March 4, 2014

 

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.

             

                                             

SPRING IS IN THE AIR

It’s that time of year.  Colorado is still getting snow interspersed with some lovely temperate days and the Rockies are down in Scottsdale, AZ for Spring Training.  Always faithful and eternally hopeful, I look forward to another great baseball season with both the Colorado Springs Sky Sox and the Colorado Rockies.  Here’s to Baseball 2014, no matter whom you’re routing for.  May the best team win and may Derek Jeter have a fabulous final year with the Yankees.  He’ll be an inspiration to upcoming players for years to come. 

 

FEBRUARY STATS NOT YET AVAILABLE

After waiting an extra day to publish this in order to include local monthly statistics, I just found out that due to the new MLS reporting system they will not be available for a while.  As soon as they are available to me I will send them out to you—hopefully by the next eNewsletter.

 

NEW HOME CRUNCH SHOWS SIGNS OF EASING

Wall Street Journal 2.27.14

After a 14 year low in early 2013, bank lending for land development and construction appears to be heading up, a sign that the supply for new homes will ease in the coming months.

This will hopefully put a downward pressure on new home prices which have been rising rapidly over the last two years and weighing in on the housing recovery.  While the outstanding balance on land acquisition, development and construction rose only slightly in the fourth quarter of last year, “economists note that if the overall balance is growing it means that originations of new homes are rising even faster.” 

According to David Crowe, chief economist for the National Association of Home Builders, “While this is an encouraging signal, we still have a long way to go to get back to a normal flow of credit to builders.”

The rising prices are great news for Sellers, but the tight supply of homes has priced many would-be Buyers out of the market, depending on their price range or neighborhood. Once the added financing yields more housing supply, it will also benefit first-time buyers who have been looking for a new home. 

In the Pikes Peak area, there are still affordable homes available for most Buyers, but it’s best to move quickly if you’ve been considering a move in order to get more of what you want at a more affordable price and interest rate.

 

GDP REVISION PUT DAMPER ON EARLY 2014 GROWTH HOPE

Wall Street Journal, 3.1.14

Last Friday the Commerce Department reported that the gross domestic product (GDP), the broadest measure of goods and services produced across the economy, grew at a seasonally adjusted rate of 2.4% in the final quarter of 2013, down from an initial reading of 3.2%. 

It is assumed that the lower rate was in response to consumer and business constraint due to the economy’s momentum slipping, bad weather across the U.S. and overseas volatility.  These factors will more than likely diminish hopes for an early 2014 breakout in growth.

“Other recent economic gauges, alongside the downgraded GDP growth, have flashed warning signs.  Measure of consumer spending, job creation, factory output and the housing market have come in well below expectations.”

It should be noted that existing home prices continue to grow while sales continue to slow down.  Lawrence Yun, NAR chief economist said unusual weather is playing a big role.  “Disruptive and prolonged winter weather patterns across the county are impacting a wide range of economic activity and housing is no exception,” he said.  “Some housing activity will be delayed until spring.  At the same time, we can’t ignore the ongoing headwinds of tight credit, limited inventory, higher prices and higher mortgage interest rates.  These issues will hinder home sales activity until the positive factors of job growth and new supply from higher housing starts begin to make an impact.”

While this is a national measure, some of the same issues have plagued the local housing market—namely bad weather and in our case, Sellers sitting on the fence in hopes of higher prices on their homes. 

Just a reminder—while home prices will continue to rise, thus providing more home equity for homeowners, if you are looking for to Sell and Trade Up or to Buy for the first time or investment purposes—the home you are looking for will also be increasing in price.  And with mortgage rates due to rise slowly, but steadily, this year—now is a better time than later if you are sitting on the fence. 

Something to consider—with more people being put in a position to rent rather than buy at present—you might want to think about keeping your present home as an investment and leasing it out while moving on to your next home.  These are issues I can discuss with you to help you determine if this is the right direction for your personal financial goals.

