Friday, April 24, 2009

First Time Home Buyers Are Finally Fueling the Come Back!

It’s finally happening! In my August 2008 Reality Check message I discussed our market’s need for the revival of the first-time home buyer. Because, as we know, first time home buyers are a critical force that will help jump start our market rebound, creating that important domino effect that will ultimately benefit all price points.

Confused? Just think about it. If first time home buyers purchase entry level homes, that allows the entry-level homeowners to sell and move-up to a mid-level, move-up market. By purchasing those homes, the move-up market is able to sell and ultimately purchase homes in the luxury arena. It’s a much-needed domino effect that could catapult our market’s rebound.

Well I talked about it eight months ago but at least you can’t accuse me of being a day late and a dollar short. I guess in this case I was a day (or eight months) early and, as my wife would say, still a dollar short. But it’s finally happening and numbers released over the last two weeks are certainly proving that.

First, let’s look at NAR’s release this week of its March existing home sales. Now of course some media did use the nationwide decrease in sales as an opportunity to take a negative spin but there were a lot of positives in this news. First, nationally, prices rose from February to March by 4.2 percent which is much higher than the typical 1.8 percent seasonal increase between those two months.

Second, housing inventory at the end of March fell 1.6 percent to 3.74 million existing homes available for sale which represents a 9.8 month supply at the current sales pace.

In the West, existing home sales declined 4.2 percent to an annual rate of 1.13 million in March but, and this is a big but people, are 18.9 percent higher than last year at this time.

Now what do all of these numbers mean? Well the fact is, the share of lower priced home sales have trended up, indicating a return of many first-time buyers. Sales in the upper price ranges remain stalled but there are two reasons for this. First, jumbo loans still are difficult to obtain right now—though that may change in the second and third quarters thanks to the government’s work to restore this—and second, now that first time home buyers are once again entering the market, it will take some time for the domino effect to take shape onto other price ranges.

Another interesting note, the Mortgage Bankers Association this week released its Weekly Mortgage Applications Survey for the week ending April 17. The index showed an increase of 5.3 percent from the previous week and that was a 76.9 percent increase compared with the same week a year ago. Yes, 76.9, that’s not a typo.

Whatever you think about what our government is doing to revive our economy, it seems some of the early work like the first time home buyer tax credit is working. Earlier this week Inman News reported that the preliminary numbers from the IRS suggest 1.4 million taxpayers will claim the federal first-time home buyer tax credit on their 2008 tax returns, meaning the program is likely to meet or exceed the 2 million target set by lawmakers before it ends November 30, 2009.

Finally and I think this is probably most notable, the Wall Street Journal reported this week that prices have fallen back into line with what the typical household can afford to pay in most of the U.S. The report showed that home prices are dubbed “fairly” valued in 202 of the 330 markets studied. That means the average price level is within a band 14% above or below the historical norm. Twenty-one markets are “overvalued” or between 14% and 34% above the norm. And 106 markets are considered “undervalued” or more than 14% below the norm. Take a look at this graph which showcases where we were in the early part of the decade as compared to today:



Now I know some of you are scratching your heads and saying, how is the drop in property value a positive thing. But the fact is that though the ride was nice in the big real estate boom of the early 2000s, we couldn’t sustain those types of record appreciation levels without eliminating certain consumer niches, including first time home buyers. Now that levels are back within range, the first time home buyers are once again able to reenter the market which is why we are seeing such a strong surge in sales in that level.

It’s just a matter of time before we weed through the remaining banked owned inventory and we should begin to see prices stabilize. Once we see that, the remaining areas of the market should begin to see an upswing, too.

With that said, let’s take a look at this week in real estate:



  • Boulder/Longmont—Our Boulder office reports that under contracts in the Boulder market are up 30% over the previous week with new listings down over 40%! I know it's only a week, but that's the kind of trend we like. The Boulder office showed a big uptick in under contracts over the previous two weeks. The Longmont office reported that business is happening. Our showings increased by 19% week over week. This is especially significant due to the blizzard like weather late in the week which caused us to close the office early on Friday. Some buyers are choosing not to buy foreclosures and short sales due to the challenges that those properties can bring. This bodes well for the non-distressed sellers. Homes in the lower and moderate price ranges are selling quickly. After the snow, the weather became wonderful. Spring has made it to the Rocky Mountains. We are also experiencing positive job growth year over year and the unemployment rate in Boulder county is lower than the state figures.

  • Evergreen/Conifer—Our Evergreen office reported that we had a total of two new listings for the week. Three listings went under contract. There were forty-eight showings for the week. Sales and showing activity were affected by the weather. Our office was closed for three days.

  • Denver Central—No information reported.

  • Devonshire—Our Devonshire office is reporting that in spite of snow storms and other weather issues, showings are increasing consistently. Buyers are finding it easier to pre-qualify for loans and are anxious to get out and begin looking. The moderate price range properties are holding strong with multiple offers. We know that the upper end will follow in the next few months. Buyers are coming to realize that if they don't move quickly on available properties someone else will.

