[Home price] "results are worst since World War II" trumpeted the USA Today sub headline to their December 27 story "Home prices in 11 big metro areas see record drops in Oct." This story was based on the Case-Shiller composite index of home prices.  Others (Kenneth Harney in his article at http://tinyurl.com/ywqo5t) and I have commented before in this space about the shortcomings of Case-Shiller, but this is getting ridiculous.  They are reporting "October" numbers in late December, but it's worse than that.

The Case-Shilling index was reporting prices of transactions that closed in October.  Generally, that means that they went under contract in August.  So, in late December they were reporting August real estate market activity. So this is NEWS?

I have also quoted here Lawrence Yun, National Association of Realtors® Chief Economist, who pointed out that the August market was severely hurt by the peaking of the sub-prime mortgage crisis, resulting in very disappointing October numbers (See NAR's report at http://tinyurl.com/2calxw).  The August market hardly qualifies as news.

Look for NAR's report on existing home sales for November (September contracts) on New Year's Eve.  It may be something to celebrate.

Last Thursday, December 20, President Bush signed into law the Mortgage Forgiveness Debt Relief Act.  Some may look at it and regard it as a gift from your government.  It is only a redress of a horrible crime perpetrated on people in financial difficulty.  Some gift!

Prior to the MFDRA, an owner selling his home for less than the mortgage balance - with the agreement of the mortgage holder - could get hit with a tax bill for the difference "forgiven" by the mortgagee.  For example, if the mortgage balance was $300,000, and the mortgagee agreed to accept $250,000, the homeowner, most likely in financial straits already, would get hit for taxes owed on the $50,000 he "earned."  Now that will not happen.

However, the act expires at the end of 2009.  I guess all mortgage difficulties will have ended by then.  Give me a break!  This atrocity was around long before the sub-prime mortgage crisis, and it will persist for years to come, even in the best real estate markets.

The National Association of Realtors® has worked hard to get the act passed.  Through its Realtor® Political Action Committee (RPAC) legislators have been urged to support the repeal of this tax atrocity.  They succeeded.

As the southernmost township in Somerset County, Montgomery falls under the pricey influence of Princeton, as those who like the convenience and charm of Princeton discover they come at a hefty price.  So it comes as something of a surprise to see Montgomery showing such strong numbers as it does currently.  After a year of some substantial price adjustments, Montgomery is becoming a hot spot (relatively speaking) in Somerset County.

Not surprising is the fact that the entry level homes (under $300,000 chiefly condos and townhomes) are selling briskly, but they are in extraordinarily short supply.  Two on the market, two under contract - a "balanced" market.  The upper middle segment of the market, from $750,000 to $1,000,000 is the next strongest segment, with 17 properties on the market and 9 under contract, for a pending/active ratio of 35% (under 50% is a buyer's market).  Those properties that are under contract took an average of 113 days to sell.  They are predominantly in the Cherry Valley and Kings Crossing developments - two very different, but similar in age, developments. 

November was an especially busy month in general in Montgomery, as the supply/demand numbers reached 73%.  The average home in Montgomery is selling for 96% of list price, a bit off from other towns in Somerset County, but not bad.  There is a seven month supply of homes at current rates of sale.

Like Hillsborough, Montgomery is showing signs of a strengthening market, which needs a couple months' more data before we can definitely say it is recovering.