Harry's Bi-Weekly Update 7.21.14
July 21, 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.
A FEW WORDS ABOUT MORgTAGE LOANS
Keeping Current Matters 7.8.14
If the process of obtaining a mortgage loan brings any or all the above words to mind, you’re not alone. When it comes to finding the right lender, it’s more important than ever to utilize the services of a qualified real estate Broker.
The asset management firm, Nomura, recently stated:
“Analysts say it’s not that Millennials and other potential homebuyers aren’t qualified in terms of their credit scores or in how much they have saved for their down payment. It’s that they think they’re not qualified or they think that they don’t have a big enough down payment.”
In the same vein, a survey by Zelman & Associates revealed that “38% of those between the ages of 25-29 years old and 42% of those between the ages of 30-34 years old believe that a minimum of 15% is required as a down payment to purchase a home. In actuality, a purchaser may be able to put down far less.”
Today there are many options available; however, knowing the best one for your particular situation may not be so easy. The ability to understand what type of commitment you are making is very important as you will be dealing with the mortgage lender for as long as they hold a lien on your property—often as long as 30 years in today’s “low interest rate” times.
A qualified Realtor can direct you to a lender who best suits your needs, both for today and into the future. Understanding the “fine print” and particulars of a mortgage loan is something we Realtors deal with on a daily basis and this can and will save you a lot of time and money.
My background in Investment Banking has allowed me to find lenders where others may not know to look, and at rates that are the best for the situation of each individual client. And with 40 plus years in local real estate, I am uniquely qualified to do the homework for you.
If you or any family member are thinking about buying a home and obtaining a mortgage, please give me a call at 598.3200 or email me at Harry@HarrySalzman.com and let me help take the stress and confusion out of the home buying experience.
FORECLOSURE DECLINE REACHES IMPORTANT ‘MILESTONE’
RealtorMag 7.17.14
The foreclosure rate for June was down 16% from a year ago, marking the lowest level since July 2005—before the housing bubble burst—according to RealtyTrac’s Midyear 2014 U.S. Foreclosure Market Report.
Colorado was one of the ten states that reached their lowest level since 2006. While the overall percentage of foreclosures locally were far less than the national level due to not having as many homes that were “under water”, it is still quite significant that we are now at this low level.
According to Daren Blomquist, vice president at RealtyTrac, “Over the next six to nine months, nationwide foreclosure numbers should start to flatline at consistent historically normal levels.”
While the days for easily finding a foreclosure to buy and fix up for Investment purposes or a quick sale are numbered, there are a limited number of homes listed that would be ideal for those looking for an Investment. Rental rates are on the rise and there are plenty of folks who need to rent rather than buy for whatever reason, so if Investment buying is on your mind, give me a call and let’s see if we can make that happen.
WHY MORTAGE RATES HAVEN’T RISEN AS EXPECTED
Market Watch, 7.15.14, HousingWire, 7.15.14
According to most sources, mortgage rates were expected to climb to more than 5% on a 30-year fixed-rate loan. In actuality, rates are now lower than they were this time last year—a great advantage to mortgage shoppers.
Analysts and economists expected that mortgage rates would rise after the Federal Reserve indicated it would taper its purchase of mortgage-backed securities through its quantitative easing program. While rates did creep up a bit last summer, they have since largely been flat.
When the Fed actually began purchasing fewer of these securities, mortgage rates began to fall. That’s because the tapering ended up coinciding with a reduction in mortgage originations—which means fewer mortgage-backed securities were being issued, according to Leonard Kiefer, deputy chief economist with Freddie Mac.
“The Fed’s ‘demand’ for new mortgage-backed securities has declined less than has the new ‘supply’,” Kiefer and chief economist Frank Nothaft wrote in a recent outlook. And that’s keeping rates down.
According to Ted Aherm, chief financial officer of mortgage lender Guaranteed Rate, “Fewer mortgages are being originated in large part because refinance activity is going down; with rates no longer at record lows, there are fewer homeowners interested in refinancing these days. Also, while the housing market is improving, there hasn’t been an abundance of first-time home buyers in the market today and that has been a drag on housing.”
While some of this can be attributed to the “confusion” over mortgage loans as I mentioned earlier, the stricter mortgage regulations due to the Dodd-Frank Act quite possibly accounts for fewer loans being approved.
In any case, “eventually the mortgage rates will go higher—unless there’s some sort of slowdown in economic growth, a recession or some big shock to the economy,” Kiefer said. “It’s likely to be gradual, but rates are going up, for sure,” he added.
What this means to you is two-fold. First, mortgage rates are still historically low but secondly, don’t wait too long. It’s not likely they will drop lower, and it’s fairly certain they will rise. If you are on the fence, now’s the time to make your move.
LOW INTEREST RATES NOT NECESSARILY GOOD FOR HOUSING
Daily real estate News, 7.14.14
An aside to the low mortgage rate issue is the fact that in reality, these historic lows are not necessarily great news for homeowners and Buyers. At present more than 1/3 of homes with a mortgage have a rate below 4% according to estimates provided by Core-Logic, a real estate data provider.
Many homeowners are inclined to stay put knowing that swapping a current mortgage for a new one might carry a rate of one point higher or more in the coming months. Those who can’t stay put may decide to keep their home and rent it out. In either case, the number of homes for sale could continue to be low and contribute to slower sales, home analysts note.
