Summertime and Showings Are Increasing

On Friday I gave you the new Monday market report early so that you could catch up on your web browsing over the weekend.  At that time our company, RE/MAX Properties, Inc (the company with the greatest market share by far in Colorado Springs) showing activity for active listings was down 48% from the best week of the year so far, April 5-11, 2010.  The number of listings was up 7% between April and the week of May 31-June 6, 2010.  The good news is now that graduations, early summer weddings, and the hub-bub that surrounds kids getting out of school here in the West has passed, people are interested in looking at houses once again.  Listings are still increasing (10% increase from the first full week of April), but showing activity has increased 41% in the past week from the week before.  Our company showing activity is down 26% from early April, but we are still hoping for steady sales through the next few months before the high real estate season in Colorado Springs winds down.

Bill to Extend Closing Schedule for Tax Credit Qualifiers

One bright spot is that a bipartisan bill is in Congress to extend the closing deadline for home buyers who have been under contract as of April 30, 2010 to September 30, 2010 rather than June 30, 2010.  This bill is intended to keep the tens of thousands of short sale purchases that were contracted for in play as banks attempt to approve short sales and give buyers enough time to close on those homes.  Without the extension many of the purchasers of these homes could change their minds without the benefit of one of the two tax credits offered this year.  Getting these homes closed could make the difference in how many more homes go into foreclosure between now and the end of the year.  It’s better for those homes to sell at a short sale price rather than an almost assuredly lower price if they go on the market as a bank foreclosure at a later date.

More next Monday!  Get the latest real estate market news here each week.

Great coffee, pastries, and free wifi

This week’s restaurant review is a day late (sorry folks), but it’s a goodie.  I spent some time this morning at La Baguette having coffee and a croissant as I read more of Dave Ramsey’s The Total Money Makeover (I’m preparing a special new book review series for readers, so stay tuned).  I love the new look the Chestnut Street location has been given.  Very fun.  I didn’t need wifi this morning, but some days I do and I noticed when I was at the downtown location this week that they now have free wifi for their customers.  And the food is yummy, too!  I love the apple croissants and when it comes to lunch, they have the best French onion soup in town.  You can take home a fresh baked loaf of bread or rolls and other pastries and surprise everyone in your household with a special treat.  The website only gives 2 locations but you can also find a third restaurant at 1420 Kelly Johnson Blvd, west of Academy near Chapel Hills Mall.  I frequent all three locations.  Tip:  try the creme carmel dessert if you like custard or flan.  Delicioso!

Other free wifi restaurants

But that’s not all!  A long time local favorite coffee house that offers free wifi is Pikes Perk.  They also have multiple locations in Colorado Springs plus an airport coffee shop.  I go to the one on N Academy most often.  It’s a great place to meet friends or clients.  I do!

My final suggestion for great coffee and free wifi is Panera which has been reviewed on this blog.  This is the only one of the three that has locations outside of Colorado Springs and Colorado, so if you want a consistent experience when you are traveling, give them a try.  Good place for coffee, pastries, and also for lunch as they have an extensive sandwich, salad, and soup menu.

I hope to cross paths with you at one of these local restaurants.  Stop and say hi if you see me there!

Less Restaurant Consumers in 2008

After the stock market tanked in October, 2008, Colorado Springs restaurants were ghost towns for awhile.  We stopped eating out as much, which is better for our waistlines anyway, and apparently a lot of other people decided also that eating at home saved money.  I’m sure it was a very scary time for restaurant owners as they tried to keep their employees working with virtually empty dining rooms.  The good news was that when you went out to eat, you were seated right away, but at a huge cost to the local economy. 

Do You Think Service Has Improved?

Now, it is June, 2010, and when we do go out to eat we see more people in the restaurants, but I don’t think it’s at the same level it was during the summer of 2008.  I know we personally have cut down on how often we eat out and we made that decision first in an effort to eat healthier and also to save more money as we build our assets to get to retirement.  The thing we have noticed is that restaurants also seem to be appreciating their clientele more.  Service is much better in general than it was 2 years ago.  I don’t think we are the only ones not eating out as often so restaurants are competing for less customers.  If we get bad service we will think twice about going back.  If we get great service, we notice, and appreciate the effort of the servers and the training they are obviously getting to help them serve customers better.

Let’s Keep Good Service Going

When the economy is roaring, all boats float.  But when times get tough, you get to see who is left standing - those who understand what business is about and understand the value of their customers.  We aren’t past seeing changes yet.  In the long run, everyone will have a new perspective of what is important in life and I think we’ll be better for it.  Restaurants are not the only businesses affected by less business.  The real estate industry has definitely lost a lot of jobs.  We are seeing tightening across most industry segments.  As things improve and people “go back to normal”, I don’t think normal will be the same as it was 3 years ago.  We can all hope the lessons of providing good service continue to be kept top of mind.

