December 6, 2010

HARRY’S WEEKLY UPDATE

A CURRENT LOOK AT THE COLORADO SPRINGS RESIDENTAIL real estate MARKET 

 

WHAT ARE OUR LATEST MORTGAGE INTEREST RATES ?

Effective Monday, December 6, the interest rates in the El Paso County 2009A bond program for new loan reservations are: 4.25% “Non-Assisted” Loans without DPA and 4.75% “Assisted” Loans with 3% DPA Grant

Conventional 30 year fixed rate with no origination fee or points are at 4.625% and VA & FHA 30 year fixed 0+0 are at 4.5%

As we have been warning our readers, rates continue to climb.  If you are considering buying a new home or an investment property, be aware that values have leveled out and increased rates will mean less home for the dollar. With QE2 on the governments agenda to help out the stock market, it appears highly probable that these rates, if not higher, may become the norm.

 

MAJORITY OF AMERICANS SAY: BUYING A HOME IS A GOOD DECISION

Despite the continuing challenges facing the U.S., nearly eight out of 10 respondents believe buying a home is a good financial decision, according to NAR's eighth annual Housing Opportunity Pulse Survey.

The survey, which measures how affordable housing issues affect consumers, also found job security concerns to be the highest in eight years of sampling, with 70 percent of Americans saying that job layoffs and unemployment are a big problem in their area; eight in 10 cite these issues as a barrier to homeownership. The telephone survey of 1,209 urban and suburban adults in the top 25 metropolitan statistical areas was conducted for NAR by American Strategies and Myers Research & Strategic Services for NAR's Housing Opportunity Program.

Some key results:

  • Americans continue to believe that buying a home is a good financial decision (77 percent believe strongly or not so strongly, 68 percent strongly so).
  • More than two-thirds of respondents (68 percent) say that now is a good time to buy a home.
  • Job insecurity and the lack of jobs continue to be the primary obstacle to home ownership and market recovery.
  • Respondents see the recession and job losses as the main reasons for the foreclosure problem, a shift from last year when they were more likely to blame homeowners who bought homes they could not afford.
  • A majority of renters say that owning a home at some point in the future is either one of their highest priorities (39 percent) or a moderate priority (24 percent). Just 21 percent of renters say that owning a home is not a priority at all.
  • Frustration with banks is up: now a majority worry that banks have made it too hard to qualify for a home mortgage loan.
  • 51 percent of respondents say foreclosures remain a big or moderate problem in their area. While there has been a significant drop in the percentage of those surveyed who say foreclosures have increased, 51 percent say that the rate of foreclosures is about the same as it was last year.
  • Most of those surveyed say that it is harder to sell a home in their neighborhood than it was a year ago.
  • Looking forward, 70 percent expect real estate sales in their neighborhood to remain about the same over the next few months. A nearly identical number (69 percent), also expect home values to remain the same.
  • Nearly one-quarter (23 percent) are now very concerned about the number of homes and condos for sale in their area—a number that is up 7 points from last year.
  • Most respondents are more concerned about the drop in home values than they are about home costs being too high. Still, cost remains the significant barrier to many who would otherwise like to buy a home.

 

ONE INTERESTING REASON FOR THE HOUSING GLUT: Fewer New Households

According to RISMEDIA (December 4, 2010) and the Census Bureau, U.S. household formations are at their lowest since 1947. And that's helping to keep the supply of unsold homes at near-record levels nationwide, even though relatively few houses are being added to the inventory.

Between March 2009 and March 2010, the number of households rose just 357,000, according to the census data. In the previous 12 months, the number increased only 398,000, the third-smallest increase on record since World War II. (Between 2002 and 2007, before the economy started on its downward trajectory, household formations averaged 1.3 million a year, U.S. census data show.)

In a well-functioning economy, household formations "would be closer to 1.25 million," said Mark Zandi, chief economist of Moody's Analytics in West Chester, Pa.

"The drop in household formations is the consequence of the consumer fear of what's happening with the economy and with the job market," said Lucien Salvant, a spokesman for the National Association of Realtors.

