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?

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.

I’m a trend analyst.  Not by formal training, but by nature.  Trends help me try to make sense of the universe.  I really must be a math geek because I am always looking for patterns.  I guess that’s why stock trading appeals to me.  As the DJIA hovers around 11,000, my curiosity peaked and I decided to take a random, or not so random, walk through recent history.  A lot of people follow the S&P, but I like the DOW.  It’s a microcosm that tells us about America.  I use the S&P and Nasdaq to verify what I think I’m seeing.

RECENT HISTORY

So what did my walk tell me?  That being in the market and investing regularly is a good thing.  I’ve mentioned before how the market went sideways through the 1970s but people still made money.  They did it by continuing to invest smartly.  As I get close to retirement I have tempered my usual aggressive self somewhat, but if you still have 20 or 30 years to invest before starting to withdraw assets, you may find my trend analysis interesting.  Even you old boomer farts (like me) might want to follow along.

A SIDEWAYS TREND

We have been in a sideways trend between 10,000 and 11,000 for the past 6 months.  That is the longest sideways run since 2007 when the DJIA moved sideways in a 1000 point range for 9 months.  It will be interesting to see if we break 11,000 and move up or meet resistance for awhile.  After hearing my analysis, you decide what you think will happen.  Starting in April, 1999 the DOW hit 10,000 and didn’t look back until the market bobbles in 2001 and 2002, in effect a 3 year run before a major change occurred.  Then in May, 2002 the market started a slide to around 7500.  Recovery was quick - 10 months of hand wringing until the market started up in March, 2003 and was once again above 10,000 in December, 2003.  People who kept buying (that would be me) were happy and had a nice double digit increase in 2003.  The DOW stayed in a range between 10,000 and 11,000 when it once again started rising in February, 2006.  At that point the market kept going up and up for 20 months until the DJIA was over 14,000 in October, 2007.  It was a lofty year for stocks and real estate alike.  But then things started to change.  After such a heady rise for over 4 years, it was hard to appreciate that the end was near in October, 2007.  The DOW stair stepped it’s way down to 13,000 and dropped to around 11,000.  It was a confusing market.  The average 401k investor couldn’t tell if it was building resistance or support. (Check the recommended reading list if these are foreign terms.)  Hindsight tells us it was definitely resistance.

In August, 2008 the party came to a crashing end with a 3 1/2 month long freefall that caused people to start crying “depression”.  Those who had ignored everything occurring in the economy were blindsided and lost 40-50 percent of their investments.  A 28% drop occurred during those 3 1/2 months with another 16% decrease until the DJIA hit bottom in March, 2009.  With the mortgage debacle that was happening, bonds weren’t sacred either.  The chase for higher bond yields in funds put these investments at risk.  An interesting aside is that market volume started rising above 2 Billion shares in September 2005 and continued to rise until it hovered mostly above 5 Billion shares from August, 2008 until June, 2009.  Volume still is hovering over 4 Billion shares, double the rate in 2005.  Who is buying and who is selling?

THE GLOBAL ECONOMY

So now we’re touching 11,000 on the DOW.  We’ve been above 10,000 since November, 2009.  The real estate market appears to be recovering.  But where are the jobs?  Where will they come from?  The banks are sitting on their impressive returns after TARP money was handed out, but businesses need capital to grow.  Without business growth there is no job growth.  The government doesn’t produce anything so all the “stimulus” activity is just blowing sand until business owners start feeling confident enough to start letting go of the purse strings.  I don’t see that happening in the real estate market yet.  Realtors are conserving cash because they know (those that educate themselves) there is another wave of foreclosures coming that will affect real estate prices until 2013.  Arms are resetting.  One of every 6 mortgages is in default and 1 in 4 mortgages is underwater.  There is phantom inventory sitting in bankers’ portfolios and there are phantom short sales overhanging the market because some delinquent loans haven’t been foreclosed on….yet.  But does that all mean you should pull out of the market and hunker down for the long haul?  Everyone has to check their gut to see how they feel about that.  I’ve pulled back more than I normally do, but I have a short timeframe before I need to tap into my money.

