Friday, February 20, 2009

Weekly Market Watch

New Legislative Action…May We Finally Restore Consumer Confidence

 

It was a week full of stories and reports, both from the cynics and proponents of the American Recovery and Reinvestment Act of 2009.  The $780 billion package was signed into law on February 17 and truly is the largest, most unprecedented recovery act in history.

 

The provisions of the bill were changing even up until hours before the House and Senate voted on the bill, but the final provisions were recently posted to NAR’s website.  Click here to access the details and learn more about the housing elements that were included:  http://www.realtor.org/government_affairs/gapublic/american_recovery_reinvestment_act_home?lid=ronav0019

 

Also announced this week was Obama’s $75 billion foreclosure prevention plan.  The multipronged plan calls for modifying loans for borrowers both at risk or already in default and for allowing those with little or no home equity to refinance into more affordable loans through interest-rate reductions.

 

Click here to read the details of the prevention plan:  http://www.realtor.org/RMODaily.nsf/pages/News2009021901

 

Obama’s administration said Wednesday that this prevention plan will help up to nine million people avoid foreclosure, by providing government funds to provide incentives to borrowers, loan servicers and mortgage investors to modify loans to affordable monthly payments.

 

I know many are wondering if this new program will help them.  Official guidelines of the plan won’t be unveiled until March 4, at which time we will focus our March Reality Check on the details of the plan and how consumers may take advantage of it.  In the meantime, I did find this article on CNN.com which may help in educating yourself:  http://money.cnn.com/2009/02/18/real_estate/Obama_foreclosure_plan/index.htm?postversion=2009021911

 

I realize this is a highly debatable topic right now but what is not debatable is the fact that in order to fix this housing crisis, we must stop foreclosures.  Real estate is 20% of the gross domestic product in this country.  The only way to fix 1/5 of this country’s GDP is to stop falling home prices and the only way we will do this is to stop people from loosing their homes.  This prevention program should help millions of people stay in their home and will hopefully get our country back on track. 

 

The fact is, when consumers feel safe in their homes, feel safe in making their payments and once again feel confident that they will continue to have a roof over their heads, they will begin to put their money back in the economy.  They’ll begin to make home improvements.  They’ll begin to feel more confident in their future and that consumer confidence will begin to trickle into all areas of our economy.  From home improvements to car purchases to vacations—and the jobs and associated spending that these create.  What we know is, when consumers feel confident, they spend.

 

Now I realize for many that statement conjures up far too many negative emotions from the recent past—people who are living beyond their means simply because they think their house is going to appreciate.  Fortunately this plan and that of the American Recovery and Reinvestment Act of 2009 provide stipulations that we hope will stop history from repeating itself.  Couple that with the fact that lenders have become far more conservative in their lending practices, we should finally be on a level playing field that will safeguard against such an issue.

 

Now, let’s take a look at this week in real estate:

 

  • Boulder—Our Boulder office is reporting very little change from the last week.  The increased rate of showings is holding steady and Agents are reporting buyer activity but not big up tick in contracts.  My sense is that we’ve been in a holding pattern until these two legislative initiatives were passed and now that we finally have the action, we should begin to see buyers enter back into the marketplace and those contracts begin to close.  Our Longmont office reports that showing activity was up significantly this week.  Open houses are seeing more activity.  The investor buyer is still looking for the great deals.  The rental market is particularly strong.  We are seeing a decline in available inventory.  Longmont seems to be the most reasonable place in Boulder County to buy/live.  First time buyers are becoming more active which will eventually trickle into all price ranges.
  • Clear Creek County—Our Evergreen office is reporting that we had a total of six new listings for the week.  On the flip side, only one buyer went under contract on a short sale property.  We had 69 showings for the week plus six Agent previews.  Our open house activity was down from the previous weekend (due to the holiday).  However, new listings in Sloans Lake brought 15 potential buyers through on Sunday.
  • Denver Central—Denver Central is reporting that short sales are picking up and banks are responding faster with offer approvals than they did this time last year.  An interest fact is that 10% of our sales are multiple offers—most of which are related to bank owned properties.  We are seeing an increase in the average sales price.  Energy is still good and our Agents are increasingly busy which is a positive sign.
  • Devonshire—Our Devonshire office reports steady figures across the board: listing inventory, sales activity and showing activity.  We had three multiple offer situations this week—two of which we won.  Our inventory is going down in the central Denver area and prices seem to be stabilizing.
  • Douglas County—Our Southwest Metro office is reporting that showings were down for the three day President’s weekend.  That said, Agents did hold open houses and had on average 8-12 groups of people come through.  First time home buyers have been awaiting the stimulus package to come through and now that it has, we should begin to see fence sitting buyers come back into the marketplace.
  • El Paso County—Our Colorado Springs office notes that Lockhead Martin and Northrop/Gruman both increased Southern California transfers to Colorado Spring.  Fore Credit in Phoenix closes the end of February and had 100 transfers that are now coming into Colorado Springs.  Builder activity has picked up on the five acre spec home business.  Homes in the $300,000 plus range have showed significant increase in buyer showings.
  • Elbert County—Our Parker office reports that although the number of new listings is still higher than the number of listings going off the market under contracts, the total inventory is coming down consistently because many of the listings that shouldn’t be on the market are being withdrawn or expire.  As a result, we see a higher percentage of listings actually selling.  Prices are slowly becoming stable in the Parker area while property values are still decreasing in the outer areas.
  • Jefferson County—Our Conifer office reports one new listing this week.  Two listings went under contract.  One REO property had multiple offers and went under contract above the list price.  Two additional offers on REO listings that we received are currently waiting for bank approval.  Showing activity continues strong with 39 showings during the week.
  • Larimer County—Our Fort Collins office reports that all indicators show increases across the board this week.  Our showing activity was at 189 showings and reports from the field are that buyers are out looking at property—lots of it.  Buyers are requesting to see virtually all inventory in a given price range.  I spoke with one Agent who showed over 20 properties in one day to a single buyer.  With the recent passage of the Economic Stimulus Package that includes an $8,000 tax credit to first time home buyers, it should be a terrific incentive for those who may have been waiting.  Permits for new construction remains at an all time low.  Builders remain aggressive to sell inventory.  With limited new construction inventory available, very small up tick in demand to see competitive pricing structures disappear especially in new highly desirable areas, like Timnath Ranch.
  • North Metro—No information reported.
  • Southeast Metro—Our Southeast Metro office reports that in addition to the several multiple offers on bank inventory, the office had an additional six multiple offer situations.  Brokers are very busy with first time home buyers and inventory in the $200,000 to $250,000 price range is moving quickly.  We are gearing up to have a great Spring!

 

Of course time will only tell if all of this legislative action will work and we’ll only know if it does when we are able to reflect on it a year, two or even three down the road.  But the fact is we’ve been in a holding pattern for far too long.  And our economy, country and people have struggled and lost far too much because of it.  The recent passage of these two very important housing initiatives—which include (among other things) the $8,000 first time home buyer credit and the increase in conforming loan limits—should finally put us on the road to recovery.

 

Until next week,

Have a great one,

 

Chris Mygatt

President and Chief Operating Officer

Coldwell Banker Residential Brokerage Colorado