Archive for the ‘Denver Home Sellers Guide’ Category

 

Nation-wide, the housing market continues a return to proper form from the sickly state of nearly 5 years ago. Everywhere one turns, new indicators can be seen as to support this claim. In a Denver market where housing inventories are tight, highly motivated buyers are creating an environment where multiple bid offers on listed properties are becoming the norm. This growing trend is reflected by home prices that in turn are steadily on the rise both here at home in the 5280 city, and across the country.

 

As indicated by the following chart, the housing recovery continues across 20 cities covered by the S&P/ Case-Shiller Home Price Indices.

 

 

 

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At year’s beginning, the composite was -as a whole- up 8.1% from 12 months prior. What this means is that of the 20 major cities included, the average home price increased slightly over 8% year-over-year (YOY). This gain is the greatest YOY gain experienced since June 2006 when home prices peaked

 

Why Case-Shiller? (Cick here to view Index)

Well, The S&P/Case-Shiller Home Price Index measures the average change in value of residential real estate given a constant level of quality. It is included in the S&P/Case-Shiller Home Price Index Series which seeks to measure changes in the total value of all existing single-family housing stock. The Index can be qualified into single city areas as to gain specific quantifiable information.

 

The thing that is so exciting about the Case-Shiller Home Price Index –Both from a Consumer and Broker’s standpoint-  is that the data is a “third party” source that provides unbiased data on the state of the industry. The index is followed closely by agents, brokers, investors, and other real estate industry professionals as to gain a feel of overall trends within various markets.

 

According to Denver’s Case-Shiller, home prices in Denver have rebounded to their 2007 levels.

 

Why is this exciting?

 

Well, the home price index for January, 2013 was 134.17, meaning that the local market home resale prices averaged 34.17 percent higher than they were in the bench mark year of January, 2000. The last time that Denver had reached this price level was back in October of 2007 when the Index was reported at 136.09. As most can attest, a lot has happened between then and now so this return to a strong showing in housing sales pricing comes as a joy to many.

 

The numbers do not lie.

Year-Over-Year, home prices in Denver rose 9.2% in January 2013.

 

As data from non-biased parties such as S&P Case-Shiller continue to roll in, the current “housing recovery” continues to be supported. Denver seems to be holding strong in the midst of the city’s current record price appreciation that goes back to 2011.  January marked the 13^th straight month of year-over-year gains, which were preceded by 18 straight months of declines.

 

Being that the Denver market is running so lean on inventories, prices are sure to keep steadily on the gain. Gains that are expected to reach double-digit returns in the very near future. With Denver mortgage interest rates being so low (As of March 26^th, 2013 3.46% avg.) this will undoubtedly continue to create a feverish environment with a hyper-affordability appeal.

 

These factors -coupled with the understandable element of pent-up buyers that have been patiently waiting for the market to show improvement and lend steady signs of stability before re-entering- further prove that (pardon the cheesy cliché) NOW, MORE THAN EVER, IS THE TIME TO BUY!

For years we’ve heard economists say the housing market will never recover until the overall economy recovers.  Guess what, now the experts believe the housing sector may actually be the driving influence in the recovery.

Here are four reports published in the last month that affirm this idea:

Morgan Stanley

“In terms of its contribution to real GDP, residential fixed investment has been a positive – albeit modest – force over the most recent four quarters, marking its longest span of back-to-back positive results since 2005.”

 

Deutsche Bank

“The [overall] resumption in residential activity cannot be understated as the long awaited housing recovery should help buoy consumer confidence and provide a mild lift to second half economic output after what was likely a disappointing first half of the year.”

Fannie Mae

“The data from the past month collectively point to decelerating economic growth, but growth nonetheless…However, despite signs of deteriorating momentum for economic activity, housing continues to be a bright spot as news from the housing market has been relatively upbeat, presenting a rare upside boost to the economy.”

