Kearney Realty News Market Update Thus far, 2010 has been a very interesting year. The year started with a bang as the homebuyer tax stimulus, low interest rates and the first signs of economic recovery brought buyers out of a prolonged hibernation. Starting in January, year-over-year sales showed strong increases. Through April, cumulative sales had surpassed 2009’s numbers by 34%. Then the market developed a leak (metaphorically). As the last chimes sounded at midnight on April 30th so to did the fuel which was feeding the market. As the tax credit expired on April 30th 26.4% of all homes on the market in Boulder County were under contract. A robust number representing strong market activity. Since May 1 we have noticed two major trends. The first was that activity dropped right away, the deadline was hard and eligible buyers, move-up and first time were both apparently a big part of the market. The number of contracts written dropped 44% in one week. From record highs to below average in one fell swoop. The other trend was a trailing trend; the number of closings. While April was the high point for contracts written, June was the apex of closings for 2010. As the reports of sales (closings) continued to give good news the actual activity in the market had slowed considerably. During July the number of closings dropped considerably. Down 35% from last month and 40% from July of 2009. Our early year-overyear gains seem to be fading as the increase is only 8% through July. Values have been holding fairly strong given fewer sales. According to FHFA.gov Boulder County had an annual appreciation rate of -1.92% ending June 2010. This ranked us in the top quartile nationally. The greater Denver market is considered one of the stronger real estate markets in the country. I guess it is all relative and we have much to be thankful for.
Summer 2010 Here are the positives I see in the market. •
Interest rates are at all time lows. 4.5% is an amazing rate for the long term. These low fixed rates allow you to lock in affordability for 30 years. Some are deciding not to buy because they will need to sell their home for less then they think it’s worth. Yes, that is a possibility. But right now you can also buy your next house on sale and at an interest rate that compounds the good deal.
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Boulder County is a dynamic area. Our employment rate is very strong and looking forward we are going to add population by adding jobs in the renewable energy and technology sector. Combine increased population with almost no builder inventory and you have a very responsive supply/demand equation. We are already seeing incoming relocations and as they increase with the economy our supply of homes on the market will decrease. This will eventually lead to an increase in prices.
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Distressed sales (foreclosures and short sales) are less than 10% of our market. Many markets around the country have a majority of their sales in the distressed category. This unnatural supply, not to mention the lack of move-up buyers, causes negative price pressure. In Boulder County distressed sales are not a big part of the market. This will allow for a quick recovery.
There are some good values in the market right now and when you combine that with the low interest rates this is one of the best times ever to buy real estate. It goes against the popular media but you will thank yourself in the future. Let me know how I can be of service.
A PRIMER ON SHORT SALES Five years ago I had never heard the term ‘short sale’, now I hear it almost every day. Even if you own your home free and clear knowing what a short sale is and how it works will keep you up to date in today's real estate market. Currently of the roughly 50 million households in the U.S. 2.5 million are in foreclosure and 7.2 are delinquent. A related number which encompasses many of these households are the 11 million homeowners (Corelogic) who owe more than what their home is worth. In order for these people to sell their house and move on they either have to come to the closing with money or negotiate with the bank who hold the mortgage. The Basics: Wikipedia.com definition - A short sale is a sale of real estate in which the sale proceeds fall short of the balance owed on the property's loan. It often occurs when a borrower cannot pay the mortgage loan on their property, but the lender decides that selling the property at a moderate loss is better than pressing the borrower. Both parties consent to the short sale process, because it allows them to avoid foreclosure, which involves hefty fees for the bank and poorer credit report outcomes for the borrowers. This agreement, however, does not necessarily release the borrower from the obligation to pay the remaining balance of the loan, known as the deficiency. Owners Perspective: These would be sellers are stuck. They would like to (need to) sell but for any number of reasons (bought for too much, negative amortizing loans, second loans, etc.) they cannot find a price a buyer will pay for the home and pay off the existing loans and the closing costs. Convincing the lender is not an easy job. First of all there must be a compelling hardship where the seller absolutely cannot keep up the payments nor come up with cash to close. Once all of the documentation is complete a package including the sales contract signed by buyer and seller is sent to the bank for approval. This is the tough part, it takes patience. It can take up to 5 or 6 months but usually no fewer than 8 weeks to get an answer from the bank. If the short sale is approved, the sale goes through at a lower amount the sellers credit is hurt (although not as bad as a foreclosure) and the bank still has the right to claim and try to collect a deficiency. Buyers Perspective: Short sales provide a unique value opportunity. Many times banks approve a price which is a great deal for the buyer. The main downside for a buyer is the uncertainty. The bank has the right to accept other offers so even if you were the first offer in to the bank, by the time they get around to reviewing it there may be multiple offers. It might take two or more months to figure out that the bank will not approve the list price of the house. Buying a short sale is not for someone who has a certain date in mind or is not willing to be patient while the weeks tick by without any word. There is no countdown, there are no numbers. You hear when you hear and the news is not always what you had hoped for. For the right buyer it is a good opportunity but it is certainly not for everyone.
Kearney Realty Co.
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Neil Kearney MBA, CRS® Direct: 303-413-6624 Email: Neil@KearneyRealty.com Kristy Kearney Direct: 303-413-6621 Email: Kristy@KearneyRealty.com
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Quick Facts Top Ten Areas for Home Appreciation
Population Trends The market for real estate is cyclical but unlike other markets, real estate provides shelter and everyone needs shelter. It’s right up there with food, water and air. So the market for buying and selling homes may vary over time but the need for a place to live remains constant. Currently the population of the United States is just shy of 310 million. Each year the population grows by somewhere around 1% or 3.1 million. Each of these people need a place to live. Of course a new baby won’t need a house of their own for many years but overtime this is the engine which spurs new construction and fuels the supply/demand curve that is the real estate market. In a laboratory one might assume that all population growth will distribute evenly across the country but this is not the case. Not even close. Migration patterns within the U.S. make a huge difference when the strength of regional real estate markets are considered. The included maps show migration patterns for Boulder County and the Detroit area in 1998. Black lines show inward population migration and red lines show outward migration. Each line shows where the population is going to or headed from. A stronger line shows more people moving to or from that one particular location. You can see that Boulder County has a net population gain and Detroit has a massive population loss. Over the past five years home values in Boulder have gained 4.72%; in Detroit values have dropped 34.62%. Colorado in general and Boulder specifically are predicted to gain more than our fair share of population over the next decade. I expect values will follow. (Charts from Forbes.com)
1. 2. 3. 4. 5. 6. 7. 8. 9.
Springfield, IL 2.68% Dubuque, IA 2.41% San Jose, CA 1.89% Anaheim, CA 1.45% Huntington, WV, OH, IN, 1.4% Kennewick, WA 1.36% Houma - Bayou, LA 1.31% Buffalo, NY 1.3% Sioux City, IA, SD, NE 1.16% 10. Cedar Rapids, IA .94% Bottom Ten Areas for Home Appreciation
303.Bend, OR -18.59% 302. Ocala, FL -18.55% 301. Madera, , CA -17.64% 300. Winter Haven, FL -17.61% 299. Reno - Sparks, NV -17.31% 298. Orlando, FL -16.11% 297. Lake Havasu, AZ -15.09% 296. Daytona Beach, FL -14.98% 295. Port St. Lucie, FL -14.42% 294. Las Vegas , NV -13.94% US Home Appreciation -1.6% Colorado Home Appreciation -.25% Boulder County Appreciation -1.92% Source FHFA.gov based on year ending June 30, 2010
For ongoing statistics, features and analysis visit www.NeilKearney.com