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Harry's Bi-Weekly Update 5.27.14

by Harry Salzman

                                                           

May 27, 2014

 

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.

 

                             

EVERY DAY IS MEMORIAL DAY…..

While the “official” observance was yesterday, I believe that every day is Memorial Day in the hearts and minds of those of us who understand its true significance.   My father and father-in-law both served with the members of the Greatest Generation and were among the lucky ones to come back and relate their experiences.  So many others, then and now, were not so fortunate and we owe them a tremendous debt of gratitude for the sacrifices they made in order for us to live in peace.  Those who gave their lives for our country are the true heroes amongst us.

 

THE TIME TO BUY IS NOW

Lots of reasons to BUY NOW and I’d like to share some of them with you. Total home ownership is right around 64.7% compared to 69.1% seven years ago.  Some of this can be attributed to foreclosures from the housing meltdown and some to the new mortgage loan regulations.  Whatever the reason, the situation is creating an increase in renters.  If you are wanting to sell and trade up, you might want to consider keeping your present home as a rental.  With historically cheap mortgage money and long term appreciation better than you could get elsewhere, this is an option worth considering if it makes financial sense to you personally.

Eric Belsky, Managing Director of the Joint Center of Housing Studies at Harvard University, revealed five financial reasons people should consider buying a home in his paper on homeownership entitled: “The Dream Lives On: the Future of Homeownership in America.”

  1. Housing is typically the one leveraged investment available.

Few households are interested in borrowing money to buy stocks and bonds and few lenders are willing to lend them the money.  As a result, homeownership allows households to amplify any appreciation on the value of their homes by a leverage factor.  Even a hefty 20 percent down payment results in a leverage factor of five so that every percentage point rise in the value of the home is a 5 percent return on their equity.  With many buyers putting 10 percent or less down, their leverage factor is 10 or more.”

  1. You’re paying for housing whether you own or rent.

“Homeowners pay debt service to pay down their own principal while households that rent pay down the principal of a landlord.”

  1. Owning is usually a form of “forced savings”.

“Since many people have trouble saving and have to make a housing payment one way or the other, owning a home can overcome people’s tendency to defer savings to another day.”

  1. There are substantial tax benefits to owning.

“Homeowners are able to deduct mortgage interest and property taxes from income.  On top of all this, capital gains up to $250,000 are excluded from income for single filers and up to $500,000 for married couples if they sell their homes for a gain.”

  1. Owning is a hedge against inflation.

“Housing costs and rents have tended over most time periods to go up at or higher than the rate of inflation, making owning an attractive proposition.”

Bottom line?  Not only does homeownership makes sense for many Americans for social and family reasons, it makes sense financially.

 

HOUSING RECOVERY REGAINS SOME STEAM BUT REMAINS WEAKEST LINK IN ECONOMIC RECOVERY

The Wall Street Journal, 5.23.14, USAToday, 5.23.14, The Gazette, 5.24.14, inman.com, 5.21.14

The housing recovery regained momentum for the first time this year during the critical Spring selling season.  Sales of existing homes rose 1.3% in April to a seasonally adjusted annual rate of 4.56 million, according to the National Association of Realtors.  It was, however, 6.8% lower than the year ago level.

This comes after a particularly harsh winter nationwide and “we think the recent slump in home sales may now be in the past”, said Daniel Silver, economist at J.P. Morgan Chase.  The coming months are crucial for the U.S. housing market because families prefer to move to a new home in a new school district by the end of summer, among other reasons. 

On the positive side, the supply of homes in April increased from March while price gains eased—two trends that could help pull more Buyers into the market and boost sales further if they continue.

Lawrence Yun, chief economist of NAR expected the improvement.  “Some growth was inevitable after sub-par housing activity in the first quarter, but improved inventory is expanding choices and sales should generally trend upward from this point.”

“We’ll continue to see a balancing act between housing inventory and price growth, which remains stronger than normal simply because there have not been enough Sellers in many areas.  More inventory and increased new-home construction will help to foster healthy market conditions,” Yun said.