For people with a long view, this market offers buying opportunities that are appealing for both stock based investments and real estate.  We could have a long sideways market.  We could see the market slip again if a lot of bad news hits the presses.  My gut is telling me that we’re not going to see any long sustained increases in the stock market or in real estate prices anytime soon.  Only time will tell me if I’m right.  The DOW is still 22.5% lower than at the height of the market in 2007.  We’ve been over 14,000 before and we’ll probably get there again.  We just don’t know when that will happen.  We not only are affected by what happens in the US but by what happens worldwide.  China owns a lot of treasury bonds.  The EU is having issues with Greece and trying to decide when/if to step in to protect the euro.  The EU is like a mini US now and they have to play nice with each other to hold things together.  It will be interesting to see what financially solid Germany does as things play out.

WHAT SHOULD I DO?

Some people are comfortable being contrarians and taking educated risks to try to take advantages of market opportunities.  Others are more comfortable pulling out, sitting back, and taking a wait and see approach.  Common sense for one person is very different for someone else.  I believe in knowledge.  The more you have, the more you can make educated decisions that feel like common sense.  So my recommendation is to read, listen, talk to people you trust, and educate yourself.  After awhile a pattern will emerge that makes sense to you so you can try to make sense of the universe.

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.

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.

Why am I posting so many times on the same issue - financially distressed homeowners?  Unfortunately, that’s where the market still is and will be for some time to come.  The number of contacts I have had recently pertaining to this issue has put this topic at the top of my mind.  It is important for people who are in fear of losing their homes to know that there are people in the real estate industry they can trust to discuss their situation.

I’ve mentioned in a previous post that many homeowners who are behind in their payments do not talk to anyone before being foreclosed on.  It is embarassing.  They didn’t expect to be in this situation.  They don’t know where to turn.  They don’t want their friends and family to know they are in trouble.  They think they can find a way out on their own.  But homes are being foreclosed on without any attempt to stop the process.  What they need to know is that there are options available.  If they wait until the last minute, it’s almost impossible to save their home from the public trustee’s sale.  One place to start is CDPE.com to find trained Realtors in the homeowner’s city.  Other training is becoming available to Realtors.  NAR now has the SFR (Short Sales and Foreclosure Resource certification).  If you don’t find a CDPE trained Realtor in your city, look for a Realtor with the SFR certification.  These Realtors have taken the time to educate themselves on the short sale process.

But the real reason for my post today is to warn you about scammers that take advantage of homeowners who are in default and who also take advantage of Realtors who don’t know what they are doing when it comes to short sales.  Everytime there is a crisis, creative criminals find ways to take money from well-intended individuals.  In this economy there are short sale scams, loan negotiation scams, you name it.  Here are some questions to ask before starting to work with any self-described short sale company.  I want to thank Brandon Brittingham of Maryland for his post of these tips on BrokerAgentSocial.

1.  Ask if the type of short sale practice they use is legal in your state.  Different states have different requirements.  Check your state laws and local laws or common practices and thoroughly research any company you are considering.  If they say they are short sale experts, what experience do they have to support that?  How many short sales have they closed?  Are they willing to give you legitimate references?  Do they work with reputable real estate brokers, lenders, and title companies who can provide those references?

2.  Are they asking for money upfront?  Some legitimate companies do charge upfront, but it isn’t the norm.  Realtors who are short sale specialists only get paid at closing and their payment is outlined on the HUD1 Settlement Statement.  How is the short sale company you are considering getting paid?  Are they accountable to the seller’s bank, who will be approving a short sale, or to anyone else?  What recourse do you have for getting your money back if they don’t do what they say they will?

