HOW WILL THE CREDIT DOWNGRADE AFFECT MORTGAGES?
August 15, 2011
HARRY'S WEEKLY UPDATE
A CURRENT LOOK AT THE COLORADO SPRINGS RESIDENTIAL real estate MARKET
IS NOW A GOOD TIME TO BUY YOUR NEW HOME?
LET'S LOOK AT THE FACTS
No matter what news outlets you read, the scary headlines about the housing market may have convinced you to postpone the purchase of your new home until the market "settles down".
Unfortunately, if you have been influenced by these depressing news stories into postponing your home purchase, you will be missing out on the opportunity of a lifetime.
Let's take a cold, hard look at our local housing market to see what the facts are.
HOW IS COLORADO SPRINGS DOING ??
Actually, compared with most other parts of the country, Colorado Springs is doing quite well. The national statistics from the National Association of Realtors and the local statistics from the Pikes Peak Association of Realtors show that, over the past four years, i.e. the period that encompasses the much-publicized decline in the housing market, the national median home price, according to NAR, has gone from $223,500 in July of 2007 to $171,900 in July of 2011. That's a decline of approximately 23%.
However, during that same period (July of 2007 to July of 2011) our local median home price has only gone from $227,000 to $194,000. That's a decline of approximately 10%. .that's 13% better than the national average for home prices (and much, much better than your retirement fund has done)
The bottom line is that "all real estate is local", and therefore, the headline that laments that "You can buy a home in Detroit for $50", doesn't really have any meaning in our local market. Our prices have held up remarkably well. In fact, they appear to have 'bottomed out' and have started to climb again.
AREN'T FORECLOSURES STILL CAUSING A PROBLEM??
In fact, the worst of the foreclosure problem came two years ago. Since then, most of the 'at risk' Homeowners have been weeded out. Foreclosure filings in El Paso County in the second quarter of 2011 dropped 36.1% from the same period in 2010 and first-half foreclosure sales were down 15.6% from last year. As a reflection of this drop, new construction is picking up. Single-family building permits are up and El Paso County is seeing more construction activity than any other major metro area in the state.
However, one significant effect that foreclosures are having on the market is that everyone who has lost a home through foreclosure has become a renter. This has resulted in a very low local vacancy rate, an increase in rents and a rise in the sale of investment properties. You may never have thought of yourself as a landlord, but you should give some serious consideration to purchasing a rental property. Prices are low, Interest rates are at record-lows and there is a big demand for homes and apartments, so rents are rising rapidly.
WHAT IS HAPPENING WITH MORTGAGE RATES? ......OR...........
HOW MUCH HOUSE WILL MY MONTHLY P&I PAYMENT GET ME ??
Here's some great news for prospective Buyers. This week, mortgage rates have gone down to as low as 3.875% for a 30 year, fixed-rate mortgage. As Karen Moore of Mortgage Loan Originator Residential Mortgage of Colorado, one of our preferred lenders points out, "These rates are lower than I have seen in my 29 years of mortgage banking".
To put these rates into real numbers, in 2007, the monthly principal and interest payments on a $200,000 home with a 6.5% mortgage was $1264.14.Today, a $200,000 home with an 3.875% mortgage would have a P&I monthly payment of only $940.47. That's a savings of $323.67, or around 25% less expense every month for the lucky HomeBuyer who decides to buy right now.
Take a look at how much your monthly Principal and Interest payment would buy at today's mortgage interest rate of 3.875%.
Approximate loan amount Monthly P&I
$212,659 $1,000
$255,190 $1,200
$318,988 $1,500
$382,786 $1,800
Keep in mind that these prices are based upon the 3.875% rate for Owner-occupied properties, but the current Investment property rate is still a very low 4.625%. It's not unusual that, considering today's high rents and the depreciation tax write-off, an investment home can generate enough income to pay for itself. In other words, the Owner has a "free" home which can be held forever, or, can be sold at a profit when prices rebound.
So, there may not be any such thing as a "free lunch", but you can now buy a "free house".
Surprised, aren't you?
