On the Other Side of the Shell Game

My last post talked about the death of the last $0 down program.

However, the bill passed by Congress also had some interesting angles for first time homebuyers.

One of them is a tax credit. If a first time homebuyer buys a house between now and next summer, you will get a $7,500 tax credit on your next tax bill.

You don't get a check when you close your house -- you get a giant refund check when you file your taxes.

What's the catch? Oh yeah, there is a pretty big catch.
This tax credit must be REPAID. Yep, the IRS giveth and the IRS taketh away.

What it means is that each subsequent year you file your taxes you will pay back (interest free, mind you) a few hundred dollars to the IRS for that $7,500 tax credit.

No, you cannot use the tax credit for your house downpayment, but you will get a fat check come next year. You can buy whatever you want with it.

I would buy cartons and cartons of Camel Lights and 50 pounds of prime rib.

(And no, I don't smoke. I just think the idea of buying cigarettes is funny.)

Blinkers

You know how they put blinkers on horses so they aren't distracted by the carnage going on around them?

I think that's how lots of realtors are feeling, like we wish we had blinkers on.

I need a little attitude adjustment. Need to light the real estate candle, tidy up my desk, and focus on the good stuff that's going on. And, there is a lot of good stuff. Maybe it's just January that's getting to me.

So I'm hoping to make $169,000 this year

I was talking to my mom on the phone and she was talking about how they paid off the mortgage a while ago. She told me that when they had us 3 kids, my dad had one week where they had only $6 left, because they paid the mortgage that week.

I was like -- WHAT??? --- YOU COULD PAY THE MORTGAGE ON ONE PERSON'S SALARY???
And what's more, my dad was paid weekly so it was just ONE WEEK'S SALARY.

God in heaven! My attorney husband's salary takes two weeks of work to pay one week of mortgage -- and we have a cheap house.

So I pulled together some stats:

Current Nerstrand Stats
(Where my parents live)
A house down the street for them sold for $120,000 recently. Some sold for more, some less, we'll use $120 as our average.

Mortgage on $120,000, with 5% down, FHA 5.5% interest:
$642 each month
$78 taxes
$720 total

To pull in a salary to pay that mortgage payment in one week's salary, you would need to make $57,200 per year.

The factory my dad was working in when they bought the house is still around. My sister works there now too, and she is not making ANYWHERE near $57,200. I think salaries there are in the high $20k-$30s for the average workers.



So now let's do St. Paul.
I pulled the average house price for my area, Merriam Park. Average house price is $329,530.

Mortgage on $329,530, 5% down, FHA 5.5%
$1777 payment
$338 tax
$2115 total


To make $2115 after-tax each week, you would need to make $3250 pre-tax, for a pre-tax income of, yes, $169,000.

I don't know anyone that makes $169,000 in a factory when they are 28.

Signs of recovery

Last week we had the big Edina Expo -- a big conference at the Xcel Center for all of the Edina agents.

We had an economist there talk about the state of the market and the possibility for recovery. He believes we will see better conditions for home sellers and stabilizing prices near to the end of this year.

He also shared the elements that he says will tell us that the market is turning and the bottom is past:

1. The number of new listings is less than previous months and less than the same month last year. This will signal two things: Sellers have realized now is NOT a good time and the foreclosure new listings are decreasing.

2. Days on market is decreasing. This means houses are selling more quickly and there is more demand.

3. The listing price and the sold price are closer to each other. This will signal that buyer have less bargaining power.

We have seen none of these things yet. I am thinking of running these stats in just my neighborhood. I do know we had fewer listings in my neighborhood in 2007 than 2006. I'll keep you updated as to the results.