While the claims of economic doom in the housing market have so far failed to materialize, things have definitely changed for the worse from the salad days of 2000-2005. Home sales in the Twin cities market are slowing, and prices are falling. In my development of around 100 houses, there are at least 10-12 houses for sale, and none of them are moving. Some homeowners are still sticking to the fantasy that they can get 2005 prices for their houses now, whereas others are cutting prices fast. A few houses have dropped their prices by upwards of 10% already with no takers. Not a good sign for any of the families that are trying to move around here.
While the housing market is fairly morbid around here (in the burbs at least, there are neighborhoods and price niches that continue to do quite well), the bottom hasn’t fallen out yet. According to a story in the StarTribune today, that may be changing though. As the article notes, more and more ARM’s are starting to reset, and those people who played financial games with ARMs, negative-amortization loans and the like are starting to feel the heat.
On a related note, I wonder if the falling house prices will do anything to the tax assessments for all of the houses around here. Local governments could more or less raise taxes at will by assessing homes higher and higher, which people would take when it seemed like their equity would keep on rising fast forever. Now that prices are leveling off or falling, it’ll be interesting to see how county governments and citizens react. If my assessed value was more than I knew I could sell my house for I’d be complaining at the annual tax meeting and I’m sure I wouldn’t be alone. Governments have gotten somewhat lax in their spending due to ever-increasing property tax income and it may be hard for them to tighten their belts like the rest of us are.