Invest in rental property, buy your first home or sell your house and move to a bigger one. Helping the creative community with it’s real estate needs.
If you’re new to the home buying process, just starting to think about it, or haven’t done it in awhile, here’s help. Though there are many variables that exist within each transaction, these basic steps are the same. My job is to make sure it runs smoothly, from our first consultation to beyond the closing. Just like every home is unique, so is every home buyer. Knowing how much house you can afford is an important first step and getting pre-approved is critical. ( I work with some stellar lenders, I’d be happy to introduce you). Having an idea of the numbers makes your home shopping more efficient, and you’ll be ready to write an offer quickly. That’s a must in this competitive market.
There is no such thing as “the perfect house”. Finding one you can fall in love with takes market savvy, intuition and teamwork. I love the first meeting with buyers when they tell me what they want in a home and I follow up with questions about things they hadn’t though of. And I love the moment when we find the home and the whole energy changes. So cool.
Any questions? Want to talk? Is now a good time? I’d love to hear what moves you and help you have a stress-free home buying experience you will enjoy.
Let’s talk about homeownership. Are you considering buying vs. renting?
Renters often ask me if it’s too late to buy a house: Are we heading for a big downturn? Are we too deep in the market cycle to buy? they wonder. Timing the real estate market perfectly is extremely difficult, perhaps impossible, and some of these potential buyers were the same renters that were sitting on the fence when the market was down, even once we’d passed the nadir. I believe that buying a home is less about the market and more about life; your life. So don’t try to time the market, take a look at your life, the low interest rates and time that!
1.) Are you getting married, starting a family, or tired of paying skyrocketing rent without having an asset to show for it? Would you like to have more space; a backyard for the dog, the kids, the BBQs, or the tomatoes? Do you like the idea of being part of a neighborhood, community? Perhaps you got a nice raise, job or promotion and you’d like to set down roots, do you plan on staying in one place for at least five years? Do you like the idea of investing in something that will build long-term wealth?
These are the types of questions you should be asking when you are considering homeownership.
Here’s another thing to keep in mind. In the U.S., the average total net worth of rental households is $5,800. Compare that with the average net worth of a home-owning household at $199,500 and you’ve got worth 34 times more than those who rent! There’s no doubt that over the long term, homeownership is a solid way to build wealth and financial security. I often advise my first-time buyers to get into something affordable now (not so easy in Denver these days, but doable) and then move up when life allows. If you can keep that first property as a rental, it’s a great way to invest in your financial future.
2. Interest rates remain at record lows but this can’t last forever. No one knows when they’re going to rise, but news this week gave hints of a rise as early as June. Though home prices have gone up the past several years, low interest rates continue to make homes relatively affordable— especially compared to renting. Once interest rates rise, the door to home affordability will begin to close for a lot of potential buyers, leaving them sorry they didn’t act when interest rates were at 50-year lows.
Let me break down the numbers. Assume you are purchasing a $210,000 condo with a 5 percent down payment. The Principle + Interest payment at 4% interest would be $952 per month (tax and insurance and HOA not included). An interest rate increase of one percent (5%) would take your payment of $1,070 per month—an increase of $1,416 a year. Now assume that rates tick up to 6 percent. That increase would result in a 21 percent increase in payments from $952 to $1,196. Where you really see the effect of these increases is when you hold the property for the full 30 years. On a $210,000, 30-year fixed-rate mortgage that increases from 4 to 5 percent, the borrower who obtains the 5 percent loan would pay an additional $42,772 in extra interest as opposed to the borrower who paid just 4 percent interest. Though most buyers consider their monthly payment as most important, when you look at the life of the loan you’re paying a lot more in the total loan amount. This is a great reason to make a “move-up” move right now. Say you’ve outgrown your place, it may be time to cash out and get your “forever home”, or like I mentioned, use your current home as an income property and let your renters pay off your mortgage.