Call us at (719)598-3200 or (800)677-MOVE (6683).
WHAT ABOUT THE APPRAISAL PROBLEMS WE HAVE BEEN READING ABOUT ?
You are probably referring to the media stories about real estate deals that have fallen apart because of "low" appraisals. Here, again, the headlines don't tell the whole story.
The reason why appraisals can present a problem is that many homes currently on the market are overpriced, either because of inadequate market research by the Realtor, or because the Seller insisted on an unrealistic listing price. Whatever the reason, the fact is that an overpriced house will not sell.
Because we do our research, have extensive knowledge of every neighborhood in the Pikes Peak area and work with our local appraisers, we have had absolutely no problems with appraisals creating closing problems.
Take a minute to think about all of these facts and then call us to discuss our local market, the outlook for real estate in the Pikes Peak area, the opportunities for acquiring your next home or investment property or any other questions you might have about Real Estate in general. Just dial (719)598-3200 or (800)677-MOVE (6683).
We're looking forward to hearing from you.
NEW MAYOR INITIATES AN "UPDATE EMAIL" TO KEEP US INFORMED
Colorado Springs Mayor Steve Bach has introduced a free email report to keep us advised of the status of the city, budgeting problems and priorities, etc. To see a copy of the recent report, Click here. Or, to get on the mailing list, send your email address to: stephenbach@comcast.net.
Great idea, Steve !!!
HOW WILL THE CREDIT DOWNGRADE AFFECT MORTGAGES?
"Not much", says Lawrence Yun, Chief Economist & Senior Vice President of the National Association of Realtors. Mr. Yun says that mortgage rates might be impacted by 30 basis points at maximum by the recent S&P downgrade of the U.S. credit rating. He states that it is also possible that the downgrade might have absolutely zero impact, if global bondholders do not care for S&P's opinion.
In a statement issued on August 8, 2011, Mr. Yun points out that, "A 30-year fixed rate rising from 4.3% to 4.6% will not change the housing game that much, but a return to normal underwriting standards and a boost to consumer confidence will be the true game changer".
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 podcast for this month .
LATEST SALES AND LISTING STATISTICS
To see the latest Sales and Listing statistics from the Pikes Peak Association of Realtors, Click Here
JOKE OF THE WEEK
"How to Succeed in Business" Advice from an Investment Banker
An American investment banker was at the pier of a small coastal Mexican village when a small boat with just one fisherman docked. Inside the small boat were several large yellow fin tuna. The Banker asked how long it took to catch them. The Fisherman replied, "Only a little while." The Banker then asked, "Why didn't you stay out longer and catch more fish?" The Fisherman said, "With this I have more than enough to support my family's needs." The Banker then asked, "But what do you do with the rest of your time?" The Fisherman said, "I sleep late, fish a little, play with my children, take siesta with my wife, Maria, stroll into the village each evening where I sip wine and play guitar with my amigos, I have a full and busy life."
The American scoffed, "I am a Harvard MBA and I could help you. You should spend more time fishing; and with the proceeds, buy a bigger boat: With the proceeds from the bigger boat you could buy several boats. Eventually you would have a fleet of fishing boats. Instead of selling your catch to a middleman you would sell directly to the processor; The next step would be to open your own cannery. You would control the product, processing and distribution. Obviously, at that point, you would need to leave this small coastal fishing village and move to the city, where you will run your ever-expanding enterprise."
The Fisherman asked, "But, how long will this all take?" To which the Banker replied, "15 to 20 years." "But what then?" asked the Fisherman. The Banker laughed and said, "That's the best part. When the time is right you would announce an IPO and sell your company stock to the public and become very rich, you would make millions." "Millions?...Then what?" The Banker replied, "Then you could retire. Move to a small coastal fishing village where you would sleep late, fish a little, play with your kids, take siesta with your wife, stroll to the village in the evenings where you could sip wine and play your guitar with your amigos."
This story illustrates the truth of the old saying, "Give a man a fish, and he will be able to eat for a day. Teach a man to fish and he will be able to sit in a boat and drink beer for the rest of his life".
