Wow!  I never guessed that it would take me over 8 months to post again on this site.  Many changes have occurred in my life over the past 8+ months.  The death of a family member in June, 2010 had the impact 0f absorbing months of my life as I helped with the myriad tasks in settling the estate.  It has been an educational process and one I will take time to learn more about as I pursue writing books to help consumers become more savvy in protecting and increasing their wealth.

RETIRED?  WELL, SORT OF…..

I retired from RE/MAX at the end of January.  After almost 8 years, it was a decision that did not come lightly, but I realized the time was right.  I still have a Colorado real estate license and have maintained my membership in Pikes Peak Association of Realtors, CAR, and NAR through 2011.  But I turned in my electronic lockbox key, sold all my lockboxes, and made the decision to spend my days pursuing a new course for my life - as an author and speaker on financial topics.

FIRST, A SABBATICAL

My first goal is to spend some time catching up on my personal life, so a 6 month hiatus from business is in order.  I still have a business association with 2 great RE/MAX agents and refer my clients and friends to them as the need arises.  This works very well for them and for my clients.  I like to help good people stay in business and I want to make sure all my great clients are taken care of when they need help with real estate.  But I also realized that instead of marching headlong into another career, that I needed to take a break, take some time to focus on personal matters, spend more time making art, and catch my breath before jumping into learning about a new industry (for me!) and building a new direction for my life.  So that is what I am doing.

During this time, I hope to post interesting commentaries on topics I consider relevant to the current real estate and financial markets, check out and report on more great local restaurants, and do a few book reviews.  Posting won’t be often or consistent over the next 6 months, but there will be things here from time to time, so stop by occasionally to see what’s new.

VISIT WITH ME

I also realize that I don’t want to become a hermit.  I don’t make a good hermit because I like to talk with people and hear their ideas.  So I am planning regular escapes from the house to work on some writing and meet with people who want to stop by and visit with me.  By April 1st, I plan to select a location or two around Colorado Springs to spend a few hours once a week to get myself out where people are.  I have my art groups and a networking and book club I attend regularly, but that’s different.  I’m looking for a place to hang out and have spontaneous conversations with people I meet.  No networking obligations, just a time to relax, have a cup of coffee, and chat with people.  I hope you will join me!

Live Your Dreams!

So until my next post, Live Your Dreams!  The economy is on the mend, but it won’t be an easy road.  With almost 25% of all mortgages underwater, we are looking at a different version of the real estate market than we’ve seen in the past.  In one way, not posting for months has given me a perspective I don’t think I would have had if I’d had my head in the computer every week.  But we’ll talk about that more in future posts.  See you then!

Real Estate Market Statistics

A new feature on this blog is something you can look for on Mondays.  I’m posting it early this time, so that I can get the new statistics from May 31, 2010 to you to review as you browse the web on your computer this weekend.

The two reports you will receive are actually links to the RE/MAX Properties, Inc company blog (for which I am a featured blogger) because the raw data and charts are posted there for you.  I will give my interpretation of what I’m seeing so you will know when I think the market really is turning up and that better times are ahead for sellers.  For you buyers, that means you will want to know when prices are starting to go up.  Increases in prices are going to have a dramatic effect on the amount of home you can purchase for the money available to you and consequently affects your payment and down payment requirements.  Interest rates are not the only variable when you are trying to decide when the time is right to purchase a home or sell and move-up (or downsize).

Days Supply and Target Market Analysis

The two reports you will see are the RE/MAX Properties Days Supply and Target Market Analysis.  The Target Market Analysis is weekly information on changes in the number of listings and showings generated through RE/MAX Properties, Inc.  Since we have the largest market share in the Pikes Peak Region, our numbers reflect the market as a whole very well.  The second report you will find monthly is Days Supply.  This is a chart of different areas and price ranges and the changes in the rate of sales over the previous 4 months.  It reflects one point in time and shows you the number of homes that are on the market and have sold during the period.  From those numbers are calculated the number of days it would take to sell all homes currently available as if nothing new were coming on the market.  A negative number is an improvement and for May 31st, that number overall is -16.52%.  In the same period (07/01/09-10/31/09) prior to the last $8000 tax credit expiring (which it never really did) that number was -9.98%.  So we saw more than a 65% improvement with the latest tax credits than we did last year.  But remember, we have borrowed buyers from the future so that they could take advantage of the tax credit and I expect to see less improvement in coming months.  Our showing activity has decreased 48% since the top of the market the first week of April and listing activity has increased 7% since then.  Sellers need to be realistic in this market if you want to sell at all.  Those first to the party with the best price and condition will win because it will still be a buyers market for the foreseeable future.

