November 22, 2010

HARRY’S WEEKLY UPDATE

A CURRENT LOOK AT THE COLORADO SPRINGS RESIDENTAIL real estate MARKET 

 

SHOULD YOU BUY YOUR DREAM HOUSE NOW?  THE NEW YORK TIMES SAYS, “YES”

The New York Times recently published an article about our present real estate market and what it should be telling prospective Buyers. Some of the more persuasive arguments cited for buying a house now were:

  • Your home provides you with a return on your investment in the form of “net imputed rent from owner-occupied housing”. i.e. You live in the house and so it provides you with a real flow of valuable services. This represents about a 6% return on your investment, after maintenance and repair and it is constant over time in real terms.
  • Your home will provide you with capital gains when you sell it, if it appreciates during the time you own it (and, at today’s reduced prices, it’s an excellent bet it will appreciate in the years ahead).
  • You can deduct the interest you pay on the mortgage
  • There is a huge inventory of homes-for-sale on the market. This results in lower prices and more choices for Buyers.
  • Home prices are down by 30% on average from the peak

In real numbers, this means that four years ago, a $300,000 home with a mortgage rate of 6.6% would have cost you $1,533 a month. Today, that same home would be available for $213.000, would have a mortgage interest rate of 4.2% and would cost you approximately $833 a month.

The Census Bureau and other demographers project that the number of American households will increase by 1 to 1.5 million each year. With new construction lagging, we should soon be experiencing a tightening market with low vacancy, as has occurred in every housing cycle since WWII.

It’s true that the performance of the housing market drives the economy and the performance of the economy drives the housing market…but housing has perhaps never been a better bargain. Sooner or later, Buyers will regain faith, inventories will shrink to reasonable levels, prices and interest rates will rise and we’ll even start building again, and the price of the home you buy today will rise accordingly.

The American dream is not dead – it’s just taking a well-deserved rest.   

9 TIPS FOR PROSPECTIVE BUYERS

Here are 9 steps that you can take to make your dream home a reality!

1. Know how much you can afford. You may already know how much monthly payment you can support (experts recommend no more than 1/3 your monthly income), but the buying process will also include upfront costs, such as a downpayment and closing costs.

2. Downpayment options. Do you qualify for downpayment assistance programs? Will you be able to get an FHA loan and pay 3.5 percent down? Do you have a relative that would like to make a downpayment gift? Many financial experts recommend a downpayment of 20 percent, so be sure to explore your options!

3. Check Credit Report. Your credit report says a lot about you. Lenders use it to evaluate your risk potential and to inform themselves on how responsible of a borrower you are. They use this report and subsequent score to figure your interest rate. The more stellar your report, the better your score and thus lower your rate. Be sure to check your report for accuracy, and report any errors to the credit reporting agencies.

4. Get Prequalified. It's time to talk to a lender! Pre-qualification will give you a ballpark figure of how much the bank would be willing to lend you. Are you looking for a $100,000 house or a $300,000?

5. Get Preapproved. This is the official letter from the lender that says they will be willing to lend you money. Many sellers look for buyers who are preapproved.

6. Affordability. The bank may tell you that you can afford a home worth $300,000. This does not mean you want to borrow to your max. A more modest home may fit better in your financial plans.

7. Housing Criteria. You have a budget, now develop a list of what you need and want. This can include anything from "must have 3 bedrooms" to "hardwoods" or "granite".

8. Neighborhood choice. Location strongly affects prices. A 3,000 square foot home in Briargate costs a fraction of one in the Broadmoor area. Decide what neighborhoods and areas are the best fit for you. This will help narrow your home search. See the latest neighborhood statistics, below.

9. Call us !!!  We can help you navigate the entire process from searching, putting in offers, to where to hire an inspector or general contractors.

