March 7, 2011

HARRY'S WEEKLY UPDATE 

 

NATIONALLY, PENDING HOME SALES DECLINED IN JANUARY

Pending home sales eased moderately for the second straight month in January, but remained 20.6 percent above the cyclical low last June, according to the National Association of REALTORS®.

The Pending Home Sales Index, a forward-looking indicator, declined 2.8 percent to 88.9. The index is 1.5 percent below the 90.3 level in January 2010 when the tax credit stimulus was in place. If contract activity stays on its present course, there should be an 8 percent increase in total existing-home sales this year.

Lawrence Yun, NAR chief economist, points to the broader trend. “The housing market is healing with sales fluctuating at times, depending on the flow of distressed properties coming on the market,” he said. “We should not expect the recovery to be in a straight upward path — it will zig-zag at times.”

“The broad fundamentals for a housing recovery are developing,” Yun said. “Job growth, high housing affordability and rising apartment rent are conducive to bringing more buyers into the market. Some buyers may be looking to real estate as a hedge against potential future inflation.”

 

THE LOCAL PICTURE

To get a clearer picture of how our local market is doing, Click here for the latest sales and listing statistics for the Pikes Peak area.

As you might notice as you examine the statistics, our local sales figures are pretty sad. The good news is that our sales numbers are still better than most other parts of the country. The bad news, however, is that the number of local residential real estate sales in February 2011 was the lowest in many years.

The number of home sales in El Paso County in February 2011 (404 sales) was down 21.7% from February of last year. However, the statistics also show a very encouraging trend. The average and median prices of those sales were up. (Average price in Feb.2011= $235,684, for an increase of +13.6% over Feb. 2010. Median price in Feb. 2011 = $190,457, for an increase of +4.6% over Feb. 2010). In fact, our annual 2010 rise in local values (5.2%) is outstanding, when compared with other parts of the country. (The national rise in value averaged only .2%.)

The breakdown of current sales also shows a significant preference for lower-priced homes. Of the 404 homes sold in El Paso County last month, 209 were sold for under $200,000 (52%). Houses between $200,000 and $300,000 accounted for 110 sales (27%). Only 85 sales were for homes over $300,000 (21%).

This is another example of how Fort Carson’s returning soldiers help our entire local economy. (They tend to buy low-cost houses when they return from overseas). It also points out that, if you are selling in the median-to-upper price range, you had better be prepared to price very aggressively and have your house in a “ready-to-move-in” condition.

One happy side-effect of these low sales figures is that, when sales are down, interest rates also go down (Because lenders have more mortgage money available). As a result, we can currently get 4.78% mortgages, but that won’t last long. Better act now!!!

Call us.

 

MORE AMERICANS CONFIDENT ABOUT HOME OWNERSHIP

Americans are more confident about the stability of home prices than they were at the beginning of 2010, according to Fannie Mae's latest national housing survey, conducted between October 2010 and December 2010. And when it comes to home ownership, younger Americans are particularly optimistic, the survey finds.

Nearly 80 percent of all respondents, including home owners and renters surveyed, said they thought housing prices would hold steady or increase over the next 12 months--which is up from 73 percent in January 2010. In fact, survey respondents expressed more confidence over the stability of home prices than they did about the overall strength of the economy. (Sixty-one percent said the economy is heading on the wrong track.)

Young Americans, Hispanics, and African-Americans were the most positive about their views on home ownership among the general population, according to the survey. Nearly 60 percent of respondents between 18-34 years old say that buying a home offers a lot of potential as an investment. Also, more than one-third of Hispanics and African Americans say they plan to buy a home within the next three years, compared to one in four of the general population.

Most respondents to the survey continue to lack confidence in the strength of the economic recovery, and they are less optimistic about their ability to buy a home in the years ahead. This sense of uncertainty is weighing on the housing recovery today and reshaping expectations for housing for the future.”

FATE OF FORECLOSURE PROGRAMS HEADS TO A VOTE

Republicans on the House Financial Services Committee said they will push for a vote next Thursday on bills that would end four government programs that are aimed at helping prevent foreclosures.

Among the programs on the chopping block include the Home Affordable Modification Program, which was created to help struggling home owners reduce mortgage payments by offering lower interest rates and longer repayment times. The Treasury Department recently acknowledged that HAMP will fall short of meeting its original goal. Instead of preventing 3 to 4 million foreclosures as planned, it’s expected to complete only 700,000 to 800,000 loan modifications.

