HARRY’S WEEKLY UPDATE

A CURRENT LOOK AT THE COLORADO SPRINGS RESIDENTAIL real estate MARKET

THE WALL STREET JOURNAL REPORTS “GOOD NEWS” – HOUSING STARTS ARE DOWN

The Commerce Department reports that the pace of new-home construction fell roughly 5% in February to 563,000 units at a seasonally adjusted rate. Strangely enough, the Wall Street Journal reports this in an upbeat manner, since the fact that housing starts are down is good news for anyone concerned about the bloated housing market.

The pace of home building already has fallen sharply, to a low of 488,000 units last April from a peak of nearly 2.3 million in mid-2006. That has helped cut excess inventory of new homes, which has fallen to its lowest level since 1971.

Despite this reduction in new-starts, experts say more thinning is needed. While new homes for sale shrank to 234,000 in January, this is dwarfed by the 3.25 million existing homes also on the market. Added to this in an additional 5 million properties estimated to be in the late stages of delinquency or the early stages of foreclosure. Little wonder that, according to their own trade association, builders’ confidence sank to a level of 15, from a level of 17 the previous month. Their confidence has been below the 50 level since April 2006.

There are a variety of government programs that have been introduced to keep all of the foreclosed properties from hitting the market all at once. Government loan-modification and foreclosure-prevention programs as well as bank-approved short sales should help clear the market gradually.

It is far too early to say that housing is ready to rebound and, until that happens, it looks like it would be better for everyone if builders aren’t feeding the glut. Sorry, fellas ! 

INTEREST RATES VS. INFLATION …IT’S A BALANCING ACT

The Federal Reserve, must strike a balance between stimulating the economy and encouraging inflation. If the Fed raises rates too soon or too aggressively, it could undermine the recovery. If it waits too long, it could fuel inflation.

Last Tuesday, the Federal Reserve announced that it would not raise interest rates in the near future, which probably means several more months. They will also end, as planned, one of its main supports for the US economy – purchases of $1.25 trillion of mortgage-backed securities – allowing a nascent economic recovery to stand with less government support. These purchases helped drive up the value of these securities and maintained existing mortgage interest rates at the lowest level in over 40 years.

Mortgage rates are not expected to rise immediately as a result of the Feds decision to stop buying mortgage-backed securities, according to Scott Simon, a managing director at Pacific Investment Management Company, a big mortgage securities investor. He stated, “Private investors, who stepped aside when the Fed jumped into the market, are ready to return. It is not as though credit is all of a sudden going to become much more difficult to get. The big problem for the housing market is unemployment”.

Keep in mind, however, that, until we know what entities are going to step forward and start buying the mortgage-backed securities that the government has been purchasing, interest rates could start creeping up.

John Lonski, chief economist at Moody’s Investor Service says he isn’t expecting the Fed to move until private-sector job-growth is tracking above 100,000 a month for three months. Even if such job growth resumes, the Fed is clearly focused on getting the economy somewhat closer to “maximum employment”,- which before the Great Recession meant a jobless rate of roughly 5% - before it feels comfortable raising rates. The risk is that the Fed loses control of stable prices as a result of postponing an increase in rates.

The bottom line to all of this is – Right now, while inventories are high, and prices and rates are low, you will never find all of these competing influences working this hard in your favor, again. Better buy that house right now !!!!

 LAST CALL FOR FEDERAL TAX CREDIT

 Attention, all prospective homeowners !!! If you plan to buy a home anytime in the near future, keep in mind that, in order to obtain the Federal Tax Credit for homebuyers, you must be under contract by the end of April and must close by June 30, 2010. You will really kick yourself, if you let these deadlines pass.

