Harry's Bi-Weekly Update 8.18.14
August 18, 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.
THE “GOOD OLD DAYS” ARE STILL HERE IN “MY” WORLD
When I saw this illustration I couldn’t help think about “Dick and Jane” and “Spot” and the early days of learning to read at school. With most schools starting this week in Colorado Springs, a lot of kids will be attending a new school because of it being their first time, graduations, or their family has moved to a new neighborhood.
I personally have helped a number of families relocate this year and when there are children involved, one of the big considerations is moving to an area with good schools, parks and other children in the neighborhood for playmates. One of the many facets of moving involves the happiness of the “entire” family, especially the young members. Oftentimes the parents might want to look at various neighborhoods recommended by friends and I have had to lead them in another direction entirely because of my awareness of the lack of “kid friendliness” of their first suggestion.
My objective as a Realtor is to try my best to find the best fit for the family as a “whole”. Having been involved in more than 2000 transactions during the last 42 years has given me extensive knowledge of local neighborhoods and how they might work for a particular family’s needs.
Neighborhoods change over time, as do the demographics and the quality of schools located within them. No matter how much you might like a home, if it no longer suits your family’s current needs there will be considerable stress for all. And if you are looking to Buy, the house you think is great might not be located in the best area for the needs of all family members.
These considerations are probably the most important when looking for a home or considering to Sell your present one. The happiness of the entire family will play a role of great importance for the next several or many years, depending on your individual situation.
My goal is to make sure that the “Good Old Days” are here to stay for every family I relocate and I can help you and your family share in that goal. Your happiness is important to me. I will always make that my main focus when working with each and every client.
HOME PRICES ARE RISING AT SLOWEST PACE SINCE 2012, BUT THAT’S NOT SO BAD
NAR,8.12.14, Realtor.org 8.12.14, The Wall Street Journal, 8.13-16.14, RealtorMag, various dates, DSNews 8.7.14
The National Association of Realtor’s (NAR’s) latest Quarterly Report of Median Sales Price of Existing Single-Family Homes for Metropolitan Areas was released several days ago and home value appreciation continued to moderate in 122 of the 173 metropolitan areas surveyed.
While the median existing single-family home price increased in 71% of measured markets from the second quarter 2013, the gain continued to be lower than in recent times. Colorado Springs was among those cities and showed an increase in median home price of 1.4% compared to a year ago.
Forty-seven areas (27%) recorded lower median prices during that same time period. To read the 3-page report in its entirety, please click here.
Lawrence Yun, NAR chief economist, says price increases are balancing out the benefit for both Buyers and Sellers. “National median home prices began their most recent rise during the first quarter of 2012 but had climbed to unsustainable levels given the current pace of inflation and wage growth,” he said. “At this slower but healthier rate, homeowners can continue steadily building equity. Meanwhile, for Buyers, increased supply with moderate price gains is giving them better opportunities to choose.”
The national median existing single-family home price in the second quarter was $212,400, up 4.4% from the second quarter of 2013. The median price during the first quarter of 2014 rose 8.3% from a year earlier.
Yun added that despite the stabilization in price growth, sharp increases still exist in some markets and are impacting sales, most notably on the West Coast where inventory shortages are more prevalent.
Despite the slow increase in home prices, Yun still expects home sales to make a strong showing in the second half of 2014. He also made the following forecasts.
- Higher inflation and higher interest rates. The Federal Reserve is planning to end its purchasing of Treasury and mortgage-backed securities in October. Yun expects interest rates to increase in 2015. He also expects the Consumer Price Index (CPI) which measures inflation, to increase 3.5 percent in 2015.
- Multi-year housing expansion. The population is on the rise. The U.S. gained 34 million people since 2000, but home sales were 5.2 million in 2000 and 5.1 million in 2013. The pent up demand will eventually equate to additional home sales over the next few years, Yun says.
- Continued inequitable wealth distribution. Household net worth is at an all time high, but only for the 10 percent of the U.S. population that has investments in the stock market. At the same time, rents are rising and incomes are generally stagnant.
According to Mark Fleming, the chief economist with CoreLogic, the ongoing slowdown in price appreciation reflects a “reversion to normality” that is “expected to continue across the country and should further alleviate concern over diminishing affordability and the risk of another asset bubble”.