"When people are afraid of losing their jobs or not being able to get into the job market, they are not thinking about buying a home," Salvant said. "Many opt to stay at home with parents, or to share rentals with friends."

The nation's gross vacancy rate — the proportion of housing units that are vacant — stood at 14.5 percent at the end of the second quarter of 2010, census data show. During normal times, builders need to add about 1.7 million houses a year to meet underlying demand stemming from, among other things, the need for replacement homes and the desire for second homes, as well as conversions from nonresidential to residential uses and increases in the number of households.

For example, about 250,000 new homes are needed per year to replace houses that are destroyed by fires and natural disasters or that wear out from neglect or old age. Demand for second homes combined with other miscellaneous factors accounts for 50,000 to 100,000 new houses a year.

Household growth typically requires 1.3 million to 1.4 million units.

"The sharp drop in household formation largely explains why the housing glut remains stubbornly high, despite the plunge in housing starts in recent years," said housing economist Patrick Newport, of IHS Global Insight in Lexington, Mass.

Two major sources of household formation — immigration and marriage — remain well below the averages of recent years.

The National Center for Health Statistics reports that the number of marriages per thousand population fell from 8.2 in 2000 to 6.8 in 2009. Divorces per thousand population fell from 4.0 in 2000 to 3.4 in 2009.

There are no hard data on "doubling up" — young people sharing rentals or moving in with their parents in a tight job market — though anecdotal evidence indicates the latter has become more commonplace in recent years.

Another big factor in the decline in households is the decline in immigration. During the late 1990s and in the first years of this decade, the housing industry banked on immigration for a good part of its growth.

Between 1990 and 2000, the U.S. population grew by nearly 33 million, with almost half of that gain attributable to immigration, according to data provided in 2003 by James Johnson Jr., a professor at the Kenan-Flagler Business School at the University of North Carolina-Chapel Hill.

In the 1990s, census data show, immigrants accounted for 250,000 household formations a year. Immigrants typically rent for their first few years in this country, housing economists say. Then, after becoming established, they become a major factor in the for-sale marketplace.

Newport believes that a drop in immigration might have played a greater role early in the recession than it did later on. In 2009, census data show, households headed by the native-born under age 35 fell by 338,000, indicating that doubling up was the larger contributor.

The number of households headed by those ages 15 to 24 fell 124,000 (students moving back in with parents), while households with six or more people rose 355,000, an 8 percent increase.

A common misconception, Newport said, is that foreclosures account for the oversupply of houses.

"A foreclosure or a bank taking possession of a home," he said, "does not by itself add to the housing glut. If a household vacates a home and moves into a rental unit, the housing supply is unchanged. Supply increases, however, if one household moves in with another, or if its members become homeless”, Newport said.

The moral of the story is: Don’t just move in with your patents …Do the patriotic thing. Get married and buy a house !!

 

COLORADO SPRINGS HOME SALES PRICES ROSE IN 2010 ..AND THAT’S BETTER THAN MOST AREAS IN THE COUNTRY

The most recent NAR report on median sales prices of existing single-family homes for metropolitan areas shows Colorado Springs prices were up 3.2% over 2009, as opposed to the national prices which were down .2% from last year. These figures emphasize that we are outperforming most other metropolitan areas of the country. (To see the complete report, click here)

In a nutshell, our local market is still very slow, with only 600 sales in November, but the outlook for Buyers looks great. Large inventories (Yes, foreclosures are still adding to the inventory), low interest rates (not as low as last month, but still a bargain), low prices and eager Sellers all add up to a wonderful opportunity for both Homebuyers and Investors. ..And, there is a growing pool of renters out there that should keep our vacancy rates low, for the foreseeable future.  

Call us and let’s discuss how these factors fit into your investment strategy.

 

THE ‘FIRST-TIME DEFAULTER’: the Newest Customer Segment for Banks  

Over the last two years, a new customer segment—the "first-time defaulter" (FTD)—has emerged and is presenting a new challenge for banks, according to a new survey examining the future of consumer lending by the Deloitte Center for Financial Services.

