November 1, 2010

HARRY’S WEEKLY UPDATE

A CURRENT LOOK AT THE COLORADO SPRINGS RESIDENTIAL real estate MARKET

 

NEWS FROM THE relocation WORLD

Last week, in Seattle, we attended the Annual relocation Symposium of Worldwide ERC and the Relocation Directors’ Council. This informative meeting was attended by over 1600 people in the relocation industry and service providers from 47 countries. It was a great opportunity to hear how the recession is affecting employee relocation and to get a clear view of how employers are planning their relocations in the near-future. We were proud to be the only representative from Southern Colorado at the Symposium.

A major concern voiced by all of the employers at the meeting was that the cost of employee relocation was rising faster than they could budget for. Their major concern was to keep the employee ‘whole’, while keeping their costs within control. As we discussed in a previous eNewsletter, if a company transfers a current employee who owns a home, the average cost to the employer is $90,017. A new-hire homeowner transfer will cost the company $66,610. A current-employee renter transfer will cost the company $20,750 and a new-hire renter transfer will cost the company $17,877.

As employers are forced to cut relocation costs, some of the cost-cutting solutions they have been forced to implement range from: cancelling some of the more traditional relocation benefits such as paying closing costs on the new home and/or paying some points toward the interest rate, or, in some cases even paying nothing for relocation.

One message that relocating employers are now sending to Realtors is that they will be better utilizing the services of local Realtors in the “target” market for more accurate advice.

It’s important to realize that relocations are one of the most influential segments of the real estate industry and they represent a fairly accurate indicator of where the Real Estate market is going.

Some of the more significant issues covered at the symposium were:

  •  Unless you are a Senior V.P, or the CEO of the company, based upon current equity, your “upside-down” home will probably not be subsidized by the relocating company
  • Because of the increasing need for “Specialized Talent” individuals, there will probably be a rise in relocations for people in these growing fields
  • Today’s Transferees feel they should be compensated for what they think their house is worth, but appraisers are using short-sale and foreclosure prices as comparables, thus reducing the market value of their homes. Educating these employees about the realities of the current market will be a challenge for employers and will require input from Realtors in the “target” location.
  • Because of the frustrations and delays involved with short-sale home purchases, and the resulting reduction in employee productivity during this stressful process, one large, public utility on the West Coast will not assist transferees with short-sale purchases.
  • Companies are now offering more information about the differences in local economies to their prospective Transferees, so as to reduce “surprises”. They also offer counseling regarding the effects that foreclosure and/or short-sale will have on the employee’s financial status.
  • Some employers are encouraging Transferees to rent, rather than purchase, when they arrive at their new location…even offering bonuses and/or subsidies, or even ‘lump-sum’ benefits to Transferees who agree to hold on to their old house and rent, rather than buy in their new location. These employers feel this will allow the market to recover, thus allowing the Transferee to realize a better selling price for the home he/she is leaving behind. Many of these employers are offering to pay the Transferees’ property-management costs during this recovery period. The commonly quoted time-limit for these inducements seemed to be three years, indicating that industries appear to be predicting a recovery within the next three years.

As a result of these changes in companies’ relocation reimbursement policies, the percentage of Transferees who rent, rather than buy has increased from 30%, just a few years ago, to almost 70%, today.

All of these factors reinforce the arguments for buying investment properties now. These new arrivals are high-quality renters who are receiving rental assistance money from their employers for the next two to three years. Add to them the unfortunate families who have recently lost their homes to foreclosure or short-sale and we see that the pool of prospective renters is larger than ever before. When you consider the low-interest rates now available (but, scheduled to go up soon), and the current low prices for available houses, investment property looks as good as gold for the next several years.

As far as we were concerned, one of the most encouraging things to come out of the symposium was that attendees from all over the world felt that 2011 was going to be a better year.

 

WHAT IS TEXAS DOING RIGHT ??

A startling fact that was discussed at the relocation Symposium was that, in 2009, 90% of the non-governmental jobs created in the US were created in Texas. The attendees from Texas stated that this amazing economic boom was created by a cooperative venture by the Governor of Texas and the cities of Dallas, Austin and San Antonio working together to make Texas a “business-friendly” place to relocate. That, plus a low tax rate and no income taxes created a magnet for anyone who wanted to start or relocate a business.

Hmmm. Perhaps it’s true that a rising tide does raise all boats. Perhaps the whole economy of Colorado would benefit if we became more competitive in attracting new businesses. By offering more tax incentives and more aggressive incentives for businesses to relocate to Colorado, perhaps we could become known as a “business-friendly’ state. …Why not?

 

THE BAD NEWS IS – RATES ARE STARTING TO GO UP  - BUT NOT VERY FAST

How low can mortgage rates go?  Many of the ‘heavy-hitters’ in the mortgage industry were at the recent relocation Symposium and their shared opinion was that mortgage rates have hit bottom. The average 30-year, fixed-rate home-mortgage rate is expected to rise in our current quarter. By the end of 2010, the Mortgage Bankers Association predicts an average of 4.4% on a 30-year loan, increasing to 4.7% in the first quarter of 2011. In about a year from now, they expect the rate to rise to 5.1%. Now, while that is higher than our current rate of 4 1/8%, it’s still a very good deal.  

 

THE GOOD NEWS IS FORECLOSURES ARE DOWN

On October 31, The Gazette published the September economic indicators for Colorado Springs. The initial claims for unemployment were down 21.5%. Taxable retail sale were up 8.4%.Hotel occupancy was up to 72.6% and foreclosure filings were down 16.8%. On the down side, the unemployment rate was up to 8.7%. Single-family home permits were down 16.5% and auto registrations were down 11.9%.

All of our down-side numbers were the result of a lack of jobs and that’s a problem that doesn’t seem to have a ‘magic bullet’ solution. It’s going to be a couple of years before we see a turnaround in that segment of our economy.

Another troubling economic factor is the high inventory of unsold homes. With some lenders halting the disposal of foreclosed and short-sale properties and with many Realtors not even showing them anymore because of the unreasonable delays in obtaining acceptance for offers, the inventory of available homes grows and prices keep going down accordingly. That makes for good deals for Buyers, but a bad deal for Sellers. Furthermore, it aggravates the ‘upside-down’ home-value problem that triggers even more foreclosures.

If you have any questions about the value of your present home, call us. We keep close watch on property values in all neighborhoods in this area.

 

LATEST STATISTICS

Click here to see all of the latest Sales and Listing statistics for the Pikes Peak area. 

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 37 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 latest podcast. ..And, if you would like to learn more about our Job Loss Protection Program, or, about our CyberHomes Complete Market Analysis of a property, please contact us. 

 

JOKE OF THE WEEK