Goldman Sachs

“As we look back at previous major housing recoveries, 1975 and 1991 began with negative jobs growth…In each case, the home sales recovery was fueled by home price improvement, driving new job growth and those jobs creating a fresh wave of demand that supported a multi-year recovery in housing.”

Bottom Line

Forget what experts used to say, the housing market is NO LONGER a victim of the economy … It may even be the cure.

While we all take time off this month to go on vacation or just to celebrate the 4th of July, I’ve got some good and some bad news to share about the local real estate market.

The bad news is Colorado faces a potential new wave of foreclosures as banks prepare to file foreclosure paperwork on a slew of distressed properties. Low prices and a recently settled federal lawsuit that targeted bank foreclosure practices led lenders to hold back on new filings until now.

More Waves Never Good

This is never encouraging news, especially when you consider there are 4 million foreclosed properties about to hit the market nation-wide. The reality is once we move the 4 million off the books, there will be another wave. And another wave. Prepare for it.

Cleansing our system of these distressed properties may take years. So don’t try to wait it out if you need to act now.

Now For The Good News

Because YES there is a silver lining to all this gloom. All these foreclosed properties that are about to flood the market? They will not shake the overall housing recovery. It’s still going to rebound, especially here in the Denver Metro area. Yes, it’sprobably going to take years to completely purge but overall the local and national markets are still poised to grow.

Why such optimism in a face of a distressed property tsunami? Chew on these numbers.

Denver HPI On The Rise

ReMax recently surveyed 53 real estate markets to gauge the relative health of local housing markets. In 48 of the markets polled, housing sales were up annually, and in 46 markets, home values had increased annually.

The recent CoreLogic home price index report says the same thing — Denver’s home sales prices are continuing to rise. The report, released Monday, shows the Denver-Aurora-Broomfield area saw home prices increase by 6.5% in May compared with May 2011. That figure includes distressed or foreclosed sales. This makes the fourth month in a row metro Denver’s HPI has posted year-over-year positive gains. This is good news folks.

Want More Good News?

If those 2 reports weren’t enough, how about last week’s Case-Shiller report from Standard & Poor’s, which states Metro Denver’s May HPI (excluding distresses sales) rose 4.5% from May 2011. The Denver area’s HPI even beat the national average. In the Denver area, home prices, including distressed sales, increased 5.1% in April 2012 from April 2011, and rose 4.1% in March 2012 from March 2011.

Bottom Line

Don’t listen to the fear-mongers. When three reports from three different organizations report the same findings, you should pay attention. The fact are: Home sale prices are up nationally but especially here in Denver-metro area. This is a great indication that we are prepared to weather the storm of foreclosures about to hit the market.

Many of us in the real estate business have touted the arrival of the echo boomers into the market for a few months now.

Obviously we jumped the gun. The latest statistics aren’t exactly making the argument that “Boomers Will Make A Splash” in the near future. In fact it’s just the opposite.

But there is hope from the Ivy League. The Joint Center for Housing Studies of Harvard University just released their annual report on the matter: the State of the Nation’s Housing 2012.

The report states, starting this year and continuing through 2032, the echo boomers (born in the late 70s and early 80s) will drive the housing market up because they’re the next generation in the prime age ranger for first home ownership.

“After several false starts, there is reason to believe that 2012 will mark the beginning of a true housing market recovery.”

Echo Boomers Back On The Couch, For Now

As we reported in our InfoGraphic on Friday, adults under the age of 35 have decided to stay at home with their parents instead of purchasing a home of their own. As the Harvard report states, it is not because they don’t believe in the value of homeownership:

“Although young households have increasingly opted to rent in recent years, most still aspire to homeownership. The late-2011 Fannie Mae National Housing Survey found that 86 percent of renters aged 18–34 believe they will ultimately own homes. In addition, close to 70 percent of respondents to both the Fannie Mae survey and the University of Michigan Survey of Consumer Attitudes felt that it was a good time to buy. In fact, the monthly mortgage payments for the typical home currently compare more favorably to rents than at any time since the early 1970s.”

