HARRY'S BI-WEEKLY UPDATE 3.22.21
March 22, 2021
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.
OF COURSE THERE ARE…AND…I’VE GOT THE ANSWERS…
In recent days I’ve discovered that my clients and potential clients have far more questions about home buying and selling than even in the most recent past. A lot of this is due to information overload from television commercials and internet searches, as well as “mis-information” from various sources.
Is now the time to buy? Or is it the time to sell? What about the high home prices? Is new construction the best option for my needs? Where are the best schools and recreation areas for my family? How can I take advantage of the historically low interest rates? Maybe I should consider a rental property for investment purposes? Can I really keep my monthly payment lower than I imagine it might be?
And the list goes on.
My answers always begin with two important facts. The first is that any answer to those questions needs to be personalized for each and every client. After all, every family has its own individual needs, wants and budget and “one size fits all” just doesn’t cut it when it comes to one of the largest assets you will ever own. As you might imagine, a home often represents about 90% of the total wealth of a household, so a home purchase decision is of considerable importance.
The second fact, which I cannot over-emphasize, is the importance of using a professional, knowledgeable and seasoned real estate professional like myself in trying to navigate today’s buying and selling market. I’ve been in the local residential real estate arena going on 48 years now and have witnessed every type of market imaginable. With my investment banking background and certification in negotiation, I do my best to make the entire process as stress free as possible.
That may seem like a given but believe me, in a market with so few available existing homes for sale it’s more prudent than ever to have a pro on your team. Existing homes for sale are scarce and are selling as fast as they get listed—more often than not from 2 to 10% over the listing price and with bidding wars.
Even newly constructed home buyers need assistance in order to get help with elevation and site selection, as well as direction to the financing that is the best fit for their particular situation.
My long-time experience certainly gives you, my clients and readers, an advantage over many and my special brand of customer service is hard to beat. If it appears that something is not in your best interest, I will tell you that. Oftentimes a “no” can be a win in the long run. I’m in this for long-time relationships and will give you my honest opinion always. It has been my greatest joy to be able to assist children and even grandchildren of previous clients who remember me from when I helped their parents buy or sell a home where they once lived.
If you’ve considered a move--even relocating to another city for a job transfer or to be near family members--or have any questions concerning residential real estate, there’s no better time than now to start the process.
I don’t always have all the answers, but lucky for you, I’m fortunate to know where to get them and sometimes that’s a true “win” for all.
So, there you go. You’ve got questions? I’ve got answers.
It all starts with a call to 593.1000 or email me at Harry@HarrySalzman.com . The sooner you ask, the sooner you’ll know, and I think you’ll be happy at what we can accomplish together. With today’s low interest rates, you might just find that you can easily afford more home than you would expect, and without increasing your monthly output by too much. No one knows how long these rates will hold as they are beginning to inch up, but at present they are around 3% for a 30-year fixed-rate and 2 3/8% for a 15-year fixed-rate. When we do the math, you will likely be pleasantly surprised at what you can afford at these rates.
I look forward to talking with you soon.
The Wall Street Journal printed three articles this past week that I found to be so pertinent to many questions I’ve been asked that I thought I would quote from them here:
THIS HOUSING BOOM IS DIFFERENT
The Wall Street Journal, 3.16.21
Today’s residential real estate boom is on its biggest tear since 2006, which was just before the housing bubble burst and set off a global recession. However, in nearly every meaningful way, today’s market is the inverse of the previous boom.
In today’s market, mortgages are stricter, down payments are higher, and a tight supply is supporting price appreciation. It’s far more stable than the last housing boom, and poses fewer systemic risks, economists say. The one downside is that there are more barriers for entry, and it’s more difficult for buyers who aren’t already homeowners to make that first purchase.
The recent pandemic helped ignite the current boom as a number of urbanites looked to leave crowded cities for cheaper cities or for more space in the suburbs while working from home. Once the lockdowns began lifting last year, home sales took off and last June sales nationally surged 21% over the prior month, the biggest monthly increase on record going back to 1968. That milestone lasted only one month, when July sales rose almost 25% from June.
Some of those who bought last year would likely have bought in the next few years anyway but accelerated their plans due to Covid-19. That could possibly slow down the demand going forward.
Economists also caution that the shortage of available homes for sale could limit the number of sales this year. Homebuying demand is so high at present that many new homebuilders are limiting the number of homes they sell at a time to ensure they don’t sell more than they can build. The rising cost of materials such as lumber, aluminum and copper are also creating higher prices on new homes being built.
