TaxEsqBlog -by Ronald J. Cappuccio, J.D., LL.M.(Tax)

Existing Home Sales Increase in October In October, existing home sales rose by 10.1% and are now 23.5% above the year-ago rate. Sales were at a seasonally adjusted annual rate of 6.10 million, up from 5.54% in September and a 4.94 million pace a year ago. Existing single family home sales rose by 9.7% to a 5.33 million pace, while condo sales soared by 13.7% to a seasonally adjusted annual rate of 770,000. Click Here for full article.

House Prices keep Declining The Case-Shiller Index of the housing industry showed a 19% year-over-year decline. The Case-Shiller report shows many regions have revisited 2002 prices. Some geographic areas are seeing prices going back to those in the year 2000.Real estate, on average, has declined by 32% from its second quarter 2006 highs. Some areas like Las Vegas and Phoenix, according to Case-Shiller, are off more than 50%!

14% Decline in Home Prices! The National Association of Realtors reported median home prices fell 14% year over year. This is a cumulative 26% decline from the peak in the third quarter of 2005. It has been nearly three-and-a-half years since the 2005 peak in prices. Are we finally close to a bottom in price declines?

Economist Robert Shiller (of the Case-Shiller Housing Index) announced his findings concerning housing price trends. He predicts the nationwide average price decline for homes will likely exceed the 30% decline that America experienced in the 1930's Great Depression. Since average price declines already are in the 20% range, the 30% benchmark is rapidly approaching. Some of the formerly "red-hot" markets are down 50% or more.

The Case-Shiller Home Price Index came out today, and it showed that home prices fell 15.4% in the second quarter nationwide, and this just puts more pressure on anyone falling behind in mortgage payments. A homeowner that has a loan worth more than their mortgage often finds it easier to just walk away from a home rather than sell it, so until we can see some price stabilization, the glut of homes on the market is likely to grow. Keep in mind that a lot of the adjustable loans are still set to adjust, so again, the pressure on prices will likely continue. Note: Commercial Building prices seem much steadier. The problem I observe is not the Sales price being too low, but the Listing price of many properties being above market value.

Increasing Foreclosure Rates Foreclosures were up 57% from March of last year. Approximately 1 in 538 houses in the U.S. are in foreclosure. Nevada has the worst rate with 1 in 139 homes in foreclosure. California has a 1 in 204 foreclosure rate.Nevertheless, since the bulk of the ARM loans were made in 2005 and 2006, the market is clearing out the problem loans through foreclosure, selling, or walking away.

The New York Times reported today that State tax revenues are declining as a result of the slowdown in real estate home sales. This lowers real estate transfer tax revenues as well as income taxes. The article stated: New home sales nationally fell in February to the lowest rate in seven years, and homeowners who tapped into plentiful home equity and spent extravagantly during the real estate boom have started to cut back. Those events not only threaten revenue streams for things like building materials and labor, but also affect spending on big-ticket items like cars and furniture, which many homeowners financed with home equity lines of credit. This will result in pushes for higher tax rates