NAR President Steve Brown said that there was some heating of the market last moth.  “The typical time on market shrunk in April, with four out of 10 homes selling in less than a month,” he said. 

“Homes that show well and are properly priced tend to sell the fastest.  More housing inventory gives Buyers better choices, and takes the pressure off the buying process, which is a welcome sign, especially for first-time Buyers.”

Properties sold faster for the fourth straight month in April, reflecting the prolonged lag in inventory relative to demand.  The median time on market for all homes was 48 days in April, down from 55 days in March.  It was 43 days on market in April 2013.

Fannie Mae Chief Economist Doug Duncan thinks that improving financial and labor market conditions should also contribute to a rebound, with economic growth in April, May and June accelerating to an annual rate of 3 percent. 

The outlook for housing “remains more worrisome with existing-home sales, new-home sales, housing starts and multifamily housing all experiencing year-over-year declines despite improving consumer attitudes,” Duncan said.  “However, we anticipate a modest uptick in housing activity as the Spring and Summer selling and buying seasons get under way.”

Fannie Mae economists say that “given the current regulatory landscape, we believe rising employment and income are more likely to bolster housing demand rather than easing credit conditions.”

In March, existing homes were selling at the slowest pace (4.59 million units a year) since July 2012, and were down 6.6 percent from a year ago for the first quarter as a whole.

One bright spot, however, is the growing number of consumers surveyed by Fannie Mae who say it’s a good time to sell a home.  “As consumers become more confident in the selling environment and more supply enters the market, it will help to boost turnover,” Fannie Mae economists said.  “Leading indicators of home sales point to cautious optimism in the near-term outlook.”

Fed Chair Janet Yellen appeared before Congress several weeks ago and said that the recent housing slowdown “could prove more protracted” than expected.  While neither Yellen nor other surveyed economists expect a housing rebound that began in 2011 to reverse course, they say the turnaround will be more gradual, crimping economic gains in 2014. 

 

THE MAIN CULPRITS BEHIND THE HOUSING SLOWDOWN…AND A POSSIBLE SOLUTION FOR FIRST TIME BUYERS

RealtorMag 5.22.14, NAR, 5.22.14

Rising mortgage rates are the main culprit for the weakening in home resales this year and they could further dampen existing home sales, according to a new paper published by John Krainer, an economist at the Federal Reserve Bank of San Francisco.  He also cited other factors such as the fragile economic recovery and the retreating of investors who have slowed their market share as home prices rise. 

Fed Chair Janet Yellen cited “very slow household formation” as young adults saddled with student debt continue to live with their parents.  “My expectation is that as the job market strengthens…we’ll see household formation pick up, but it’s hard to know here what exactly the new normal is,” she said.

New mortgage lending regulations which took effect on January 10, 2014 have also made it difficult for many, especially first time homebuyers, to obtain mortgages. 

The FHA has recently announced a plan to expand access to mortgage credit for underserved borrowers according to Department of Housing and Urban Development Secretary Shaun Donovan. 

Donovan said that the FHA will launch a housing counseling program later this year.  The four-year, two-phase pilot program, called Homeowners Armed With Knowledge (HAWK) will offer a 50 basis point reduction in the upfront mortgage insurance premium and a 10 basis point reduction in the annual premium at the time of loan origination to first time home buyers who complete the program.  Loans that remain in good standing will also receive reductions, which could add up to thousands of dollars in savings for homebuyers over the life of their loan. 

 

5 REASONS TO HIRE A real estate PROFESSIONAL

keepingcurrentmatters, 5.20.14

Whether you are Buying or Selling a home, you need an experienced real estate Professional in your corner.  I’ve been telling you this for a long time, but today’s new rules and regulations makes For Sale By Owner (FSBO) more confusing and difficult than ever.

The reasons have not changed, but they have been strengthened in recent months as the market recovers.

