July 18, 2016

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 COMPLICATED PSYCHOLOGY OF BUYING AND SELLING A HOUSE

The Wall Street Journal, 6.13.16

We might often forget this, but it’s a “fact of life”—homes come with far more emotional attachment that any other investment we might make.

Homes are places were we take refuge from the rest of the world and raise a family.  They offer an investment that hopefully will provide fruitful returns over time.  And we fall in love with a home in a way that we never fall in love with an investment portfolio of stocks and bonds.

How we feel about our homes or potential homes can often blind us to the reality of the market when it comes time to buy and/or sell. 

On the buying side, we often prioritize one set of emotional needs over others that are just as strong but not as evident at first.  Ignoring those can often lead us to make poor decisions that could affect us for years to come.

When it comes to selling, there’s a whole other set of issues.  We tend to value our homes based on our “rose-colored” perceptions and expect it be valued far beyond reasonable expectations or present market conditions. 

Here are a few missteps that buyers and sellers often make as they head into the housing market.

  • Ignoring the big picture.  Buyers are often looking for features such as a long driveway or large backyard that will make them happier with their home.  What they don’t realize is that those changes may not make them happier with their life as a whole. 

“When people move to a better housing, they think they will be a lot happier overall,” says Singe Oishi, a co-author of a 2010 study on the subject in Social Indicators Research.  “When they actually move, however, their overall happiness does not often change because there are many tradeoffs in moving.”

One of the biggest tradeoffs is commuting.  Oftentimes moving to a bigger house means moving further away from work.  The commute can tend to add stress and detract from overall happiness, such as providing less “family time”.

Various studies have shown that if you move to a home far away from work or your friends, but it has nicer “stuff”, it’s not a great deal for your happiness. Therefore, it’s important to consider how the places you’re looking at will shape your social relationships.

 

  • Overlooking big expenses.  Not totaling up the cost of everything needed to fix up and furnish the home can often lead to making poor choices about how much to pay for a home, says Alex Tabarrok, a professor of economics at George Mason University.  Overspending on a down payment can leave a buyer without enough for furniture or decorations that they want. 

 

  • Weighing buying vs. renting.  The biggest budget concern is whether to rent or buy.  Research has shown that there are reasons for buying and also for opting out.  

Buying a home can provide a psychological boost, especially for a first-time buyer, since homeowners feel they have more control over their lives and are not dependent on a landlord who can change terms and conditions with each lease renewal.

However, home ownership has it’s own kind of stress since there is a certain amount of work necessary in order to maintain a home—not to mention the financial aspect of being tied to a mortgage or keeping up with repairs or other unforeseen costs.

 

  • Expecting a big return. Robert Shiller, a professor of economics at Yale University wrote a paper, which was updated in 2014 that looked at the ways recent homebuyers around the country think about the future values of their properties.

He found, among other things, that “homebuyers have extremely high long-term price expectations”.  This can cause buyers to purchase homes that aren’t a good fit in terms of location or social scene just because they seem like a good investment.  Or they may stake their plans for retirement on the possible financial returns from selling a home. 

On a much larger scale, this “over-optimism” can lead to speculative booms that warp the overall market. 

It isn’t clear why homeowners are usually so cheerful about the future value of their homes, but researchers feel it may result from the “money illusion” – a failure to take inflation into account.

 

  • Not wanting to come up short.  While people have many reasons for selling a home and for setting the prices they do, research has found that the most powerful emotion at work in a sale is loss aversion-- not wanting to sell a home for less than they paid for it.

If your home has depreciated in value it’s a fallacy to assume you’ll be able to recoup losses you’ve already incurred.  The current market price has nothing to do with how much a person actually paid for a home.  This can result in people stubbornly sticking to an asking price above market value and not selling their home at all.

With today’s market of quick decisions and high percentages of selling price to listing price, it’s still important to heed the above advice.  A home is often the most important financial investment you can make and you don’t want to miss the “warning signs” of emotional involvement.  That is just another good reason to turn to a knowledgeable, experienced real estate Professional like myself who can remain emotionally detached and help you find solutions that are based on market research and fact.  Taking your needs, wants and budget into consideration, I can help steer you in the right direction whether you are buying, selling or looking for investment properties.  Simply call me today at 598.3200 or email me at Harry@HarrySalzman.com and let’s see how I can put my 44+-year experience in the local market to work for you.

