Newsletter Draft

October 20, 2020

HARRY’S BI-WEEKLY UPDATE

                       A Current Look at the Colorado Springs Residential Real Estate Market

As part of my Unique Brand of 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. 

AND SO IT CONTINUES….

Having been in the Colorado Springs residential real estate arena for more then 47 years I often think I’ve seen it all…but then something happens and I realize there’s still more to see. What I’ve been seeing and thinking about lately is how much has changed in the last several years--in the world generally, but also in my professional world.

Home prices are going through the roof—literally.  And mortgage interest rates are going into the cellar—also literally.  We’ve seen enormous home appreciation over the past several years and until there are more available listings, this is going to continue.  In the U.S., the average home appreciation from August 2019 to August 2020 was 5.9%.  Our local appreciation was almost twice that. 

Mortgage interest rates keep spiraling downward—and this is affording many folks the ability to get 15-year mortgages rather than the more traditional 30-year ones, resulting an even greater savings in interest and faster home equity.  When I first started selling real estate, a 12% mortgage was the norm and I’ve even seen ones at 9% and higher!  Today, mortgage rates are under 3%—something I could never have imagined back then.

And interestingly enough, if you think about what really matters—monthly housing out-of-pocket costs—things haven’t changed that much.  I often need to remind my clients that with prices increasing and mortgage rates declining, out-of-pocket monthly cost can often be less than it was with lower homes values and higher interest rates. 

This current pandemic has caused so many of us to reconsider what we want and need in our living spaces. WFH (working from home) is the new normal for many and not likely to change in the near future.  Home schooling and virtual learning can be an option due to COVID-19.  Folks are avoiding their normal workout places and ordering exercise equipment for the home, and outside entertainment areas have become a necessity. These factors have created the need for separate spaces so the entire family can proceed with life in the new normal in the best way possible.   

Some are taking this time to deal with renovation of their present homes while others are looking for new homes or new neighborhoods.  Unfortunately, this pandemic hit at a time when available housing is at a record all-time low locally.  When homes come on the market, they are tending to sell in record time and often over list price.  Bidding wars are prevalent, and disappointment is all too common.  Buying and/or selling a home should be an exciting adventure and I try to make it as stress-less as possible for my clients.  Therefore, it’s quite distressing for me to see my clients disappointed due to not getting their first or second choice or having to deal with buyers who have not-so-scrupulous lenders, and more.  I often wonder if some of the “new” real estate professionals could possibly imagine a day when there were so many homes for sale that buyers got a relative bargain at times.  Those days are long gone, but they sure made things easier for all.

New home construction has become a choice for many of my buyers due to some of the above reasons and also because a lot of the new homes have the “spaces” that folks are now realizing they want and need.  Inventory is better than it was previously since home construction was able to continue while other industries were shut down.  However, the availability and price of lumber and other materials has contributed to new construction price increases as well. 

I’ve been working with a number of clients, both local and ones who are relocating here, in dealing with home builders and have helped them in site selection, home features and have also directed them to lenders who can work with their individual situations.  This is a service I provide AT NO ADDITIONAL COST to my clients and one that has saved them substantial dollars as well.  If new construction is an option, please give me a call and let’s discuss the possibilities for you and your family.

Actually, no matter whether it’s new construction or existing home sales, I’m your guy.  With all my years of experience, along with my investment banking background, I’m your “ace in the hole” when it comes to residential real estate. 

So, if you’ve been thinking about making a move, or even purchasing for investment purposes, NOW is the time to at least see what you can do to make your real estate dreams a reality.  Just give me a call at 593.1000 or email me at Harry@HarrySalzman.com and let’s get the ball rolling. 

 

REAL ESTATE INVESTING 101

YPN Realtor, The Lounge, 10.8.20

As many of you know, I put my money where my mouth is.  I have been investing in residential real estate since I started in this business and it has proven time and again to be not only a sound, but also lucrative business.  In fact, just last month I sold the very first home I purchased for investment back in 1977.  I purchased it for $20,800, sold it for $289,500, and collected rent on that home for all the years in between.  You do the math—even after essentially gutting and redoing it prior to sale, I still made a substantial profit. 

Being a landlord can be quite rewarding, but it’s not for everyone.  At first I acted as my own property manager, but now I employ one to take care of my investment properties.  Either way can work—it all depends on how much time and energy you want to put into it. 

