February 5, 2018

HARRY’S BI-WEEKLY UPDATE

          A Current Look at the Colorado Springs Residential real estate Market

As part of my Personal 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.

LOTS OF CHANGES IN THE ECONOMY THIS PAST WEEK…BUT LOCAL real estate JUST KEEPS ON TRUCKIN’…WITH MEDIAN HOME PRICES AT RECORD HIGHS

At the risk of sounding redundant, I can’t believe the pace at which we are experiencing so many changes locally.  In my almost 46 years in local residential real estate, I’ve never seen anything like what we now experiencing.  The PPAR statistics in the next article will show you just how much growth we’ve seen over the past year.

In January 2018, Colorado Springs was once again named one of the “Top Performing Markets”, coming in at Number 4 according to realtor.com.  This is no surprise to those of us here in residential real estate.  And it’s evident to most buyers and sellers in this market too.

The days of the spring “buying season” are gone, along with the relative “bargains” one might find by looking for a new home in early January or February.  “Buying Season” is now a yearlong event and bargains are no longer on the table for the most part. 

I’ve been predicting for more than a year that the mortgage interest rates were not going to stay historically low forever and in the past week we’ve seen them increase by 3/8-1/2 percent.  FHA/VA rates for a 30-year-fixed mortgage went from 3 ¾% to between 4% and 4 1/8 % and Conventional loans from 4% to 4 3/8-1/2% in the last week.  The Federal Reserve has indicated there will be 3 or 4 more rate increase this year, so expect mortgage interest rates to follow suit. 

I tell you this so you are not caught off guard, but I also want to emphasize that with median home prices rising so quickly, equity is building much faster than it has in the past, so your home investment today should offset the marginally rising prices.  Even at 5%, interest rates on a 30-year-fixed rate mortgage are still much lower than in the not so distant past.

Let me take a moment to tell you why it’s more crucial than ever to work with a real estate professional like myself, one who has many years of experience and has worked with clients through all the ups and downs of market trends.  It’s essential to work with someone who understands the economic cycles and can help you navigate more easily through the necessary steps to insure you are getting the most for your hard-earned dollars.  My investment background gives me a step-up but more importantly, my almost 46 years in this market can help make the difference between a successful home-buying and selling process or not.

Between the increasing interest rates and lack of available listings, it’s no longer prudent to wait if you’ve been sitting on the fence about selling to trade up or to purchase for the first time or investment purposes.  It’s still quite the “seller’s market”.  However, I want to again remind you that if you’re looking to sell, it’s important to know where you will live next since your present home will likely sell much faster than you might have anticipated. 

And for you investors out there, this is an excellent time for you as well.  Increasing interest rates and home prices will make it more difficult for some first time buyers to get into home ownership, so rental properties will be in demand. 

I am available to help you in determining any and all of these things. Having someone like me on your team makes the entire home buying and selling experience one that will be as stress-free as possible.  Simply give me a call today at 593.1000 or email me at Harry@HarrySalzman.com and let me put my special brand of customer service to work for you.

And now for a few statistics…

Homes are selling at 99.4% of listing price with the average days on the market at a low 36.  This continues to be great news for both buyers and sellers, despite the fact that interest rates have started to rise.

As you will see in the Cumulative Year to Date Summary, total sales numbers in Single Family/Patio Homes and Condo/Townhomes are up 3.3% and 9.2% respectively for year-over-year.  This number would have been much higher had there been more homes for sale. 

The Monthly Summary shows that compared to a year ago, total active listings are down 7.1% for Single Family/Patio Homes and down 31.1% for Condo/Townhomes, continuing a downward trend that tends to favor sellers.  New listings are up 20.1% for Single Family/Patio Homes and down 7.1% for Condo/Townhomes.  The reality is that total active listings are at a record low and are a factor in the median price escalation. 

For more details, please see the following article.

 

JANUARY 2018 WAS ANOTHER OUTSTANDING MONTH IN LOCAL RESIDENTIAL real estate

Statistics provided by the Pikes Peak REALTORS Service Corp, or it’s PPMLS

Here are some highlights from the January 2018 PPAR report.  A look at the Median Sales Prices should put a big smile on many of your faces!  Please click here to view the detailed 15-page report, including charts. If you have any questions, just give me a call.