  1. What do you do with the paperwork?

Each state has different regulations regarding the contracts required for a successful sale, and these regulations are constantly changing.  A true real estate Professional is an expert in their market and can guide you through the stacks of paperwork necessary to make your dream a reality.

  1. Ok, so you found your dream home, now what?

There are over 230 possible actions that need to take place during every successful real estate transaction.  Don’t you want someone who has been there before, who knows what these actions are, to make sure that you acquire your dream?

  1. Are you a good negotiator?

So maybe you’re not convinced that you need an agent to sell your home.  However, after looking at the list of parties that you need to be prepared to negotiate with, you’ll realize the value in selecting a real estate Professional. From the Buyer (who wants the best deal possible) to the home inspections companies, to the appraiser, there are at least 11 different people that you will have to be knowledgeable with and answer to during the process.

  1. What is the home you’re buying/selling really worth?

Not only is it important for your home to be priced correctly from the start to attract the right buyers and shorten the time that it’s on the market, but you also need someone who is not emotionally connected to your home, to give you the truth as to your home’s value.

According to the NAR, “the typical FSBO home sold for $184,000 compared to $230.000 among agent-assisted home sales.”

Get the most out of your transactions by hiring a professional.

  1. Do you know what’s really going on in the market?

There is so much information out there on the news and the Internet about home sales, prices, mortgage rates: how do you know what’s going on specifically in your area?  Who do you turn to, to tell you how to competitively price your home correctly at the beginning of the selling process?  How do you know what to offer on your dream home without paying too much or offending the seller with a low-ball offer?

“When getting help with money, whether it’s insurance, real estate or investments, you should always look for someone with the heart of a teacher, not the heart of a salesman”—Dave Ramsey

Hiring an agent who has their finger on the pulse of the market will make your buying/selling experience an educated one.  You need some one who is going to tell you the truth, not just what they think you want to hear.

Bottom Line?

You wouldn’t try to replace the electrical wiring in your home unless you were an electrician nor install new sinks or toilets unless you were a plumber.  Why would you want to make one of the most important financial decisions of your life with hiring a professional? 

Fortunately, if you’re reading this, you already know that answer.  You have me.  With my investment banking background and 40 plus years as a top producer in the local real estate arena, I’ve got you covered.  Whether you’re Buying, Selling or looking for Investment Income, I’ve got the pulse on the market and help make your dreams a reality.  Just give me a call today at 598.3200 or email me at Harry@HarrySalzman.com and let’s get the conversation started.

 

HARRY’S JOKE OF THE DAY 

 

 

 

 

Harry's Bi-Weekly Update 5.12.14

by Harry Salzman

May 12, 2014

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 HOUSING NEWS THIS MONTH

DSNews 5.2.14 and various other publications

As I’m sure you have seen, there’s lots of talk about the housing market in the news lately.  Some good, some not so much, but the one thing everyone seems to agree on is that as one of life’s biggest financial investments, homeownership is the way to go.  Home prices are increasing—not quite as fast as during the last couple of years—but they are still providing equity and helping those with homes that were at one time under-water. 

According to Zillow, “among positive factors for the short-term for housing are ongoing historically low interest rates.  For example, data from the Federal Housing Finance Agency (FHFA) indicate that the average contract interest rate on conventional mortgages was 4.21 percent in March.  This is higher than rates experienced for the first half of 2013 but remains low by historical standards.  On the other hand, affordability has been challenged by rising home prices.  The FHFA Housing Price Index has risen by 15 points over the last 25 months.”

Also from Zillow, a recent break-even horizon analysis came to an interesting conclusion:

  • In half the U.S. metro areas, buying a home is a better financial decision than renting for buyers intending to stay in their home at least two years.

This is based on all costs associated with buying vs. renting, including upfront payments, closing costs, anticipated monthly rent and mortgage payments, taxes, utilities, maintenance and renovation costs.