Other smaller programs at risk are aimed at refinancing loans, helping unemployed home owners, and aiding state and local governments in buying foreclosed properties in order to sell or rent them.

Committee chairman Rep. Spencer Bachus, R-Ala., says the foreclosure prevention programs haven’t had much impact and, in some cases, actually are doing more harm than good in helping struggling home owners.

The Obama administration argues that killing the programs will hurt some home owners.

WITHOUT FANNIE AND FREDDIE, THE 30-YEAR MORTGAGE MAY FADE AWAY

How might home buying change if the federal government shuts down the housing finance giants Fannie Mae and Freddie Mac?

If Freddie Mac and Fannie Mae were closed, homeownership in America could change greatly.

  • The 30-year fixed-rate mortgage loan, the steady favorite of American borrowers since the 1950s, could become a luxury product, housing experts on both sides of the political aisle say.
  • Interest rates would rise for most borrowers, but urban and rural residents could see sharper increases than customers in the suburbs.
  • Lenders could charge fees for popular features now taken for granted, like the ability to “lock in” an interest rate weeks or months before taking out a loan.

Life without Fannie and Freddie is the rare goal shared by both the Obama administration and House Republicans, although it will not happen soon. Congress must agree on a plan, which could take years, and then the market must be weaned slowly from dependence on the companies and the financial backing they provide.

The reasons by now are well understood. Fannie and Freddie, created to increase the availability of mortgage loans, misused the government’s support to enrich shareholders and executives by backing millions of shoddy loans. Taxpayers so far have spent more than $135 billion on the cleanup. The collapse of Fannie and Freddie took with it the pretense that the government could do so at no risk to taxpayers. Some Republicans and Democrats say the price is too high. They want the government to pull back, letting the market dictate price, terms and availability.

Hanging in the balance are the basic features of a mortgage loan: the interest rate and repayment period.

Fannie and Freddie allow people to borrow at lower rates. The key to that success is the guarantee that investors will be repaid even if borrowers default — a promise ultimately backed by taxpayers. Fannie, Freddie and other federal programs now support roughly 90 percent of new mortgage loans because lenders cannot raise money for mortgages that do not carry government guarantees.

Fannie and Freddie also allow borrowers to repay loans with fixed-interest rates over an unusually long period. A person who borrows $100,000 at 6 percent interest will pay $600 each month for 30 years, compared to $716 each month for 20 years.

Some experts say that one of the reasons that American housing finance is in such bad shape right now is the 30-year mortgage. Such loans are not available in most countries.

Fannie and Freddie also allow a wide swath of the American public to borrow money at the same interest rates and on the same terms. Borrowers who did not meet their standards were forced to pay higher interest rates to subprime lenders, but the companies essentially persuaded investors to treat a vast number of American families as if they were interchangeable.

They took messy bunches of loans, with risks as variable as snowflakes, and created securities of uniform quality, easy to buy and sell. The result was one of the most popular investment products ever created. And in its absence, experts on housing finance say that fewer borrowers would qualify for the best interest rates.

Fannie and Freddie slashed the requirements for down payments in recent years. Two-thirds of the borrowers whose loans were guaranteed by the companies from 1997 to 2005 made a down payment of less than 10 percent. But borrowers who invest less default more often. The Obama administration has said that it wants the companies to demand a minimum down payment of 10 percent.

A quirkier example is the ability to “lock in” an interest rate. Fannie and Freddie permitted lenders to make such promises at no risk because the companies had already obtained commitments from investors. In the companies’ absence, borrowers seeking rate locks may need to pay for them.

 

WINTER MONTHS CAN OFFER GREAT TIME TO SELL

Winter’s harsh weather certainly can bring a curve ball to selling, but some savvy Buyers and Sellers are finding it a good time to do business. That’s because the real estate market tends to be smaller in the winter, and buyers and sellers tend to be more serious and motivated about making a deal.

Winter can be a buyer’s market. They can usually get a better price, because there are not as many buyers in the market. Plus, buyers may be able to get quicker action on their mortgages since lenders aren’t dealing with as many applications.

If a house is on the market in the winter, the seller is usually extremely motivated. Sellers tend to be more flexible and the prices more affordable.

However, the common weather-related winter obstacles are often still there: The house often lacks curb appeal, icy sidewalks, and snowy driveways.

But, when buyers come out in rougher weather, you know they are serious and motivated.


