Real Estate Information Archive

February 19, 2018

HARRY’S BI-WEEKLY UPDATE

         A Current Look at the Colorado Springs Residential real estate Market

As part of my Unique Brand of Personal Service, it is my desire to share current real estate issues that will help to make you a more successful and profitable buyer or seller.

THERE’S NO “NEW NORMAL” WHEN IT COMES TO RESIDENTIAL real estate ANYMORE…THE TIMES THEY ARE A-CHANGING

Every time I think things are going to stabilize for a bit I’m finding there’s something else either new or changing on the close horizon. 

I’ve always advised that it’s in your best interest to deal with a seasoned, knowledgeable real estate professional in all your transactions and now I’m telling you it’s essential.  When you work with me you’ve got my 45 plus years worth of experience, along with my background in investment banking, on your side and believe me when I tell you—you’re going to need every bit of it in order to close on a deal in today’s residential real estate market.

With a record low inventory in the Pikes Peak area, there are fewer options in most price ranges, especially for those listed between $250,000-350,000.  If you are looking, or thinking of looking, you can’t afford to wait.  Property values here are currently going up at about 1 percent a month and interest rates will continue to rise.  When you find a property that fits your wants, needs and budget you need to act quickly.  In fact, you’re going to need to make your first offer your best one—and oftentimes that means paying more than list price.  And even so, there’s no guarantee that the seller will accept it.  Bidding wars are becoming the norm and all-cash offers are taking precedence over others. 

My clients keep asking if I think prices are going to drop soon and I’m saying it’s not likely in the Colorado Springs area.  The last time prices dropped dramatically began around ten years ago, and that was mainly due to the sub-par mortgage situations that created so many foreclosures nationally.  That type of financing is no longer a concern and even when prices dropped back then, Colorado Springs fared much better than most of the rest of the country as we had far fewer foreclosures. 

When you add that to the fact that Colorado Springs is in the 2018 top ten lists of “hottest real estate market”, “best place to live” and more—it’s less likely that we will see price drops anytime soon.  These are also some reasons why we’ve seen such price increases of late. 

In the newly published NAR “Median Sales Price of Existing Single-Family Homes for Metropolitan Areas”, which ranks the top 177 metropolitan statistical areas (MSAs), the Median Sales Price for Colorado Springs was more than double that of the national average. 

Our median sales price increase year over year for the fourth quarter 2017 was 10.8% versus the national average of 5.3%.  This is a fairly good indicator that things are not going to change any time soon.  To view the report of all 177 MSAs, and see how we compare to other cities, please click here.

I wish I could report otherwise, but this is “life in the fast lane” for residential real estate.  Once we make an offer, both you and I need to be available to get it done as best we can.  I hate to see my clients disappointed but it’s happening more and more lately in this type of market.  That’s why you need to be open to neighborhoods you might not have looked at before or consider new construction as an option.  I’ve assisted a number of clients in new construction purchases lately but a consideration there is the time frame in getting the home built.  If you need to move immediately, new construction is probably not for you.  What I’m saying is that you need to consider everything BEFORE beginning your search.

That’s where my special brand of customer service is a blessing.  I can help you determine the best choices based on your individual situation and we can proceed from there.  As dismal as all of this might seem, I can always find a silver lining for you if it’s at all possible. 

So there you go.  My advice?  If you are even thinking of making a move, call me yesterday. I don’t say that factiously—you don’t have a minute to waste.  Just give me a call at 593.1000 or email me at Harry@HarrySalzman.com today and let’s get the ball rolling to make your residential real estate dreams come true.

Note to potential investors:  With increasing home values and interest rates, some potential buyers are going to find it difficult to qualify and will be looking for places to rent.  While you might pay more in terms of price and interest rates, this will be offset with the increased rental prices.