“Rents keep rising, and mortgage interest rates remain very low, which is helping to skew the rent vs. buy decision toward buying for those who can afford it.  Many renters may ask themselves why renew a lease, when you can break even on the same home in less time in many areas,” said Zillow Chief Economist Dr. Stan Humphries.

On the other hand, “some renters still have to overcome significant hurdles before they can pull the trigger on homeownership.  For those renters who can’t qualify for a mortgage, or aren’t able to save enough for a down payment on a house, renting can be a more flexible, and often far less frustrating option,” Humphries added.

Some of the hurdles faced by first time homeowners have to do with the new regulations from the Dodd-Frank legislations that took effect on January 10, 2014.  It is the first of two rules that were intended to protect consumers by strengthening underwriting standards, but some are arguing that the rules will raise costs and reduce access for consumers (see a real-life incident concerning lenders further down).

If you’re a regular reader of my eNewsletter, you know where I stand.  I’ve been telling my readers for the last couple of years that the time to Sell and Trade Up or Down or Buy for the first time or Investment purposes is NOW.  Mortgages, while now hampered by new regulations, still afford low interest rates.  These are predicted to go up before year-end so that’s something to consider. 

Also, while your present home is continuing to increase in equity, so is the new home you might be looking to purchase.  By securing the lowest interest rate possible at least you can help keep your monthly payment lower. 

There’s a lot going on, both locally and nationally, and if you are wondering how this might translate to your personal situation or that of a family member—give me a call at 598.3200 or email me at Harry@HarrySalzman.com and lets see how we might put the current housing market situation to work for you. 

With my unique background in Investment Banking and more than 40 years in the local real estate market, I do the homework and provide all my clients with personal service tailored to their individual needs, wants and budget.  This includes working with qualified mortgage lenders who understand the new regulations and can help get your home to closing. 

 

APRIL LOCAL STATISTICS BEAT MANY OTHER HOUSING MARKETS

Statistics provided by the Pikes Peak REALTORS Service Corp, or its PPMLS

The Listing and Sales Summary from PPAR was released last week.  In case you’re wondering, February and March were never published so I could not share them with you, but apparently the new MLS system is now up and operating correctly so I should be able to continue sharing these statistics with you on a monthly basis again.

While local single family and patio home sales overall have declined 1.1 percent from a year ago April, there were several factors that most likely contributed to this.  One of the coldest winters in years kept many potential buyers at home rather than out looking at homes.  And many homeowners were still wondering whether to wait for prices to rise more or for interest rates to fall again.  We now know that interest rates, while still low, ARE rising and will continue to do so and that will more than likely help increase sales during the Spring Buying season. 

Many local Realtors feel that this year will be even better than last in terms of total sales, and if my recent experience in the Spring Sales frenzy is any indication, I’m in agreement with them. 

In a similar vein, local homebuilding starts were behind 2013 for the beginning of this year, and more than likely this was due to reasons similar to those stated above.

In spite of the above, some highlights comparing April 2014 to April 2013 still show that the housing market is in good shape:

  • The number of single family/patio homes sold is only 1.1% fewer than a year ago.
  • New listings were are about the same—only a 0.4% decline over a year ago.
  • The average sales price is 2.5% higher than a year ago.
  • The median sales price is about the same—only 0.7% less than a year ago.

And now a look at the stats.  To read the complete 10-page report, click here.  If you have any questions, as always, I’d be happy to answer them for you.

In comparing April 2014 to April 2013 in PPAR:                 

                        Single Family/Patio Homes:

  • New Listings are 1719 Down 0.4%
  • Number of Sales are 922, Down 1.1%
  • Average Sales Price is $241,004, Up 2.5%
  • Median Sales Price is $213,500, Down 0.7%
  • Total Active Listings are 3,691, Up 9.3%

                        Condo/Townhomes:

  • New Listings are 197, Down 7.5%
  • Number of Sales are 94, Down 24.2%
  • Average Sales Price is $153,657, Up 1.3%
  • Median Sales Price is $136,500, Down 0.2%
  • Total Active Listings are 385, Down 3.0%

 

