HARRY'S BI-WEEKLY UPDATE 4.26.21
April 26, 2021
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.
“NEW NORMAL” IN RESIDENTIAL real estate KEEPS EVERYONE ON THEIR TOES…
Just when I begin to think that things in residential real estate couldn’t get crazier…they do. The current lack of existing homes for sale and the wait list for new construction are hard enough for buyers to comprehend but now more than ever before the “offers” on existing homes need to be especially creative and more comprehensive.
And this isn’t just a Colorado Springs “thing”. All across the country buyers are encountering not only rising prices and lack of homes for sale, but those who do make the winning bids are those who have real estate professionals on their side who understand exactly what it’s going to take to make certain their client’s offer even gets considered. Fortunately for you, you’ve got me on your side. With my 48 years in the local market along with my certification in negotiation and up-to-the-minute knowledge of all things residential real estate, I have a distinct advantage over most.
However, that still doesn’t always allow my clients to get their first “pick” these days. One of the new additions to contracts that was recently created by The Frascona Law Firm is an “appraisal gap” clause in which the buyers indicate the minimum accepted appraisal they agree to accept in order to make an offer on the home. What that means is twofold: the buyer agrees to purchase the home as long as it appraises up to the amount to which they agree to in the contract and that if the appraisal comes in under the offer price, the buyer will increase the size of the down payment in order to offset any decline in the amount of the new mortgage loan caused by the appraised value being less than the purchase price.
This is not a requirement in the purchase contract, it is an additional “provision”; however, without that provision it is not likely that the buyer will get the home they want in today’s highly competitive market.
You might wonder what’s behind this new normal and it’s coming from all directions at present. The shortage of existing homes for sale is being created by folks deciding to renovate their current home, baby boomers choosing to “age in place”, and folks just simply living in their homes so much longer than in the past. This has caused the median price of existing homes to reach a 15-year high across the country with prices in March increasing 17.2% over the previous March. This marks the biggest price increase in National Association of Realtors (NAR) data going back to 1999.
At present, the U.S. home shortage is nearing 4 million units. That represents a 52% rise in the nation’s home shortage compared to 2018 and underscores the severity of the deficit.
With loan rates dropping again this past week to 2.97% for a 30-year fixed-rate mortgage, there are still many potential buyers who are vying for the few existing homes for sale. For something that should be an exciting prospect, especially one involving one of the largest investments a family might make, the stress involved is certainly not fun. I’ve always taken pride in trying to keep the stress levels of my clients to a minimum during the buying and selling process, and lately it’s not an easy thing to do.
In recent months I’ve directed a number of my clients to newly constructed homes when it became apparent that their needs, wants and budget requirements would be better satisfied in that type of situation. However, now even new home construction availability is considerably tighter than in the recent past and with the rapidly increasing prices of lumber, concrete, copper, aluminum and more—new home prices are going up much faster than ever.
I wish I could paint a prettier picture of the current state of the market, but it’s only fair to tell it like it is. Those of you who know me well understand that in my constant state of “positivity”, I have always done whatever possible to turn a negative into a positive. Where there’s a will, I do my utmost best to find a way.
If you’ve even considered a move, now is the time to get started. Prices aren’t going down any time soon and mortgage rates essentially have nowhere to go but up, so today is the best time to start. It shouldn’t take long to sell your present home and it will likely go for far more than you might imagine. However, finding a replacement could take some time so it’s best to start in that direction first.
The best move you can make is to call me at 593.1000 or email me at Harry@HarrySalzman.com to get any and all of your residential real estate questions answered. I look forward to speaking with you.
BUYERS ARE UNDETERRED BY HOME PRICES
RealtorMag, 4.22.22, The Gazette, 4.25.21, Colorado Springs Business Journal, 4.12.21
Even with the existing-home prices surging to a record high in March and sales easing 3.7% nationally compared to February, it wasn’t due to any let-up in buyer demand, but can be blamed on the ongoing housing shortages from a lack of homes for sale. Sales year-over-year, however, are still up 12.3% according to NAR.
“The sales for March would be been measurably higher, had there been more inventory,” according to Lawrence Yun, NAR’s chief economist.
Properties typically sold in 18 days—a record low, NAR reported. “Without an increase in supply, the society wealth division will widen with homeowners enjoying sizable equity gains while renters will struggle to become homeowners”, said Yun.
With NAR making it a priority to be at the forefront of the anticipated economic revival, “We will continue pushing for an increase in housing construction and inventory, with the goal of helping qualified buyers and countless families achieve the American Dream of homeownership”, said Charlie Oppler, NAR president.
In Colorado Springs, many homebuyers aren’t holding off on their purchases of new homes. Through the first quarter of 2021, building permits pulled for the construction of single-family homes in El Paso County were nearly one-third higher than the same period last year, according to reports by the Pikes Peak Regional Building Department.
Despite local resale inventories plunging to their lowest level in at least 25 years, demand remains strong. Rental rates are rising, mortgage rates are historically low, and folks are wanting to buy homes before they get priced out of the market. This is all fueling that “new normal” I mentioned earlier.
The increase in building materials is not simply affecting homebuilders. Commercial real estate such as apartment buildings and storefronts are feeling the burn as well and those costs are being passed along in the form of higher rental and consumer prices. That’s causing renters to want to become homeowners sooner than they might have and also driving up the number of those looking for investment property homes for rentals.
It’s a never-ending merry-go-round at the moment and folks just want to get on before they can no longer afford the ride.
Another thing to add to the equation is that property values in El Paso County get reassessed every two years and guess what? It’s that time now. Property values have taken a huge leap since the last reappraisal period and could impact tax bills, which mail on April 30, 2021, accordingly.
So once more…you get the gist…if you’re ready to at least talk about the possibilities that exist for your individual situation, I’m ready to help. Just don’t wait too long as it will most definitely cost you.
93% OF AMERICANS BELIEVE A HOME IS A BETTER INVESTMENT THAN STOCKS
Keeping Current Matters, 4.14.21
A recent survey of Consumer Finances released by the Federal Reserve, reveals the net worth of homeowners is forty times greater than that of renters. In case you ever wondered if homeownership is a good investment that study clearly answers your question with a huge YES.
The Federal Reserve Bank of New York noted that 93% of Americans believe buying a home is definitely or probably a better investment than buying stocks. Here is how the results break down:
Bottom line?
This data shows just how strongly Americans believe in homeownership as an investment and that belief is warranted. The Liberty Street Economics Blog put it best by saying:
Housing represents the largest asset owned by most households and is a major means of wealth accumulation, particularly for the middle class.”