FOR real estate AGENTS, THE FUTURE IS CLEAR – OFFER MORE INFORMATION TO CLIENTS, WORK HARDER FOR SMALLER COMMISSIONS, AND LEARN TO NEGOTIATE

The Inman News, a website dedicated to helping Realtors prepare for the future, featured an article titled, “real estate Darwinism”, March, 2010. The article lists some of the realities that will shape the future of the Real Estate market and predicts that the agents who survive and lead us out of this current mess are going to be those most willing to change. They will share three key attributes: they will be the most competent in their craft, utilize all available technology and be the most dedicated to customer service. Externally, technology will continue to drive industry change. Internally, change will come in the form of   technology and reduced commissions. Some of the predictions in the article were:

  •  Online sources for information will enable customers to learn everything about specific properties before they even talk to an agent. We are almost there now.
  • In order to justify a fair commission, agents will have to be transaction and negotiation experts to add value to the transaction
  • There will be a shift back to the local and regional broker
  • The brokerage office of the future will have far fewer agents, each handling many more transactions (Already, board memberships are falling in most areas. NAR membership is almost back down to 2004 levels).
  • Independent contractor status will begin to evolve into employee status, with transaction bonuses

The article points out that these changes are market-driven and Realtors are facing the Darwinian reality that they can change, or be left behind. In 1975, a $1 million producer won awards and could feed a family. Today, they still get the award, but are barely making a living. These agents will cease to exist: the part-time agent will generally not fit in. You can see this evolution at work today in the growing number of “teams” working within brokers.

The article concludes by pointing out that all “free” markets move to an equilibrium of efficiency based on supply and demand, but the real estate industry has not yet made that adjustment. However, it appears that agents will eventually evolve into account managers with standard work schedules and quotas.

FEBRUARY SALES TAX REVENUES WERE UP

On March 16, 2010, The Gazette reported that in February, Colorado Springs sales tax collections rose 4.74% compared with those of February 2009. Sales tax collections fund more than half the city’s annual budget for general services such as police and fire protection, parks and roads.

Categories of goods that produced the greatest increase in sales taxes were furniture, appliances and electronics, up 17.76%; utilities, up 8.4%; department and discount stores, up 7.09%.

Decreases were posted by auto repairs and leases, down 11.02% and building materials, down 7.93% from the year before. This ties in with our other story about the decrease in home-building.

COUNTY PROJECTIONS SHOW THAT OUR AREA CONTINUES TO GROW

Prospective home owners and investors will be interested in the following chart from our County Government Planning Dept. As you can see, it shows that our area is one of the few parts of the country that is looking at continued growth through the foreseeable future.

 

 

Population Projections for El Paso, Park and Teller Counties

 

 

 

 

 

 

 

 

 

 

2000

2005

2010

2015

2020

2025

2030

El Paso

520,572

564,776

647,060

707,570

762,151

815,265

868,222

Park

14,703

17,255

25,242

37,202

51,139

67,953

86,141

Teller

21,145

22,558

25,177

28,150

31,008

33,572

35,865

Total

556,420

604,589

697,479

772,922

844,298

916,790

990,228

THANK YOU, AGAIN, TO OUR GREAT CLIENTS

At the recent conference in Las Vegas, we were very pleased to be awarded the Platinum Producer Award for 2009 by the sponsoring organization, Leading real estate Companies of the World. It goes without saying that we are well aware the award was the result, not of our efforts, but of our clients’ loyalty and support, and we want to take this opportunity to thank all of you for your friendship and for your business. Stop by the office to see your award and we’ll buy you a cup of coffee.

Thanks, folks. 

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

Someone asked us what was meant by the expression, “Welfare Mentality”. We thought the following joke explains it perfectly:

Two old friends meet passing on the street one day. But one looked forlorn, and almost on the verge of tears. His friend asked, "What had the world done to you, my old friend?"

The sad fellow said, "Let me tell you. Three weeks ago, an uncle died and left me forty thousand dollars."

Friend: "That's not bad."

"But you see, two weeks ago, a cousin I never even knew kicked the bucket, and left me eighty-five thousand free and clear."

Friend: "Sounds like you should be grateful..."

"You don't understand!" he interrupted. "Last week my great-aunt passed away. I inherited almost a quarter of a million."

Now his friend was really confused. "Then, how come you look so glum?"

"This week... nothing!"

Margaret Thatcher said it best …”The problem with Socialism is that, eventually, you run out of other peoples’ money”