News of the Day

Home Prices Rise Even Faster, Posting 19.8% Gain in February

Home prices showed no sign of a letup in February, rising 19.8%, according to the S&P CoreLogic Case-Shiller U.S. National Home Price Index released on Tuesday.

The reading follows a 19.1% increase in January and continues a red-hot pace for housing that has been a hallmark of the past two years, a combination of low inventory of available properties for sale and strong demand exacerbated by the coronavirus pandemic. Buyers continue to outnumber sellers.

“Today’s S&P Case Shiller Index highlights a housing market experiencing a renewed sense of urgency in February, as buyers worked through a small number of homes for sale in an effort to get ahead of surging mortgage rates,” George Ratiu, manager of economic research at Realtor.com, said. “The imbalance between strong demand and insufficient supply pushed prices higher.”

“For buyers, the jumps in prices and mortgage rates translated into sticker shock,” he said. “For a median-priced home financed with a 30-year loan, the monthly payment is $550 higher than a year ago, a 46% jump which dwarfs the 15% increase in housing prices and 8.5% advance in consumer prices.”

Phoenix, Tampa and Miami led the gains, with increases of 32.9%, 32.6% and 29.7%, respectively.

USPS Implements New Service Standards for First Class Packages and Priority Mail

On May 1, 2022, the United States Postal Service (USPS) will implement new service standards for First-Class Package Service (FCPS) and update Priority Mail service standards.

FCPS applies to the domestic shipment of packages that weigh less than one pound and have a maximum combined length and girth of 108 inches. Items can be sent in an envelope, poly mailer, or plain or branded box.

By way of background, postal service delivery standards are “the stated delivery performance goal[s] for a mail class or product. A service standard reflects the number of days after acceptance of mail by which the sender and recipient can expect it to be delivered.

According to the USPS Fact Sheet on the new service standards, the majority of FCPS volume will not be impacted – 64% will still be subject to a standard of 2-3 days. Some FCPS (4% of volume) will upgrade from a 3-day to a 2-day service standard. Meanwhile, 17% of 3-day FCPS volume will shift to a 4-day service standard, and 15% will shift to a 5-day service standard. Packages traveling the longest distances (e.g., New York to California) will be most affected.

Postal customers may still opt to use Priority Mail Express and Priority Mail services to ship packages within the contiguous United States with a 1-to-3-day service standard. The Postal Service is removing an extra day for Priority Mail transported via ground. The extra day was temporarily put in place in April 2020 due to the COVID-19 pandemic.

DHS Extends COVID-19 Vaccination Requirements for Non-U.S. Travelers Entering the United States via Land Ports of Entry and Ferry Terminals

Yesterday, the Department of Homeland Security (DHS) announced that it will extend temporary Title 19 requirements and continue to require non-U.S. travelers entering the United States via land ports of entry and ferry terminals at the U.S.-Mexico and U.S.-Canada borders to be fully vaccinated against COVID-19 and provide related proof of vaccination upon request. These requirements will continue to apply to non-U.S. travelers who are traveling both for essential and non-essential reasons, and do not apply to U.S. citizens, Lawful Permanent Residents, or U.S. nationals.

These requirements were extended in consultation with the Centers for Disease Control and Prevention (CDC) and several other federal agencies. According to CDC, vaccines remain the most effective public health measure to protect people from severe illness or death from COVID-19, slow the transmission of COVID-19, and reduce the likelihood of new COVID-19 variants emerging.

Non-U.S. travelers entering the United States via land ports of entry and ferry terminals, whether for essential or non-essential reasons, must continue to:

  • verbally attest to their COVID-19 vaccination status;
  • provide, upon request, proof of a CDC-approved COVID-19 vaccination, as outlined on the CDC website;
  • present a valid Western Hemisphere Travel Initiative (WHTI)-compliant document, such as a valid passport, Trusted Traveler Program card, or Enhanced Tribal Card; and,
  • be prepared to present any other relevant documents requested by a U.S. Customs and Border Protection (CBP) officer during a border inspection.

COVID-19 testing is not required to enter the United States via a land port of entry or ferry terminal.

IRS Reminds Employers of Penalty Relief Related to Employee Retention Credit Claims

The Internal Revenue Service (IRS) has received requests from taxpayers and their advisors for relief from penalties arising when additional income tax is owed because the deduction for qualified wages is reduced by the amount of a retroactively claimed employee retention tax credit (ERTC), but the taxpayer is unable to pay the additional income tax because the ERTC refund payment has not yet been received.