 

JANUARY 2018 LOCAL MARKET UPDATE AND MONTHLY INDICATORS ILLUSTRATE OUR CONTINUING UPWARD TREND IN GREATER DETAIL

Pikes Peak REALTORS^® Services Corp.,

These reports contain much greater detail than the first of the month reports I share and cover ALL residential areas in the Pikes Peak Region.

The local median sales price increase year-over-year in all properties was a whopping 12.1%. The shortage of listings is helping to drive up prices and as I just mentioned, if there were more listings, more people would be moving—either selling to trade up or buying for the first time and for investment purposes.

In the recently published January 2018 Monthly Indicators and Local Market Update for El Paso and Teller Counties, new listings year-over-year were up 6.5% for the single-family/patio homes and down 9.9% for condo/townhomes. 

     The “Activity Snapshot” shows the one-year change:

• Sold Listings for All Properties was up 1.1%
• Median Sales Price for All Properties was up 12.1%
• Active Listings on All Properties was down 24.8%.

You can click here to read the 16-page Monthly Indicators or click here to get specific information on the neighborhood of your choice from the 34-page Local Market Update. I recommend that you check out your own neighborhood, or one that you are considering, to get a good idea of the local pulse. I have reprinted just one neighborhood, Northwest, below to show you the type of information available for all local areas.

For questions about any of these reports or just to find out how I can put my special brand of customer service to work for you, please give me a call.

 

WHEN A PICTURE SPEAKS LOUDER THAN WORDS:

Rismedia, 2.17.18

As I’ve been saying it would for some time now….the average 30-year fixed mortgage rate is rising swiftly, at 4.38 percent this past week, according to Freddie Mac’s recently released Primary Mortgage Market Survey.  The average 30-year fixed mortgage was 4.32 percent the week before.

Concurrently, the average 15-year fixed mortgage rate was 3.84 percent last week, up from 3.77 percent the week prior.  The five-year Treasury-indexed hybrid adjustable mortgage rate was 3.63 percent, up from 3.57 percent the week before.

According to Len Kiefer, deputy chief economist at Freddie Mac, “Wednesday’s Consumer Price Index report showed higher-than-expected inflation; headline consumer price inflation was 2.1 percent year-over-year in January—two-tenths of a percentage point higher than the consensus forecast.”

“Inflation measures were broad-based, cementing expectations that the Federal Reserve will go forward with monetary tightening later this year.  Following this news, the 10-year Treasury reached its highest level since January 2014, climbing above 2.90 percent.  Mortgage rates have also surged.  After jumping 10 basis points last week, the 30-year fixed-rate mortgage rose six basis points—it’s highest level since April 2014,” he added.

Lenders are more recently starting to tailor mortgage loans to the individual borrowers, which is certainly going to help with the rates rising so quickly.  There are a number of options available and I can help direct you to a lender that will work with your particular needs and budget.

Once again though…now is NOT the time to wait.  What was historically down is on its way up and you don’t want to be priced out of the home you want due to higher mortgage interest rates.

 

BIDDING WARS PUT ON AUTOPILOT

The Wall Street Journal, 2.16.18

In heated bidding wars, there is a weapon that may help ensure victory:  an escalation clause. 

It’s an addendum to a real estate contract, typically when the offer is made, in which the prospective buyer says, “I will pay X dollars for this house, but if another buyer submits a verifiable bid that’s higher, I will raise my offer in increments of Y dollars to a maximum price of Z.”

These clauses are particularly useful in today’s competitive market where we are seeing multiple bids.  If a bidding war erupts on a home, the escalation clause will automatically raise the buyer’s offer on the house by the predetermined increment, up to the maximum amount the buyer authorizes. 

This eliminates the back and forth of offer and counteroffer and helps the buyer avoid paying too much for a house by getting caught up in the frenzy of a bidding war.  But they can also be risky for buyers who use them.

“A buyer can think of an escalation clause as a ‘have your cake and eat it too’ clause,” say David Reiss, a Brooklyn Law School professional who specializes in real estate.  “But in real estate, as with cake, it is hard to have it all.”