However, market watchers are saying that a number of longer-term trends are at play that should keep the housing market hot, or at least steady, even after the pandemic related demand fades.
Millennials, the largest living adult generation, are entering their prime homebuying years and are putting down payments on homes. Simultaneously, the market is critically undersupplied and new home construction has not kept up with the demand. Homeowners are also holding on to their houses longer and buyers are competing fiercely for a limited number of homes.
Also different from the boom of 2006 is that mortgage lenders are maintaining tight standards and buyers are drawn to the market by the historically low interest rates, not by easy access to credit. Rising home values also mean that even if homeowners can’t afford their mortgage payments, they can likely sell their homes for a profit rather than face foreclosure.
Today’s biggest winners are those who already own their homes, who gained a collective $1.5 trillion in equity in 2020 from a year earlier, according to CoreLogic. They have also saved money by refinancing their mortgages at record low rates and have started renovation projects or bought second homes.
These same folks are the ones who have plenty of equity to use toward new homes that have the living requirements many found lacking in their present homes during the lockdown.
Put all together, these longer-term trends are at play and should keep the housing market hot for some time to come.
COMMODITIES BOOM HITS HOME / RISING COSTS ADD TO HOME PRICES
The Wall Street Journal, 3.17.21 & The Wall Street Journal, 3.18.21
Just when rock-bottom mortgage rates have made owning a home more affordable, the price of building materials have gone sky-high.
Lumber, one of the biggest costs in home-building after land and labor, has never been more expensive and is more than twice the typical price for this time of year. Crude oil, a starting point for paint, drain pipe, roof shingles, and flooring, has shot up more than 80% since October. Copper, which carries water and electricity throughout houses, costs about a third more than it did in the Fall.
Prices for granite, insulation, concrete blocks and common brick have all pushed to records in 2021, according to the Bureau of Labor Statistic’s producer-price index, which measures the change that producers receive for their output. Drywall and ceramic tiles are short of records but have also climbed.
What does all this mean? For one, homebuilders were not prepared when buyers began looking in earnest last April. With sawmills and factories shut down like most other workplaces, oil wells shut in and refineries idled, suppliers never had a chance to catch up.
At present, building permits for residential construction are being issued at their highest rate since 2006 and the newest round of stimulus checks are arriving just in time for spring, when Americans tend to house hunt.
The National Association of Home Builders says that rising lumber prices have added $24,000 to the cost of building the average single-family home and about $9,000 per apartment.
What this translates to you is that if you’re in the market for new construction you may have to get in line and expect to pay more than you thought. However, the sooner you begin the search the better off you will be since it’s likely that prices are only going one way for quite some time—and that way is UP.
If new construction is something you have even considered, call me yesterday. I can assist in all facets of it, and the time to begin is today!
FIRST-TIMERS OFTEN SHOCKED AT HOW MUCH HOME THEY CAN AFFORD
RealtorMag.com, 2.22.21
Many first-time homebuyers are finding that with assistance from parents and personal savings they are able to stretch their housing budget more than they thought possible, according to a recent survey from realtor.com. More than two-thirds of respondents say they are surprised at what they can afford; 47% say their budget is larger than they thought it would be.
“The dramatic decline of mortgage rates in 2020 was a pleasant surprise for many buyers,” says George Ratiu, senior economist at realtor.com. “For first-time buyers, the drop in the 30-year mortgage rate from 3.65% in March 2020 to a record low of 2.65% in January has provided unexpected leverage. Lower rates allowed many buyers to stretch and buy more expensive homes while keeping their monthly budget the same.”
With a housing shortage nationwide, many first-time buyers are still having to compromise on recent purchases and nearly half of the survey respondents say they have been outbid on homes they wanted to purchase.
However, first-time buyers are also saving for a home faster than they expected. Half of the respondents say they were able to save for a home in less than three years by putting aside a portion of their paycheck each month, cutting out discretionary spending, and saving lump-sum payments like tax returns. Also, many are getting help with down payments from their families or friends.
Considering how high rental rates have gotten, if there is a way, first-time buyers will not only be saving on rental payments but will be building equity of their own.
AND A THOUGHT FROM ELLIOT EISENBERG, THE BOWTIE ECONOMIST:
Domicile Deficit
“Existing inventory of residential homes is currently just 1.04 million units, or 1.9 months of supply, both record lows. It is partly due to insufficient homebuilding over the past decade, Boomers aging in place, Covid-19 preventing sellers from listing, huge demand by buyers to escape dense cities and decamp to suburbia and more space, low interest rates, forbearance plans, and the seven million single-family homes that have become rentals.”