The IRS is aware that this situation may arise, in part, due to the IRS backlog in processing adjusted employment tax returns (e.g., Form 941-X) on which the taxpayers claim ERTC retroactively. Based on applicable law, IRS guidance provides that an employer must reduce its income tax deduction for the ERTC qualified wages by the amount of the ERTC for the tax year in which such wages were paid or incurred.

Taxpayers that claimed the ERTC retroactively and filed an amended income tax return reducing their deduction for the ERTC qualified wages paid or incurred in the tax year for which the ERTC is retroactively claimed have an increased income tax liability but may not yet have received their ERTC refund.

The IRS reminds taxpayers that, consistent with the relief from penalties for failure to timely pay, they may be eligible for relief from penalties for failing to pay their taxes if they can show reasonable cause and not willful neglect for the failure to pay. In general, taxpayers may also qualify for administrative relief from penalties for failing to pay on time under the IRS First Time Penalty Abatement program if the taxpayer:

  • Did not previously have to file a return or had no penalties for the three prior tax years;
  • Filed all currently required returns or filed an extension of time to file; and
  • Paid, or arranged to pay, any tax due.

For more information, visit the IRS Penalty Relief webpage https://www.irs.gov/payments/penalty-relief

State of Wisconsin in line for $283 Million in Additional Federal Transportation Aid

Wisconsin is in line for an additional $283 million in federal transportation aid in the current fiscal year.

The bulk of the additional money comes from the recently signed bipartisan infrastructure law. The Department of Transportation wants to put $123.6 million of it into the state highway rehabilitation program, according to a letter the agency sent to the Joint Finance Committee.

The letter noted an abundance of projects awaiting funding from the state’s main highway improvement program. That would make it easier to get the money obligated by September 30, 2022. That’s the deadline for the state to allocate the bulk of the additional federal money. Otherwise, it would risk losing the funds, according to the letter.

The agency also wants to put $83.8 million into local transportation facility assistance and $60.7 million into local bridge assistance.

Under state law, the agency must submit a plan to the Joint Finance Committee for review anytime federal funds are 105 percent or more of what had been appropriated in a fiscal year. The extra $283 million is 35.2 percent above what the state had expected to receive from the feds.

The pot of additional money includes $55 million that the federal government redistributed after states that had received the funds failed to use it by a deadline.

The infrastructure law was signed last fall with several resolutions approved earlier this year to allocate the money. DOT noted in its letter the state is still awaiting word on two smaller pots of money. But it wants Joint Finance to move forward on the plan now to avoid the risk of losing the funding if it’s not spent by the deadline.

Wisconsin Supreme Court Adopts GOP-Drawn Legislative District Maps

The Wisconsin Supreme Court on Friday adopted Republican-drawn maps for the state Legislature, handing the GOP a victory just weeks after initially approving maps drawn by Democratic Gov. Tony Evers.

The court reversed itself after the U.S. Supreme Court in March said Evers’ maps were incorrectly adopted, and came just as candidates were about to begin circulating nominating papers to appear on this year’s ballot without being sure of district boundaries.

The Wisconsin Supreme Court had adopted Evers’ map on March 3, but the U.S. Supreme Court overturned it on March 23. The high court ruled that Evers’ map failed to consider whether a “race-neutral alternative that did not add a seventh majority-black district would deny black voters equal political opportunity.”

Evers told the state Supreme Court it could still adopt his map with some additional analysis, or an alternative with six majority-Black districts. The Republican-controlled Legislature argued that its map should be implemented.

The Wisconsin court, controlled 4-3 by conservatives, sided with the Legislature.

“The maps proposed by the Governor … are racially motivated and, under the Equal Protection Clause, they fail strict scrutiny,” Chief Justice Annette Ziegler wrote for the majority, joined by Justices Patience Roggensack, Rebecca Grassl Bradley and Brian Hagedorn.

The Legislature’s maps, they wrote, “are race neutral” and “comply with the Equal Protection Clause, along with all other application federal and state legal requirements.”

Hagedorn, a conservative swing justice, initially backed Evers’ map but reversed himself once the matter came back before the court. In a separate concurrence, he wrote that the U.S. Supreme Court decision required the state court to adopt a race-neutral map, and the Legislature’s maps “are the only legally compliant maps we received.”

The court’s three liberal justices — Jill Karofsky, Ann Walsh Bradley and Rebecca Dallet — dissented. Karofsky, writing for the minority, said the Legislature’s maps “fare no better than the Governor’s under the U.S. Supreme Court’s rationale.”