 

real estate PRICES SEEM TO HAVE BOTTOMED – BUYERS AND SELLERS TAKE NOTE

For the fourth consecutive month, price reductions increased for homes currently listed in the United States, according to Trulia.com. These reductions amount to more than $30.7 billion nationwide and are now at an all-time high of 27 percent. In a press release, Trulia.com. concludes that “Beginning in June 2010, there has been a continual and dramatic increase in price reductions in many cities. Comparatively speaking, we've found that seasonal considerations combined with a lack of urgency on the part of would-be buyers and continued job market doldrums nationwide have led to more significant reductions during this time period than during the same time frame in 2009," said Tara-Nicholle Nelson, consumer educator.

As a result of the latest reductions, Sellers have gotten much more aggressive in their pricing. "We would normally expect to see a seasonal uptick in price reductions between June and November, as motivated sellers whose homes are still on the market after the summer selling-season aggressively cut prices in an effort to get their homes sold before the holidays. This is like Christmas coming early for buyers who are hoping to capitalize on a bargain-buy before the year's end.” said Tara-Nicholle.

But many experts predict that prices and mortgage interest rates will now begin to rise. So, before the window closes, it's important to remember that if you're an ill-prepared buyer, you could lose the deal of a lifetime and the home you really want.

Here are a few tips to keep that “perfect new home” from slipping away:

  • Even if you're just browsing, get your pre-qualification for your loan. You might think, you're not really ready to buy but let's go shopping any way. Know your price point. Understand how much home you can afford and browse in that market range.
  • Since the mortgage crisis, getting loans and buying a home has gotten more complex and can take even longer than before. That shouldn't discourage you but rather encourage you to get everything in order to make the close of escrow simpler.
  • Act now. Timing the market and waiting to see if you can get the absolute rock bottom interest rate might cause you to lose the home you love. Certainly negotiating is always part of a real estate transaction, but just keep in mind that if you're not careful you could time yourself out of the home you really want. Work with your Realtor on this.
  • If you're in a situation where the purchase of your new home is dependent upon the sale of your current home, then you must stay on top of your home sale. Sometimes buyers get so busy shopping for their next home that they end up leaving their current listed home a mess. This turns off potential buyers; it happens all the time. So, keep a close eye on how appealing your present home is to a buyer, as you shop for your new dream home.

Bottom line: Unless you’re an experienced juggler, you will need the services of an experienced Realtor to guide you through the maze of selling your present home, obtaining financing, and locating and purchasing your new home. Call us !!!

 

UNDERWATER? MAYBE WALKING AWAY ISN’T THE BEST SOLUTION

Mortgages are "underwater" or "upside down" when the property experiences “negative equity” i.e. the mortgage is larger than the current value of the property. Negative equity is caused by a decline in property value, an increase in mortgage debt or, most likely, both. However, homeowners who are "underwater" with their home loan and are considering walking away from the debt, could still be gasping for relief years down the road.

There are occasions when walking away from your home -- and down the road to foreclosure -- is your only option, but seldom is it the best alternative. The consensus among experts is to consider the alternatives before abandoning your home, talk with your lender and seek counseling from a U.S. Department of Housing and Urban Affairs (HUD) certified counselor.

Before walking away, some of the other options that should be considered are:

• Refinancing, turning in your existing mortgage for a new one, is perhaps the toughest option to accomplish. A refinance requires meeting stiff underwriting requirements -- an excellent credit report, a high credit score of 720 or more, documented career level income and little debt, for starters. Federal programs, including the Federal Housing Administration's refinance effort, can be a good bet for those who haven't yet faced hardship and can qualify for a new loan.

• A mortgage modification reworks the terms of existing loans to get the payment down to a more affordable level. To add greater affordability, lenders lower the interest rate, lengthen the term of the loan or reduce the principal -- or do some combination of all three. Modifications can be used by qualified home owners who aren't yet struggling as well as those who are in a pinch.

• Short sales. Modifications and short sales can impact your credit, but not necessarily with the force of a foreclosure.

Bottom line, exploring all the options is a better first step than walking away. Call us.