One concern is that the buyer is tipping his hand to the seller by using an escalation clause, Prof. Reiss says. By indicating the maximum amount he will pay for the house the buyer is revealing the fact that he is willing to pay more. 

Here are some things to consider if you’re thinking of using an escalation clause:

 

• Be aware of the mortgage.  If an escalation clause is invoked, buyers may need additional cash on hand for a larger down payment.  The escalated price can also affect the type of mortgages available to the buyer—as well as the appraisal, which may not match the escalated price.  It would be advisable to have a higher pre-approved amount from the lender prior to using an escalation clause.

 

• Feel out the seller first.  Some agents and sellers do not think escalation clauses are fair and they may react unfavorably to one.  It helps to know their position before blindly using this strategy or the seller may not consider your offer. 

 

• Get it in writing.  Buyers should specify the type of documentation the seller must provide before the escalation clause kicks in.  For example, the escalation clause could specify that the seller must provide a copy of the highest offer received.

 

NO NEED TO PANIC OVER STOCK MARKET MAYHEM

RealtorMag, 2.6.18

The housing market won’t be deeply affected by the sharp decline in stocks over the last week because underlying economic fundamentals remain strong, says Lawrence Yun, chief economist for the National Association of Realtors (NAR).  Jobs are being created, workers are seeing wage gains and there’s no recession on the horizon.  Those data trends don’t support the theory that the stock market dip indicates a larger underlying problem with the economy, says Yun.

At present, the effect of the dive in stocks in mainly psychological.  But if it becomes a prolonged slowdown it could cut into the buying power of households who have exposure to stocks—and many do, primarily through 401(k) and other investment accounts.  It could also lead to job and wage cutbacks, but Yun says it’s premature to draw any conclusions.

 

February 5, 2018

HARRY’S BI-WEEKLY UPDATE

          A Current Look at the Colorado Springs Residential real estate Market

As part of my Personal Service, it is my desire to share current real estate issues that will help to make you a more successful and profitable buyer or seller.

LOTS OF CHANGES IN THE ECONOMY THIS PAST WEEK…BUT LOCAL real estate JUST KEEPS ON TRUCKIN’…WITH MEDIAN HOME PRICES AT RECORD HIGHS

At the risk of sounding redundant, I can’t believe the pace at which we are experiencing so many changes locally.  In my almost 46 years in local residential real estate, I’ve never seen anything like what we now experiencing.  The PPAR statistics in the next article will show you just how much growth we’ve seen over the past year.

In January 2018, Colorado Springs was once again named one of the “Top Performing Markets”, coming in at Number 4 according to realtor.com.  This is no surprise to those of us here in residential real estate.  And it’s evident to most buyers and sellers in this market too.

The days of the spring “buying season” are gone, along with the relative “bargains” one might find by looking for a new home in early January or February.  “Buying Season” is now a yearlong event and bargains are no longer on the table for the most part. 

I’ve been predicting for more than a year that the mortgage interest rates were not going to stay historically low forever and in the past week we’ve seen them increase by 3/8-1/2 percent.  FHA/VA rates for a 30-year-fixed mortgage went from 3 ¾% to between 4% and 4 1/8 % and Conventional loans from 4% to 4 3/8-1/2% in the last week.  The Federal Reserve has indicated there will be 3 or 4 more rate increase this year, so expect mortgage interest rates to follow suit. 

I tell you this so you are not caught off guard, but I also want to emphasize that with median home prices rising so quickly, equity is building much faster than it has in the past, so your home investment today should offset the marginally rising prices.  Even at 5%, interest rates on a 30-year-fixed rate mortgage are still much lower than in the not so distant past.