 

COLORADO SPRINGS RANKED 4TH BEST CITY TO LIVE IN…AHEAD OF DENVER

The Gazette, 7.13.16

Here’s another feather in our cap!  With all the high rankings in recent polls concerning “quality of life” and “affordability” of our city—we now add another one.  “Wallethub.com” recently named Colorado Springs “2016’s Fourth Best U.S. City in which to Live”, following the recent fifth place ranking for the same by U.S. News and World Report that I previously wrote about.  

Our city placed just above fifth-ranked Denver but below San Francisco, Seattle and Raleigh, N.C.  The top 62 largest cities in the U.S. were ranked by measuring, among others, livability, education, health, local economy and taxes. 

I’ve been living here for almost 45 years and am thrilled that the rest of the country is now discovering what I’ve always known—Colorado Springs is the BEST place to live.

 

LOW MORTGAGE LOAN RATES AREN’T LEAVING JUST YET

The Washington Post, 7.14.16, The Wall Street Journal, 7.14.16

All those predictions of higher mortgage loan interest rates that we read about after the Federal Reserve rate hike last December?   Not happening.  In fact, as I reported two weeks ago, rates are at their lowest in years.  That doesn’t mean they are never going up…it’s just not happening right now. 

Fannie Mae revised its outlook for mortgage rates last week and now predicts the 30-year rate won’t move above 3.6% this year and will be about 4% in 2017.  In the past it said that rates would reach 4.5% by the end of this year.

According to Sean Becketti, Freddie Mac chief economist, “The turbulence abroad should continue to create demand for U.S. Treasuries and keep mortgage rates near historic lows; thereby, allowing home sales to have their best year in a decade, along with a boost in refinance activity”.

And Elliot Eisenberg, the “Bowtie Economist” says this about the “Real Rate”.  “While short-term rates are extremely low, the Fed Funds rate is at 0.375%; monetary policy isn’t all that expansionary!  The real interest rate—the fed funds rate minus inflation—is roughly -1.25%, yet the rate that is neither expansionary nor contractionary is about 0%.  That’s why the Fed isn’t in a huge rush to raise rates.  I expect one quarter-point rate rise in 2016 and two in 2017”.

This is all incredible news for local buyers and sellers.  With our median sales prices at a record high and home values rising steadily, many who were “underwater” due to the housing crisis are now seeing increased equity which will enable them to enter the market at a time when interest rates are still historically low. 

Even in this fast-paced, slightly frenetic market at present there are still great values, especially compared to Colorado communities further north of us, especially Denver.  New listings become available daily and there’s a home that’s just right for you.  When it’s your time to begin the process, whether buying or selling, please give me a call and let’s get the ball rolling. 

 

SHOULD YOU WAIT UNTIL NEXT YEAR?  OR BUY NOW?...Infographic

Keeping Current Matters, 7.16.16

Some Highlights:

  • The Cost of Waiting to Buy is defined as the additional funds it would take to buy a home if prices & interest rates were to increase over a period of time.
  • Freddie Mac predicts interest rates to rise to 4.6% by next year.
  • CoreLogic predicts home prices to appreciate by 5.3% over the next 12 months.                     

If you are ready and willing to buy your dream home, it’s time to check with me and find out if you are able to!

 

SAVE THE DATE FOR THE 20TH ANNUAL SOUTHERN COLORADO ECONOMIC FORUM

Mark your calendars for what is sure to be another sold-out event.  The Southern Colorado Economic Forum, sponsored by the UCCS College of Business is celebrating 20 years and this year the Forum is changing things up a bit and having an afternoon meeting and happy hour.

The date is Friday, October 14, 2016 at The Broadmoor Hall and will be held from 1:00 p.m. to 4:30 p.m. with a Networking Happy Hour to follow.  The full agenda will be available in August and should promise to be another informative meeting.

Salzman real estate Services has been a proud sponsor of the Forum since its inception and I encourage those of you who might have missed this event in the past to be sure to calendar it in today.  Registration information will be available soon at:  www.UCCSEconomicForum.com .