In comparing January 2018 to January 2017 for All Homes in PPAR:                     

                        Single Family/Patio Homes:

  • New Listings are 1,163, Up 20.1%
  • Number of Sales are 938 Up 3.3%
  • Average Sales Price is $332,834, Up 11.4%
  • Median Sales Price is $295,000, Up 11.3 %
  • Total Active Listings are 1,236, Down 7.1%
  • Months Supply is 1.3

                        Condo/Townhomes:

  • New Listings are 170, Down 7.1%
  • Number of Sales are 142, Up 9.2%
  • Average Sales Price is $218,832 Up 10.1%
  • Median Sales Price is $196,750 Up 10.8%
  • Total Active Listings are 84, Down 31.1%
  • Months Supply is 0.6

COLORADO SPRINGS AREA MONTHLY SINGLE FAMILY/PATIO HOME SALES ANALYSIS*

 

                                                Median Sales Price             Median Sales Price

                                                  January 2018                          January 2017

Black Forest                            $514,950                              $470,000                       

Briargate                                  $379,950                             $389,900          

Central                                      $240,000                              $200,000

East                                          $256,000                              $229,000

Fountain Valley:                      $255,000                              $239,000

Manitou Springs:                    $245,000                              $368,000

Marksheffel:                            $306,250                             $302,500

Northeast:                                $293,000                              $251,000

Northgate:                                $447,500                              $443,686          

Northwest:                               $368,000                              $326,818           

Old Colorado City:                  $310,000                              $229,000

Powers:                                    $295,000                              $269,900

Southwest:                              $324,000                              $345,000

Tri-Lakes:                                $485,000                              $437,225

West:                                        $271,750                              $232,500

*Statistics provided by the Pikes Peak REALTORS Services Corp,or its PPMLS.

 

MILLENNIALS STARTING TO FIGURE HEAVILY IN MANY AREAS—MOST ESPECIALLY IN COLORADO SPRINGS

The Wall Street Journal, 1.31.18, The Gazette,2.4.18

The U.S. homeownership rate rose in 2017 for the first time in 13 years, driven by young buyers who overcame rising prices, tight supply and strict lending conditions to purchase their first home.  The homeownership rate rose to 64.2% from 63.7% a year earlier.

This annual increase marks a crucial turning point because it comes after the federal government reined in the “bubble-era” policies that encouraged banks to ease lending standards to boost homeownership.

Susan Wachter, a professor of real estate and Finance at the Wharton School at the University of Pennsylvania said, “This is market, market and market…There’s no government incentive program in sight that is having this effect.  This is back to basics.”

And what’s driving this?  In one word:  Millennials.  The more than 75 million people born between 1981 and 1997 are the largest home-buying generation since the baby boomers and they are favoring ownership over renting.  They are getting married, starting families and wanting to start building equity for the future.  Owning a home can help them in the equity building and in financial planning for their futures. 

And for Colorado Springs?  Millennials are moving to Colorado Springs at a higher rate than anywhere else in the country, according to a study recently released by the Brookings Institution’s Metropolitan Policy Program.

Our millennial population increased by 14.7% from 2010 to 2015, with San Antonio placing second at 14.4% and Denver third at 12.8%.

In 2015, Colorado Springs’ population featured the sixth-highest proportion of millennials—26.4%.  The nation’s 100 largest metropolitan areas were the cities used in these studies.

According to William H. Frey, senior fellow at Brookings and the report’s author, “Millennials are already making an indelible impact on the nation, as the most diverse—and now largest—adult generation.  As the bridge between a whiter, older America and the multi-hued country we are becoming, millennials will pave the way for generations behind them as workers, consumers and leaders in business and government in their acceptance by and participation in tomorrow’s more racially diverse nation.”

 

ASSESSING THE STATE OF THE HOUSING UNION

Rismedia.com, 1.28.18

In 2018, the challenge for the housing industry will be balancing bursting demand with the severe shortage of supply, according to realtor.com’s State of the Housing Union, released in-step with the U.S. State of the Union last week.  As with last year, first-time buyers will have the hardest time, with so little in their price point.

“The macro-factors that have defined real estate in recent years—strong demand and weak supply—continue to set the tone for the industry,” said Joseph Kirchner, senior economist for realtor.com.

The issues include builders who have been burdened by construction costs and lack of labor, and have concentrated on higher-priced homes.

“Builders will need to focus more on homes geared for moderate incomes, partner with government on initiative to transform distressed urban neighborhoods and overcome labor shortages through a combination of workforce development training and pressure to ease artificial restrictions on the supply of labor,” Kirchner says.

The shortage of inventory made prices rise, but sales struggle in 2017, according to data from realtor.com.  Nationally, appreciation was at an average of 5.8%, while pre-owned sales eked out a 1.1 percent gain.  Comparing Blue and Red States:

 

A significant factor here is tax reform.  In 2017, 2.5 percent of blue state mortgages were over $750,000—the limit on the mortgage interest deduction (MID) under the Tax Cuts and Jobs Act, which will apply to loans obtained on or after December 15, 2017.  Only 0.4 percent of red state mortgages were over the threshold.