Let me take a moment to tell you why it’s more crucial than ever to work with a real estate professional like myself, one who has many years of experience and has worked with clients through all the ups and downs of market trends.  It’s essential to work with someone who understands the economic cycles and can help you navigate more easily through the necessary steps to insure you are getting the most for your hard-earned dollars.  My investment background gives me a step-up but more importantly, my almost 46 years in this market can help make the difference between a successful home-buying and selling process or not.

Between the increasing interest rates and lack of available listings, it’s no longer prudent to wait if you’ve been sitting on the fence about selling to trade up or to purchase for the first time or investment purposes.  It’s still quite the “seller’s market”.  However, I want to again remind you that if you’re looking to sell, it’s important to know where you will live next since your present home will likely sell much faster than you might have anticipated. 

And for you investors out there, this is an excellent time for you as well.  Increasing interest rates and home prices will make it more difficult for some first time buyers to get into home ownership, so rental properties will be in demand. 

I am available to help you in determining any and all of these things. Having someone like me on your team makes the entire home buying and selling experience one that will be as stress-free as possible.  Simply give me a call today at 593.1000 or email me at Harry@HarrySalzman.com and let me put my special brand of customer service to work for you.

And now for a few statistics…

Homes are selling at 99.4% of listing price with the average days on the market at a low 36.  This continues to be great news for both buyers and sellers, despite the fact that interest rates have started to rise.

As you will see in the Cumulative Year to Date Summary, total sales numbers in Single Family/Patio Homes and Condo/Townhomes are up 3.3% and 9.2% respectively for year-over-year.  This number would have been much higher had there been more homes for sale. 

The Monthly Summary shows that compared to a year ago, total active listings are down 7.1% for Single Family/Patio Homes and down 31.1% for Condo/Townhomes, continuing a downward trend that tends to favor sellers.  New listings are up 20.1% for Single Family/Patio Homes and down 7.1% for Condo/Townhomes.  The reality is that total active listings are at a record low and are a factor in the median price escalation. 

For more details, please see the following article.

 

JANUARY 2018 WAS ANOTHER OUTSTANDING MONTH IN LOCAL RESIDENTIAL real estate

Statistics provided by the Pikes Peak REALTORS Service Corp, or it’s PPMLS

Here are some highlights from the January 2018 PPAR report.  A look at the Median Sales Prices should put a big smile on many of your faces!  Please click here to view the detailed 15-page report, including charts. If you have any questions, just give me a call.

In comparing January 2018 to January 2017 for All Homes in PPAR:                     

                        Single Family/Patio Homes:

• New Listings are 1,163, Up 20.1%
• Number of Sales are 938 Up 3.3%
• Average Sales Price is $332,834, Up 11.4%
• Median Sales Price is $295,000, Up 11.3 %
• Total Active Listings are 1,236, Down 7.1%
• Months Supply is 1.3

                        Condo/Townhomes:

• New Listings are 170, Down 7.1%
• Number of Sales are 142, Up 9.2%
• Average Sales Price is $218,832 Up 10.1%
• Median Sales Price is $196,750 Up 10.8%
• Total Active Listings are 84, Down 31.1%
• Months Supply is 0.6

COLORADO SPRINGS AREA MONTHLY SINGLE FAMILY/PATIO HOME SALES ANALYSIS*

 

                                                Median Sales Price             Median Sales Price

                                                  January 2018                          January 2017

Black Forest                            $514,950                              $470,000                       

Briargate                                  $379,950                             $389,900          

Central                                      $240,000                              $200,000

East                                          $256,000                              $229,000

Fountain Valley:                      $255,000                              $239,000

Manitou Springs:                    $245,000                              $368,000

Marksheffel:                            $306,250                             $302,500

Northeast:                                $293,000                              $251,000

Northgate:                                $447,500                              $443,686          

Northwest:                               $368,000                              $326,818           

Old Colorado City:                  $310,000                              $229,000

Powers:                                    $295,000                              $269,900

Southwest:                              $324,000                              $345,000

Tri-Lakes:                                $485,000                              $437,225

West:                                        $271,750                              $232,500

*Statistics provided by the Pikes Peak REALTORS Services Corp,or its PPMLS.