Fannie Mae’s chief economist, Doug Duncan, in commenting on Fannie Mae’s July 2014 National Housing Survey says “the continued cautious sentiment expressed across the range of consumer indicators this month gives weight to our view that the first phase of the housing recovery is decelerating, and 2014 will be a year of mixed housing outcomes with home prices rising more slowly and home sales falling slightly. We have always believed that for the housing recovery to be considered robust, we will need strong and sustained full-time job and income growth. Recent data indicating the creations of more than 200,000 jobs over each of the last six months, combined with this month’s improvement in the share of consumers reporting significantly higher household income than a year ago, does provide some reason for optimism. If these trends continue, they could lead to some upside in housing in 2015.”
For now, though, caution seems to be the rule. Many economists are saying that price appreciation is slowing partly because Buyers, including Investors, have become more cautious and are pulling back amid the big price gains of the past year. Also, these same price gains have persuaded more homeowners to put their homes up for sale which has added inventory. The multiple-offer situations are not as prevalent as they were earlier this year.
There are also some Sellers who are listing their homes now rather than waiting for next year’s Spring buying season because of fear that interest rates will be higher at that time.
Highlights from the Fannie Mae Survey include:
- Half of respondents said they thought it would be difficult for them to get a home mortgage today
- The average 12-month home price change expectation dropped to 2.3%
- The average 12-month rental price change expectation fell to 3.8%
- The share of respondents who say their household income is significantly higher than it was a year ago rose by 4 percentage points to 28%--a survey high.
And locally…
As I mentioned above, Colorado Springs saw a 1.4% increase in the median home price in the NAR Quarterly Report. While this is lower than recent increases, it must be reiterated that our area never saw the dramatic drops or number of foreclosures that many areas in the country did.
What these statistics mean to us is that our local homes are still increasing in value and providing steady home equity for owners. More importantly, it means that more Buyers are NOT being priced out of the market by unsustainable home price gains that have kept them from qualifying for home financing. It’s a “win-win” for all at the moment, most especially when you consider that mortgage loan rates are still historically low and lenders are slowly making funds more available.
MORTGAGES ROLL BACK TO YEARLY LOW
RealtorMag 8.15.14, Housingwire, 8.8.14
This past week, the 30-year fixed-rate mortgage rate averaged it’s low for the year at 4.12%. The same low was reached in May as well as a week in July, this according to Freddie Mac in its weekly mortgage market survey.
The rates have countered many forecasters’ expectations so far this year by not rising, but dropping instead.
Will this continue? According to the above statements by Yun, possibly not. But it’s really anyone’s guess at the moment.
The best advice I can give you is today’s interest rates are CHEAP. If you Buy now, I believe you will be looking back a year from now and be happy that you did.
CHANGE IN CREDIT REPORTS COULD REVAMP CREDIT SCORES
The Gazette, 8.9.14, DSNews, 8.11.14
FICO, the company responsible for one of the most widely used measures of credit health is making changes to its current model that could boost credit scores nationwide.
In a recent announcement, analytics and decision management from FICO said its new credit model, FICO Score 9, “introduces a more nuanced way to access consumer collection information,” resulting in greater precision for lenders measuring a borrower’s credit stability. The model will be available to lenders through the country’s various reporting agencies in the fall.
When I learn how the changes will effect home mortgage lending, you will read it here.
And good news for renters looking to buy…two of the national credit bureaus—Experian and TransUnion—have begun incorporating verified rental-payment data into credit files where it can be included in the computations of credit scores when they apply for a mortgage.
MORTGAGE LENDING STANDARDS EASING
The Wall Street Journal 8.5.14, Bloomberg-BusinessWeek, 8.5.14
The Federal Reserve’s quarterly survey of banks showed that nearly one in four U.S. banks said they had eased mortgage-lending standards for borrowers with strong credit during the second quarter of 2014. This is the largest such movement by lenders since the housing bust hit 8 years ago.
The standards have eased amid sustained increases across the U.S. in home prices and a plunge in refinancing activity over the past year.
According to the survey, demand for prime mortgages rebounded to its highest level in a year, offering a hopeful sign for housing markets that have stumbled during the first half of the year.
Over the past year, top policy makers have expressed concern that tight credit standards could hamper the housing recovery. Fed Chairwoman, Janet Yellen, speaking to a congressional hearing last month, said that while standards should have ratcheted up after the housing bubble, “it is now become the case than any borrower without a pretty pristine credit rating finds it awfully hard to get a mortgage.”
While easing the lending standards will help some consumers, those who have high levels of debt, damaged credit from the recession or insufficient incomes to become home Buyers will have to wait for these to change in order to obtain mortgage loans.
HARRY’S JOKE OF THE DAY