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

                                                Median Sales Price               Average Sales Price

Black Forest                             $356,500                             $355,605

Briargate                                   $290,000                             $304,887                    

Central                                      $175,000                              $193,195

East                                           $165,500                              $170,135

Fountain Valley:                       $199,250                              $194,602

Manitou Springs:                     $290,000                              $265,000

Marksheffel:                             $239,900                              $247,314

Northeast:                                 $211,000                              $224,065

Northgate:                                $370,750                               $360,201

Northwest:                                $324,960                              $349,732

Old Colorado City:                  $195,500                               $205,882

Powers:                                     $210,000                              $209,269

Southwest:                               $230,000                               $294,834

Tri-Lakes:                                 $420,000                              $438,344

West:                                         $207,450                              $292,648

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

 

I CAN’T SAY IT ENOUGH…PLEASE USE A REPUTABLE real estate BROKER AND MORTGAGE LENDER

Today’s real estate transactions are more complicated than ever before and the importance of using a reputable, licensed Real Estate Broker cannot be overly emphasized.  A reputable broker does the homework for you.

We all know what we “think” our home is worth and to us it may be.  However, if you want to take advantage of today’s market, it’s important to know what it’s worth in relation to many factors, including local comparables, current interior and exterior conditions of the home and what it’s going to take to present the home in its best light. 

Oftentimes you need to be creative and innovative in order to get your home to closing.

That’s where I come in.  Part of my excellent customer service is helping you do all of the above and more. If you listen to my advice on what I believe to be your best options, you will be way ahead of the game.  This includes my relationship with mortgage lenders that can help make the difference of getting a loan to closing…or not.

A recent example:

As the listing Broker on a home, my Seller was presented with an offer from a “pre-approved” Buyer that was accepted.  However, the loan officer did not fully understand the new Qualified Mortgage (QM) qualifications and the Buyer was disqualified almost a month later.

The downside of the lender’s decision was not good news for my Seller.  At the time of the acceptance, the listed home was currently rented on a month-to-month basis.  Once the acceptance was signed, the Seller gave notice to the tenant, who vacated the home at the end of that month so that the Buyer could take possession after closing.  THAT DID NOT HAPPEN because the closing didn’t take place due to the mortgage lender’s late reversed decision.

However, the Buyer really wanted to purchase this home and I had a discussion with the Buyer’s Broker about how she might better select another lender more familiar with the QM rules.  Extensions of dates are short for “loan extensions”; however, following my advice, with a new, more informed lender, the Buyer was able to secure a mortgage within two weeks.  Extra timely service from an appraiser who went to the home yesterday, on Mother’s Day, will allow the closing to take place within a few days. 

Experienced Brokers understand the new lending regulations and I cannot emphasize that importance here.  If the Broker does not get their client to a credentialed and competent mortgage originator, the result can create problems on both sides of the sale, or at best, delay the closing date.

Enough said.

 

NOW FOR NATIONAL NEWS…

Some positive, some not, and some contradictory… but all interesting enough to share with you.

 

USAToday, 4.30.14:

5 Reasons Why the Housing Recovery is Stalling:

  • Home Prices have risen more than 20% in the past two years, driven by the strong ’12 and ’13 real estate market.  They’re still about 20% below their 2006 peaks in many places.
  • Higher Mortgage Rates, which rose almost a full percentage point last spring and summer.  They’re now higher than a year ago, but remain near historic lows.
  • There’s a Low Supply of Homes for sale, which is contributing to higher prices.  That’s holding back some Buyers who can’t find homes at prices they want to pay.
  • A new generation of potential first-time home Buyers is shouldering MORE STUDENT LOAN DEBT than any previous generation, making it hard for them to qualify for mortgages with today’s tougher lending standards.
  • High unemployment, A SLOW HIRING PACE and modest economic growth are holding back the creation of new households and keeping people from Buying and Selling homes as they move for new jobs.