Remember Mondays for new information

So check back here weekly for new Target Market Analysis information and monthly for the latest Days Supply numbers.  We want you to be on top of the market so that you can be an educated consumer when it comes to real estate.  We’re here when you need us.  We’ll put a light on the market for you.

Freddie Mac and Short Sales

If you have a VA loan, you have a relationship with Freddie Mac.  As one of the former quasi-government agencies and now owned by the federal government after the mortgage industry blew up in 2008, Freddie Mac is the go-to insurer of VA loans.  Consequently, they are very concerned about fraud when lenders who are originating VA loans approve short sales for borrowers.  The attached link is directed towards these lenders, but consumers can learn from this post.  Note the Fraud Prevention Red Flags.  Remember my earlier post about borrowers paying off their credit cards and letting their mortgage go?  This idea belongs in the Land of Unintended Consequences.  If you need the advice of someone who has experience with and ongoing education about short sales, please contact me.  My team of CDPE trained Realtors® stay on top of what is going on with this segment of the market.  We are here to help!

Active, Pending, and Sold Since January 1, 2010

Since the $8000 first time homebuyer and $6500 move up buyer tax credits expire after 04/30/10, I thought it would be interesting to see what the effect of the home buyer credits have been on our local market this year.  By analyzing the numbers now, I can do another analysis at the end of summer and see what the real impact has been.  Many of the residential properties closing between now and the end of June undoubtedly are affected by the tax credits.

Since January 1, 2010

There are currently 6027 residential properties for sale in the Pikes Peak MLS.  Since January 1, 2010 2682 have sold and 2174 are pending.  Of the properties pending 328 or 15% are tagged as short sales.  What is more interesting is the distribution of activity in different price ranges in 2010.

Sales and Pending Sales in 2010

The statistics related to different price ranges is very interesting.  Of the 6027 active properties today, 19% are priced $400,000 or higher.  That equals 1165 homes.  Of those, 159 are priced at $1Million or more.  Between $300-400K, there are 883 homes or 15%, between $200-300K, there are 1672 homes or 28%, and below $200,000 there are 2307 homes or 38% of the homes available for sale.

Pending sales with a $300,000 or higher list price are 18% of the pending sales or 389 homes.  Between $200-300K are 23% or 507 pending sales, and the remaining 59% of pending sales are priced below $200,000.  I would say from this that the first time homebuyer credit is definitely having an effect on which homes are selling.  This affects the median sales price as well since a much greater volume of lower priced homes are selling.  It will be interesting to see if the median price increases as the tax credits go away.  Right now demand is high below $200,000 and it is helping to stabilize prices at this level.  As the tax credits go away we will see if that demand continues to keep prices stabilized.

The High End of the Market

So higher priced homes ($300K and above) account for 34% of the market but only 18% of pendings and 16% of sales so far in 2010.  The mid-range of $200-300K accounts for 28% of the available homes, 23% of pending sales, and 24% of sold properties in 2010.  The curve is very much skewed to the lower end of the spectrum as 59% of available homes are priced below $200,000 as are 38% of pending sales and 60% of sales so far in 2010.  The properties included are single family homes, patio homes, townhomes, and condos.

For homes priced at $1Million or more, 7 have sold in 2010; 9 are pending, and 159 are available.  It will take a long time for that part of the market to recover.  With 34% of the market but a much lower percentage of sold properties, sellers in the $300,000 price range and above are going to have to have their homes be very competitively priced and in excellent condition to acquire a sale in their peer group.  For buyers with extra cash, wonderful homes can be purchased at prices that wouldn’t have even been dreamed about 3 years ago.  Stay tuned for our follow-up report in August as the high selling season winds to a close for 2010 and we prepare for the more sluggish autumn sales months.

As a featured blogger for HomesColorado.com, I post about once a month.  Here is the link to my latest offering, a follow-up to my March blog post about reducing principal as a way to increase wealth.  Enjoy.