  • Douglas County—No information reported.

  • El Paso County—Our Colorado Springs office reports that buyer activity is picking up dramatically mostly due to military and Schriever Space Center. Short sales are slowing and a lot of those sellers are renting their homes. REOs have slowed as well as foreclosures.

  • Larimer County—Our Fort Collins office reports that activity continues to increase in our market with property showings increasing and still the occasional multiple offer situation. The majority of the current activity is coming from homes in the $200,000 to $300,000 price range. The upper end is moving slowly. The three days of rain/snow did decrease the activity somewhat last week, but we are looking to rebound strong with the great spring weather and 70 degrees this week. We are still experiencing numerous short sales and some foreclosure activity. However, the banks are responding to offers a little quicker than before as these situations are becoming more commonplace. Interest rates are the lowest they have been since 1954 and the property values are holding relatively strong for our economy. If you are waiting for a better time to buy you may have to wait another 55 years!

  • North Metro—Our North Metro office reports that Agents are going out on many listing appointments. Some sellers remain overly optimistic about the price they would like to get for their home, over current market value. We are seeing an increase in listing appointments that are in short sale situations. The first time home buyer tax credit is helping to increase the number of buyer appointments. The result is a lower average sales price of the homes we put under contract. Floor calls continue to be strong. Average list price this week has been around $250,000.

  • Parker—Our Parker office reports that although we set a new record for listings under contract for the month of March, our inventory increased slightly because we added another high producing team to our sales force. Showing activity has been the highest since 2006! Our number of showings increased by over 100 in one week! We still receive multiple offers on power priced listings. Last week’s record was 14 offers on one listing within the first four days on the market.

  • Southeast Metro—WOW!! Busy, busy, busy with showings averaging 100+ per day! Our success story of the week is a condo near City Park that went on the market and closed in two weeks at full price! We continue to see multiple offers on homes priced below $250,000. Open houses are generating lots of energy and excitement in the market.

  • West Lakewood— Nearly 70% of our sales are under the $250,000 range. Very little is moving over $500,000. Many, many first time homebuyers are taking advantage of the $8,000.00 tax credit. Nearly all multiple offers are on bank-owned properties.

Next week will bring some more interesting news. Check out this article that ran Monday in The Wall Street Journal: http://www.washingtonpost.com/wp-dyn/content/article/2009/04/19/AR2009041901875.html. Once we see the results of new home sales (existing home sales were already reported), we should have a better indicator of where we are. I’ll leave you with this excerpt from the The Wall Street Journal’s story:


“Whatever the March numbers say, there are good reasons to think that home sales will improve as the spring selling season gets underway. Anecdotal reports suggest that low mortgage rates and an $8,000 first-time home-buyer tax credit are coaxing buyers back into the market. And while foreclosures are set to rise as banks begin to move on delinquent homeowners, that actually could boost home sales as banks auction homes for whatever the market will bear.”


The market is without a doubt changing and we may finally be seeing the end of the great housing challenge of the 2000s. I for one am very happy to see it.

Brian L. Thomas
 
Originally posted by,

Chris Mygatt
President
Coldwell Banker Residential Brokerage Colorado


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Tuesday, April 7, 2009

I'm Invigorated!

Okay, I know that headline seems a little exaggerated and maybe even a little far-fetched, but honestly I am.  I don’t know if it is a combination of the sun, the clean Spring air and the excitement that seems to be brewing in our offices, but I can feel that change is abuzz in the real estate market and for the first time in a long time, I’m truly invigorated!

 

This week was yet another week of milestones.  Several weeks ago I questioned, are all of these positive indicators the start of a trend or are they just that, positive indicators that will have a short shelf life.  Well, after at least four weeks of some strong, positive gains, I truly am invigorated.

 

This week, NAR released its Pending Home Sales Index, a forward-looking indicator based on contracts signed in February, reporting that pending home sales rose 2.1 percent to 82.1 from a reading of 80.4 in January.  Pending home sales have a way to go for there to be a meaningful increase, but recent increases in shopping activity are hopeful indicators that we’ll see additional sales gains.

 

NAR’s Housing Affordability Index also rose 0.9 percentage points to a record high of 173.5 in February from an upwardly revised index of 172.6 in January, and is 36.3 percentage points higher than a year ago.  This broad measure of housing affordability using consistent values and assumptions over time, shows that the relationship between home prices, mortgage interest rates and family income is the most favorable since tracking began in 1970.  1970!!!!

 

Also interesting, Inman News released a survey this week noting that of the 225 readers who responded to an online survey from March 23 to April 1, 48.9 percent said housing markets in their area were improving, 27.1 percent said they were stabilizing and just 12.9 percent characterized them as worsening.

 

That, along with the indicators I’ve referenced over the last several weeks including last week’s jump in mortgage applications, the historic drop in interest rates and the surge in new housing starts, we truly are seeing some very positive and indicative signs of recovery.  I truly believe that buyers are seeing inventory move and that gets them moving. 

