February 19, 2018

HARRY’S BI-WEEKLY UPDATE

         A Current Look at the Colorado Springs Residential real estate Market

As part of my Unique Brand of 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.

THERE’S NO “NEW NORMAL” WHEN IT COMES TO RESIDENTIAL real estate ANYMORE…THE TIMES THEY ARE A-CHANGING

Every time I think things are going to stabilize for a bit I’m finding there’s something else either new or changing on the close horizon. 

I’ve always advised that it’s in your best interest to deal with a seasoned, knowledgeable real estate professional in all your transactions and now I’m telling you it’s essential.  When you work with me you’ve got my 45 plus years worth of experience, along with my background in investment banking, on your side and believe me when I tell you—you’re going to need every bit of it in order to close on a deal in today’s residential real estate market.

With a record low inventory in the Pikes Peak area, there are fewer options in most price ranges, especially for those listed between $250,000-350,000.  If you are looking, or thinking of looking, you can’t afford to wait.  Property values here are currently going up at about 1 percent a month and interest rates will continue to rise.  When you find a property that fits your wants, needs and budget you need to act quickly.  In fact, you’re going to need to make your first offer your best one—and oftentimes that means paying more than list price.  And even so, there’s no guarantee that the seller will accept it.  Bidding wars are becoming the norm and all-cash offers are taking precedence over others. 

My clients keep asking if I think prices are going to drop soon and I’m saying it’s not likely in the Colorado Springs area.  The last time prices dropped dramatically began around ten years ago, and that was mainly due to the sub-par mortgage situations that created so many foreclosures nationally.  That type of financing is no longer a concern and even when prices dropped back then, Colorado Springs fared much better than most of the rest of the country as we had far fewer foreclosures. 

When you add that to the fact that Colorado Springs is in the 2018 top ten lists of “hottest real estate market”, “best place to live” and more—it’s less likely that we will see price drops anytime soon.  These are also some reasons why we’ve seen such price increases of late. 

In the newly published NAR “Median Sales Price of Existing Single-Family Homes for Metropolitan Areas”, which ranks the top 177 metropolitan statistical areas (MSAs), the Median Sales Price for Colorado Springs was more than double that of the national average. 

Our median sales price increase year over year for the fourth quarter 2017 was 10.8% versus the national average of 5.3%.  This is a fairly good indicator that things are not going to change any time soon.  To view the report of all 177 MSAs, and see how we compare to other cities, please click here.

I wish I could report otherwise, but this is “life in the fast lane” for residential real estate.  Once we make an offer, both you and I need to be available to get it done as best we can.  I hate to see my clients disappointed but it’s happening more and more lately in this type of market.  That’s why you need to be open to neighborhoods you might not have looked at before or consider new construction as an option.  I’ve assisted a number of clients in new construction purchases lately but a consideration there is the time frame in getting the home built.  If you need to move immediately, new construction is probably not for you.  What I’m saying is that you need to consider everything BEFORE beginning your search.

That’s where my special brand of customer service is a blessing.  I can help you determine the best choices based on your individual situation and we can proceed from there.  As dismal as all of this might seem, I can always find a silver lining for you if it’s at all possible. 

So there you go.  My advice?  If you are even thinking of making a move, call me yesterday. I don’t say that factiously—you don’t have a minute to waste.  Just give me a call at 593.1000 or email me at Harry@HarrySalzman.com today and let’s get the ball rolling to make your residential real estate dreams come true.

Note to potential investors:  With increasing home values and interest rates, some potential buyers are going to find it difficult to qualify and will be looking for places to rent.  While you might pay more in terms of price and interest rates, this will be offset with the increased rental prices.

 

JANUARY 2018 LOCAL MARKET UPDATE AND MONTHLY INDICATORS ILLUSTRATE OUR CONTINUING UPWARD TREND IN GREATER DETAIL

Pikes Peak REALTORS® Services Corp.,

These reports contain much greater detail than the first of the month reports I share and cover ALL residential areas in the Pikes Peak Region.

The local median sales price increase year-over-year in all properties was a whopping 12.1%. The shortage of listings is helping to drive up prices and as I just mentioned, if there were more listings, more people would be moving—either selling to trade up or buying for the first time and for investment purposes.

In the recently published January 2018 Monthly Indicators and Local Market Update for El Paso and Teller Counties, new listings year-over-year were up 6.5% for the single-family/patio homes and down 9.9% for condo/townhomes. 

     The “Activity Snapshot” shows the one-year change:

  • Sold Listings for All Properties was up 1.1%
  • Median Sales Price for All Properties was up 12.1%
  • Active Listings on All Properties was down 24.8%.