The main reason the average home owner has so much more personal wealth than the average renter is that homes appreciate in value. Over the past 45 years, homes in metro Denver appreciated 6.3 percent per year. If you buy a $200,000 home, you can expect over the long term its value to rise about 6 percent every year. This means you’d make $12,000 in appreciation the first year, an additional $12,720 the second year, another $13,483 in the third year, and on and on. Contrary to popular belief, only 4 of the past 45 years did prices actually fall in metro Denver.
If you’re still wondering whether you’d be better off renting or buying, Trulia built a great Rent-vs-Buy tool. Answer a few simple questions and the system tells you whether it makes more financial sense over the next seven years to rent or purchase. I think it’s worth a couple minutes of your time to see what you can learn – you’ll really like it!
Key Messages for May
Prices are up 8% in the prior 12 months vs historical 6%. Inventories are tighter than last year, especially for small, lower priced homes. In 2016, we expect 8-9% appreciation, flat unit sales volume increases, and continued tight inventories.
Everybody loves Zillow. I love Zillow. I love how excited it gets buyers and sellers when they see a home they love or what a neighbor’s house is selling for; a useful tool in many ways, for better or worse, it empowers the consumer. I look at Zillow to see what my clients/potential clients are taking as accurate information… and then I do my homework. The #Denver #realestate market is moving so quickly that even agents and appraisers can have a hard time keeping up. Public record algorithms don’t have the ability to distinguish the differences in the quality of one property from the other, upgrades, location, or if there’s a crack house next door. Algorithms don’t call other agents to inquire about that “Coming Soon” sign or have the latest data on solds as it takes some time to record.
The Los Angeles Times recently published an article that lays it out quite clearly. Though a “Zestimate” can have a low margin of error, it can also be alarmingly high. Imagine a scenario where you’re meeting with your perspective agent thinking that your home is worth 26% more than what it will really sell for.
Sellers, armed with the Internet, often have an idea in their heads about their home’s value. When I pull comparable properties, show them what the list vs sold prices are and how many days on market it’s taken those homes to sell, they may find a different story. Sometimes the news is good, based upon my data, their home may be worth more than they think. Other times it can be a let down.
Buyers burn the midnight oil searching Zillow then send me a link to their dream home. When I hit the MLS at 7 a.m. most often I find that this dream home is under contract… or sold three months ago. If you’re looking to buy a home, I’ll send you to REColorado, the consumer website linked to the Denver Matrix MLS I use so we can work together efficiently. It’s updated throughout the day, has great home search capabilities and saves me time looking for your real home, not the one someone’s already moving in to.
All this to point out that you now have access to a lot of information about my business. A lot of it is helpful and a whole lot of fun, but none is as accurate as hiring a professional; one who specializes in finding the right home in the right neighborhood that suits your needs. If you’d like an “Exact-i-mate” about what your home might sell for in today’s Denver market, give me a call I’d be glad to sit down with you and show you your market value and why.
Denver is a crazy-hot real estate market right now with low inventory and multiple offer situations, especially in desirable neighborhoods like Park Hill. Whether you are buying, selling or both, you’ll need to be very prepared and your first step is finding the right Realtor®. Listen to what the Bernuths have to say about their experience.
Jim and Mary Bernuth wanted to downsize from their beautiful Congress Park bungalow to something smaller but with the same charm.We looked at many homes but the heat turned up when their Congress Park beauty went under contract. Like most current sellers, they were nervous about finding the right replacement home and timing both transactions to make a seamless move. We found “The One” and quickly put in an offer… which was rejected. The sale of their home was complicated on the buyers’ side, adding to the stress. Thank you, Jim and Mary, for sharing how it turned out for you and why you recommend TracysDenverHomes for your real estate needs. Click here for more information on the current Denver market.
“How’s the Denver real estate market?” Being a Realtor© I’m asked question daily and plenty of things factor into the answer; Rising home prices, consumer demand, lack of inventory, new construction changing the face of our neighborhoods, not keeping up with housing demand, skyrocketing rents, the of effect gas and oil prices, interest rates, affordability index, rates of appreciation and what do I think is the next hot area? But the big idea is supply and demand.