U.S. Long-Term Mortgage Rates Rise; 30-year Loan Reaches 5%

Long-term U.S. mortgage rates continued to climb this week as the key 30-year loan rate reached 5% for the first time in more than a decade amid persistent high inflation.

The average 5% rate on the 30-year mortgage was up from 4.72% last week, mortgage buyer Freddie Mac reported Thursday. The average rates in recent months have been showing the fastest pace of increases since 1994. By contrast, a year ago the 30-year rate stood at 3.04%.

The average rate on 15-year, fixed-rate mortgages, popular among those refinancing their homes, jumped to 4.17% from 3.91% last week.

With inflation at a four-decade high, rising mortgage rates, elevated home prices and tight supply of homes available for sale, the goal of homeownership has become the most expensive in a generation, Freddie Mac says. And this comes as the spring homebuying season begins.

Home prices are up about 15% over the past year and as much as 30% in some cities. Available homes had been in short supply even before the coronavirus pandemic started just over two years ago.

DATCP, WEDC Announce New Wisconsin Agricultural Export Advisory Council

Wisconsin Department of Agriculture, Trade and Consumer Protection (DATCP) Secretary Randy Romanski and Wisconsin Economic Development Corporation Secretary and CEO Missy Hughes announced yesterday the creation of the new Wisconsin Agricultural Export Advisory Council (WAXC). This council will help guide the initiatives created through the Wisconsin Initiative for Agricultural Exports (WIAE), a collaborative project between DATCP and WEDC to promote the export of Wisconsin’s agricultural and agribusiness products.

The council includes international trade experts from WEDC and DATCP, state legislators, and agriculture organizations and agribusinesses representing crop, dairy, and meat products. The council will meet at least twice per year, and the first council meeting will take place at 9 a.m. on May 4, 2022 at the WEDC headquarters, 201 West Washington Avenue, Madison, WI 53703. These meetings are open to the public, and are
expected to have virtual attendance options.

Wisconsin agricultural exports reached an all-time high of $3.96 billion in 2021. Through the WIAE, DATCP is working collaboratively with WEDC to build on that momentum by promoting Wisconsin agricultural products in the international marketplace.

State Supreme Court Agrees Vacant City Lot is not Agricultural for Tax Purposes

In a case representing an important victory for local governments and their taxpayers, the Wisconsin Supreme Court upheld the Kenosha City Assessor’s determination that a vacant city lot the owner intended to develop into residential homes should be assessed as residential rather than agricultural use for property tax purposes. Nudo Holdings, LLC v. Board of Review for the City of Kenosha

The property at issue in Nudo was mostly raw and covered in underbrush, but also included several walnut and pine trees. The landowner challenged the classification of the property as residential, arguing it should be classified as agricultural instead because he collected walnuts intermittently. Agricultural use qualifies for a much lower assessed valuation. The board of review sustained the assessor’s classification as residential, which the circuit court and the court of appeals affirmed. The Wisconsin Supreme Court affirmed the lower court and board of review decisions.

Statement of Jerry Deschane, Executive Director, League of Wisconsin Municipalities, regarding the court’s decision: “Today, the Wisconsin Supreme Court upheld a commonsense interpretation of the agricultural use law that the Legislature enacted decades ago. The purpose of the law was to provide a property tax break for farmers, not developers. The Court’s decision makes clear that agricultural classification and the tax break that goes along with it is only proper if the land is chiefly given over to agricultural use.”

U.S. Consumer Prices Rose 8.5% in March

The consumer price index, which measures a wide-ranging basket of goods and services, jumped 8.5% from a year ago on an unadjusted basis, above even the already elevated Dow Jones estimate for 8.4%.

Excluding food and energy, the CPI increased 6.5%, in line with the expectation. The data reflected price rises not seen in the U.S. since the stagflation days of the late 1970s and early ’80s. March’s headline reading in fact was the highest since December 1981. Core inflation was the hottest since August 1982.

 

Food rose 1% for the month and 8.8% over the year, as prices for goods such as rice, ground beef, citrus fruits and fresh vegetables all posted gains of more than 2% in March. Energy prices were up 11% and 32%, respectively, as gasoline prices popped 18.3% for the month, boosted by the war in Ukraine and the pressure it is exerting on supply.

One sector that has been a major driver in the inflation burst subsided in March. Used car and truck prices declined 3.8% for the month, though they are still up 35.3% on the year. Also, commodity prices excluding food and energy fell by 0.4%.