“The new tax law that caps the mortgage interest deduction and the deductibility of state and local taxes can be expected to impact the upper-end market in 2018—precisely how and the extent of which remain to be seen,” say Kirchner.

 

HOME PRICES:  WHAT GOES UP ISN’T COMING DOWN SOON

Themreport, 1.23.18

According to the Winter 2018 edition of The Housing and Mortgage Market Review, released by Arch Mortgage Insurance Company, if current analyses are any indication, home prices in the nation aren’t heading south anytime soon.  Among the assessments, U.S. housing prices will keep climbing by 2 to 6 percent yearly, especially in the entry-level space.

“With interest rates and home prices both on the rise, first-time homebuyers—largely millennials—may want to consider making the jump from renting to owning sooner rather than later,” said Dr. Ralph G. DeFranco, Global Chief Economist, Mortgage Services, Arch Capital Services, Inc.  “Our research shows few signs of a housing bubble because the typical warning signs aren’t present.  Overall, the shortage of housing paired with a robust job market should keep the housing market strong and growing, short of an unexpected event and despite the contrary pressures that may be created by the tax bill.”

“The Estimated Fundamental Home Value Index spots housing bubbles by evaluating home prices across 50 states and 401 metro areas and “suggests that the average probability of home price declines in America’s 401 largest cities remains unusually low, at 5%.” 

Note to those of you thinking you might buy when prices go down---don’t be counting on that—there are no signs that we will see this happen in the forecasted future.

 

BUYING IN A SELLER’S MARKET:  WHO’S THE WINNER?

Rismedia.com, 10.17.17

I came across this information in October and it’s just as applicable today as it was then, so wanted to share it with you. Many of this is what I’ve been telling you for some time now.

These are some things that are especially good to know in a “Seller’s Market” like we’re presently experiencing:

  • Time is valuable.  Buyers have fewer options today and this means more competition because there aren’t as many homes to look at in their price points.  Buyers need to know what they want, need and can afford.  If you know you absolutely need three bedrooms, you’ll need to ignore looking at that two bedroom house or risk losing out on better opportunities.

You also need to be prepared to make offers quickly.  Buyers without a preapproval will not be considered and will likely miss out on highest and best deadlines by the time they obtain one.  On the other hand, sellers will have an easier time selling their home.  If in good condition, their home will likely be the cream of the crop during these low-inventory times.

 

  • Offers are aggressive.  In a seller’s market, buyers will often have to deal with multiple-offer situations.  If they don’t bring their best offer to the table, they will most likely lose out.  Sellers can also prioritize stronger terms.  They may decide to go with a lower offer if the buyer can close faster or is putting more money down.

A combination of the highest purchase price with a 20 percent down payment and a reliable lender is usually the winner.  Of course, you can’t forget that cash is king.  An all-cash offer will likely trump any others on the table.

 

  • Negotiations are a game changer.  Unfortunately, buyers may lose some negotiating power in a seller’s market.  Unless the seller is incredibly motivated to get rid of their property, they may take advantage by refusing to take care of some inspection items.  Buyers should be wary of asking for too much, as even big-ticket items may not be taken care of.  Unless something is a safety or health hazard, it shouldn’t even be brought up.

Sellers may also decide to be more selective about what they are leaving with the house.  They may decide not to include appliances such as a refrigerator, dishwasher or washer and dryer.

Even small things like tone in a negotiation email should be taken into consideration.  Alienating the sellers this early in the game can force them to go with a backup offer.

 

  • real estate agents are essential.  Even though a seller’s market clearly tips the scale in one direction, buyers are more likely to lose out if they are not working with an experienced, knowledgeable real estate agent.  Likewise, sellers may not even be aware of their advantage without the help of a real estate professional.  Agents will advocate for their clients—whether they are buyers or sellers—by helping them get as much as possible during sale price and inspection negotiations.

Things that might not seem significant—such as getting all of the paperwork submitted correctly, sending emails to the opposing agent and doing due diligence on the property—can make a huge difference in a seller’s market.

 

DASHBOARD FROM UCCS ECONOMIC FORUM

Please click here for a look at the detailed charts from the UCCS Economic Forum updated on January 23, 2018.  These show economic trends for the country as well as for El Paso County and cover such areas as housing, cost of living, consumer sentiment, job market and more.

If you have any questions, please give me a call.