HOWEVER, SELLERS NEED TO GET PRACTICAL ABOUT PRICE

Sellers whose homes have lingered on the market for months--or years, in some cases--are banking on this spring to turn the tide.

Foreclosures and short sales are still flooding the market, which means many sellers are still up against big inventories and some big bargains that may pull away buyers.

As such, more real estate pros say it’s time to have tough conversations with sellers about slashing their sales price of their home, particularly if it hasn’t garnered any traffic in recent months or years. After all, spring usually brings out more buyers, as home shoppers look to buy and move before the next school year.

Experts suggest sellers check out the competition by visiting open houses or viewing online virtual tours of similar homes for sale to see how the seller’s house compares in price and appearance.

Sellers have to be very realistic about what is keeping their home from selling. "Sometimes it may actually be the person in the mirror, if your expectations are not realistic. Ultimately, there is a price at which all things sell.

 

4 RED FLAGS THAT SEND BUYERS RUNNING

How you present a listing online and the words you choose to describe it may be turning off some buyers. Bankrate.com recently asked real estate professionals to weigh in on what listing red flags are turning off their buyers.

1. No photos. One red flag in many buyers' eyes is the lack of photos for a listing. There can be some legitimate reasons for few (or no) photos in a listing: The sellers want privacy, or they have valuables they don't want in the photos. But many would-be buyers--rightly or wrongly--assume that there's something wrong. Sellers should have about a dozen photos for listings and photos that match the home’s description and showcases its best features.

2. Outlandish claims. Referring to the listing as “the best property on the market” might not be a good idea. Some buyers may be turned off to begin with and some will inevitably be disappointed if the claim doesn't live up to their expectations. Instead, focus on adjectives that are flattering to the property but leave some room for interpretation.

3. Priced too low. You want to price the property competitively but pricing too low may make some buyers suspicious or attract unqualified buyers. Typically, multiple buyers will be attracted to the low asking price and eventually the sales price will climb close to market value as competing offers bid up the price. However, the strategy is not without risk in that some buyers will be alienated by a potential bidding war.

4. Listing a property “as is” in the description. That’s not a deal breaker but when you see “as is” in a listing, buyers might be cautious. Some buyers take the “as is” phrase as the "previous owners stole everything including the kitchen and bathrooms. Most contracts state 'as is' anyway, but some agents restate that in the listing, which is a disservice to their sellers.


LEADING real estate COMPANIES OF THE WORLD MEET IN LAS VEGAS

This week, we will have the opportunity to speak with relocation experts from around the world at the Leading RE national conference in Las Vegas. This organization has over 5000 offices with more than 150,000 sales associates in over 30 countries around the world. It will be a great opportunity to learn about the current real estate market worldwide. We will report to you in next week’s eNewsletter about the international trends and how they will affect our local market.

 

JOKE OF THE WEEK

The Society of Adults, a non-profit group, in an effort to reduce the level of whining that now bombards our society, has requested that parents post the following Rules of Life in the bedrooms of all of their children.

Rules of Life

 Rule 1:

Life is not fair; get used to it.

Rule 2:

The world won't care about your self-esteem.

The world will expect you to accomplish something BEFORE you feel good about yourself.

Rule 3:

You will NOT make 40 thousand dollars a year right out of high school.

You won't be a vice president with a car phone until you earn both.

 

Rule 4:

If you think your teacher is tough, wait till you get a boss.

He doesn't have tenure.

Rule 5:

Flipping burgers is not beneath your dignity.

Your grandparents had a different word for burger flipping;

they called it opportunity.

Rule 6:

If you mess up, it's not your parents' fault,

so don't whine about your mistakes.

Learn from them.

Rule 7:

Before you were born, your parents weren't as boring as they are now.

They got that way from paying your bills, cleaning your clothes,

and listening to you talk about how cool you are.

So before you save the rain forest from the parasites of your parents' generation,

try delousing the closet in your own room.

Rule 8:

Your school may have done away with winners and losers but life has not.

In some schools they have abolished failing grades.

They'll give you as many times as you want to get the right answer.

This, of course, doesn't bear the slightest resemblance to ANYTHING in real life.

Rule 9:

Life isn't divided into semesters.

You don't get summers off, and very few employers are interested in helping you find yourself. Do that on your own time.

Rule 10:

Television is NOT real life.

In real life people actually have to leave the coffee shop and go to jobs.

Rule 11:

Be nice to nerds.

Chances are you'll end up working for one.