The report projected the effect of echo boomers entering the housing market over the next twenty years:

Over the next 10 years…

“… the most important drivers of household growth are the size and age structure of the adult population. Assuming the economic recovery is sustained in the next few years, the growth and aging of the current population alone— including the entrance of the echo boomers into adulthood— should support the addition of about 1.0 million new households per year over the next decade.”

Over the next 20 years…

“Over the next 20 years, the echo boomers have the potential to spur new home demand to an even greater extent than their parents did beginning in the 1970s. The good news for housing production is that this new generation already outnumbers that of the baby boomers at the same ages. With even a modest lift from immigration, the echo-boom generation will grow even larger as its members move into the prime household formation years.”

Bottom Line

Don’t let the current statistics fool you, the echo boomers may be down but they’re not out of the housing market.  In fact, as housing affordability reaches historic lows, we believe more and more echo boomers will take the plunge into homeownership and raise all boats. It’s just going to take time.

If you want to sell a home in today’s market, you need to distinguish your property from the rest of the competition. What makes your property stand out?

That’s why we’re on the subject of green homes this week. A new study by McGraw-Hill Construction shows significant growth in the green residential industry.

Sellers shopping homes that are not only green, but also of higher quality and better value, have a major competitive edge over traditional homes on the market.

Green Homes Offer Competitive Edge

Green housing has never been more popular. New and remodeled green homes already accounted for 17 percent of the construction market back in 2011 (or $17 billion), nearly three times the amount under construction in 2005.

If the market continues on its current pace, green homes could grab up to 38 percent of the residential market by 2016 (with a market share of $87 to $114 billion).

Numbers don’t lie. Green is here to stay – and not just because of a desire to improve the planet.

Though green home additions can be more expensive to purchase and install - they can save you lots and lots of money!

Green Homes Save Money

It’s not like the country has suddenly developed a social conscience. The three biggest reasons to make green additions to your home that are cited in the study all relate to saving money.

It doesn’t matter if you believe in global warming or not, saving money appeals to everyone.

Most Popular Reasons To Green A Home

• Improve your home’s air quality
• Conserve water usage in your home
• Improve overall efficiency to lower energy usage

All in all, the biggest selling green home improvements relate to sustainability, improved waste management practices and use products made from post-consumer materials.

Builders Going Green

Improving your home’s indoor air quality is extremely hot right now, just ask your builder. 60 percent of the builders surveyed believe all the efforts to improve indoor air quality has made homes more efficient than they were even two years ago.

Half of the home builders surveyed consider durable materials one of the most important features in new homes today. Durability and better materials are key reasons why green homes and remodeling projects are considered of higher quality.

Remodelers also emphasized greening their properties as often as possible. So what are you waiting for?

Bottom Line

If you want to improve the value of your home and save energy, look into making green addition to your home to make it rise above the rest.

And if you missed my last post – check it out to learn more about how to finance your green projects; and save the planet while saving your pocketbook, with a green home improvement.

In this market what happens when you change the listing price of your home? Good question. The answer is nothing good for the seller.

Yes, there are plenty of shady broker/agents out there who will happily fill a sellers’ head full of bad advice on this subject. Don’t take bad advice from con artists out for a quick-buck.

Really Want To Change Your Listing Price?

If all of this is news to you – I urge you to remain calm and clear-headed all the way through the home selling process, and to fire your real estate agent.

Just The Facts, Ma’am

I know, I know, who can you trust? The answer is no one but ‘me’ naturally, so listen up all you information starved home owners.

We all know how elusive the truth can be when wading into the treacherous world of home buying and selling – so here are 3 undisputed facts from an objective expert that may change your life.

1) On average, homes that change listing price take longer to sell.

2) On average, homes that change listing price recoup less money than comparable houses who do not change their listing price.

Set Your Own Asking Price. Once.