If you’re wanting to Sell, I’d again like to remind you of the importance in making certain you price your home right, get it good condition, and be realistic in your expectations.  All these factors will make it much easier to make certain that your home is the one that gets to closing.

If you are sitting on the fence or just beginning to think about a move, why not give me a call and let me help you determine what’s in your best interest?  Sometimes it’s good to wait, and sometimes not, but if you’re in the market or about to be, I am here to help you make an informed decision.  Just give me a call at 598-3200 or email me at Harry@HarrySalzman.com and let’s start the conversation rolling.

 

LOCAL FORECAST IS BRIGHT

The Gazette, 2.27.14, Colorado Springs Business Journal, 2.28.14

Great news was delivered at the Vectra Bank Economic Forecast Update I attended last week.

According to the presentation by a University of Colorado economics and finance professor, job growth in Colorado this year will be the strongest since 2000 and will be especially strong in Southern Colorado.

Rich Wobbekind, executive director of the school’s Business Research Division, indicated that Colorado is expected to rank in the top six states in job growth, with a rate of more then 2 percent this year.

And next year he said Colorado will rank in the top three with a job growth of nearly 3 percent.  The strongest growth will come in construction and technology, he said. 

“I expect stronger growth this year in Colorado Springs as the state continues to recover, especially along the Front Range, and I expect that growth will be much more pervasive and moving south,” Wobbekind said.

“Regionally, with ongoing net migration, Colorado is ‘probably the strongest-growing state in the West’ and one of the fastest-growing states in the country, with 83 percent of the population in 12 Front Range counties, including El Paso County.”

Wobbekind also said he expects the GDP to grow by 3 to 3.5 percent this year.

“Stability in the federal budget will be helpful to the Colorado Springs economy, which will reduce uncertainty, because it depends so heavily on defense spending,” he said.  But he added that cuts to the Army are coming that could affect the area.

Local foreclosure sales have “gone down significantly year over year” as I’ve pointed out many times and considering we’ve had fewer filings than many areas, this is one more positive for the Pikes Peak area. 

Wobbekind said the slower job growth in our area has been linked to military and federal government spending which has declined in the past two years.  His forecast indicates the economy growing at a rate of 3 to 3.5 percent this year and will produce an average of 200,000 jobs a month, with unemployment falling below 6 percent by year-end. 

Recent college graduates and those over 55 have had difficulty in finding jobs so consumer confidence remains somewhat weak and considerably below pre-recession levels.  However, according to Wobbekind, “it is not unusual for the recovery to gain strength in the sixth or seventh year after a recession” so the positive outlook for Colorado Springs is right on track.

 

REALTORS OPPOSE TAX PLAN TO LIMIT MORTGAGE INTEREST DEDUCTION

National Association of Realtors, 2.27.14

Last Wednesday the following statement was issued by NAR:

“NAR supports reforms that promote economic growth, but we strongly oppose severely altering the rules that govern ownership and investment in real estate.  Real Estate powers almost one-fifth of the U.S. economy, employes more than 17 million Americans, and contributes a quarter of all federal and state tax revenue and as much as 70 percent of local taxes.

“We are extremely disappointed with several of the provisions contained in U.S. House Ways and Means Chairman Dave Camp’s tax reform draft released today (2.26.14), namely proposed limits on the mortgage interest deduction and capital gains, and the repeal of deductions for state and local property taxes.”

These proposed changes to the taxation of real estate will impact every single American, either directly or indirectly.  If this passes, it will take away an essential reason many Americans choose to own their own home—namely tax deductions that make home ownership possible and affordable for many. 

You might want to take time to write your Representatives and let them know you are opposed to any bill that will impact or limit your mortgage, capital gains and state and local property tax deductions.

NAR intends to carefully analyze the details of the Chairman’s plan in order to educate the public and Congress on long term implications and I will keep you abreast of news as it becomes available to me.