According to Deloitte's survey, 11 percent of bank customers surveyed have been hit with a negative credit experience for the first time in their lives during the past two years. Overall, 22 percent of consumers have experienced a serious negative credit situation since the peak of the crisis in September 2008, including events such as delinquency, foreclosure, bankruptcy and charge-offs.

"This is a significant new customer segment that banks should be aware of," said Andrew Freeman, executive director of the Deloitte Center for Financial Services, Deloitte LLP. "Our research shows just how sizeable the first-time defaulter group has become."

More than half of FTDs (58 percent) have been contacted by a collection agency, and 43 percent have been delinquent in their medical bills.

According to the survey, these events could be costly for financial institutions, as poor interactions and unmet customer expectations may cause the first-time defaulters to look elsewhere: 63 percent of respondents say they are not at all likely to borrow from their current institution in the future based on the lender's efforts to help resolve their issues.

"Today, retail banks are rethinking their broader lending strategies and practices," said Freeman. "As part of this reassessment, lenders are likely to be paying careful attention to how they serve this new segment. When implementing strategies to re-engage with these customers, financial institutions may want to recognize that once many of these individuals are able to regain their economic footing, they may become profitable again."

Other findings of the survey, from the full base of respondents, include:

  • Almost two-thirds of consumers (65 percent) say they have the same level of satisfaction relative to two years ago with their bank.
  • At the same time, most respondents have seen little change in the lending process overall, although 16 percent said they have seen higher fees associated with loans and credit.
  • Only 28 percent believe the Dodd-Frank Act and other new regulations will have immediate benefits for consumers. Furthermore, a significant proportion of consumers expect higher fees, higher rates, more paperwork and fewer offers from lenders in the next 12 months.
  • More than half of those surveyed (52 percent) would prefer to use a single bank for all their financial services needs. But, with consumers' interest in obtaining loan products from their primary bank surprisingly low, the survey findings indicate that banks' cross-selling efforts will likely require some fresh, creative efforts.

Unfortunately, this is just one more problem they have to face in today’s competitive market.

 

CHIEF ECONOMIST FOR NAR TO SPEAK IN COLORADO SPRINGS

Lawrence Yun, Chief Economist for the National Association of Realtors, will speak at the Crowne Plaza Hotel, in Colorado Springs on Wednesday, February 16, 2011, 9am-11am. Attendance will be by registration only and will be limited to 300. Registration for the event will begin at 8:30am.

Dr. Yun creates NAR’s forecasts and participates in many economic forecasting panels, including Blue Chip and Harvard University Industrial Economist Council. USA Today recently listed him among the top 10 economic forecasters in the country.

The registration fee for this event is $10. Be sure to register ASAP, to insure getting a seat to hear this outstanding speaker.

The Sponsor of this outstanding presentation is Land Title Guarantee Company.

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. 

 

LATEST STATISTICS

Click here for the latest monthly Sales and Listing statistics for the Pikes Peak area.

 

CHRISTMAS JOKE OF THE WEEK


Q: Where do polar bears vote?
A: The North Poll.

Q: How does Al Gore's household keep Christmas politically correct?
A: On Christmas morning, they give the presents TO the tree.

Q: What do you call a cat on the beach at Christmas time?
A: Sandy Claus!

Q: How do sheep in Mexico say Merry Christmas?
A: Fleece Navidad!

Q: What nationality is Santa Claus?
A: North Polish.

Q: What do you call a bunch of grandmasters of chess bragging about their games in a hotel lobby?
A: Chess nuts boasting in an open foyer!

Q: What goes Ho, Ho, Swoosh, Ho, Ho, Swoosh?
A: Santa caught in a revolving door!

Q: What do you call people who are afraid of Santa Claus?
A: Claustrophobic.

Q: How come you never hear anything about the 10th reindeer "Olive" ?
A: Yeah, you know, "Olive the other reindeer, used to laugh and call him names"

Q: Why is Christmas just like a day at the office?
A: You do all the work and the fat guy with the suit gets all the credit.

Q: What's a good holiday tip?
A: Never catch snowflakes with your tongue until all the birds have gone south for the winter.

Q: Why did they have to cancel the Nativity pageant in Washington, this year?

A: Because they couldn’t find three Wise Men or a Virgin.