SO, I’M THINKING OF SELLING MY HOME. WHAT SHOULD I BE AWARE OF??
August 22, 2011
HARRY’S WEEKLY UPDATE
A CURRENT LOOK AT THE COLORADO SPRINGS RESIDENTIAL real estate MARKET
HOMEOWNERSHIP: IT’S STILL THE AMERICAN DREAM
Fannie Mae and Freddie Mac just released the results from their NATIONAL HOUSING SURVEY. We thought you might like to see some of the results.
First, let’s look at Rent vs Buy:
- 63% of renters have aspirations of someday owning their own home
- 72% of renters think that owning is superior to renting
- 95% of homeowners see homeownership as a positive experience.
- 96% of homeowners live in a single-family residence, while 46% of renters live in a multi-unit building
The survey also shows that the four major reasons a person buys a home have nothing to do with money. The top four reasons, in order, were:
- It means having a good place to raise children and provide them with a good education
- It provides a structure where you and your family feel safe
- It allows you to have more space for your family
- It gives you control of what you do with your living space (renovations and updates)
How about homeownership as an investment? Though most people purchase a home for non-financial reasons, everyone realizes there is a money component to homeownership. Here is what survey respondents had to say about that:
- 65% of the general population (and 67% of homeowners) believe that homeownership is a ‘safe’ investment.
- 56% believe that homeownership has more potential as an investment than any other traditional asset class.
- 69% think that now is a good time to buy a home (this number has increased in each of the last two quarters).
The bottom line is that, even in difficult times, Americans still realize the value of homeownership.
SO, I’M THINKING OF SELLING MY HOME. WHAT SHOULD I BE AWARE OF??
If you want to sell your home right now, there are some factors you should be aware of. First of all, our current real estate market is, to use a technical term, “lousy”. Why did this happen and how does it affect you?.
- As a result of the national economic decline, foreclosures and short-sale homes have flooded the real estate market, thus creating a temporary oversupply. When there is an oversupply of a product or service, prices tend to go down. …and homes are no exception to that rule.
- Again, as a result of the general economic decline, this year’s county assessments of property values show lower values for homes, thus impacting our pricing of homes for sale. The bottom line is that home prices have gone down from their peak of about five years ago.
- This temporary oversupply has allowed prospective Buyers to be very selective about the price and condition of any home they look at. What this means to you, as a Seller, is that, if you want to sell right now, you will have to price your home realistically and make sure it is in great condition. Your house will not sell if it is overpriced (compared with your competition) or if there is deferred maintenance, peeling paint, dirty windows, worn carpeting, etc.
All of this means that you will probably have to invest some money in repairing or remodeling your home to bring it up to the quality that today’s Buyers are looking for.
Because of these factors, many homeowners have decided not to sell right now, but rather, to stay put, until prices rebound. They are adding features, finishing basements, remodeling, etc. Some are doing this to prepare their home for eventual sale, Others are doing it to upgrade their present home so they can stay in it, rather than selling it.
Call us now to discuss your options. We are very familiar with every neighborhood in this area and we will be happy to discuss with you the current market value of your present home, the relative merits of selling now, selling later, buying your next home now and converting your present home into an investment property, etc., etc., etc.
Call us at (719) 598-3200, or, 800 677 MOVE (6683). We would be happy to hear from you.
OK, I THINK I’LL HOLD ON TO MY PRESENT HOME FOR NOW …..BUT TELL ME ABOUT INVESTMENT PROPERTY. IS IT REALLY A GOOD IDEA?
There’s a great window of opportunity right now for acquiring some investment property. Why right now? …Because:
- Prices are low …probably lower than you will ever see again
- Rates are low… probably lower than you will ever see again
- The inventory of available homes is very high. You have your ‘pick of the litter’
- The high volume of people who, prior to foreclosure, were homeowners, but who are now renters has resulted in very low vacancy rates.
