The Pending Home Sales Index of existing U.S. homes fell 2.6 percent in June. Not surprising, these are the first numbers that do not reflect the added stimulus of the homebuyer tax credit. The Index, based on contracts signed in June, is 18.6% below June 2009.

Lawrence Yun, NAR chief economist, said lower home sales are expected in the short term. “There could be a couple of additional months of slow home-sales activity before picking up later in the year, provided the job market continues to improve,” he said. “Over the short term, inventory will look high relative to home sales. However, since home prices have come down to fundamentally justifiable levels, there isn’t likely to be any meaningful change to national home values. Some local markets continue to show strengthening prices.”

Regionally, The PHSI in the Northeast dropped 12.2 % in June, 25.4 % lower than June 2009. In the Midwest the index fell 9.5 %, 27.8 percent lower than 2009. Pending sales rose 3.7 % in the South, still 13.3% below June 2009, and the West saw the index fall 0.2 %, 14.2 % below a year ago.

With some positive signs followed by some negatives, it seems we are bumping along the road to economic recovery.   Mortgage purchase applications increased 2 percent last week according to The Mortgage Bankers Association, while refi’s were down 4%. Continuing worries about unemployment  helped keep confidence down. The Fed’s Beige Book survey of economic conditions shows that while some major market areas are improving including New York and Chicago, it does see any great improvement for the near future. The latest  S&P/Case-Shiller home price indexes show  the May 20-city index was up 4.6% from  a year ago and the 10-city measure was up 5.4%. new-home sales jumped 23.6% in June but that followed a 36.7% drop in May.   

This Week’s Real Estate Insight:

With the drop in prices and interest rates in the mid 4’s, affordability is the best it has ever been, but unemployment has left millions unable to qualify for a mortgage. Until job creation picks up, many people will not feel confident enough to take on a mortgage.  

 On July 14th, the Providence City Council’s Finance Committee voted to increase the property tax rates for residential and commercial property and eliminate the homestead exemption for owners of 1 - 5 non-owner occupied properties.   The full City Council will vote tonight, July 26th. This week Rich and Chas had Sally Herreid in studio to talk about the proposed tax hike. Sally lives and owns investment property in Providence, and is a Realtor in our Providence office.  If you are the owner of investment property in the city of Providence, you should attend this meeting.  The mayor was unable to call in to voice his opinion but assured me that he will veto this increase, but in the meantime let your voice be heard as well. Here are some questions from the RIAR website regarding the proposed tax increases:

How will these increases affect me?

• 25.5% increase in residential property tax rate: The residential property tax rate would increase from $24.21 per $1,000 of assessed value to $30.38.
• 88% rate increase for small landlords: The Council will vote to repeal a homestead exemption for non-owner occupied rental properties of 1 - 5 units. If approved, this will result in an additional increase in the actual property tax rate for owners of these properties. This will mean an increase from the current discounted rate of $16.14 of assessed value to $30.38 or more than 88%.
• 17.8% increase in commercial property tax rate: The commercial property tax rate would raise the commercial rate from $28.60 per $1,000 of value to $33.70
• When will these increases take effect? Property owners will receive revised tax bills in August, (July 16th Providence Journal).
• Why is Providence punishing small landlords? In the words of Finance Committee Chair Igliozzi (July 20th Providence Journal), “They are business people, and they will probably not make as much profit as they are use to, and they are unhappy”. In other words, small landlords are greedy fat cats who are rolling in dough. In the same article, Chair Igliozzi further claims that a tax break that has been in affect for years is suddenly illegal.

This week’s Real Estate Insight: We can fight City Hall!  Tell your elected officials that you oppose these property tax increases.  Make their phones ring off the hook.

• Attend the Providence City Council hearing on July 26th.
• Call Mayor Cicilline: Telephone: (401) 421-2489
  Email: mayor@providenceri.com
• Call City Council   Telephone: (401) 521-7477
  Email: Council@providenceri.com