May 2009 Newsletter by Neil Kearney

Kearney Realty News Market Update

Neil Kearney MBA, CRS®

Kristy Kearney

Quick Facts Boulder County was ranked 17th out of 293 tracked areas in annual appreciation through the fourth quarter 2008.

Source -Federal Housing Finance Agency

According to BusinessDictionary.com “a market for a particular item is made up of existing and potential customers who need a good or service and have the ability and willingness to pay for it.” It is well established that everyone needs a place to live but having the willingness and ability to pay for one has become a stumbling block in today’s real estate market. Sales of all residential properties in Boulder County during the first quarter dropped 34% compared to a year ago. Clearly, there are fewer buyers in the market who are ready, willing and able to buy a home. The first quarter sales followed a trend which has been in mo-

May 2009 tion for over two years. Fewer people have been moving, and I believe there is pent up demand of potential buyers and sellers who, given the right market conditions, would love to move to a new home. Being willing and able is another matter. Consumer confidence as measured by The Consumer Research Center, hit an all-time low in February. People are worried, and the current economic conditions have affected nearly all purchase decisions. There is a silver lining to this situation. Right now is one of the best times on record to buy real estate. Interest rates are low, the selection of homes is good and in many cases sell-

ers are motivated to sell and are offering great deals. The situation is especially good for firsttime homebuyers or those who have not owned in three years or more who can take advantage of the $8,000 tax credit. Even if you don’t qualify, maybe a family member does. We welcome your business and appreciate every opportunity to serve you, our valued clients.

Do You Qualify for the Housing Stimulus Plan? The current economic crisis represents the deepest recession the United States has seen since the Great Depression of the 1930’s. The cause of the crisis has been popularly pinned upon the housing and mortgage sectors, but as we learn more we find many industries whose success was dependent upon an unsustainable upward curve. We all recognize and are living through the effects of the cri-

sis, but the most important issue now is what is being done to insure the quickest recovery possible. Banks have been bailed out, infrastructure projects have been fast tracked, money has been issued and debts have been forgiven. In addition to these efforts, the administration has recognized the importance of a housing recovery in the overall strength of the economy. A three-part plan

has been issued to address the main issues in housing today: slowing the foreclosure rate and bringing new buyers to the market. The first part of the plan is an $8,000 tax credit for first-time homebuyers. The second part allows refinancing of loans for homeowners who do not have enough equity to qualify without assistance. The final part of the plan provides incentives to loan companies to modify the loan of those Continued

Page 2

K ea rn ey R ea lt y Ne ws

Housing Stimulus Plan - continued

Housing is one of the pillars of a strong economy. Improving the housing market will help us all toward economic recovery.

“The loan modification program provides for refinances that cap payments at 31% of monthly income.”

homeowners who are in distress. Here are the details of each of those plans: $8,000 Tax Credit for FirstTime Homebuyers • The law provides for an $8,000 tax credit for home purchases made on or after January 1, 2009 and on or before November 30, 2009. • The tax credit is available to first-time homebuyers or those who have not had any ownership interest in a primary residence in at least three years. • Any home above $80,000 qualifies for the full $8,000. Homebuyers will be credited 10% of the purchase price for amounts less than $80,000. • The monetary benefit comes in the form of a tax credit, a reduction in the income taxes owed by the homebuyer. If there are not any taxes due, the full amount will be refunded. For example if you owe $3,000 in taxes next April you would get a refund of $5,000. • To claim your credit you must close on a home or condo within the time frame and file either an amended 2008 tax return or wait until you file your 2009 return next year. • The program does have income restrictions. Single filers are phased out if their adjusted gross income on their 1040 is above $75,000. The limit is $150,000 for joint filers. • There is no application and no pre-approval needed. All that needs to be done is to file the new form 5405 as an attachment to your tax return. • In order to keep the entire credit, the homebuyer must not sell the house within three

years. There are some hardship exceptions for this provision. Home Affordable Refinance The refinance provision of the 2009 Stimulus plan is designed for homeowners who are current on their loans but are unable to take advantage of today's low interest rates. Due to the tightening of credit, many homeowners cannot qualify for a conventional refinance because they do not have the required 20% equity in their home. The refinance program allows homeowners with less then 20% equity in their homes to qualify for the low interest rates now available. The program has the following requirements: • You own and currently occupy a one-to-four-unit home. • Your mortgage is held by Fannie Mae or Freddie Mac. • The amount you owe currently does not exceed 105% of the current value. • You have stable income sufficient enough to support the new mortgage payments. • If you would like to participate, you can call the lender of your choice. You do not need to work with your current loan company and there are no "approved providers", so don't get scammed. The refinance initiative is not designed for: • Homeowners who are delinquent on their mortgage payments. • Homeowners who owe more than 105% of the homes current value of