You can click here to read the 16-page Monthly Indicators or click here to get specific information on the neighborhood of your choice from the 34-page Local Market Update. I recommend that you check out your own neighborhood, or one that you are considering, to get a good idea of the local pulse. I have reprinted just one neighborhood, Northwest, below to show you the type of information available for all local areas.

For questions about any of these reports or just to find out how I can put my special brand of customer service to work for you, please give me a call.

 

WHEN A PICTURE SPEAKS LOUDER THAN WORDS:

Rismedia, 2.17.18

As I’ve been saying it would for some time now….the average 30-year fixed mortgage rate is rising swiftly, at 4.38 percent this past week, according to Freddie Mac’s recently released Primary Mortgage Market Survey.  The average 30-year fixed mortgage was 4.32 percent the week before.

Concurrently, the average 15-year fixed mortgage rate was 3.84 percent last week, up from 3.77 percent the week prior.  The five-year Treasury-indexed hybrid adjustable mortgage rate was 3.63 percent, up from 3.57 percent the week before.

According to Len Kiefer, deputy chief economist at Freddie Mac, “Wednesday’s Consumer Price Index report showed higher-than-expected inflation; headline consumer price inflation was 2.1 percent year-over-year in January—two-tenths of a percentage point higher than the consensus forecast.”

“Inflation measures were broad-based, cementing expectations that the Federal Reserve will go forward with monetary tightening later this year.  Following this news, the 10-year Treasury reached its highest level since January 2014, climbing above 2.90 percent.  Mortgage rates have also surged.  After jumping 10 basis points last week, the 30-year fixed-rate mortgage rose six basis points—it’s highest level since April 2014,” he added.

Lenders are more recently starting to tailor mortgage loans to the individual borrowers, which is certainly going to help with the rates rising so quickly.  There are a number of options available and I can help direct you to a lender that will work with your particular needs and budget.

Once again though…now is NOT the time to wait.  What was historically down is on its way up and you don’t want to be priced out of the home you want due to higher mortgage interest rates.

 

BIDDING WARS PUT ON AUTOPILOT

The Wall Street Journal, 2.16.18

In heated bidding wars, there is a weapon that may help ensure victory:  an escalation clause. 

It’s an addendum to a real estate contract, typically when the offer is made, in which the prospective buyer says, “I will pay X dollars for this house, but if another buyer submits a verifiable bid that’s higher, I will raise my offer in increments of Y dollars to a maximum price of Z.”

These clauses are particularly useful in today’s competitive market where we are seeing multiple bids.  If a bidding war erupts on a home, the escalation clause will automatically raise the buyer’s offer on the house by the predetermined increment, up to the maximum amount the buyer authorizes. 

This eliminates the back and forth of offer and counteroffer and helps the buyer avoid paying too much for a house by getting caught up in the frenzy of a bidding war.  But they can also be risky for buyers who use them.

“A buyer can think of an escalation clause as a ‘have your cake and eat it too’ clause,” say David Reiss, a Brooklyn Law School professional who specializes in real estate.  “But in real estate, as with cake, it is hard to have it all.”

One concern is that the buyer is tipping his hand to the seller by using an escalation clause, Prof. Reiss says. By indicating the maximum amount he will pay for the house the buyer is revealing the fact that he is willing to pay more. 

Here are some things to consider if you’re thinking of using an escalation clause:

 

  • Be aware of the mortgage.  If an escalation clause is invoked, buyers may need additional cash on hand for a larger down payment.  The escalated price can also affect the type of mortgages available to the buyer—as well as the appraisal, which may not match the escalated price.  It would be advisable to have a higher pre-approved amount from the lender prior to using an escalation clause.

 

  • Feel out the seller first.  Some agents and sellers do not think escalation clauses are fair and they may react unfavorably to one.  It helps to know their position before blindly using this strategy or the seller may not consider your offer. 

 

  • Get it in writing.  Buyers should specify the type of documentation the seller must provide before the escalation clause kicks in.  For example, the escalation clause could specify that the seller must provide a copy of the highest offer received.

 

NO NEED TO PANIC OVER STOCK MARKET MAYHEM

RealtorMag, 2.6.18

The housing market won’t be deeply affected by the sharp decline in stocks over the last week because underlying economic fundamentals remain strong, says Lawrence Yun, chief economist for the National Association of Realtors (NAR).  Jobs are being created, workers are seeing wage gains and there’s no recession on the horizon.  Those data trends don’t support the theory that the stock market dip indicates a larger underlying problem with the economy, says Yun.

At present, the effect of the dive in stocks in mainly psychological.  But if it becomes a prolonged slowdown it could cut into the buying power of households who have exposure to stocks—and many do, primarily through 401(k) and other investment accounts.  It could also lead to job and wage cutbacks, but Yun says it’s premature to draw any conclusions.