HARRY'S BI-WEEKLY UPDATE 10.24.22
October 24, 2022
HARRY’S BI-WEEKLY UPDATE
A Current Look at the Colorado Springs Residential real estate Market
As part of my Special Brand of Customer Service, it is my desire to share current real estate issues that will help to make you a more successful and profitable buyer or seller.
SO MANY QUESTIONS AND NO STOCK ANSWERS…
With a recession literally knocking on the door and mortgage interest rates escalating daily, I get regularly questioned about the “state of Residential real estate”.
And, like most things, there is no “right” answer to any of these questions. It’s not a matter of one-size-fits-all…but then, again, purchasing Residential real estate never falls into a one-size-fits-all category.
Each transaction must be considered against an individual family’s needs, wants and budget requirements and I have yet to find two families with the exact same situation.
Another thing that I tell my clients is that all Residential real estate must be looked at from a LOCAL point of view. What’s happening in the Colorado Springs area is often quite different from other parts of the country.
As an example, our city is experiencing fabulous growth as more and more companies and their employees relocate here. In addition, now that “work from home” (WFH) has become the norm for some—it’s somewhat of a “no-brainer” to choose a city such as Colorado Springs, known for the fabulous “work-life balance” so many crave.
For several years now we have had fewer available homes for sale than ever before, and this is one reason our home values have skyrocketed and created a sellers’ market that essentially still exists today.
Local homebuilders were not able to keep up with demand, in part due to the shortage of supplies such as lumber, cement and steel but there are still an historic number of local homes under construction due to having so many folks wanting to buy.
And with home appreciation across the U.S. now “normalizing”, we are still seeing better returns than most of the country. Some cities are slowing down or staying even, but Colorado Springs is continuing to thrive.
While our home values are continuing to increase, the fact that they are doing so slower than in the past several years is a important for several reasons.
To begin with, there was no way to sustain the type of increases we had been seeing. It would not have been too long before many more folks, and most particularly first-time buyers, would not have been able to afford a home. As it is, with the interest rates more than double what they were at the beginning of this year, monthly payments are not as affordable for many.
The lack of available homes for sale created a frenzy that favored sellers and forced buyers into bidding wars and paying above list price for many homes. There were no concessions for buyers and even appraisals went by the wayside in many cases. It was one of those “buy as is” type situations--if you even got the opportunity to buy.
Buyers today in most cases have the time to deliberate and to make realistic offers with some contingencies that we did not see even six months ago. When you consider that a home is often the most valuable asset in a family’s financial portfolio, this is a good thing.
If you are a regular reader of my eNewsletter, you know that I have been telling you for some time now that low interest rates and fast appreciation were not going to be here forever. However, even I did not foresee things moving as fast as they have.
Those of you who rent or have family members or friends who are renters have seen that rental rates are rising faster than ever. Some of that is due to investors realizing that there are many who need to rent for whatever reason and these investors are either purchasing homes to rent out or going in with larger investment groups who are building apartments at a faster pace than we have seen in years. Whatever the case, it is almost always preferable to own rather than rent, if possible, because one way or another you are helping to pay down a mortgage—be it yours or your landlord’s.
If you have wanted to sell and trade up or move to a new location and were waiting, what should you do? Again, it depends on your specific situation, but as I say…there are always those who need to sell and those who need to buy. It’s just likely to take longer in this current marketplace.
I’ve seen homes that might have sold in one day had they been listed 6-8 months ago compared to now seeing only a few prospective buyers. The reason? Buyers can be pickier than they were earlier in the year and are taking more time in decision making. And of course, the interest rates are holding some back.
While interest rate increases have hurt some potential buyers, but I don’t think they can be blamed for everything. If you are selling to trade up, the equity in your present home can be used for a larger down payment which can help keep the monthly payment more reasonable. And, when the rates go down, and they will at some point, you can likely refinance and get the payments even lower.
I have been in this business for 50+ years, so interest rates of 7% don’t seem so high to those of us who can remember 18%. Yes, compared to the 3% or so of recent times, it is a bit confounding, but those rates were unrealistic as well.
If you’re wanting a home now and cannot wait indefinitely for interest rates to go down, you might be finding your life plans aren’t lining up with economic conditions. If that’s the case, sometimes you must deal with higher monthly payments than you’d like until you can refinance down the road.