their home. • People who want to get cash back from their refinance. Making Home Affordable Loan Modification The Making Home Affordable program is designed to facilitate the modification of the existing loans of homeowners who are in financial distress. In order to be eligible for a modification you must: • Be an owner occupant. • Have an unpaid principle balance of $729,750 or less for single unit properties. • Have a loan which was originated on or before January, 1, 2009. • Have a mortgage payment (including taxes, insurance and HOA dues) that is more than 31% of your gross (pretax) monthly income, and • Have a mortgage payment that is not affordable. The program is available to homeowners who are either current or behind on their mortgages and make payments to a participating servicer (mortgage company). If you are approved for the program your payment will be reduced to a level where the total payment is no higher than 31% of your gross income. You will first be put on a three month trial modification at the new interest rate and payment amount. If payments are made successfully throughout the trial period, your servicer will execute a permanent modification agreement that will lower your interest rate to a fixed rate for five years. The U.S. Treasury is providing incentives to mortgage companies to lower interest rates down to as low as 2%. For full details on the program go to: www.MakingHomeAffordable.gov

K ea rn ey R ea lt y Ne ws

Page 3

A Tale of Many Markets - A Breakdown by Price In order to get a true picture of the current state of the real estate market, you must break it down into smaller segments. Looking closely at different price ranges gives a much more comprehensive and interesting view.

price range. Under Contract % ≤ $400,000 $400,001 - $800,000 $800,001 - $1,200,000 ≥ $1,200,000

22% 12% 9% 4%

and no new homes were to come on the market. Homes below $400,000 are in a healthy range, and those above $1.2 million are oversupplied given the current sales rate. First Quarter Sales: 2008 2009 Change

As a rule, homes priced near or below the conventional loan limit of $417,000 are moving much more quickly than higher priced homes. The reason is simple: affordability. At this writing loans at or below $417,000 can be obtained in the 4.875% range and jumbo loans (those above $417,000) start at 6.375%. This spread makes a big difference in what one can afford. When low rates are coupled with an incentivized first-time home buyer, it makes sense that the lower end homes in any of our local markets are moving well. Here are a few statistics that will show the difference in activity by

U/C % shows the current level of activity in the market. Simply put, it’s the percentage of active homes on the market at any given time which have found a buyer. Clearly, the lower the price the more market activity there is. Current Inventory in Months: (Using the past 12 months sales rate) ≤ $400,000 6 months $400,001 - $800,000 12 months $800,001 - $1,200,000 19 months ≥ $1,200,000 52 months Inventory is a gauge of how long it would take to sell all homes in a given range if the past sales rate were to continue in the future

≤ $400,000

571

406

-29%

$400,001 - $800,000

212

122

-42%

$800,001 - $1,200,000

-46%

≥ $1,200,000

-48%

Sales were down across the board, but there is a direct correlation between the magnitude of change and the price range. It is interesting to see that a majority of the sales in Boulder County are below $400,000.

Website Re-Design I’m really excited to announce that www.NeilKearney.com has recently undergone a major re-design. I have integrated my blog, an MLS search, useful links, my listings, statistics and hundreds of unique articles about Boulder and Boulder area real estate into one great package. I’d love for you to come take a look! If you like what you see and would like to be notified via email of new articles on an as written or weekly basis, you can subscribe in the section called “Sign Up”. You can also subscribe to the “Image of the Week”. This is where I post a photo that I have taken each week; a place to see what I’ve been up to. Here are the latest posts that you can find on the site as well as a few of the recent photos: •

April Statistics

•

Boulder County Property Assesments - How to Appeal

•

Boulder, Colorado - Weekly Activity Index

•

Inspection Issue - Aluminum Wiring

•

Walk at Sawhill Ponds

•

Happy Earth Day!

•

Boulder Sales - The Breakdown

•

Inspection Issue - Radon

•

The Grand Staircase of Boulder Real Estate

Kearney Realty Co.

PRSRT STD U.S. POSTAGE PAID BOULDER, CO

1790 30th Street, Suite 130 Boulder, CO 80301

PERMIT NO. 518

Neil Kearney MBA, CRS® Direct: 303-413-6624 Email: Neil@KearneyRealty.com Kristy Kearney Direct: 303-413-6621 Email: Kristy@KearneyRealty.com

We’re on the web! www.NeilKearney.com www.TheBoulderBlog.com

Sales Statistics 1 Year Appreciation 15.0%

10.0%

5.0%

0.0% 2nd Qtr. 2006

3rd Qtr. 2006

4th Qtr. 2006

1st Qtr. 2007

2nd Qtr. 2007

3rd Qtr. 2007

4th Qtr. 2007

1st Qtr. 2008

2nd Qtr. 2008

3rd Qtr. 2008

4th Qtr. 2008

-5.0%

-10.0% Boulder County

United States

Source: Federal Finance Housing Agency