/09 - a 138% increase. 

(As an FYI: Governor Pawlenty has proposed a plan focused on reducing spending and raising revenue without raising taxes.)

No big surprise to those of us in real estate, but the house tax bill hurts real estatein the state of Minnesota. The DFL (Democrat) 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?

WE NEED YOUR HELP

ACTION REQUEST: To fight this unbelievable proposal we are asking that you take three steps:

1. 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
2. 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.
3. 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

I dove into the Stimulus Plan on the House Appropriations website to try and find out what kind of agreement the Senate and House of Representatives came to regarding the First Time Home Buyers Tax Credit. Not the most fun reading, but extremely important to know about for any serious real estate professional.

Currently, a taxpayer who is a first time home buyer (someone who has not owned a home within the previous three years) was allowed a refundable tax credit of the lessor values of $7500 or 10% of the purchase price of the home. The credit was allowed for homes purchased between April 9, 2008 to July 1, 2009. However it would have to be repaid, interest free, over a period of 15 years, or recaptured at the time of sale.

The stimulus package modifies the current rules, but also keeps the following in place:

• the tax credit phases out for individual tax payers you have a modified gross income of $75,000 to $95,000 ($150,000-$170,000 for joint filers)


• tax payers can claim the purchase of a home on their 2008 tax return (thus the reason for the credit beginning on December 31, 2008), even if they buy their home, for example in January of 2009

The new agreed to provisions that go into effect December 31, 2008 and are:

• extends the current home buyer tax credit for qualifying home purchases to December 1, 2009


• increases the maximum credit to $8000 ($4000 for a married person, filing separately)


• waives the recapture of this tax credit for homes bought between December 31, 2008 to December 1, 2009


• if the home is sold, or ceases to be the primary residence, within 36 months of the closed date, then the rules of recapturing the tax credit apply (currently over a time period of 15 years)

The part that really stinks about the revisions is for the first time home buyers who closed on their home between April 9, 2008 -December 30, 2008. It appears they will still need to repay the tax credit of $7500 over a period of 15 years, just as originally written, and none of the new revisions will apply to them.

Don't worry though, at least you get a tax credit. We closed on your new home in March 2008, and even though we are only 30 days out for qualifying, no soup for us!

 Twin Cities Luxury Market stats compared to the National Luxury Home Market

New data is out for the Twin Cities Luxury Home Market and it looks like the upper tier of homes is inching toward the national average. While it is still a buyer's market, buyer's are beginning to come out of the woodwork, getting over the fear seen across the national market, and are starting to purchase high priced homes again.

From speaking with some local buyers, they feel now is a great time to buy as luxury home prices have come down drastically in the last two years. While some are still wary, many are looking to negotiate with sellers, and sellers are now willing to listen to their wants and needs. Here are some local numbers for the luxury home market in the Twin Cities.

• Average Price: $850,615
• Average Square Feet: 3739
• Number of Homes for Sale : 781
• New Listings: 24
• Sold Homes: 39
• Average Days on the Market (DOM) : 153

Below are some market graphs, illustrating luxury home trends over the last year for the Twin Cities. Of course, the huge dip at the end is for December, a month which typically always produces a slower market. Stay tuned over the next few months as winter draws to an end, and the Spring buying frenzy begins, to see how the market will change for 2009.

 Average prices for the upper tier having been inching up since May 2008 

As soon as Fall hit the Twin Cities, available Inventory has declined

Over the last five months, the average days it takes a home to sell has increased by 40 days

The area in Minneapolis which has the most single listings is by far downtown Minneapolis. With the inventory largely condominiums, it is easier to break down the data, separating out the houses (only six for sale currently) from the condos. Below is a break down of what has happened so far this year when compared to 2007 for downtown Minneapolis condominiums:

• Average Days on the Market (DOM) : it is taking on average 108 days for a Minneapolis condo unit to sell, up an amazing 28% from this same time last year!
  
• Inventory : the good news is that the number of condos for sale in downtown has decreased by 28%. This means there is less competition compared to 2007, and because of this inventory decrease, the Average Price for condos has increased by 5.6%. The only downside is that the number of closings so far in 2008 is pretty much the same as that in 2007.
  
• Foreclosure Rate: So far this year, of the 571 closed sales, between 7-8.5% of them have been foreclosures or short sale properties. I don't know about you, but that is a pretty low portion of condo sales. When compared to the average Twin Cities real estate market, which is at 35% rate of foreclosure, it is really quite good.

So the bottom line is this, if you own a condominium in downtown Minneapolis, keep your chin up. While times are tough, if you stay positive and have patience, your condo will most likely sell. Just remember to keep your asking price realistic, and possibly ahead of the market. With current listings receiving 96% of the asking price, pricing it right from the start is imperative. Before you know it, Spring will be here and a new wave of home buying will begin!

About a month ago I bought a Blackberry Curve...finally upgrading my phone to something that can help my business get better. Sprint has a fantastic "Everything" plan for $99/month, and I would never have gotten this phone if not for this plan. 

Tonight I was driving by Lake Nokomis in Minneapolis after showing some homes and decided to test out the camera for dusk shots. Here are three of the best photos I was able to capture. Not too bad if you ask me.

(the last shot of the dock came out slightly blurry, so I thought the photo would make a great candidate for the "glow" effect from Picasa...what do you think?)