I’ve read articles by The Mortgage Professor, George Mantor, over the past several years, but his articles have taken a very different direction recently.  I believe his research is probably right, that banks pushed products to keep money flowing which benefitted financial intermediaries and the financial intermediaries found a way to skim off a lot of money from credit default swaps as things went very wrong.  The result is that retirement plans have changed for almost everyone, especially those in retirement or getting close to retiring.  Here’s a link to a recent article on George’s blog.  To be honest, his posts depress me and I prefer to be an eternal optimist, but perhaps this is information that someone can use to improve their situation, so here it is for you to read.  Actually, George’s posts segue right into one of my top pet peeves.  Why is it that we don’t provide financial education in US schools?  This is something that I’ve always felt is missing and plan to be involved in during my retirement years.

Financial Education

We make sure kids can read and write and do minimal math, but we don’t train them to understand finance.  They leave high school and fall into the trap of easy credit and not saving and lack an understanding that they are the ones ultimately responsible for their financial well being.  They become buried in debt at too early an age and don’t know how to dig themselves out.  If we had been educating our children on how our markets work and on how to manage money wisely, do you think more mortgage borrowers would have made a different decision about the loan they signed for?  Maybe they would have had a better understanding of what was really going to happen with their loan.

Affordability

When I first became aware of the increasing use of interest only loans being used for home purchases after I became a Realtor in 2003 , it made my skin crawl, because I knew these products were intended to be used for cash flow management by wealthy investors, not mom and pop homeowner.  Builders in states where prices were unaffordable by the masses worked with banks to provide loans that made their homes “affordable”, at least in the short term.  With the dream of homeownership twinkling in their eyes, many people signed up.  We’ve seen the result in places such as California, Florida, Arizona, and Las Vegas.  Is it any coincidence that these are all areas where new construction was a huge part of the economy?  These were communities where warm temperatures and vibrant lifestyles drew new residents.  They are all areas where home values shot up 30-40% a year and where foreclosure rates now top the list year over year.  The high appreciation rates were unsustainable because they were eventually going to run out of buyers who could afford the homes, even with tricky loan products.  But without a basic understanding of how the financial markets work, the average home buyer didn’t have a clue.

The Solution - Supply and Demand

Since I hate to discuss a problem without trying to find a solution, what is the solution?  It’s not going to be easy.  One in four mortgages is underwater in the country.  The good news is that 3 of every 4 is not.  But without jobs and people having a sense of stability, more home value decreases will come.  Hopefully many of the go-go markets have hit bottom or near it so that they can recover.  Supply and demand is real and it is the solution.  With low real estate prices now in places where homes were unaffordable until 2008, people who want to buy, can.  The tax credits that end April 30, 2010 have provided an extra incentive for those sitting on the fence to buy, and they are.  What happened in the housing market had to happen for anything to change.  Over time those who lost their homes to foreclosure will recover as well and be able to buy again, hopefully with a better understanding of what happened so they can avoid it a second time.  We are already seeing people who qualified for a short sale being able to buy again.  We can all hope that this next wave of home appreciation will be more tempered so that we don’t hit a wall again anytime soon.  With 40% of baby boomers selling and moving somewhere else (somewhere warm, like CA, AZ, FL, and Las Vegas?), there will be a lot of big homes available to the next wave of move-up buyers.  Lots of supply, probably not as much demand, so that prices stay steady.  In Colorado Springs, we usually have steady growth with a few hiccups along the way.  We saw prices decrease in 2008-2009, but most homeowners are okay.  Foreclosure and short sale properties are selling and many other sellers are sitting on the fence waiting for things to improve.

The Future

When I look back in 5 years I expect to see that things settled out, prices started to go up slowly once again, and sellers who really want to sell and move will put their homes on the market increasing supply and keeping prices from becoming overheated.  In areas where supply is limited, prices will go up faster, but without loan products that trip them up, buyers will have to save before buying a home and that will keep demand in check.  During the height of the market, 25% of sales nationwide were for second homes and investment properties.  I wouldn’t expect to see that same ratio going forward because investors will have to bring larger down payments to the table.  But investors are part of the solution too.  While they are saving up a down payment, buyers need to live somewhere and if they aren’t living in mom and dad’s house, they’ll be renting and investors who bought real estate during this perfect storm of low prices and low interest rates, will be able to make a profit renting them out.  Rental income may become a cornerstone for some retirees so that they have enough income to retire.  Property managers will manage those properties, make money, hire people to help manage them, hire people to make repairs and improvements, and a new cycle will start.  Whew, what do you know, I get to be an optimist afterall!  Right now things feel dire to many people and we still have a lot of issues with government debt and the elitist, arrogant thinking in Washington, but this is America and when we know what needs to be done, we do it.  If you are financially able to, go out, buy a house or some land, and get the economy moving.  You’ll be the one who benefits down the road.