The easiest way to bring all of this info into focus is by rolling out the charts and graphs. Take a look at the “Everything You’ve Wanted to Know About the DenverReal Estate Market” chart below and let’s see what it’s telling us.
See those two lines, the blue one and a yellow one? The yellow line is the number of homes for sale in metro Denver every month from January 2007 to December 2015. The blue line is the number of homes sold every month. Inventory peaked in July 2007 at 30,827 homes for sale. That was at the depth of our economic and housing downturn, when fear ruled our market, banks were being shut down, our local and national economies were in shambles, unemployment was rising, and consumer confidence plummeted. No one wanted to take the risk and buy a home. Reasonable doubt about the future took away our appetite for risk. On the seller side home owners were getting slapped with rising monthly mortgage payments as their Option ARM mortgages adjusted upward, sometimes forcing them to sell at the very worst time.
Supply and demand, baby; prices start to fall (2007 to 2009). Around 2010/2011 the market found some balance with 18,000 to 20,000 homes on the market but, like me in my yoga class, it didn’t stay balanced for long. Supply continued to fall… and you know what that means. Just like dating; it’s all about the inventory!
But let’s stop living in the past. In January 2016, there were 4,286 homes on the market! That’s nearly an all-time low for a January since records have been kept. For the past few years we’ve seen an incredibly strong real estate market in metro Denver as the supply of homes performs a vanishing act, putting the imbalance on the other foot. No three dimensional, super fancy, econometrics model can do a better job of explaining the imbalance in our market than this simple chart, but a 3-D printer might be fun.
I know, blah blah blah, Tracy, what about ME? To which I quip, that depends on what you’d like to do. If you own a home and are thinking of moving, it’s an off-the-hook seller’s market and you can expect to get top value for your home (more on pricing later). You’ll need to think about your next home too, and make sure you have planned the process correctly (this is where my mad skills come in) so the transition from your current to future home is seamless. If you’re buying, make sure you’re pre-approved with a strong lender and have a Realtor© who knows how to write a strong and winning offer. (insert mad skills)
So let’s say you’re renting, or one of those basement-dwelling millennials. With rents zooming to all-time highs, you might want to get out of the (basement) rental rat race and buy a home! You’ll need to cultivate patience and persistence but just in case you missed the earlier piece, the payoff can be YUGE! We expect prices to continue to move up for several years as the inventory balances with the demand, meaning you’ll gain appreciation in your home purchase for the next several years, longer if you stay. You could even turn that first home into a rental property!
There’s no better way to build wealth than owning rental properties for the long term. Home prices have risen, but so have rents, and interest rates remain at record lows. Smart investors don’t try to time the real estate market; it’s as difficult to do as timing the stock market. The vast majority of Americans who have built wealth as real estate investors have done it buying rental property and having their tenants pay it off for them over time. It’s not complicated and it works.
Of course, everyone’s situation is unique. If you want to talk about how best to take advantage of our real estate market and see what it can do for you please give me a call. I love talking about the real estate market!
Sellers and pricing Now that I’ve got you all pumped up on the Super-hero strength of our housing market, let me tell you another trend I’ve been seeing. Rising prices come as welcome news to sellers, but lately I’ve noticed that not every home sells in a weekend bidding war. Buyers are not stupid and overly ambitious pricing still means that homes languish on the market. Every day my inbox brings email announcements of price reductions after sellers and/or their agents over-shoot the mark. Call me and I’ll be happy to run a complimentary Comparative Market Analysis on your home to let you know what it’s really worth in today’s market. It’s always better to have an ‘exactament’ than a ‘zestimate’.
I hear the question “Is it still a good time to buy a house in Denver?” quite often, as potential home buyers wonder whether they’ve missed the market. My answer is that yes, it’s still a good time to buy a house in Denver, though it’s going to take resilience, and let me tell you why. Even though the dream of getting a screaming deal on a foreclosure got on the bus and left the depot, the strength of today’s market and home affordability show that buying a house in Denver is still a great idea.
