August 23, 2010

 HARRY'S WEEKLY UPDATE

TODAY'S LOOK AT THE COLORADO SPRINGS RESIDENTIAL real estate MARKET

 

THE ECONOMY IS SHOWING VARYING SIGNS, ACCORDING TO NAR

The following excerpts are taken from an August 18, 2010 article by Lawrence Yun, chief economist for the National Association of Realtors:

"These past few months saw a "pause" in housing market activity following the rush of Buyers to qualify for the tax credit. This pause was anticipated and is still occurring. Whatever current or former Fed chairmen say, most observers and analysts of the housing market say the same thing: IT DEPENDS ON JOBS.

Gross Domestic Product (GDP), which measures total production in the economy, decelerated to 2.4% in the second quarter after growing 3.7% and 5% in the prior two quarters. Let's review what we know of each of the GDP components in real dollars above inflation:

  • Consumer spending has been rising at a 2% rate, rather than a 4% growth rate prior to the recession.
  • State and local government spending has been falling by 2% because of the need to balance their budgets.
  • Federal government spending has been increasing by 6%-7% in the past two years.
  • real estate construction spending has not experienced any meaningful growth lately.
  • For a variety of reasons, do not expect any help to GDP growth from foreign trade.
  • Business spending remains 23% below its peak. Businesses are not spending as they should

One thing is clear. Slow business spending will mean slow economic expansion and a slow pace of job creation. (Editors note: The government's response to all of these factors reminds me of the old cartoon's title, "The beatings will stop when productivity improves")

For home sales, the only hope to restart any momentum in the absence of robust job growth is low mortgage rates. Thankfully, we still have that.

Despite the low interest rates (which should encourage and abet borrowing), consumer prices could stop decelerating and start to move up. If that happens, watch out for what happen to interest rates.

The outlook for the economy remains unusually uncertain. However, if business spending comes back where it should be, then GDP could easily grow at a 5% rate. That would correspond to very healthy job gains of possibly 3 million in a single year. As we know, people with jobs, buy homes. That would, indeed, be a good sign for housing.

 

HOUSING PRICES ARE A DIRECT REFLECTION OF THE AVAILABILITY OF JOBS

One of the most difficult tasks that Realtors face today is telling prospective Sellers what their homes are worth in today's market. Most people are not aware of how drastically the economic downturn has affected the market value of their homes, until they decide to put them on the market. When we show them what the local market says their home is worth, they go through the classic steps of grief, i.e. disbelief, anger, negotiation and resignation.

But, keep in mind that "All real estate is local"  and, in some parts of the country, Real Estate values have held up quite well. What's the difference between the "Winners" and the "Losers"? In every case, the thing that makes the difference between sinking and rising Real Estate values is the local job market. Where there are opportunities for good, primary jobs, real estate values are up. Where there is a shortage of good, primary job opportunities, as there is now in Colorado Springs, home values have been strongly affected.

The fact is that real estate values, as well as all other aspects of any economy depend upon the health of the local job market. (In a healthy economy, Real Estate represents approximately 6% of the total economy.)

So, what can a community do to create more job opportunities? To seek an answer to that question, let's look at what some other creative groups have done to create jobs in their cities.

First, let's look at Huntsville, Alabama, a city that has shown remarkable economic growth in recent years. As the August 20, 2010 issue of the Colorado Springs Business Journal points out, the boom in Huntsville was the result of a coordinated effort by local government, jobs-creation groups, influential political allies, a long-standing commitment to building a diverse economy, generous local government incentives and a university that makes technology innovation a top priority. All of the efforts of all of these various groups were spearheaded and overseen by a single economic development force, namely, the Huntsville/Madison County Chamber of Commerce.

Bottom line: They created jobs. Huntsville, Alabama was just named by The Wall Street Journal (Aug. 21, 2010), as one of the best cities in the U.S. for real estate investment. Their housing prices are up. Their unemployment rate is 7% (vs. 8.9% in Colorado Springs and 9.5% nationally). Businesses are hiring and available retail and office space is at a premium.