 

MILLENNIALS STARTING TO FIGURE HEAVILY IN MANY AREAS—MOST ESPECIALLY IN COLORADO SPRINGS

The Wall Street Journal, 1.31.18, The Gazette,2.4.18

The U.S. homeownership rate rose in 2017 for the first time in 13 years, driven by young buyers who overcame rising prices, tight supply and strict lending conditions to purchase their first home.  The homeownership rate rose to 64.2% from 63.7% a year earlier.

This annual increase marks a crucial turning point because it comes after the federal government reined in the “bubble-era” policies that encouraged banks to ease lending standards to boost homeownership.

Susan Wachter, a professor of real estate and Finance at the Wharton School at the University of Pennsylvania said, “This is market, market and market…There’s no government incentive program in sight that is having this effect.  This is back to basics.”

And what’s driving this?  In one word:  Millennials.  The more than 75 million people born between 1981 and 1997 are the largest home-buying generation since the baby boomers and they are favoring ownership over renting.  They are getting married, starting families and wanting to start building equity for the future.  Owning a home can help them in the equity building and in financial planning for their futures. 

And for Colorado Springs?  Millennials are moving to Colorado Springs at a higher rate than anywhere else in the country, according to a study recently released by the Brookings Institution’s Metropolitan Policy Program.

Our millennial population increased by 14.7% from 2010 to 2015, with San Antonio placing second at 14.4% and Denver third at 12.8%.

In 2015, Colorado Springs’ population featured the sixth-highest proportion of millennials—26.4%.  The nation’s 100 largest metropolitan areas were the cities used in these studies.

According to William H. Frey, senior fellow at Brookings and the report’s author, “Millennials are already making an indelible impact on the nation, as the most diverse—and now largest—adult generation.  As the bridge between a whiter, older America and the multi-hued country we are becoming, millennials will pave the way for generations behind them as workers, consumers and leaders in business and government in their acceptance by and participation in tomorrow’s more racially diverse nation.”

 

ASSESSING THE STATE OF THE HOUSING UNION

Rismedia.com, 1.28.18

In 2018, the challenge for the housing industry will be balancing bursting demand with the severe shortage of supply, according to realtor.com’s State of the Housing Union, released in-step with the U.S. State of the Union last week.  As with last year, first-time buyers will have the hardest time, with so little in their price point.

“The macro-factors that have defined real estate in recent years—strong demand and weak supply—continue to set the tone for the industry,” said Joseph Kirchner, senior economist for realtor.com.

The issues include builders who have been burdened by construction costs and lack of labor, and have concentrated on higher-priced homes.

“Builders will need to focus more on homes geared for moderate incomes, partner with government on initiative to transform distressed urban neighborhoods and overcome labor shortages through a combination of workforce development training and pressure to ease artificial restrictions on the supply of labor,” Kirchner says.

The shortage of inventory made prices rise, but sales struggle in 2017, according to data from realtor.com.  Nationally, appreciation was at an average of 5.8%, while pre-owned sales eked out a 1.1 percent gain.  Comparing Blue and Red States:

 

A significant factor here is tax reform.  In 2017, 2.5 percent of blue state mortgages were over $750,000—the limit on the mortgage interest deduction (MID) under the Tax Cuts and Jobs Act, which will apply to loans obtained on or after December 15, 2017.  Only 0.4 percent of red state mortgages were over the threshold.

“The new tax law that caps the mortgage interest deduction and the deductibility of state and local taxes can be expected to impact the upper-end market in 2018—precisely how and the extent of which remain to be seen,” say Kirchner.

 

HOME PRICES:  WHAT GOES UP ISN’T COMING DOWN SOON

Themreport, 1.23.18

According to the Winter 2018 edition of The Housing and Mortgage Market Review, released by Arch Mortgage Insurance Company, if current analyses are any indication, home prices in the nation aren’t heading south anytime soon.  Among the assessments, U.S. housing prices will keep climbing by 2 to 6 percent yearly, especially in the entry-level space.