​​

Bloomberg Businessweek, 5.5.14:

The Housing Rebound Stalls

  • After a decade of boom-bust-boom, the U.S. housing market is going downhill just when many economists thought it would be heading upward.
  • Nationally, applications for mortgages are down 21 percent from this time last year, indicating fading demand during what is typically the busiest season for deals.
  • Housing woes are slowing the economic recovery as residental investment, including construction, accounted for 3.1 percent of gross domestic product in the fourth quarter, which is less than half the peak contribution of 6.6 percent in 2006.  This was according to an April 28 report by Capital Economics. 
  • According to Mark Palim, VP for applied economic and housing at Fannie Mae, “Now that national drivers are less significant to the market, you’re seeing reemergence of local economic factors.”
  • The National Association of Realtors’ Housing Affordability Index, which compares household incomes with home prices and mortgage rates, fell 16 percent in the 12 months through February.  Lawrence Yun, chief economist for NAR said that “prices have climbed so fast in the past two years that Buyers have sticker shock.”  He projects sales will decline 2 percent nationally this year.  “Housing is a victim of its own success,” he says.  “It’s just that the fast price growth is not healthy.”
  • Signs of a Slowdown: (change from a year earlier)
  1. March existing home sales:  -7.5%
  2. February new home sales:  -14.5%
  3. Mortgage applications for the week ended April 25:  -21%

 

DSNews, 5.8.14, RealtorMag, 5.8.14:

Fannie Mae says Americans are Optimistic About housing market

In it’s April National Housing Survey, Fannie Mae said that with concerns about employment easing, Americans are increasingly optimistic about the housing market.  This optimism may foreshadow an upswing in housing activity through the summer months.

Survey results released last Wednesday show that 42 percent of Americans believe now is a good time to Sell a home.  And 69 percent believe it’s a good time to Buy one.  This is the third straight month that the percentage of respondents saying it’s a good time to Sell has increased. 

Half the respondents to the survey believe home prices will increase in the next 12 months, while 52 percent said they expect mortgage prices to go up in the same time period.

The encouraging thing is that fewer people are concerned about losing their jobs, which, according to Fannie, may encourage potential homebuyers to enter the market.  And 90 percent said their income is either more stable or has improved in the past year.  This was tempered by rising expenses, with 39 percent saying their household expenses are “significantly higher” than 12 months ago.

Doug Duncan, senior VP and chief economist at Fannie Mae said “Concern about job loss among employed consumers has hit a record survey low” and that consumer attitudes are at the most favorable level Fannie has seen in the survey’s four-year history and “consumer confidence is moving in a positive direction.”

 

The Wall Street Journal, 5.4.14:

Home Ownership Falls to Lowest Level Since ‘90s

A recent Census release shows that despite two years of recovery in the housing market, there are still fewer homeowners than before the recession. 

Some 64.8% of American families--74.4 million households—owned the homes they lived in during the first quarter of this year, down from 65.2% at the end of 2013 according to the U.S. Census Bureau.  That was the lowest level since 1995 and a significant drop from 2006, when a peak of 76.5 million households, or 68.9% were owners.

Reasons for the steady decline were familiar.  With the housing bubble burst, many Americans lost their homes to foreclosure when prices fell and exotic mortgages took their toll.  Job loss triggered a second wave of foreclosures.

A positive sign in the data, however, indicates that more young people are moving out of their parents’ homes and into rentals—a first step toward homeownership and an eventual recovery in the ownership rate.

 

SKY SOX TICKETS AVAILABLE

Just a reminder that I have 4 front row seats to all Sky Sox games available to you on a first-come-first-served basis.  Just give me a call and I’ll be happy to put the tickets aside for you.

 

HARRY’S JOKE OF THE DAY 

 

 

 

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Harry A Salzman
ERA Shields / Salzman Real Estate Services
5475 Tech Center Drive, Suite 300
Colorado Springs CO 80919
719-593-1000 or Toll Free: 800-677-MOVE(6683)
Cell: 719-231-1285
Fax: 719-548-9357

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