Naturally, the most important part of this equation is how you start out. It is crucially important for you to establish the right price from the beginning.

Remember, there is a fine line between confidence and hubris, optimism and delusion. Don’t let anyone fool you and don’t fool yourself.  Remain calm and clear-headed throughout the process.

In This Case, Change Is Bad

It doesn’t matter if you raise or lower your asking price, the direction of the listing price change does not matter.  Simply changing one way or the other leads to longer marketing times and lower prices. Again. Facts.

3) If you overvalue your home at the outset, your property will most likely experience a listing price change much worse than you envisioned yourself.

Smart People Make Smart Money

Don’t forget your mantra home-sellers: List too-high and you’ll be the one who pays… List too-high and you will be the one who pays.

Got it? Good. Now don’t let anyone tell you otherwise!

Don’t Change A Solid Listing

If you’ve done your homework and worked with a reliable broker/agent, you can find a sweet spot in the pricing spectrum and feel comfortable. If you are unfortunate enough to be with one of those afore-mentioned brokers/agents who carelessly throw homes on the market, thinking you will ‘get the price right later’ – here is a newsflash: you’re broker is making more work for both of you – and frankly not doing you (as the seller) any favors.

Bottom Line

Establish the right price for your home at the beginning! Whether you’re a seller or a broker/agent, do your homework: analyze the market, be realistic and don’t go changin’ your listing price unless absolutely necessary.

There is a lot of misleading information out there about the state of the real estate market.  The one thing people can agree on is the housing market is recovering and sales will be strong for the rest of 2012.

As for some of the other optimistic headlines out there – I’m not convinced.  For example, I do not believe strong home sales will make your home’s value go up… at least not yet.

Why not? Because of the large surplus of homes coming to market, there is simply too much competition to bump prices up significantly.

Why The Surplus Now?

Now the surplus of homes is due to two categories of inventory hitting the market:

1. Foreclosures entering the market as a result of the National Mortgage Settlement
2. Homeowners who have been unable to sell their homes over the last several years are finally selling

Headlines Can Be Misleading

You’ve probably seen a headlines or two about the rebounding market yourself. I caution you to read the entire story before jumping for joy. Here are four headlines of stories that actually contain truth if you just read further down the page.

LPS Home Price Index Shows U.S. Home Price Increase of 0.2 Percent in February; Early Data Suggests Further Increase of 0.3 Percent is Likely During March

Reason for Caution

“Reasons for caution are clear, as we’ve been here before. Non-seasonally adjusted prices increased for a few months in early 2009, 2010 and 2011 – trends that all ended by summer, after which all the gains – and then some – were lost. As is true this month, those temporary increases were on low sales volumes – about 30 percent lower than at any point since 1998. Furthermore, the inventory of distressed homes remains high, which will continue to put a drag on prices.”

Foreclosure hotspots show signs of housing turnaround

Reason for Caution

“However, much will depend on the continued health of our economy, specifically job rates, and how lenders will release their foreclosure inventories now that the 49 state AG Agreement has been signed.”

Fiserv Expects Home Prices to Stabilize

Reason for Caution

“On the other hand, nearly one-half of the metro areas, or 191, saw prices decrease by more than 2 percent, including double-digit losses in Atlanta (-12.8 percent), Reno, Nevada (-10.8 percent), and Tucson, Arizona (-10 percent). In the fourth quarter of 2011, the average price of a U.S. single-family home fell four percent from the year-ago period, and Fiserv Case-Shiller projects a further decline of 0.8 percent by the end of 2012.”

Home Prices in March Show Monthly Gain: CoreLogic

Reason for Caution

“Even with price gains above 5 percent for leading states and CBSAs, Capital Economics said in response to the CoreLogic report that over the year, prices are more likely to stabilize rather than make a dramatic climb… There are fears in some quarters, triggered by recent disappointing GDP and payrolls data, of a sharp slowdown in economic growth which could derail the fledgling improvement in the housing market.”