 

TOP 5 STAGING TIPS FOR SELLERS

Staging is a way for your home to stand out from the competition. It's a way for a buyer to see the true potential of your home. Many real estate agents work with professional stagers. But if you don't have the money to spend for professional help, then consider these five tips to stage your own home.

  1. Curb Appeal: A first impression happens only once! Prune overgrown plants and remove unnecessary clutter from your yard. For a finishing touch, consider painting your front door an attention grabbing color, like dark blue, red, or green.
  2. Remove Clutter: Knickknacks, doodads, and bric-a-brac must go. When you put your home on the market, a showing could be scheduled at any point. So, for now, take a box and go from room to room collecting the extra "stuff." These baubles distract homeowners from seeing the actual room and space.
  3. Edit: It's not just clutter that needs removed from counters and shelves. Editing is a way of making your rooms look bigger. In staging you need only have the bare essentials of furniture. Remove heavy pieces that make rooms look smaller. If you can, put these items into storage. As a very last resort, you can put them in the garage and cover them with a tarp.
  4. Main Functions: This means that a dining room should be staged as a dining room, not a sewing room or office. A patio is a place to relax with nature, not a catch-all for outdoor items, toys, and grills.
  5. Ambiance: You want to create an atmosphere that is welcoming and makes the buyer feel at home, something of paramount importance in staging. This means the home should be smell clean, be light and airy, and be a comfortable temperature. To accomplish these tasks, you can bake cookies just prior to a showing to fill the air with yummy goodness. If you are a smoker or have pets you may need to take more drastic measures, such as repainting walls or cleaning carpets and furniture. To liven-up your home, replace old and burnt out light bulbs, and have heavy curtains open or removed. If you are showing during the winter months, be sure to leave the heater set to a comfortable temperature. The same goes for the A/C during the heat of summer.

Use these simple tips to get your home ship shape for your sale!


ALSO ....SUCCESSFUL SELLERS AVOID THE FOLLOWING DEAL-KILLERS

At last count, nationwide, new home sales were down more than 12 percent and resale home sales down even more -- 27 percent. Yet many Sellers are still making some classic mistakes as they try to market their homes. To help you avoid these “deal-killers”, here are some mistakes that Sellers make:

• Pricing too high. A high listing price will cause some buyers to lose interest sight-unseen. It may also lead other buyers to expect more than what you have to offer. Overpriced homes tend to take an unusually long time to sell, ultimately selling at a lower price. Your Realtor can help you set a realistic listing price.

• Mistaking refinance appraisals for the market value. Lenders often estimate the value of homes at a higher level than it's actually worth to encourage refinancing. Ask your real estate agent for the most recent information regarding property sales (similar to yours) in your community.

• Forgetting to "showcase your home." When selling your home, make it look as pleasant and move-in-ready as possible. Make necessary repairs. Clean. De-clutter. (See the staging tips, above)

• Using the "hard sell" while showing. Don't try haggling or forcefully selling with prospects. Allow your Realtor to do the selling.

• Trying to sell to "looky-loos." A prospective buyer who shows up because they saw a for sale sign likely isn't interested in your property. Buyers who don't come through a real estate agent are, typically, six to nine months away from buying. They just want to see what's available. Chances are, they still have to sell their house, haven't been to a lender and may not be able to afford a home yet. Your real estate agent can distinguish real potential buyers from lookers because they will take the time to determine a prospective buyer's savings, credit rating, and purchasing power.

• Being ignorant of your rights and responsibilities. Understand the details of the sales contract. They are legally binding documents that can be complex and confusing. Know your responsibilities before signing the contract. Can the property be sold "as is"? How will deed restrictions and local zoning laws affect your transaction? There's much more to know. This is an area where your Realtor can really help explain the complexities of real estate Law to you.

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. 

LATEST STATISTICS

Click here for the latest Sales and Listing statistics for the Pikes Peak area.