Two key measures of home sales showed significant year-over-year increases last month, according to new data released Wednesday by local realtor trade groups.
There were 4,676 signed purchase agreements in October, up about 34 percent from October 2008, according to two Twin Cities realtors associations. Compared to September, a smaller percentage of pending sales involved distressed or "lender-mediated" properties.
Completed home sales were up about 28 percent between October 2008 and last month.
The Twin Cities median home sales price fell slightly in October, to $169,000, down from $170,000 in September. The October price was down about 6 percent from a year earlier. But the Minneapolis Area Association of Realtors says it was the lowest year-over-year decline in 24 months.
Both Twin Cities trade groups are expecting to see another burst of homebuying activity in the coming months, given the federal homebuyer tax credit program. The first-time homebuyer credit has been extended to April 30 and has higher income limits of $125,000 for singles, $250,000 for couples.
An additional credit of up to $6,500 is now being offered to "move-up" buyers who have owned and occupied a home during five of the past eight years.
Housing experts and insiders disagree on how much benefit the tax credit has created so far, and what it will do for the real estate market in the coming months.
“There's a finite amount of buyers ... and we can't manufacture buyers with these tax incentives.”Real estate agent Teresa Boardman
Many real estate agents and homebuilders cheered the extension of the first-time homebuyer tax credit, hoping it would continue to give their beleagured industries some business and boost the overall economy.
But Teresa Boardman, a real estate agent in St. Paul, doesn't think the government should have renewed the credit.
"There's a finite amount of buyers ... and we can't manufacture buyers with these tax incentives," Boardman said.
A study by Campbell Surveys suggests that the expanded program will deliver about a 5 percent home sales increase -- the earlier credit provided a 10 percent boost.
No matter how much of a push sales will get, Boardman fears the program won't increase the number of buyers overall. She thinks people will buy now, not later, meaning next year will bring lean times.
"I understand what they're trying to do ... pump more money into the economy. And hell, it's probably helped me, personally. I've probably had more sales. But if I look at the big picture and out towards the end of next year, I don't know where my sales are going to come from," Boardman said.
Rick Sharga, and executive at the housing data firm RealtyTrac, said tax credit was a necessary measure for stabilizing the housing market.
"I don't think we're going to take so much of the future purchases out of the market that we're going to have really anything in the way of long term implications," said Rick Sharga.
The credit has helped clear up the inventory of distressed properties, which have pushed down overall home prices.
Some critics complain that the tax credit has led to an artificial inflation of home prices. But Sharga said home prices in most markets around the country are still down anywhere from 20 percent to 50 percent and the homebuyer tax credit simply kept things from getting even worse.
"If the property values were to fall further, I think you'd continue to see a very nasty cycle of more foreclosures and therefore more price depreciation," Sharga said. "I think what we're doing is helping...to set a new [property value] level and start to rebound from there."
Morris Davis, a real estate economist at the University of Wisconsin-Madison, disagrees.
"I don't want to assign the stabilization of the housing market to one program," Davis said.
Whatever effect the credit has had, Davis said the money would've been better spent helping homeowners avoid foreclosure and keep their houses.
By one estimate, the tax credit cost the government about $10 billion through August 22. The expanded credits are projected to cost nearly $11 billion more.
It's a small bill relative to some of the government's other stimulus related programs. The Troubled Asset Relief Program, for example, had a price tag of about $700 billion.
But Davis said the aims of the homebuyer tax credit program have been vague and unworthy of the cost.
"It's expensive relative to what it tries to do," Morris said.
Twin Cites real estate agent Karen Nestingen of the Realty House has mixed feelings about the long-term benefits of the tax credit program. But she's in favor of its expansion, especially with winter approaching, when the housing market typically freezes along with the rest of Minnesota.
"We're going to have a seasonal blow because we always do," Nestingen said. "People don't want to move between Thanksgiving and February 15."
Nestingen said she's just glad not to suffer the additional blow of the homebuyer credit expiring.