It looked for a moment that the Denver Real Estate Market was slowing down toward the end of the summer and into fall, but what I’m seeing now, we still have a very strong market! Showing activity is high meaning that buyers are out there looking, and inventory as of January 1 was still very, very low at one month of inventory [meaning if no other homes came on the market it would only take a month to sell them ALL].
Buyers will need to be prepared to pull the trigger in this tight market; pre-qualified, well qualified and ready to present a strong offer to win in the ever-so-common bidding wars. This can mean a number of things I’d be glad to go over with you specifically. Many Buyers will conduct a home inspection solely for informational purposes without asking the Seller to repair or credit for inspection items. This relieves the Seller of the anxiety of a major or costly issue coming up and being asked to pay for it, and though the Buyer may feel similar anxiety over having to assume a house “AS-IS” they can, if done properly, still terminate the contract should the home prove unsatisfactory. Reasonable buyers, sellers and their agents would rather work out a fair negotiation than lose a good contract, even with this stipulation. Another strategy I’ve seen applied is for the buyer to offer to make up some or all of any difference between the contract purchase price and the appraised value of the home should it come in low. As bidding wars force prices up, last month’s comps may not provide the appraiser with enough information to value at contract price, or the home might have exceeded current market value. The market is moving so fast, many buyers would rather kick in some extra cash than go back out looking once they’ve found and been accepted on a home they love. Of course, you’ll have to have the cash to do this so a bit of planning might be in order if you decide to employ this.
The good news for you Buyers is that real estate still offers great wealth building potential. Using standard assumptions (5% annual appreciation), a home purchased today for $250,000 with a 10% down payment and a 4.5% interest rate can produce about $200,000 in equity in a decade! Those of you who are renting may want to think seriously about investing in yourselves. Even if you don’t have a full 10% for the down, there’s still $$$ to be made.
There are two myths in real estate that are not holding up in today’s Denver market. One is that real estate runs in seven year cycles; statistics show the last up-swing lasted for seventeen, plenty of time to build equity. The second myth is that condos are the last to rise in value and the first to tank. Right now we are seeing condominium values appreciating similarly to single homes. Overall home affordability remains attractive when you factor in interest rates, home prices and average rents (up 40% over the past five years). A very good time to buy, but before you do I advise investing in some good running shoes.
According to the latest monthly Case-Shiller Home Price Index, Denver-area home-resale prices rose an average 9.1 percent in March from a year earlier. Prices were up 1.4 percent from February, reaching an all-time high. One reason for this, as you may well know, is that our inventory is still incredibly low. Last spring, when the market suddenly turned, we thought this was a fluke but a year out, this seems to be the new norm. Click here to read more in the Denver Business Journal.
What does this mean for you? SELL! I have clients who made a move up during the leaner years and if they were able to hold on to their first property and buy their second, that’s what I’ve encouraged them to do. Rental income and market appreciation made this a wise move for many and now that equity is allowing them to sell at a tidy profit. I’m all for real estate investing and for having a buy and hold strategy in your portfolio, but you need to ask yourself if that is the best use of your money right now. Sometimes an investment has peaked and/or life has changed drastically, providing other options or shall we say ‘rearranging priorities’?
Buyers and sellers are often hesitant to sell for fear of finding a replacement home and though the market is swift like a snowmelt stream, I’ve yet to move one of my clients into a hotel or a shelter. All things are negotiable.
So if you’re looking, or thinking about looking., selling or wondering if selling is your best option, I’d love to sit down and have a conversation with you.
Denver real estate market is strong and hot like a cup of coffee. After years of waiting for home prices to rise, the Denver real estate market is elevated. So why are buyers and sellers so hesitant to make their move? Let’s blame it on the media. Screaming headlines make money when the sky is falling.