3.  Be wary of companies that have no affiliation with a real estate company.  Companies Brandon says he has run across that are running scams or offer no real service are not affiliated with a real estate broker for a reason.  Real estate brokers and agents that are members of NAR are required to abide by the Code of Ethics of the National Association of Realtors.  Any licensed Realtor is required to abide by the laws of the state in which they are licensed.  If you aren’t a licensed real estate broker or agent you don’t have to follow these laws or codes.  So be cautious of companies who are not affiliated with legitimate brokers.  Do your homework to see if they are legitimate companies and provide the services they claim to offer.

Let me add one last caution.  In a short sale, the seller’s bank is agreeing to take less than is owed to allow the homeowner to sell their home.  Therefore, they have to approve the sale.  Some short sale or real estate investment companies do what is referred to as a double close.  An investor buys the property at the first closing and then shortly after (the same day) the investor sells the house to another buyer the seller has never met at a second closing and takes a profit from the transaction.  Do you think there is room for fraud in this type of activity?  Very much so.  If the seller could have gotten a higher price to begin with, don’t you think their bank would like to know that? 

There are people in the marketplace who want to take money out of the deal without putting down any money of their own or getting their own loan for the first closing.  Oftentimes the company you are talking to is the investor.  Please know there are legitimate investors who close and then sell to someone else.  And legitimate real estate investors are a group that will help get us out of the real estate mire we are currently in, but they do things according to the rules.  If the buyer won’t have their own hard money on the table at the first closing, be suspicious and cautious.  This same caution goes to buyers who know there is an intermediary between them and the seller.  Work with a reputable Realtor who can spot suspicious activity and help you avoid it.

As always, if we can help, we are here to do that.

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.

Recently I read an article that discussed a new paradigm occurring when people can’t pay everything and decide what bills to pay.  More and more they are choosing their credit card bills over their mortgage.  But isn’t homeownership sacrosanct?  Don’t you keep a roof over your head first?  This doesn’t appear to be the case for a growing number of homeowners.  The reasoning behind the latest statistics is interesting and easy to understand.  With 1 in 4 homeowners who have a loan on their home being underwater (they owe more than the house is worth), with fears about job security, and with a low savings rate in the USA, maintaining credit is important to people who do not feel financially secure.  Therefore, they are letting their mortgage payments go and paying their credit card bills first so that they can keep that credit line if they need it.

With the banks so overwhelmed with foreclosures and short sales, many homeowners going through foreclosure get to stay in their homes for many months after they are notified they are in default.  It takes time for the process to work.  Waiting for eviction, not knowing when it will happen, and being locked out of your home is not something people want to experience, but it is happening as mortgage payments aren’t being made.  With credit cards, borrowers can lose their ability to use credit within 60-90 days if they do not make payments.

The sad thing is that many homeowners who are in default never talk to anyone to see if they can be helped.  The government HAFA program, which provides payments to the investors who provide mortgages and homeowners who are in default moves forward in April, 2010.  If you know someone who needs help, have them talk to a real estate agent who is a CDPE designee and understands what options may be available to a financially distressed homeowner.  They may be able to help lift the burden of an underwater home from the homeowner’s shoulders.  I have a team of CDPE agents who work with me and continually educate themselves on all the changes surrounding these issues.  Let us know if we can help you or someone close to you who is struggling with the decision of which bills to pay.

I love it when a plan comes together!  As you may know, I read a lot of articles and listen to a lot of speakers whose content pertains to the real estate and investment markets.  I want to make sure I’m on top of the latest information for the benefit of my clients and readers.  Today I read my new Realtor Magazine Online and half the articles happened to be on subjects I’ve thought about recently.  That’s where my plan comes in - I have a tendency to see trends rather than follow them and want to share those insights with you.

One of the current articles is on a topic critical to any seller in the current market or who is thinking of taking the plunge.  How to price homes in the MLS.  ONLY HIRE A REALTOR WHO KNOWS YOUR MARKET AND WHO WILL BE HONEST WITH YOU!!  Did you know that 90% of pricing is based on location and size of the home?  Did you know buyers want all the great stuff you put in your house, but at a steal of a deal?  Did you know you are competing with foreclosures and short sales and those distressed sales are anywhere from 30-75% of all sales in many communities?  Colorado Springs is currently at about 30% with that number expected to increase to between 40-50% of sales as ARM loan rates reset.