 

HOT HOME PRICES DUE TO COOL DOWN

Wall Street Journal, 2.26.14, RealtorMag, & RISMedia, multiple dates, Kiplinger Letter

Even though home prices rose to their largest annual gain since 2005, signs keep pointing to a leveling off this year.  Rising home prices are good for consumers who were once under water and now can see some home equity.  However, higher prices along with rising interest rates are reducing affordability, which has curbed sales. 

The most significant reason stated was interest rates which are predicted to rise to 5% or more for 30-year fixed-rate loans by year-end.

Another factor will be more homes going up for sale as price hikes have pulled homeowners out from mortgages that are underwater, making them more willing to sell.  This will loosen inventory a bit.

The Kiplinger Letter recently forecasted a modest 4 to 4.5 percent gain in home values for 2014 vs. an 11 percent gain in 2013. 

“More moderate growth this year is not necessarily bad news, it signals a more sustainable, long-term growth trajectory that will help quell fears that another bubble is arising,” says Gillian White, Kiplinger Letter’s associate editor.  “Rising rates will also be helpful in some cases, cooling overly hot markets, where cheap rates and high demand sparked outsized price hikes.”

 

HOW THE QUALIFIED MORTGATE (QM) IS IMPACTING LENDING SO FAR

RealtorMag, 2.18.14

A recent NAR survey of a sample of lenders to determine the effect of the QM lending rules showed the following:

  • 55 percent of survey respondents say the QM rule would impact 2.6 percent to 20 percent of the mortgage originations.
  • 60 percent of lenders indicate they were most concerned about the impact of the 3 percent cap on points and fees.
  • 45 percent of lenders say they would not originate non-QM mortgages, while a majority said they would defer to investors’ preferences on how to treat non-QM loans.
  • About a fifth of lenders surveyed say they did not know whether they would charge non-QM borrowers higher rates.  However, the most frequently cited change for prime and near-prime borrowers was a rise of 50 to 75 basis points and 150 basic points for subprime.

According to Ken Fears, manager of Regional Economics and Housing Finance Policy for NAR’s Economists’ Outlook Blog, “Consumers should expect to have to document their income, employment and resources.  If someone has a high debt-to-income ratio, the FHA, as well as Fannie Mae and Freddie Mac, will be more lenient than private financers.”

 

GOOD NEWS FOR “BOOMERANG BUYERS”

RealtorMag, 2.26.14

Former homeowners who lost their homes to a short sale or foreclosure are now re-entering the housing market.  After spending a few years rebuilding credit, they are ready to begin again.

At three years past the peak of the foreclosures, it’s the time when most people would qualify for another loan according to Daren Blomquist, spokesman for Realty Trac.  “The market really needs these boomerang borrowers to maintain the current recovery,” he added. 

Some boomerang borrowers may find they need to put as much as 20% down in order to qualify, while others are finding opportunities to put down as little as 3.5 or 5 percent. 

While wait times for loan qualification may vary for former homeowners, the typical wait times are:

  • Seven year wait for homeowners with a previous foreclosure before they can qualify for a new mortgage through mortgage giants Fannie Mae and Freddie Mac.  If the foreclosure was included in a bankruptcy, the borrower has to wait only four years.
  • Two year wait for homeowners who underwent a short sale before they are eligible for another Freddie Mac and Fannie Mae loan.
  • Three year wait for homeowners seeking an FHA loan after a foreclosure or short sale.  Some homeowners who underwent a foreclosure because of at least a 20 percent cut in their pay may be able to qualify for a new mortgage after just a year through FHAs Back to Work program.

If you, a family member, co-worker or friend was in the unfortunate situation of having to give up their home, now might be the time for getting back in the game.  Please call me and let’s see whether or not the time is right to again qualify while mortgage rates are still considerably low and homes are still affordable for most income brackets.  I will do my part to help Boomerang Borrowers to once again fulfill the “American Dream” of home ownership.

 

HARRY’S THOUGHT OF THE DAY  (hint, hint—send me your referrals, please)