I try not to indulge in pizza very often because it just screams calories, but when I do I want a good one.  So we try different pizza places to see whose pizzas rise to the top.  So far my favorite overall pizza place is Borriello Brothers.  They have 8 different locations around town and you get to enjoy a fun atmosphere while chowing down on a pizza that definitely is a value for the price.  And it tastes scrumptious!

For a more uptown environment and a crispy pizza with fresh fresh fresh ingredients, give Piazza in Rockrimmon a try.  They have a great lunch special that includes a personal pizza and salad.  Nice spot to take clients when you want good food and a quiet place to talk.

Buon appetito!

Real Estate Stimulus in Retrospect

Last spring the federal government sprung the $8000 home buyer tax credit on the real estate market in an attempt to spend stimulus money and nudge the real estate market forward.  Many buyers took advantage of the tax credit and sales increased, even though prices haven’t really.  Then when it was apparent that the real estate market, especially new home sales, needed further resusitation, the $8000 tax credit was extended to April 30, 2010 and a new $6500 tax credit for current home owners who have been in their home 5 consecutive years out of the past 8 years was launched.  These homeowners now had the opportunity to buy one of those higher priced homes languishing on the market or to build the home of their dreams up to $800,000 and with very low interest rates (if they qualified for a loan).  Many people have taken advantage of these programs as well.  It has been a boon to the real estate market — but a temporary one, in my opinion.

Sellers Tired of Languishing Market?

So what will happen now?  Past posts on this blog have addressed this issue, but an update would be timely given that the clock is ticking on all the sales generated through April.  Many transactions have already taken place and new homeowners have the keys to their new home.  Congratulations new homeowners!  Builders have until the end of June to get all those new home starts closed for first time homebuyers and repeat buyers alike.  Sellers whose homes are currently available for sale have been making price adjustments to try to capture the attention of buyers who haven’t pulled the trigger yet.  Some sellers who would like to sell and have been sitting back waiting are putting their toes into the water, but they haven’t had a market reality check yet and many are probably too optimistic in their pricing.  This could have the effect of making homes with recent price reductions look more attractive, but it also increases competition for buyers.  Only sellers who have decided they must sell now and are willing to price their homes competitively will capture the buyers who are actively pursuing a home.  And those buyers know they are in the driver’s seat.  That isn’t going to change for quite awhile.  Even in a good market, all homes don’t sell.

Just what is median price?

But, wait a minute you say.  I’ve seen reports that the median price is going up.  Doesn’t that mean that sellers are getting more for their homes than they were in the past?  Not necessarily.  Here is how the dynamics of the recent market works.  Since the first round and second round of tax credits were aimed at first time homebuyers, the segment of the market that has been in demand has been the entry level home market.  In 2009 that meant that the median price of homes that sold were lower than if the sales distribution fell along a more normal curve with sales throughout all price ranges.  In Colorado Springs, the entry level market is primarily homes under $200,000 and definitely below $150,000.  The sales during the past year have been skewed to the lower end having the effect of lowering the median price.

Homes priced over $400,000 have a lot of competition because those are typically move-up homes in our market and there haven’t been many move-up buyers.  The over $1Million home market has been abysmal.  The middle ground ($200-400K) is a mixed bag since some first time buyers buy in this price range.  The good news is that by targeting first time homebuyers, former renters now own homes and the sellers of those entry level homes have had a lot of well priced homes to select from for their next home.  The sales of those homes has had the effect of increasing the median price this spring as sellers of entry level homes now have the opportunity to buy.  More higher priced sales brings the median price up.  The bad news is that about 1/3 of the sellers locally are either short sales or bank sales of foreclosure properties, so those sellers won’t be moving up into a nicer home.  They are back in the rental market.  So there’s not as much help for sellers of more expensive homes as we’d like to see even though the median price has gone up in recent months.  Those increases are not due to increased prices for sellers.  They are a function of what the sales curve looks like.

That brings us back to the repeat homebuyer tax credit.  If someone who has been in their home for the past 5 years or longer wants a nicer, bigger home, the government offered $6500 for them to take their shot.  Of course, all those underwater homeowners who purchased since late 2005 are out of luck.  Chances are they would have to bring cash to closing to sell anyway and are unlikely to move unless they have to.  Do you think the government stimulus plan architects knew that?  Their goal was to get homeowners who had equity in their homes to move that money to a new home thereby generating commissions to market professionals and increasing mortgages that can be bundled and sold to Fannie Mae and Freddie Mac.  An underwater homeowners best option may be to stay put, accelerate their mortgage to gain equity faster, and create a selling opportunity in the future.

Future Trends?

