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?

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.

Realtor.org posted this article and I thought it was interesting to see which communities seem to be the most attractive to today’s retirees.  Top of the list is Ft.Collins/Loveland, Colorado.  Both great smaller affordable communities with Colorado’s temperate climate - milder, sunny winters, and pleasant summers.  We do get a lot of retirees in Colorado Springs too.  I love Honolulu (tropical weather and island beauty), Tucson (great winters, lovely desert terrain, but hot summers), Santa Fe (great SW food and shopping, mild summers, but cold winters), and San Diego (gorgeous ocean vistas, great climate, but expensive).  I would consider some of the other cities  but…Michigan??  Those retireees must like cold and snow, but… property is probably very affordable there now.  Here’s the list of the top 15 cities provided by AARP and CNBC.  Looks like you can still catch the Tom Brokaw story on March 4th on CNBC to hear all the details.

15 Top Retirement Cities - Boomers are willing to move farther than previous generations when they retire, and they are choosing places unlike stereotypical retirement hotspots, says Tom Brokaw in his report on Boomer retirement, airing on CNBC, Thursday, March 4 at 9 p.m. ET.The top places listed by AARP and explored on the show are:

1. Loveland/Fort Collins, Colo.
2. Las Cruces, N.M
3. Rehoboth Beach, Del.
4. Portland, Ore.
5. Greenville, S.C.
6. Sarasota, Fla.
7. Ann Arbor, Mich.
8. Tucson, Ariz.
9. Montpelier, Vt.
10. Honolulu
11. Santa Fe, N.M
12. Atlanta
13. Charleston, S.C
14. Northampton, Mass.
15. San Diego, Calif.

Source: CNBC, Paul Toscano (02/05/2010)

There’s a new real estate community that just launched today - epicketfence.  It started in Colorado and I had the opportunity to be the first Featured Realtor for the Colorado Springs market.  When you click on the link above, it takes you directly to the article I wrote for epicketfence.com.  Check it out if you want to learn more about what’s happening in the Colorado Springs real estate market.  If you want to learn more about the statistical details of our market, don’t miss PikesPeakFacts.com.  It’s updated every month.

One post leads to another it seems.  In looking for photos of the Collegiate Peaks in Colorado I clicked through one site to another.  In the process I found this great site for South Central Colorado - home of great skiing in winter and white water rafting in summer.  The Arkansas River stretches through this area and passes through the dramatic Rifle Gorge.  If you are planning a Colorado vacation, don’t miss this area of the state.  One of my favorite spots is the Great Sand Dunes.  Amazing!

Yesterday we went skiing at Monarch Mountain.  The snow was great, but you had to know how to keep yourself upright in deep powder to keep from doing a face plant.  As it can be at Monarch, it was cold and snowing and the wind made your cheeks pink riding the lift.  It was a glorious day with great skiing.  Tip for skiing powder:  Keep your ski tips up by redistributing your weight slightly back.

On the way home the clouds lifted and driving past the Collegiate Peaks was spectacular.  Snow covered and massive, they stretch through central Colorado and create a feast for the eyes.