All too often, I see homes listed way above where they are selling in that neighborhood (like one right now in my own neighborhood - $35,000 too high).  Why?  Do the sellers really want to show their home for months on end and then have the listing expire?  It is hard enough to get a sale when the price is in the right range but prices keep dropping because of financially distressed properties nearby.  You can decide for yourself why people would do this to themselves.  Share your thoughts if you’d like to.

My team and I are honest about what sellers can expect to get for their home in this market.  Not only that - we tell you if things are changing so you can change your expectations as well.  This market is not static.  Some day we hope to be able to tell you it is improving month after month, but that’s not now.

Here’s the link to the article from Realtor Magazine that prompted my post today.  Colorado Springs is listed as a market that is on track.  Homes are being priced for the most part to reflect recent sales and the amount of inventory is staying fairly steady.  That’s good for current and future sellers.  If you have questions about your neighborhood, we’re only a phone call or email away.  What are you going to do to sell your home after the home buyer tax credit goes away?  Let us help you come up with your plan.

I like to stay in touch with past clients and one of the most frequently asked questions I get is “How’s the Colorado Springs real estate market doing?”.  In the past week I had the opportunity to hear Alex Charfen, founder of The Distressed Property Institute and the Certified Distressed Property Expert (CDPE) real estate designation, speak to our company and my response to a recent client inquiry reflected what I heard Alex say.  We are not out of the woods yet.

My family built a new home in Colorado in 1988 and it did NOT appreciate for 5 years until MCI opened their headquarters in Colorado Springs in 1993 and did massive hiring.  Many new jobs followed in the technology and service sectors.  Colorado Springs grew.  Our home has appreciated nicely since 1993, even though those first years were not good, but we didn’t build our house intending to rake in appreciation in 12 months, 18 months, or even 3 years.  Many people had that mindset as they bought between 2004 and 2007.  It hasn’t worked out for them as we as a nation have experienced a devastating recession and billions of dollars of wealth has been lost.  What does it take to get positive home appreciation?  Jobs!!!  Until we see the job situation improve, we will not see a robust real estate market.  Does that mean you shouldn’t buy now, or sell and buy a nicer home?  Absolutely not.  Over a lifetime, home ownership has proven to be an amazing vehicle for wealth accumulation compared to renting and paying someone else’s mortgage.  But you do have to pay attention to your personal financial circumstances and lifestyle and decide whether you can afford to not have any appreciation for the next 2-3 years.  That is what we will probably see locally and nationally.  We expect Colorado Springs to improve ahead of many markets, but there is no guarantee when that will happen.

So what did I tell my client?  Here’s my response.  Do you agree with me?  Or do you believe the national press telling you all is good, no worries, things are looking up?  Stayed tuned for more facts in the coming weeks.  Then you decide.

We’re doing better with the number of sales than last year, but last year was the worst year in about 20 years in Colorado Springs.  The $8000 first time homebuyer tax credit is helping increase the number of sales for 2009 and 2010, but prices are not going up.  Rather we expect them to either stay flat or decrease again once the tax credit goes away 4/30/10.  It’s an awesome buyer’s market, but a lousy seller’s market.  My team and I are telling people that if they have to sell or they are looking for a great move-up deal and are willing to take a price hit on their current home to get the $6500 move-up buyer credit and great pricing and low interest rates on a larger or newer home, then go ahead and list their home, but if they just want to “try” to sell, this is not the market for that.  There is another wave of foreclosures coming as ARMs reset in 2011 so we don’t expect prices to improve locally for at least another 2 years.  We’re encouraging people to pay down their mortgages and pay in additional principal to build equity in the coming few years.