The next 3 months is the remainder of the best selling season in a lot of markets.  Once school starts again in the fall, people tend to stay put and sales slow during the cold winter months.  We are keeping a close eye on local activity in the Pikes Peak Region so we can try to anticipate what the future trend will be in 2011.  With the government financial incentives gone, sellers will need to create those in the marketplace to encourage buyers to keep buying.  If they aren’t willing to do so, they may as well stay put.  My expectation is that activity and prices will decline, with declining median prices once again, until buyers start feeling secure in the job market and we reach an equilibrium that starts to generate demand once again.  Classic economics.

We Can Help You!

If you are a seller sitting on the sidelines or a buyer who is uncertain what to do now, I work with a team of professionals who can help.  By understanding the underlying factors in the market and knowing our local market, we can provide you with the knowledge you need to make the right decision for you.  We love to help!

Don’t forget to come back here every week for updates on the real estate and financial markets.  And don’t forget restaurant reviews on Thursdays.  Tomorrow - where to get a great pizza!

This week I saw an article about a new Panera Bread restaurant in Clayton, MO.  There are no prices - just suggestions.  According to the article, this restaurant operates as a non-profit and patrons can pay as little or as much as they want for their meal.  I have always liked Panera Bread.  They have a deli format plus a bread counter where you can purchase breads and pastries to go.  There are 5 locations throughout Colorado Springs.  I frequent the two on the north side of town on North Academy and at Shops at Briargate.  Both these locations are always busy.  Since free wifi is available, it is a great place to meet clients or just enjoy working away from the office while you get something good to eat.  They have delicious soups, sandwiches, and other offerings.  The specialty coffees are yummy.  Give Panera a try!

Distressed Property Sales Statistics

Depending on the season, anywhere from 15-35% of residential real estate sales in the Pikes Peak Region are distressed properties (short sales and foreclosures) in the past few years.  We have a relatively stable market compared to Nevada, Arizona, Florida, and California.  The number of mortgages that are underwater in California varies with the city, but many California communities are finding they have an unusually high number of homeowners who owe more than they can sell their home for.

The Top Three

The cities and states with extremely high rates of underwater mortgages are also the markets where huge unsustainable appreciation rates were the norm during the height of the market.  These appreciation rates were exceeding 30% a year in many cities.  Three statistics I thought were the scariest for homeowners were Las Vegas (70% underwater), Phoenix (58%), and Florida (48%).  It will take many years for these locations to dig out from under their real estate problems.  As long as rates stay low, buyers will come, but the condo markets will continue to be in distress due to tightening financing requirements for these properties.  Las Vegas and Florida have a lot of condos that were built with speculation in mind.

Strategic Defaults

A consequence of all this misery is that some homeowners are making strategic defaults - a fluff term that means walking away from your home and sending the keys to the bank.  Many homeowners in these greatly distressed markets don’t see any way out.  They would rather trash their credit than pour more money into these properties or wait for the turn around.  Statistics show that homeowners most likely to default on their loan are those that have a loan to value ratio of 125% or greater.  Other sellers with an underwater loan are seeing an opportunity to rent out these properties to people who would rather rent than buy or who aren’t in a position to buy, let them pay the mortgage, and wait for things to improve.  And the third group doesn’t need to move, like their homes, and are content to just wait it out and live their lives.

Just food for thought.  What do you think will happen in the next 5 years in your community?

Mollica’s - Italian Deli and much more

I love Mollica’s!  I have been eating there for over 20 years and I am never disappointed.  Dom Mollica was the principal at Eagleview Middle School in District 20 and opened his family restaurant while still working at D20.  It’s a place I take clients for a quick lunch.  It’s a place I stop at when I’m out and about and get hungry for their huge Italian salad or a grinder made with homemade sausage.  The deli case is packed with delicious choices of meats and cheeses and they have fresh made meals in the refrigerator display that you can pick up and take home for dinner.

New Broadmoor Towne Center Location

Mollica’s recently opened a second location in the Broadmoor area.  I haven’t tried it yet, but I’m sure it’s just as good as their original location on Garden of the Gods Road.  Go early for lunch.  The original location is always busy since it is a local favorite.

Today’s pick - Conway’s Red Top - burgers and shakes

A lot of new burger joints have opened in Colorado Springs over the past several years - Five Guys, Smashburger, Red Robin, and Carl’s Jr, not to mention the old standards of Burger King and McDonalds.  But one local burger joint keeps going even with all the new competition.  That restaurant is Conway’s Red Top.  They have huge burgers, so I order a half size because I could never eat a whole one.  There are many other choices on the menu, but a burger and shake is what I order when I go to Conway’s Red Top.  There are 3 locations in Colorado Springs.  My go-to location is on North Carefree just east of Academy.  Fun place to take your out of town visitors for a local tradition.

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.