- Lenders are starting to tighten lending requirements and loans will soon become more difficult to obtain
- As of October 1, 2011, FHA maximum loan amounts will drop from $325,000 to $272,800 for most communities in the US, including Colorado Springs.
The Wall Street Journal, Wed. Aug 17, 2011 stated, “Prices are so low that more investors are scooping up foreclosed properties and renting them out. Investors can cover their monthly costs and make an 8% -12% profit pretty easily. We haven’t seen that in 20 years”.
As a matter of fact, the profit can easily be greater than that.
As an example, let’s take a look at what we discussed with one of our clients just last week, as we helped him build his retirement portfolio with an investor property. The following figures are based on realistic estimates in our local; market.
Purchase price $200,000
Down Payment 50,000
Loan Amount $150,000
Using today’s investment interest rate of only 4.5% for non-owner occupied property, on a 30-year fixed loan (and assuming a tax bracket of 33%), here’s how the numbers worked out:
Monthly payment P&I $760
Estimated taxes $120
Estimated Insurance $ 80
Total Monthly Payment $960
Typical one-year tax deduction
Interest deduction $6,700
Estimated property tax $1,440
Total deduction $8,140
Annual Income-tax savings $2,686
Net cost of the property
Monthly payment $ 960
Less tax savings $(224)
Net cost $736
The monthly rental net income (after estimating repairs and vacancies) would be $1,054
On a monthly basis, that works out to:
Income $1,054
Loan cost $ (736)
Income before depreciation $ 318
Depreciation per month $ (390)
Actual loss per month ($72)
Further, the estimated annual depreciation would be $4,675.
If you held this property for 10 years, assuming typical inflation and appreciation, you could expect an average annual growth of 3% per year. Thus, the market value would go to $260,000.
At the end of the ten years, your balance on the loan would be at $120,134 and your equity would be $139,866 from your original investment of $50,000. That’s 27.97% growth per year as your rate of return.
Finally, in the event that there is absolutely no growth for ten years, i.e. the economy does not grow at all, your rate of return would still be approximately 16%. In a dead economy, that would be fantastic !!
The icing on the cake is that these figures don’t even take into account your annual tax benefits/deductions. …That alone puts an additional $8,140 per year in your pocket.
And you thought Stocks were the way to go
If you would like us to go into more detail about these numbers, please call us at (719) 598-3200, or, 800 677 MOVE (6683). We would be happy to hear from you.
MARK YOUR CALENDAR NOW FOR THE 15th Annual Southern Colorado Economic Forum
On October 14, 2011, The Southern Colorado Economic Forum will bring together local experts from the public, private, and academic sectors to report on our economy. Thought of by many as our region’s economic “State of the Union,” the Forum offers the community an annual snapshot of local economic activity and provides forecasts to help businesses plan for the upcoming year.
This valuable research about where our community has been and where we are headed is made possible through a cooperative effort between UCCS and local business sponsors. This long-standing partnership between the academic and business communities has produced timely, accurate, and objective economic data to guide local businesses for nearly a decade.
This year’s Forum wiill be held in the Heritage Ballroom of the Antlers Hilton.
To register for this very informative meeting, Please click here.
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
Click here to see the latest Sales and Listing statistics for the Pikes Peak area.
JOKE OF THE WEEK
Top Ten Things Never Before Said by a Presidential Candidate
10. "Vote for me or I'll slash your tires"
9. "Forget universal health care -- I'm buying every American an XBox"
8. "In a crisis I ask myself, 'What would Regis Philbin do?'?
7. "I'd give you my plan for economic recovery if I actually had one"
6. "If your last name begins with 'M' through 'Z,' sorry -- your taxes are doubling"
5. "We're gonna cut the deficit by selling North Dakota to Canada"
4. "I have tons of experience from being president of the Aston Kutcher fan club"
3. "Lady, that is one ugly baby"
2. "When I'm president, I'm putting Elvis on Mt. Rushmore"
1. "Read my lips: I plan to fire half the people in Washington"