I don’t want to repeat blog posts I write on other sites, but I want you to have access to the content.  I am now one of the featured bloggers for our company site, HomesColorado.com.  RE/MAX Properties just launched a new site this winter and the blog is now up and running.  Enjoy the article I’ve written on the effects on equity by accelerating your mortgage!  And watch for my posts on HomesColorado.com about once a month.  You’ll always find a link here.

Should I sell my home now?  Why not wait until things improve?  When are they going to improve?  I don’t want to sell unless I can get a buyer to pay what I put into the house.  Will they do that?  What can I expect to get for my house?  Do I have to pay closing costs for the buyer?

These are all questions Realtors hear daily.  The answer to most of these questions is - It depends.  It depends on when you bought your home.  It depends on whether you have been paying down your mortgage since you purchased your home.  It depends on how much money you have invested in your home on improvements.  It depends on whether you are willing to bring money to closing if you owe more than you can sell for.  It depends on whether you have a hardship that is forcing you to leave your home, in which case you may qualify for a short sale.  It depends on what your goals are when you leave your current home.  Are you leaving town?  Do you want to be a landlord long distance or would rather not?  Have you outgrown your current home and need more space or want a different type of home or a different location?

The fact is that as a buyer of another home, this is a golden opportunity - right now!  Interest rates are staying low for now.  Home prices are staying low for now.  There are plenty of resale homes available for sale.  Builders are anxious to keep their employees and sub-contractors busy during this lull so they are prepared when the market improves and they’d love to build a home for you.  And no one has a crystal ball that tells us exactly what will happen in the future.  The only real information you have to work with is what we know now.

Here are some other things to consider.  If you are thinking of buying a more expensive home, did you know that this is the perfect market for saving money?  Here’s a sample scenario:  Your current home can sell for $200,000, but was worth $220,000 2 years ago, which is a $20,000 difference (10%).  The home you would like to buy sells for $300,000.  Two years ago it would have sold for $330,000, a 10% difference.  By selling (or keeping your current home as a rental) and buying a more expensive home now, you save $10,000 over buying in a “normal” market!  With 5% down payment and a 5% interest rate on a fixed 30 year mortgage, that saves you about $153 a month for principal and interest.  Other savings include lower taxes, possibly lower insurance premiums, and $1500 less down payment required for a 5% down payment.  Currently FHA loans require 3.5% down payment, but that may change to 5% this year.  Down payment requirements can vary.  In this example we’re assuming 5% is required.

If your sights are set on a new house, go to your favorite web calculator and run the numbers yourself.  If you like what you see, give it a shot!  Talk to a Realtor.  We’d love it if you talked to us.

Here is the link to an article on the fbi.gov website giving future landlords and future tenants valuable information about scams to be aware of and includes a list of steps to take to protect yourself.  Since this is a recent press release, it is apparent these scams are still out there.  In some distressed markets, scammers even rent out a vacant home, the tenants move in, and then find out it was all a scam when they are told to leave.  If it sounds too good to be true……..you know the rest.  Landlords should use a reputable service to do a credit check on potential tenants or use a property manager who takes those steps on behalf of the landlord.  It never hurts to hold a check for a 10-14 day period before releasing any of the money so you can make sure it’s good.  Prospective tenants should take the steps outlined in the FBI press release.  Don’t get scammed.

Remember my post on March 16th that discussed people in distress paying off their credit cards and letting their mortgage payment go.  Well, that strategy may come back to bite them if they try to sell their home as a short sale later on.  Lenders are now checking to see if sellers requesting short sales are also delinquent on their other bills.  If not, they might not be as anxious to approve the short sale.  Another example of unintended consequences.  Beware.