You might need to make some concessions to accommodate a more expensive loan, like reworking your monthly budget-- but over the long haul, there’s a good reason why homeownership is a big part of the “American Dream”. The sooner you are a homeowner, the sooner you can start building equity for you and your family.
What I’m saying is that while there is no stock answer, and never has or will be when it comes to the buying and selling of Residential real estate, there IS an answer for each individual situation.
Having seen almost every cycle imaginable over my fifty years here, I’m in a good position to help you and your family find the best answers for YOU.
It all begins with a call to me at 719.593.1000 or an email to Harry@HarrySalzman.com and we can start finding solutions that can work for you.
WITH THE LATEST NEWS ABOUT INFLATION, SHOULD YOU STILL BUY A HOME?
KeepingCurrentMatters, 10.19.22
The prices of groceries and most goods and services are climbing daily, so it’s no surprise that folks are wondering whether now is still the time to buy a new home. If you fit into that category, here’s what you need to know.
Homeownership Is Historically a Great Hedge Against Inflation.
In an inflationary economy, prices rise across the board. Because you can lock in what is likely your largest monthly payment (your mortgage) for the duration of your loan, historically homeownership is a great hedge against those rising costs.
According to James Royal, Senior Wealth Management Report at Bankrate, “A fixed-rate mortgage allows you to maintain the biggest portion of housing expenses at the same payment. Sure, property taxes will rise, and other expenses may creep up, but your monthly housing payment remains the same”.
And, as I mentioned above, with rents being as high as they are, the ability to stabilize your monthly payments and protect yourself from future rent hikes may be even more important.
Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), explains what happened to rents in the latest inflation report: “Inflation refuses to budge. In September, consumer prices rose by 8.2%. Rents rose by 7.2%, the highest pace in 40 years”.
Rental contracts are typically renewed annually, at which time a landlord may be more likely to increase monthly payments to offset the impact of inflation. This could be part of the reason why a survey from realtor.com shows that 72% of landlords said they plan to raise the rent on one or more of their properties in the next year.
Bottom Line? The best hedge against inflation is a fixed housing cost. If you are wanting to find a way, I’m here--- ready, willing, and able to help you explore the possibilities.
REPAIRS THAT PAY OFF IN A COOLING housing market
The Wall Street Journal, 10.11.22
In this slower-than-recent-times housing market, sellers are finding that remodeling properties can be a way to avoid cutting their asking price.
The bidding wars and frenzy of the recent past are gone, and buyers are looking much closer at what they want in a new home. For sellers, making repairs, or even small improvements that buyers care about could make the difference between getting your asking price or giving a discount.
Between mid-July and mid-August about 95% of home sellers made updates or repairs before listing their properties, up from 71% of sellers six to 12 months ago, according to realtor.com. They spent an average of $14,163.
However, data suggests that not all renovations are worth the cost for sellers. According to a recent NAR report, the top three interior remodeling projects with the highest return on investment are a hardwood flooring refinish, new wood flooring and an insulation upgrade.
Other sellers might find that smaller fixes such as a fresh paint job can make a bigger impression on buyers than pricier changes such as a renovated third bathroom, some real estate agents said.
At times, a big remodeling project, such as a new kitchen or deck, might not be worth the investment and could delay a seller’s timeline given supply and labor shortages.
Focus on more affordable projects that appeal to buyers and look beautiful in photos, such as the refinishing of hardwood floors, suggested Jessica Lautz, a vice president at NAR.
A hardwood flooring refinish has a 147% cost recovery, meaning homeowners are likely to recoup well more than the cost, she added. In comparison, a kitchen upgrade has a 67% cost recovery.
Giving the home a deep cleaning before showing it to potential buyers can also go a long way to presenting the home in its best light.
Enhancing curb appeal is another way to help a home stand out to buyers and reduce seller concessions.
Anything that isn’t broken and isn’t overtly visible, such as a new air conditioning system, won’t impress buyers as much as improvements they can see, such as new doors for the kitchen cabinets or customizable closet shelves. Aim to fix anything that an inspection would turn up.
These are just some possible ways to show your home in the best light without having to possibly lower the asking price or give unnecessary concessions.
As with everything to do with Residential real estate, it must be “localized”. Different neighborhoods attract different type of buyers, and the expectations can different so it’s important to know those differences when fixing up a home for sale.
When you are ready to sell, I’ll be happy to make suggestions based on years of experience working within most all local neighborhoods that can enhance the selling power of your home and get you the most return for your investment.
HARRY’S THOUGHT OF THE DAY:
