FORTUNE MAGAZINE SAYS, "IT'S TIME TO BUY AGAIN".
April 18, 2011
HARRY'S WEEKLY UPDATE
A CURRENT LOOK AT THE COLORADO SPRINGS RESIDENTIAL real estate MARKET
FORTUNE MAGAZINE SAYS, "IT'S TIME TO BUY AGAIN".
Fortune, April 11, 2011
In their April, 2011 issue, Fortune Magazine's cover trumpets, "The Return of real estate" and their headline article declares, "Forget stocks. Don't bet on Gold. After four years of plunging home prices, the most attractive asset class in America is housing. It's time to buy again".
Fortune bases their recommendation upon the fact that, according to recent reports of inventories in 41 major housing markets, there are only 78,000 houses for sale or under construction in those markets. That's less than one fourth of the 343,000 units at the peak of the frenzy in 2006, and well below the level of a decade ago.
In normal times, those inventory levels would sell in 2 ½ months and we would have an incredible shortage. The article declares that's where we are heading.
Karl Case, one of the two economists who founded the famous S&P/Case-Shiller Home Price Index, states that, "People think I'm crazy to be optimistic, but housing is looking like the little engine that could".
Two basic factors are laying the groundwork for dramatic recovery in residential real estate:
- The historic drop in new construction
- The steep decline in prices
The new affordability will gradually lure Americans back to buying homes and the return of the homeowner will start raising prices in many markets this year.
As to affordability, analysts find that homeowners now pay just 9.8% of their income in after-tax mortgage, tax, and insurance payments. That's down from 17.2% at the bubble's peak in 2007 and by far the lowest number since 1999.
As to the cost of homeownership, in 28 out of 54 major markets, it's now cheaper to pay a mortgage and other major costs than to rent the same house.
For this scenario to play our, however, America will need a decent economy (translate: JOBS) and a resulting rise in consumer confidence.
In non-distressed areas like Colorado Springs, where our foreclosure numbers are low, compared with most other areas of the country, it will not take as long for the market to work through our housing inventory. Since our inventory stands at about a seven month figure, a modest increase in demand will translate into strong gains in both prices and new construction. Again, the key will be JOB GROWTH.
Zandi of Moody's Analytics expects that prices will rise three to four points faster than inflation for the next few years in virtually all of the non-distressed markets like Colorado Springs. His view is that prices will increase in line with rents, which are now growing briskly because rentals are in short supply. These higher rents will encourage buyers to buy a home of their own.
The non-distressed markets will also lead the way in construction, Zandi says. He predicts a rise from our present 470,000 national starts in 2010 to as much as 700,000 starts this year.
What about the inventory of foreclosed properties? Well, keep in mind that many of them are now being purchased and converted into rentals, thus reducing our inventory. So, as the inventory of homes available for sale decreases, selling prices increase and new construction picks up.
All in all, it looks like real estate is poised for a dramatic comeback. ..And, it's about time.
Call us to discuss your new home, or you new investment property at (719) 598-3200 or 800- 677 MOVE.
The train is starting to move. Don't get left at the station.
FREDDIE MAC MARKET OUTLOOK PREDICTS AN INCREASE IN HOME SALES
Freddie Mac forecasts a 5 percent increase in 2011 home sales over 2010, according to its U.S. Economic and housing market Outlook for April.
The report also contends that refinancing will likely account for a smaller share of loan applications later this year as wealthy borrowers decrease and mortgage rates increase.
"Expect to see a bit of spring in homes sales activity during the second quarter," said Frank Nothaft, VP and chief economist at McLean, Virginia-based Freddie Mac.
Nothaft continued, "Sales contract signings for existing homes were up in February, positioning the market for a bounce up going into the traditional home-buying season."
The expected pick-up in home sales is due to recent positive employment reports, the Market Outlook reveals. Unemployment declined for the fourth straight month to 8.8 percent, and net employment increased by 216,000 jobs. real estate employment was up by 10,000 jobs since last November.
The report also calculates that the share of adjustable-rate mortgage loans will be 7 percent in 2011 compared to the 5 percent 2010 average.
Freddie Mac compiles data on major economic and housing and mortgage market indicators and offers forecasts based on those indicators.
SPRINGS FORECLOSURE RATE 18% LOWER THAN A YEAR AGO
The Gazette
While many areas of the country saw their foreclosure situation worsen, the Colorado Springs area fared far better in the third quarter from both the previous quarter and from a year earlier, according to RealtyTrac's report.
According to the Gazette, the Springs had one foreclosure for every 129 households during the third quarter, which ranked it No. 64 among 206 communities. In the second quarter, Colorado Springs had one foreclosure for every 67 households, and ranked No. 53. At the end of 2009, the Springs had a rate of one foreclosure for every 39 households and was No. 50.
Although El Paso County Public Trustee Tom Mowle expects upward of 4,000 foreclosures this year, this would still be short of the record 5,470 filings established in 2009. Last month's total was the fewest number of filings since September 2008.
This is good news for our local real estate market and it is a good sign that our market is stabilizing.
PRICES ARE LOW! MORTGAGES CHEAP! BUT, CAN YOU GET ONE?
CNN Money
Yep, mortgage interest rates are low, but there's a catch: It doesn't matter how cheap rates are if you can't get a loan.
And these days, only highly qualified borrowers can get financing -- let alone the best rates.
Nearly a quarter of people who apply for loans are turned down, according to the Federal Reserve.
"Good borrowers with one or two blemishes on their credit are being denied credit," said Lawrence Yun, chief economist for the National Association of Realtors.
The denial rates tell only half the story. Many potential buyers aren't even applying for loans because they assume they can't get one.
Who's buying homes? The people with cash and/or good credit
That shows up in credit scores for loans financed with backing from Fannie Mae and Freddie Mac. The average credit score has risen to 760 from 720 a few years ago. For FHA loans, the average score has gone to 700 from 660. Loans made to borrowers with sub-620 scores are almost nonexistent.
Another factor keeping people out of the mortgage market is that lenders now require much more up-front cash. The median down payment for purchase is about 15%. During the housing boom, it approached zero. On most loans, banks want 20% down. On $200,000 purchases, that's $40,000, an insurmountable obstacle for many young house hunters.
Industry insiders say all these factors have reduced the pool of buyers, lowering demand for homes and hurting prices.
"We feel it really reduces the demand for houses," said Mike D'Alonzo, president of the National Association of Mortgage Brokers. "It's an unbelievable buyer's market, but there hasn't been as much activity as you would expect because not as many people qualify for loans."
If you have questions about your present ability to obtain financing, please give us a call to discuss it, at
(719) 598-3200 or 800- 677 MOVE (6683).
LEGISLATION INTRODUCED TO SPEED LENDER RESPONSE TO SHORT SALES
Two lawmakers, one Republican and one Democrat, have joined forces to push federal legislation through that would facilitate wider use and shorter transaction timelines for a foreclosure alternative that some say could be a lifeline for millions of underwater homeowners while drastically reducing the number of empty, repossessed homes lining U.S. neighborhoods - the short sale.
The bill, introduced by Reps. Tom Rooney (R-Florida) and Robert Andrews (D-New Jersey), would impose a deadline of 45 days on lenders to give an approval, disapproval, or status of a decision on an offer for a short sale.
Rooney and Andrews say their legislation, the Prompt Decision for Qualification for Short Sale Act of 2011, will bring the processing time for short sale price approvals in line with the home-buying and home-selling consumer's expectations - at most 45 days after submitting the request for short sale approval.
A similar bill - in fact, by the same name - was introduced last September but never came up for debate before a House committee before the legislative session ended.
The National Association of Realtors (NAR) is throwing its support behind the new bill. Our trade group has been actively pushing the lending industry to improve the process for approving short sales, which represent about 13 percent of recent home sales according to NAR data.
The Prompt Decision for Qualification for Short Sale Act of 2011 has not yet been referred to a committee.
CITY'S SALES TAX TAKE IS UP ..AGAIN
The Gazette
Colorado Springs sales tax collections shoed a small gain from the same month a year ago, the city reported Tuesday.
Although the gain was only a .83% gain, it represented the 17th consecutive month of year-over-year gain.
These tax revenues fund more than half of the city's annual budget for police and fire protection, roads and other services and they serve as a barometer of the vitality of the local economy, so the upward trend is a hopeful sign of recovery.
MORTGAGE RATES RISE; 30-YEAR FIXED IS AT 4.91%
Wall Street Journal, Friday, April 15, 2011
Mortgage rates rose slightly, with the average rate on 30-year fixed-rate mortgages climbing for a fourth straight week, according to Freddie Mac's weekly survey of mortgage rates.
The 30-year fixed-rate mortgage averaged 4.91% in the week ended Thursday, up slightly from the prior week's 4.87% but down from 5.07% a year earlier.
Mortgage rates generally track U.S. bond yields, which move inversely to Treasury prices. Rates have climbed this year after slumping most of last year when prices rallied on economic uncertainty.
Rates on 15-year fixed-rate mortgages averaged 4.13% in the latest week, up from 4.1% in the previous week but down from 4.4% a year earlier.
Five-year Treasury-indexed hybrid adjustable-rate mortgages were 3.78%, up from the prior week's 3.72% but down from 4.08% a year earlier. One-year Treasury-indexed ARMs were 3.25%, up from 3.22% but down from 4.13%, respectively.
Keep in mind that these 'official' rates are normally rounded up to the nearest eighth, at the Buyer' level.
To obtain the rates, the 15-year fixed-rate mortgages required payment of an average 0.7 point and the others required an average 0.6 point. A point is 1% of the mortgage amount, charged as prepaid interest.
Even with these increases, these are still great rates for Buyers, but the trend is going up, so call us today to discuss your new home, at (719) 598-3200 or 800- 677 MOVE (6683).
LET US TAKE YOU OUT TO THE BALL GAME
Salzman real estate Services would like to invite you to be our guest at a Sky Sox game. We have four season tickets to all Sky Sox home games and, if you give us a call and if nobody else has already requested the tickets, we would be happy to let you have them.
These are great seats, in the first row, right behind the Sky Sox dugout.
However, you'll have to buy your own peanuts and Crackerjacks. Sorry !!
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 39 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, please contact us.
LATEST STATISTICS
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JOKE OF THE WEEK
John was driving when a policeman pulled him over. He rolled down his window and said to the officer, "Is there a problem, Officer?"
"No problem at all. I just observed your safe driving and am pleased to award you a $5,000 Safe Driver Award. Congratulations. What do you think you're going to do with the money?"
John thought for a minute and said, "Well, I guess I'll go get that drivers' license."
Judi, sitting in the passenger seat said to the policeman, "Oh, don't pay attention to him -- he's just a wise guy when he's drunk and stoned."
Brian from the back seat said, "I told you guys we wouldn't get far in a stolen car!"
At that moment, there was a knock from the trunk and a muffled voice said, "Are we over the border yet?"
The policeman decided to postpone the award until John is released from prison.