Mark Fleming, chief economist at Core-Logic estimates that up to 3.6 million homeowners will be unlikely to sell this year because they do not want to give up a lower mortgage rate.
“They got the deal of the century,” Glenn Kelman, CEO of Redfin, told the Associated Press. “I don’t think in 100 years anyone will be lending money at 3.5 percent. How do you walk away from a deal like that?”
The AP reports that this marks a significant shift from the way the housing market has worked in the past three decades. “For most of that time, whenever a homeowner decided to trade up to a better home, mortgage rates usually were lower than the last time they had bought,” the AP reports.
Ok. So I’ll say it one more time. If you’re looking to Sell and Trade Up or looking for Investment property, rates are still historically low. But don’t think this is here for good, as all signs still point to mortgage rate increases this year. Don’t say you haven’t been forewarned more than once.
BUYERS, SELLERS ‘NOT ON THE SAME PAGE’
RealtorMag, 7.10.14
A recent survey by Redfin showed that home Buyers and Sellers are “not on the same page” when it comes to the state of the housing market. Both of them are taking a more aggressive stance in the market, with some Sellers overpricing their homes and more Buyers refusing to get into bidding wars, the survey found.
The survey also found that Sellers are holding “unrealistic” expectations about the value of their homes and Buyers are showing less willingness to chase after a home as they face affordability and financing hurdles.
According to Nela Richardson, Redfin’s chief economist, “Buyers who have been searching for a long time may still try to win deals with aggressive offers. However, new Buyers in the market are much less willing to chase an escalating sale price to compete with multiple bids. The demand side of real estate is moving from ’please take my offer’ to ‘take it or leave it as you please’. Homebuyers’ willingness to walk away from a deal that’s a bad fit is good for them and is ultimately healthier for the housing market.”
So whether it’s a Buyers or Sellers Market is currently up for grabs. One thing I can tell you from experience—whether you are Selling or Buying—you must be realistic. Market comparables are a more reliable indicator of what a home is worth than what Sellers “think” it’s worth. Equally important for Buyers is knowing what they can afford and knowing when a deal is one to walk away from.
Again, that’s where having a Qualified real estate Broker is vitally important. We do the homework and are not as emotionally involved in the transaction as you might be. It’s our job to help Sellers determine the best selling price for your home based on a number of non-emotional issues. It’s also our job to advise Buyers when it’s in their best interest to walk away from a deal.
My professional goal is to make certain that my clients have the best available knowledge to make informed decisions based on actual FACTS. Your continued trust in me is not something I take lightly and you can rest assured that I will always do my best to help you obtain your own personal homeownership goals.
THINKING OF A SOLAR LEASE? YOU MIGHT WANT TO THINK AGAIN
You might have heard about the rapid growth of rooftop solar installations in Colorado, including long-term, third-party solar leases to Colorado homeowners. What exactly is this and what might it mean to you when it’s time to sell your home?
Solar leasing companies offer homeowners the option of signing a long-term lease (sometimes 20 years) in order to have a ‘no-money down” solar system installed without the significant outlay of money that such systems normally cost.
The idea behind this is that homeowners pay a monthly fee to the solar leasing company and any power generated by the solar panels is applied against their electric bill with the hope that the overall electric savings are greater than the monthly lease payment. It’s important to note here that the homeowners give the solar leasing companies all the tax subsidies they would have gotten had they bought a solar system themselves. The federal tax credit alone is 30% of the system’s cost so the subsidies on an average system can be pretty significant.
According to recent articles in Bloomberg Businessweek, there are some serious considerations when looking at buying v. leasing for rooftop solar installations. Prospective Buyers are hesitant to buy a house with an existing long-term lease that they will inherit and some prospective Buyers may not even be able to inherit the lease even if they wanted to because the credit requirements for solar leasing can be even higher than those required to buy a house.
So if you are considering a solar lease, check out all the ramifications involved in case you may want to sell that home. You don’t want to find yourself saddled with having to pay off a long-term lease in order to sell your home as it could possible eat up all the hard earned equity that you might need as a down payment on a new home.
Additionally, it would be a good idea to check with your tax advisor to determine whether it’s in your best interest to forego the tax subsidies in lieu of a solar lease.
HARRY’S PHILOSOPHY OF THE DAY :
MEN AND WOMEN ARE ‘WIRED’ DIFFERENTLY…
Inman.com, 7.15.14
Have you ever had a conversations with a spouse or friend and left saying, “You just don’t understand”?
Women and men are “wired” differently in terms of how they communicate and understanding these differences can improve both your business and personal communication.
According to the book “Men Are Like Waffles, Women Are Like Spaghetti” men tend to compartmentalize. To illustrate this point, think of a waffle. Men start in one “box” or compartment in the waffle. They need to resolve what is in that compartment before going on to the next idea or concept.
Women, on the other hand, “are like spaghetti” and tend to start a train of thought and then let it run without a break, much like a strand of spaghetti.
This is not always the case, but it does show how this can often be the point where male-female communications breaks down. Men often become frustrated when women launch into a stream of multiple ideas, while other women have no problem following the conversation. Conversely, women become frustrated when they have to backtrack to explain a previous point they thought they had already covered.
So the next time you find yourself befuddled when talking with the opposite sex, just try to remember these things and attempt to communicate in the manner in which the person you are with will understand. If you can’t do that, at least realize that it’s quite possible you might not be getting your point across!