For those of you who are considering buying or selling a property, understanding the big picture is critical. So let’s take a look at where in the real estate cycle the Denver market stands.
You may think this tremendous seller’s market and super tight inventory is something new, something that’s going to come to a head and suddenly erupt overnight. Not true. We are FOUR YEARS PAST THE BOTTOM of our last real estate cycle. This is a logical continuation of a market that is reacting strongly to the overselling we saw between 2007 and 2009, and finally bottomed out in 2009. It’s doing exactly what real estate market cycles do, go up and go down over long periods of time. Remember, over the past 40 years residential real estate appreciation has averaged 6 percent per year and there is no reason to think that is going to change over the next 40 years.
If you think of market cycles in the short-term, spiking and crashing over short periods of time it’s easy to see the sweet meteor of death hurling toward your swing set, but a quick look at the last market cycle shows clearly this is not how real estate works. Real estate cycles over the past 40 years, tend to move in much broader periods, 7-10 years typically. This is why predicting short-term market movements can be very difficult, whereas assuming the market will move in 7-10 cycles is a bit more realistic.
The past four years of the upswing has been largely a sellers’ market. Plummeting inventory, rising prices, nervous buyers often involved in multiple offers, and happy sellers often getting the price they wanted. Buyers can be very nervous, reading news articles, watching TV reports, and figuring the market is teetering on the brink of a crash and being afraid to buy. Rents are skyrocketing, up 8 percent this year alone and renters may confuse the short-term media screeds about this tremendous market with the long-term patterns of market cycles, thinking that the minute they buy a home the market is going to crash.
I don’t see this. And unlike my clients who may buy or sell a home ever 5-10 years, I work in real estate every day. No one can predict the real estate market with 100% accuracy. I can’t, the Federal Reserve can’t, the banks with all the money can’t, no one can. But, understanding how market cycles work, and recognizing how low our current inventory is, I can say with confidence I do not see any impending weakness in the market over the next couple of years. We are four years into what will probably be a typical 7-10 year cycle of low inventory and rising prices. I can’t tell you what the Dow Jones will finish at next Monday. I can’t tell you if the Rockies will win their fifth game of the season. I can’t tell you what the weather will be on June 15th, but I can say with confidence that real estate tends to move over predictable long-term trends, and this market cycle has a long way to go.
The National Association of Realtors just wrapped up their 2013 Conference & Expo. Chief economist for the organization, Lawrence Yun offered his insight on what to expect for the 2014 housing market: steadiness in existing-home sales over the next year as prices continue to ascend.
Based on what has happened in 2013, Yun says he expects existing-home sales to be up about 10 percent in 2013 to 5.13 million and that 2014 will hold fairly even at about 5.12 million.
We in the Denver housing market, predict continued growth in the number of homes sold, with the accelerated appreciation of 2013 to level out in ’14 to around 4 percent.
National median existing-home prices should end this year about 11% higher than 2012, while next year’s growth is expected to nearly half of that. Those who’ve been following the return of the housing market know that the past two years have shown a 20% cumulative increase in existing-home sales with prices rising an average of 18%. Incomes have not kept pace, rising between 2-4% in the same period.
“We’ve come off of record high housing affordability conditions in the past year, and are now at a five-year low, but conditions are still the fifth best in the past 40 years,” Yun said, noting that the median-income family should still be “well-positioned” to buy a home in 2014 in many areas.
Affordability, limited inventory (especially in metro Denver), stringent mortgage standards and rising interest rates will all factor into the expected gains over the coming year. Housing starts are predicted to fall short of the underlying demand, while sales of new homes are expected to total 429,000 in 2013 and 508,000 next year.
Based on Lawrence Yun’s forecasts,the top 10 markets to watch for a housing turn around in 2014 are Salt Lake City, Utah; Naples and Tampa, Florida; Atlanta, Georgia; Boise, Idaho; Houston, Texas; Charlotte, North Carolina; Denver, Colorado; Seattle, Washington; and Tucson, Arizona.