September 13, 2010

HARRY'S WEEKLY UPDATE

A CURRENT LOOK AT THE COLORADO SPRINGS RESIDENTIAL real estate MARKET

 

LET'S TALK TURKEY ABOUT THE CURRENT real estate MARKET

It's easy for us to get so involved in presenting all of the details of our local real estate market  that we forget to put the facts and trends into a context that is easily absorbed. In other words, sometimes we make it so complicated that it's difficult for our readers to "see the forest for the trees".

So, even though Thanksgiving is still a couple of months away, maybe it's time for us to "talk turkey" about the current real estate market and lay out the options that face potential Buyers and Sellers.

Question: Is this a good time to sell?  

Answer : No.

The inventory of available homes for sale far outdistances the demand. And that inventory is growing as banks dump their foreclosed properties on the market. Government attempts to help people avoid foreclosure have not worked. (The Home Affordable Modification Program was supposed to help 3-4 million people. So far, less than 500,000 have applied.). Demand plunged this summer after the Tax credit expired and unsold homes are still piling up. Some experts are estimating that distressed homes could account for half of the market by year-end.

Adding to the problem of oversupply is the pesky problem of unemployment. When people don't have jobs, they don't buy homes. Unfortunately, the programs that have been introduced by the government don't seem to address the real problems of real people. As an example, we have a friend who has been unemployed for 16 months, after being "downsized" by a Fortune 500 company. During this period of unemployment, this individual continued to make regular house payments. When she applied for assistance under the Home Affordable Modification Program, she was told she didn't qualify for assistance because she had made all of her house payments. She would have to be 2 months behind in her payments, before the government could consider her request.

"But, we are being transferred and we have to get rid of this house". Well, if this were five years ago, we would point out that selling your home would depend on upgrading the exterior, repainting, staging, landscaping, etc., etc., etc.. Today, however, the cold, hard fact is that selling your home will depend primarily on aggressive pricing.   

So, where does that leave people who want to sell, but who don't want to "give their house away" by reducing their asking price?  The suggestion we have been making to credit-worthy people who can afford to buy another house is not to sell, but to rent out their present homes until the market can absorb the present glut of distressed properties. Even thought there is a shortage of Buyers out there, there are also growing numbers of potential renters. Almost everyone who has lost a house to foreclosure has now become a renter.

These new renters are quality people who are used to taking care of their homes and who are looking for high-quality places to raise their families. Considering the current low-interest rates, the benefits of home ownership, including income-tax tax-deductions, the pool of potential renters and the looming inflation, the present real estate crisis could turn out to be a blessing in disguise for would-be Sellers who decide to turn their homes into rental properties.

Question: Is this a good time to buy?

Answer: Yes ! Yes ! Yes !

For all of the reasons listed above, this is a great time to buy real estate, either for a personal residence, or as a rental. Inventories are high and interest rates are now starting to creep up (The Wall Street Journal reported on Monday, September 13, 2010, that Fannie Mae and Freddie Mac are now charging over 4%, wholesale. That's an increase of over ¼% from recent days).

Finally, to put all of this into historical perspective, let's compare our present market with what was going on in real estate in 1982.

1982 rates - 18%.    Appreciation rates - 10-12% annually.

Net cost of home ownership - negative 8%

2010 rates -  4.25%. Appreciation rates ­­-   5% annually.      

Net cost of home ownership - positive .75%

So, as you can see, although our present market looks grim, the cost of home ownership is actually way down from 1982 levels. And, in fact, Colorado Springs is currently doing much better than most other parts of the country. Our local Sellers are getting an average of 96.4% of their listed price, whereas, in many of major metropolitan areas of the country, Sellers are only getting 30%-55% of their listed prices. That's a good sign that our local market is starting to stabilize.

The bottom line is that, rather than being concerned about "Inflation" and "Deflation", perhaps it's time for you to concentrate on "Meflation", or, to put it another way, "What opportunities does our present real estate market offer to Me and to My retirement portfolio.

Give us a call and let's discuss it.

 

WRAP-UP

The Wall Street Journal (Monday, Sept. 13, 2010) contained a very succinct prescription for our present economy.

"The fastest cure for housing would be job creation because it would boost demand for homes while putting delinquent borrowers back on solid footing."

 

SALES TAX COLLECTIONS CONTINUE TO RISE

Sales tax collections in Colorado Springs rose 1.7% form August 2009. That represents the 10th month iin a row that collections have risen. Our year-to-date rise over 2009 is 5.82%. These figures indicate that out local citizens are spending money and that is the key to returning to normalcy. Very few cities in the nation are showing that kind of increase.

 

BITS AND PIECES

FHA Debuts New Plan for Underwater Owners

The latest government program to help underwater borrowers debuted Tuesday.

Under the plan, FHA permits lenders to choose which borrowers will participate from among their clientele. The idea is that there are some borrowers that banks and investors want to get rid of because they are likely to default anyway.

To qualify, a borrower must be current on their mortgage and owe at least 15% more than their home's current value. Lenders must agree to forgive at least 10% of the debt.

The government estimates that between 500,000 and 1.5 million borrowers will be helped, but analysts at Barclays Capital say they doubt whether the program will reach 300,000 borrowers.

 

FDIC Head calls for Tighter Lending Standards

Banks seeking government guarantees for mortgage debt should be required to hold borrowers to tight and consistent standards, Federal Deposit Insurance Corp. Chair Sheila Bair said in a CNBC interview.

Bair said standards should include "very robust" income documentation, proof of a borrowers ability to repay standard loans and a significant down payment.

"Clearly, there is a strong correlation between the amount of skin in the game a borrower puts in up front and how that loan performs", Bair said. "Do you put 20% down? You're committed to that house. You walk away from that house, you're going to lose a lot of the money that you put up front".

 

Recipients of First Tax Credit to Begin Payback

Borrowers who took advantage of the original 2008 home buyer tax credit must begin paying the credit back this year. The Inspector General for Tax Administration (TIGTA) says 950,000 owe money.

The required payments are amortized over 15 years - $500 per year. If the property is sold, the credit must be paid at closing.

The TIGTA says the IRS has the incorrect purchase date in its database for some taxpayers who took the original credit. These people may never be identified as owing money, it admits.

 

Southern Colorado Economic Forum scheduled for October 1

Don't forget to register for the Southern Colorado Economic Forum which will take place on October 1, 2010. This event will present a comprehensive review of all aspects of our local economy and will include presentations from some of the most informed experts in our community.

 

LATEST STATISTICS

Please click here to see the latest Sales and Listing Statistics for the pPikes Peak area.

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

A very successful real estate Broker had a meeting with his new son-in-law. "I love my daughter, and now I welcome you into the family," said the man. "To show you how much we care for you, I'm making you a 50-50 partner in my Real Estate office. All you have to do is go to the office every day and learn the business."

The son-in-law interrupted, "I hate the office. I can't stand Agents."

"I see," replied the father-in-law. "Well, then you'll work in the office and take charge of some the paperwork."

"I hate paperwork," said the son-on-law. "I can't stand being stuck behind a desk all day."

"Wait a minute," said the father-in-law. "I just made you half-owner of my real estate office, but you don't like the office and won't work in an office. What am I going to do with you?"

"Easy," said the young man. "Buy me out."