Another dramatic example of jobs creation was the work done by Jodi Rell, Republican Governor of Connecticut. In a traditionally Democratic state, she organized all levels of state and federal government, together with commercial business leaders, into a dynamic marketing effort to persuade Starwood Hotels to relocate their headquarters from New York into Connecticut. Under her leadership, a new office park was created, anchored by Starwood, with over 800 new, high-level jobs, paying an average of $115,000 annually. Obviously, this type of job spins off many other service-type jobs within the park.

In every other example of successful jobs creation that we have investigated, there is one common denominator. The successful efforts all required strong, local political leadership .Leaders with a vision, with leadership and organizational skills, with the ability to work with local businesses and with a willingness to develop incentives that could attract new businesses into the area.  

Bottom line? The direction of our local economy, our quality of life and the market value of our homes will depend largely upon how many new jobs our elected leadership can create in Colorado Springs. So, we strongly suggest that, in the upcoming elections in April, we should ask every candidate for office, "What is your plan for creating new jobs in Colorado Springs?"  

 

FROM HERE AND THERE

Realtor Magazine gave us three interesting items, this week:

Americans still want to own a home

More than 72% of American adults say that home ownership is a part of their personal American dream, down from 77% six months ago, according to a survey from Trulia.com

About 23% said their attitude toward home ownership has grown more positive in the last six months, while 19% say theu feel more negatively.

Among those adults who are renting a home, 27% say they never intend to buy.

Of the renters who do plan to purchase eventually, 68% said it would be more than two years before they do.

The factors that would encourage them to buy now are:

  • Able to save a down payment, 47%
  • Land a new job, 28%
  • Interest rates stay low or fall lower, 27%
  • Some other factor that persuades them that buying makes financial sense, 24%
  • Get a raise. 23%
  • Local real estate market stabilizes. 9%

Three reasons to buy a home now

Stocks are up 50% from the March 2009 bottom. Some commodities have risen dramatically. The only asset class left in the cellar is real estate, says Michael Murphy, editor of the New World investor stock newsletter.

As a result, Murphy is advising investors to buy now for these three reasons:

  1. Desperate sellers: Both home owners and lenders are eager to unload a flood of foreclosed and underwater properties. Buyers with the patience to push through these complex deals can save a bundle.
  2. Little competition: Because most people don't have what it takes to negotiate their way through the short sales and REOs, patient investors are winners.
  3. Low rates: Mortgage rates are at their lowest level in 40 years. If you believe inflation is inevitable, lock in now.

 

LATEST STATISTICS

Click here to see the latest Sales and Listing statistics for the Pikes Peak region

And, please remember, I would be honored to serve as your Broker for all of your residential real estate needs. I want to help you, my reader, make the most prudent and accurate Real Estate business decision.

Also if you know of anyone who desires to buy or sell local real estate, or, who is moving in or out of the Pikes Peak region, remember that, with over 37 years of providing relocation and Real Estate services to clients throughout the country, I am uniquely qualified to assist them with the relocation process, including buying and/or selling their homes on both ends of their move. Please allow me to implement my negotiating skills on your behalf.

Just click on the icon at the top of this email to listen to my latest podcast. ..And, if you would like to learn more about our Job Loss Protection Program, or, about our CyberHomes Complete Market Analysis of a property, please contact us. 

 

JOKE OF THE WEEK

So, this Realtor dies and goes to Heaven (OK, OK, It's just a joke, for goodness sakes). When he finishes the Grand Tour, he says, "Hey, St Peter, you have a great place here. We could really double your investment if we just built a few condos, did some strategic re-zoning, dedicated a couple of parks and marketed the whole development properly. What do you say?"

St. Peter says, "That sounds like a great idea, but we can't do it".

The Realtor says, "What do you mean, you can't do it. It's a slam dunk. Everybody's home values would go up and we'd all be on Easy Street.

St. Peter says, "You don't understand. It's a financing problem. We don't have any lenders up here".

Just then, there's a knock on the pearly gates. When St. Peter opens the door, the devil is standing there, looking embarrassed. He says, "Is it too late for me to change my mind? I think I would like to come back to Heaven".

St. Peter asks, "Why the change of heart?"

The devil replies, "I don't have anywhere else to live. My banker just foreclosed on Hell and evicted me".