Here are a few tips that can help you become the owner and property manager of a successful rental property:

1. Run the Numbers.  A rental property should serve as another source of income.  Unlike buying an owner-occupied property, it’s all about your bottom line.  That means you need to consider the numbers rather than emotions when you’re looking for a property.  You need to strive for a positive cash flow when considering the property’s monthly expenses and how much rent you can charge in the current market.  This needs to be the driving force behind your decision.  The goal is to exceed your monthly home payment and repair budget.  And investors typically need 20% down to qualify for a mortgage so there’s that to consider too.

​​

2. The Rental Search.  There are a lot of layers to this, but number are the key, followed closely by location.  Traditionally, purchasing a home in an expensive area may help guarantee that the home will hold its value or increase in price.  Yet some investors prefer a more affordable area where purchase prices are lower but may not gain equity as quickly.  The difference is higher instant gains versus long-term returns.  Also important is weighing the pros and cons of different property tax rates and potential assessments.  (Your tax and/or investment advisors can help steer you in the right direction.)  Proximity to your home is also important if you plan on handling repairs yourself.

 

3. Single-Family Homes vs. Attached Housing.  Single family rental properties may have more long-term expenses such as the roof, siding, and mechanical replacements.  Again, it’s all about running the numbers when considering a single-family property versus a townhome or condo in a multi-unit building. If a condo can give you a positive cash flow, that might be the way to go.  Attached housing could also be a great opportunity to ease into investing.

 

4. Maintenance.  If you are good at home repair, bravo for you.  Most of us need to hire others to tackle repairs in our homes and that would include rental properties as well.  You can keep the cost down by tackling some small items you can handle while hiring out things like plumbing, electrical, heating and cooling, etc.   As I mentioned earlier, some folks hire property managers to handle all of this, as well as the collecting of monthly rent.  For this they take a percentage that will run you around 10% to 15% or more. 

 

These are just a few things to consider and I’d be happy to discuss my own personal experiences in owning rental properties with you if you are interested.  Again, let me remind you that it’s important to discuss all options with your tax and/or investment advisors first.  I can help you find an investment property, but I can’t advise whether it’s advisable or even feasible for you to do so from a tax standpoint.

MORTGAGE RATES SET RECORD LOW FOR 10^TH TIME

Freddie Mac Survey, 10.16.20

Mortgage rates fell slightly the week of October 15^th, setting a new record low for the 10^th time this year, according to Freddie Mac.  The 30-year, fixed-rate mortgage averaged 2.81%, the lowest rate since Freddie Mac began tracking such data in 1971.  The previous low of 2.86% was set in mid-September.

“Low mortgage rates have become a regular occurrence in the current environment,” says Sam Khater, Freddie Mac’s chief economist.  “As we hit yet another record low, many people are benefiting, as refinance activity remains strong.  However, it’s important to remember that not all people are able to take advantage of low rates, given the effects of the pandemic.”

However, home buyers who are ready to enter the market are rushing to take advantage of these lower borrowing costs.  “With mortgage rates to remain near 3% for the next couple of years, homebuying activity is expected to stay strong for several more years,” Nadia Evangelou, a research economist for NAR wrote on NAR’s Economists’ Outlook blog.

AND, ACCORDING TO LAWRENCE YUN, NAR chief economist:

“Home prices have mostly outpaced broader consumer price inflation over the past decade.  From 2010 to mid-2020, the median home price (nationally) rose 61% to reach $295,300.  The key reason:  steadily shrinking supply coupled with steadily rising demand.  Americans saw inflation of 18% and a wage hike of 30% over the same 10-year period.  Yet, incredibly, the percentage of income devoted to a mortgage principle and interest payment to buy a median priced home is essentially unchanged, reflecting the awesome power of low mortgage rates…”

“More amazingly, in the midst of a pandemic and high unemployment, home prices are setting new highs, with multiple offers common on many properties.  The rate of home sales, after plunging during the spring shutdown (nationally) is poised to surpass 2019 levels in the final months of the year.”

Yun’s comments reflect what I’ve been telling you for some time.  NOW is the time to buy and sell. No matter the higher cost of the homes, it’s the monthly payments that count…and they are likely much lower than you might imagine.  Give me a call sooner than later and let’s discuss.

 

HARRY’S JOKE OF THE DAY: 

Considering the shortage of listings today….

And…not a joke…. just a reminder…