Bottom Line

If you want the truth about the real estate market, read more than the misleading headlines. Truth of the matter is the volume of home sales is up but home prices are not….yet.

I answer a lot of questions about the real estate market. One I seem to hear more frequently is about short sales vs. foreclosures.

I’m not a CPA but if you ask me, some buyers of short-sale homes can get great deals but the process can be difficult and time-consuming. As for property sellers trying to decide which option is best for them, let’s start at the top.

A Short Sale Is…

A short sale is when a bank agrees to accept less than the total amount owed on a mortgage. This is not a new practice, only recently, due to the economy, has it become part of the public lexicon.

Qualified Sellers

If you are selling a home, to qualify for a short sale, your house must be worth less than you owe. You must be able to prove you’re the victim of a financial hardship like a job loss, divorce, medical condition, etc. that prevents you from repaying the loan in full. Your bank must approve the sale and must agree to release the mortgage.

Myth Busting Short Sales

Now that we’re all versed in the language of short sales – let’s bust some myths!

1. After foreclosure you can walk away with a clean slate. [FALSE]

You rarely get away totally clean. A short sale may help your liability to your bank, but there are exceptions where you still owe the difference on the property (called the deficiency balance). Plus don’t forget your credit is ruined if they foreclose on your home.

I don’t want to totally freak you out but even if you sell short – there are instances where you have a tax liability and still owe the bank. You could be taxed on both the short sale and a foreclosure. Remember, the IRS counts the difference between the sale and the charged off debt as a “gain” on your taxes. That’s right, you lost money and it’s counted as a gain.

2. There are no options to avoid foreclosure. [FALSE]

There are more options than ever to avoid foreclosure. Other than a short sale, loan modifications or a ‘deed in lieu’ are alternatives. That said, in most cases (not all) a short sale is still your best option.

3. Banks do not want to participate in a short sale. [FALSE]

Banks welcome short sales. They would much rather perform a short sale than a foreclosure, as foreclosures create huge expenses for banks. Banks have more foreclosure inventory than ever, they don’t want more. A short sale saves both time and money.

4. Short sales are not common. [FALSE]

Short sales make up 10-50 % of sales in various markets. This year we will have more short sales than ever. Short sales are in every market. They should be looked as a helpful tool, not a negative stigma. That is why the government is offering programs that actually pay consumers to participate in short sales. It is not just affecting one community; it is affecting communities and consumers across the nation.

5. The short sale process is too complicated. [FALSE]

Though the short sale process is time consuming; it is not as difficult as some would have you believe. The problem is most short sales are denied because they screwed up the processing. An experienced agent knows how to avoid this.

6. Short sales are too expensive. [FALSE]

A short sale should not cost you any money out-of-pocket. In fact, you could get between $3000-up to $30,000 to participate in one. A short sale may put you in a better financial position. Almost every program now has some financial incentive for the home owner.

As a seller, never pay for any short sale cost upfront. Realtors charge a commission that is paid for by the bank. The only potential cost would be if the bank makes you pay the deficiency balance, which is happening more infrequently these days.

7. If I am behind on my payments, I can perform a short sale any time. [FALSE]

The closer a property gets to foreclosure the harder it is to convince the bank to perform a short sale.  If you’re going to pull the trigger, the sooner you start the process, the better.

8. I’ll get denied for a short sale because I was denied a loan modification. [FALSE]

Short sales and loan modifications are totally different in approval and denial. If you are denied for a modification you can still apply for a short sale; in some cases you can get a short sale approved faster than a loan modification.

9. If I go through a short sale I cannot buy another home. [FALSE]

This depends on your entire credit picture. I know people who went through a short sale and bought another house in less than 12 months.

BOTTOM LINE

With the options available today, no homeowner should have to foreclose on their home. Be smart before walking away and do your homework so you understand what lasting effects a foreclosure can have.