Don't forget about the $7,500 federal tax credit for first-time homebuyers

Weekly Market Activity Report

Like The Godfather: Part II, the Twin Cities housing market showed a surprisingly strong sequel to last week's huge upswing in pending sales. For the week ending September 6, there were 749 purchase agreements written—a rise of 49.8 percent from the same week in 2007. This comes on the heels of last week's then-unthinkably large increase of 51.3 percent.

There are factors at work that are exacerbating the appearance of this rebound and slightly tempering this good news. First, the sales slowdown in August and September of last year was historically extreme; current activity seems extraterrestially high, compared to 2007, but is actually only slightly above the pace of 2006. In addition, there is likely a short-term increase in sales activity as home buyers act now to take advantage of sunsetting seller-funded downpayment assistance on FHA mortgages. This program is currently the only zero-down loan option still available and is disappearing as of October 1, subject to a congressional rescue.

Other factors working to boost buyer activity include the newly authorized $7,500 federal tax credit for first-time homebuyers, home prices too good to pass on and downward pressure on interest rates.

Elsewhere in the market, the supply of homes for sale continues to shrink. There are currently 9.0 percent fewer homes on the market than there were a year ago. And we are almost dead even with the number of homes on the market at this time in 2006.