 

It seems some of Obama’s various recovery efforts are starting to have some effect on the market.  The billions to slow foreclosures and goose bank lending, plus the tax credit, are getting buyers to move which is a positive sign. 

 

Now, of course, we’ll have to keep our eye on it and watch as the market continues to progress through our traditionally busy Spring selling season, but thus far the signs are positive and my magic eight balls says “Outlook is Good.”

 

With that good news in tow, let’s take a look at this week in real estate: 

 

  • Boulder/Longmont—Our Boulder office reported very strange two weeks in the Boulder market.  New listings fell about 33% during the last week of March compared to the week before but under contracts skyrocketed!  They went from 3 to 27! A 900% increase.  Showings were down due to the snowstorm.  Inventory in Boulder County continues to increase but we are holding steady at about 10% of going under contract in the first two weeks on the market.  Our Longmont office reports showing activity was down 35% from last week…the blizzard of March 2009 did impact the showings!  The week ended on a positive note with the showings going up again.  Buyers are finally getting the message that the interest rates are awesome!  More investors are writing contracts to purchase.
  • Evergreen/Conifer—Our Evergreen office reported a total of two new listings for the week.  Two listings went under contract, one is a short sale property.  63 showings for the week making a total of 335 for the month of March.
  • Denver Central—Our Denver Central office reports we have seen a big increase in activity in March. The lower-end market is very hot right now with multiple offer situations.  We are also seeing increases in sales volume.
  • Devonshire—Our Devonshire office is reporting that we are still seeing showings increase even with the unsettled weather.  Buyers are getting tired of waiting for things to stabilize and are anxious to get out there and get a home.  They are however, looking at many more homes before making a decision.  The interest rates are wonderful so I believe that activity and closings will increase as we move further into Spring.  Sellers are seeing that price and staging of their homes are more important than ever.  Now is truly the time to move forward towards your real estate goals.
  • Southwest Metro —Our Southwest Metro office reports our floor has been generating great leads this past week.  We have had four Agents that picked up buyers from their floor shifts.  Open houses were very successful this past weekend.  We are seeing a turning point (small but turning).  Our mortgage rep is still very busy.  He registered 25 leads out of 26 this month!
  • El Paso County—Our Colorado Springs office reports that the under $250,000 market seems to be the hottest price range right now compared to $350,000 two months ago.  This may be due to more of the workforce of some of the companies at the Space Command Center at Schreiver coming in and the executive transfers have slowed.  
  • Larimer County—Our Fort Collins/Loveland office reports that Spring has sprung and following a fast-moving blizzard this past week, we've seen a spike in activity in Larimer County.  Loveland overall remains slower, but all indicators are that the Spring selling season is underway in the Fort Collins/Windsor area as showings are up 20% from previous weeks.  Contracts are strong as well with an end of month blitz that doubled the number of the week before.  We are seeing an increase in open house activity and sign calls as interest in current inventory increases while interest rates remain unbelievably favorable.
  • North Metro—Our North Metro office notes that Agents are going out on many listing appointments.  Sellers are ready to "sell.”  Numerous buyer appointments as well.  Seeing an increase in number of short sale listings.  Average days on market for our listings is about 95 days.
  • Parker, Douglas and Elbert Counties —What a busy week last week of March!  We set a record for March under contracts as well as for showings during week one of March of over 300! The biggest impact comes without a doubt from the first time home buyers that want to take advantage of the $8,000 tax credit.  Because of the increased activity and the decreased inventory, more and more communities in the lower price ranges show a stable value.  The upper end communities are still slow, however it's only a question of time until those pick up as well.
  • Southeast Metro—No information reported.
  • West Lakewood— We have bank owned properties that are receiving multiple offers.  This week we had a short sale listing receive seven offers. Of the property with seven offers, the selling Agent was asked to give their highest and best offer. Two owner-occupied homes which have been listed since Fall received multiple offers.  The buyer offered $10,000 over list price and lost the home to an investor. First time buyers who want to take advantage of the tax credit are finding themselves either in multiple offer situations or the property went under contract within hours of them viewing it.  They are also in competition with investors. Owner occupied sellers are busy getting their homes ready for market. They are open to staging, painting and carpeting so they can compete well.  Eight parties came through a $730,000 home at an open house last weekend.  That is the highest traffic since last summer.

 

As you can see, the market is heating up.  Consumer confidence is finally on the rise and buyers are edging off the fence.  For those who are still cautious, please consider all of the positive signs that are knocking at your front door.  From the first time home buyer credit to the historically low interest rates to the increases in conforming loan limits to the generous amount of inventory to the motivated sellers to the…honestly, the list goes on.  Opportunity is knocking and it is time for buyers to recognize this and jump in.

 

 

Brian L. Thomas

Coldwell Banker Residential Brokerage

720-934-4745 Direct

303-675-5657 Fax

Brian@SouthOfDenver.Com

www.SouthOfDenver.com