HARRY’S WEEKLY UPDATE

A CURRENT LOOK AT THE COLORADO SPRINGS RESIDENTIAL real estate MARKET

HOMEBUYERS' TAX CREDIT - THE IMPETUS FOR A RECOVERY, OR, A FLASH IN THE PAN ??

Last week’s Enewsletter article about how the government benefits from home sales generated a lot of positive feedback and a couple of questions from our readers. One question was, “How much tax money does a home sale generate?”. To answer that question, let’s look at a typical home sale to see where the money goes.

Let’s say that a Homebuilder builds a home and offers it for sale for $300,000. 

The “non-taxable sales items” built into that $300,000 selling price will total around $150,000.  e.g.:

  • Lot cost
  • Permits
  • Utility fees
  • School and park fees
  • Overhead
  • Supervision
  • Brokerages costs
  • Seller and buyer closing costs
  • Etc., etc., etc.

And, oh yeah, profit

That means that around $150,000 of the $300,000 selling price is spent on building materials, which directly generate sales tax revenues of 7.4%, or $11,000. This income alone to the government more than pays for the $8000 Homebuyers’ tax credit, and we haven’t even considered the additional income taxes paid by the carpenters, plumbers, roofers, etc. that worked on the home. All of the income taxes generated by these construction-related jobs more than balance out the tax credit “cost” to the government for resale homes (which do not generate the sales taxes on materials created by new construction).

So, the recent tax credit to Homebuyers should not be seen as money “given away by the government”, but was, in reality, a method for ‘priming the pump’ of economic growth.

Too bad it’s no longer available.

Will the demise of the Homebuyers’ tax credit mark the end of the recent surge in home sales? It’s too early to tell, but it’s no coincidence that most of the title companies are very busy processing contracts that came in right before the deadline on the tax credits. Some experts are also concerned that the traditional “summer vacation” Homebuyers simply moved their normal purchases from June and July to March and April, in order to take advantage of this program.

Time will tell whether the tax credit program actually generated more home sales or, whether it only nudged Buyers into changing the timing of their purchases.  

LENDERS HAVE A PROBLEM – THEY HAVE TOO MUCH MONEY !!!

No, we’re not kidding.  Lenders all over the nation have money to lend, but nobody is asking them for loans. That’s not a hopeful sign for the economy, but it’s a great opportunity for people who are looking to finance a new home. Prospective Buyers are finding that lenders will compete for their business. For example, we recently arranged for a home loan at 4 7/8% with no origination fee and no discount points. An FDIC commercial bank in Florida is now making loans (to Doctors only) with no-down payment, no origination fee, no discount points, for a 6% 30 year fixed or a 5% 5/1 ARM. (It would almost make it worthwhile to go to medical school, just to get one of those loans).

Right now, there seems to be an oversupply of money and an undersupply of Borrowers.  

LANDLORDS ARE SMILING – MAYBE YOU SHOULD JOIN THEM

This past week, the Gazette reported that our local vacancy rate in multi-family residences was down to 6.2%. That’s the lowest vacancy rate since 2001. The article cited the two major factors for this phenomenon, namely, the increase in the number of troops at Fort Carson and the increase in the number of renters who used to be Homeowners, but who have lost their homes to Short Sale or Foreclosure. 

The bottom line for anyone who has ever considered purchasing income property is that our present market looks great for prospective investors. Consider the following factors 

  • People who have recently lost their homes are now looking to rent
  • These same people are more responsible than typical renters
  • Prices for investment property are historically low
  • Mortgage interest rates for investment property are historically low
  • Inflation is approaching quickly, which means today’s investment property will be worth much more tomorrow

In the past, the industry considered a vacancy rate of 5% to be ‘Fully occupied” (because around 5% of rental units are always in the process of upgrading). Therefore, our present 6.2% vacancy rate is motivating investors to buy even more rental property. Maybe you should consider taking advantage of this opportunity. Give us a call to discuss the possibilities.

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

THE FACTS OF LIFE IN THE real estate BUSINESS

If you are a Realtor,

  •  Helping train new agents is training your enemy.
  • A new agent will sell the most expensive listing in the office, then say, “Isn’t this fun?” Don’t answer.
  • If you show a prospect enough property, he will get his own real estate license.
  • If you show enough property, you may not make a sale, but you will need a new car.
  • Creative financing is followed by creative litigation.
  • Your next prospect will be a family with four children …One with a ball-point pen, one prone to car-sickness, and one who screams all the time. The fourth will be an infant overdue for a change.
  • The fussiest buyers have the least money.
  • Everyone wants the house that sold yesterday. It was on the market for two years.
  • The cat that escaped has a pedigree and is in heat. The sign says, “Don’t let Whiskers out”.
  • The house they left on the East Coast was bigger, better and cheaper. The weather is never mentioned.
  • The house they left on the West Coast was bigger, better and cheaper. The weather is always mentioned.
  • No matter how well you know the property you’re showing, they will ask you something you can’t answer.
  • If the house sells quickly, the owner will believe the price was too low.
  • If you break a date for a prospect, the prospect will stand you up.
  • The friendly dog in the yard, wagging his tail, bites.
  • The house down the street sold for more than you can get for the house up the street.
  • Your own family will list with another agent, or buy from an owner, probably both.
  • Whatever you learn in this escrow will not apply in the next.
  • If you say you’re busy, the prospects think you’re making too much money.
  • If you say you’re not, they think you’re unsuccessful.
  • If your owner re-lists with another agent, he’ll lower the price. Even if he doesn’t, his house sells the next day.

And, if you are a landlord or a property manager,

  • Tenants only lock themselves out in the middle of the night... or on Christmas.
  • At least one tenant's check will be "lost in the mail" every month.
  • A tenant's ability to see dirt and damage is much greater when they move in than when they move out.
  • Your best tenants always get job transfers during the worst rental markets.
  • The insurance inspector always shows up to take photos of the building as you are putting the evicted tenant’s possessions on the curb.
  • Tenants always swear under oath that the window was broken when they moved in.
  • If it exists, your tenant will try to flush it down the toilet.
  • If it is pouring rain, you can be sure the windows are open at one or more at your units.

But, it’s still a great way to make a living !!!