“With interest rates and home prices both on the rise, first-time homebuyers—largely millennials—may want to consider making the jump from renting to owning sooner rather than later,” said Dr. Ralph G. DeFranco, Global Chief Economist, Mortgage Services, Arch Capital Services, Inc.  “Our research shows few signs of a housing bubble because the typical warning signs aren’t present.  Overall, the shortage of housing paired with a robust job market should keep the housing market strong and growing, short of an unexpected event and despite the contrary pressures that may be created by the tax bill.”

“The Estimated Fundamental Home Value Index spots housing bubbles by evaluating home prices across 50 states and 401 metro areas and “suggests that the average probability of home price declines in America’s 401 largest cities remains unusually low, at 5%.” 

Note to those of you thinking you might buy when prices go down---don’t be counting on that—there are no signs that we will see this happen in the forecasted future.

 

BUYING IN A SELLER’S MARKET:  WHO’S THE WINNER?

Rismedia.com, 10.17.17

I came across this information in October and it’s just as applicable today as it was then, so wanted to share it with you. Many of this is what I’ve been telling you for some time now.

These are some things that are especially good to know in a “Seller’s Market” like we’re presently experiencing:

• Time is valuable.  Buyers have fewer options today and this means more competition because there aren’t as many homes to look at in their price points.  Buyers need to know what they want, need and can afford.  If you know you absolutely need three bedrooms, you’ll need to ignore looking at that two bedroom house or risk losing out on better opportunities.

You also need to be prepared to make offers quickly.  Buyers without a preapproval will not be considered and will likely miss out on highest and best deadlines by the time they obtain one.  On the other hand, sellers will have an easier time selling their home.  If in good condition, their home will likely be the cream of the crop during these low-inventory times.

 

• Offers are aggressive.  In a seller’s market, buyers will often have to deal with multiple-offer situations.  If they don’t bring their best offer to the table, they will most likely lose out.  Sellers can also prioritize stronger terms.  They may decide to go with a lower offer if the buyer can close faster or is putting more money down.

A combination of the highest purchase price with a 20 percent down payment and a reliable lender is usually the winner.  Of course, you can’t forget that cash is king.  An all-cash offer will likely trump any others on the table.

 

• Negotiations are a game changer.  Unfortunately, buyers may lose some negotiating power in a seller’s market.  Unless the seller is incredibly motivated to get rid of their property, they may take advantage by refusing to take care of some inspection items.  Buyers should be wary of asking for too much, as even big-ticket items may not be taken care of.  Unless something is a safety or health hazard, it shouldn’t even be brought up.

Sellers may also decide to be more selective about what they are leaving with the house.  They may decide not to include appliances such as a refrigerator, dishwasher or washer and dryer.

Even small things like tone in a negotiation email should be taken into consideration.  Alienating the sellers this early in the game can force them to go with a backup offer.

 

• real estate agents are essential.  Even though a seller’s market clearly tips the scale in one direction, buyers are more likely to lose out if they are not working with an experienced, knowledgeable real estate agent.  Likewise, sellers may not even be aware of their advantage without the help of a real estate professional.  Agents will advocate for their clients—whether they are buyers or sellers—by helping them get as much as possible during sale price and inspection negotiations.

Things that might not seem significant—such as getting all of the paperwork submitted correctly, sending emails to the opposing agent and doing due diligence on the property—can make a huge difference in a seller’s market.

 

DASHBOARD FROM UCCS ECONOMIC FORUM

Please click here for a look at the detailed charts from the UCCS Economic Forum updated on January 23, 2018.  These show economic trends for the country as well as for El Paso County and cover such areas as housing, cost of living, consumer sentiment, job market and more.

If you have any questions, please give me a call.