“Tracy Shaffer was such a pleasure to work with. I am a young, single professional, so wading into these rough real estate waters by myself was ulcer inducing. Tracy told me that she was here to balance me out. A real estate decision is both a strongly personal and a strongly financial decision, and that if I tip one way too much, she would make sure I was also incorporating the other side. She didn’t want me to fall in love with a home I couldn’t afford or buy a home that I didn’t love simply because it was affordable. Tracy helped me find a property that got me both, a beautiful duplex in Whittier that fits me to a T and will be a great investment. She was not afraid to give me hard truths, but was also supportive and informative through all of my first-time home buyer questions. We closed on the house on a relatively quick timeline, and Tracy was able to keep the myriad of pieces on track to hit our closing day with only smiles and handshakes all around. I highly recommend working with Tracy.” – M.E. Smith
The last seven years have seen a surge in the metro Denver real estate market as record numbers of buyers look for homes, which in turn has caused prices to jump. The strength in the market has been so pronounced that people are beginning to ask “Are we in another bubble?” It’s a reasonable question given the horrendous experience of the housing crisis, and while no one can ever predict the future with certainty, I see no evidence that we’re heading for a dramatic downturn in the real estate market any time soon. Here’s why:
1. Even with the continued increase in metro Denver home prices (up another 8 percent in the past 12 months) the average inflation adjusted PITI (Principle, Interest, Taxes, and Insurance) payment made in metro Denver is actually BELOW our 35-year average. This means that while prices have steadily risen, buyers are still able to afford their monthly payments, providing plenty of room for continued home price increases.
2. The number of transactions relative to the population of metro Denver is just about at the 25-year average. At the peak of the bubble in 2006 the number of home sales was about 20 percent above the historical average. When we see the number of closed transactions well above our historical average that’s an indication of an overheated market, as it was in 2006. The number of closed home sales is actually DOWN 12 percent in the past year due to the low inventory. No sign of a bubble here.
3. In 2006, many of the deals were closed with low or no documentation mortgages (“liar loans” or “no doc loans”). Today, mortgage underwriting standards are among the toughest they’ve been in decades. This prevents unqualified buyers from purchasing property, which mitigates the chance of the market overheating (fewer buyers means fewer purchases means less chance of the market frothing into bubble territory like it did in the past).
4. Because of relatively high home affordability it’s a lot cheaper to buy than rent in our market. This would not be true in a bubble. For housing price affordability to return to the average level that we saw in the years between 2000 and 2004 either home prices would have to increase an additional 35 percent or interest rates rise to 6.6 percent. Neither is going to happen any time soon.
5. The imbalance between buyers and sellers we’ve seen recently in our housing market (too many buyers/not enough homes for sale) is due to a lack of inventory, not illogical/unrealistic/unsustainable demand from buyers. “Much of the price increases we are seeing are the result of rising demand among investors and homebuyers for a still-limited supply of homes for sale,” said Anand Nallathambi, president and CEO of CoreLogic. This imbalance is a logical correction from years past when we had too FEW buyers in the market. This is how markets are supposed to work, always regressing to the mean over time.
6. Rising mortgage rates will help to temper the possibility of a bubble as well (they are still near 50-year lows but are expected to rise someday). “History shows that a rapid rise in interest rates tends to have little correlation with home prices. Rather, rising rates are more likely to contribute to a decrease in home purchase volume,” wrote Mark Palim in a Fannie Mae commentary. So the positive side of a rise in mortgage rates is that it will reduce the number of buyers and therefore lower the chance the market will rise out of control and end up collapsing in a bubble.
Click on the monthly market snapshot, the inventory of metro Denver homes for sale continues to fall; it’s down another 5 percent from a year ago. Since the inventory is still extremely low (about 5,520 homes on the market where about 18,000 is a balanced market) I am all but certain the demand will still exceed the supply for the next several years and prices will continue to rise for the foreseeable future. No bubble on the horizon yet… Stay tuned!
If you agree that we’re not headed for a bubble any time soon what does this mean for you as a buyer? I think it means you should consider buying a home IF it makes sense for you to do so. Are you running out of room at home? Expecting a baby? Have an awful commute? Want to live in a nicer neighborhood? Looking for a better school district for the kids? There are a lot of great reasons to move. But don’t buy a home to speculate on the market; buy because it’s time for a new home. Call me anytime to discuss what your options are and how I can help you find a wonderful place to live.
We have been discussing the incredible strength in our housing market. If you’re looking to sell your home this should be very welcoming news! The inventory of homes on the market is at an all-time low and prices are up. Call me and I’ll be happy to run a complimentary Comparative Market Analysis on your home to let you know what it might be worth. It’s great information and costs you nothing.
The most recent “Metro Denver Area Residential Rent and Vacancy Survey” shows the great news continues for landlords. According to the report:
“The overall vacancy rate for the metro area for the fourth quarter of 2015 was 3.1 compared to 3.9 percent for the previous quarter, and 1.5 percent for the fourth quarter of 2014. It was 2.0 percent in the fourth quarter of 2013, 1.7 percent for the fourth quarter of 2012, 2.1 percent for the fourth quarter of 2011, 2.0 for the fourth quarter of 2010, 5.5 for the fourth quarter of 2009, and 4.9 percent for the fourth quarter of 2008.”
In the U.S., more millionaires owe their wealth to real estate investments than any other single source of income. Today’s market could not be better for long-term buy –and-hold investors. Call me to find out more.
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.
“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’.
As the clock ticks toward year’s end, it’s time to review the 2015 real estate market.
When someone asks me how the real estate market is, the cocktail party answer is that it’s been a very pleasing 12 months and future looks bright and shiny. Because the economic news is good our Denver Metro real estate market is projected to stay strong but not overheat. I’ll share some of the metrics I use to evaluate the market and understand it better, describing what 2015 looked like and where I think we’re headed.
Market strength–2015 was an extremely strong seller’s market. The market strength peaked in the spring when the bottom dropped out of our inventory and multiple offers were all the rage. Frustrating for buyers who felt they had to give away so much to stay competitive, the good news is that the market reacted appropriately and became more balanced as the year progressed. With prices on the rise, sellers were motivated to sell as we approached the fall so the market cooled with the start of school and the weather. It is still a strong seller’s market, but far more in balance. I expect 2016 to continue along this line and see no sign of a major imbalance that could lead to any sort of ugly peak and crash. Sellers should get a good price for their homes and replacement properties should not be as hard to find.
Buyers– Real estate website Trulia says that buying an average home in Denver is a whopping 38 percent cheaper than renting a home! For the average home, the interest rate would have to skyrocket to 11 percent for renting to become cheaper than buying, meaning that it is currently MUCH more affordable to buy than to rent. Even with current prices and current rents, interest rates would have to nearly triple to make renting more affordable than owning. (Call me if you want to talk about this.)
Sellers-Can’t say this enough: the most important thing to prepare your home for sale is to get rid of clutter. This includes furniture. You may have learned to live with that cherished armchair stuffed into the corner but a professional stager will often times whisk away half of your furniture. The house looks so much bigger for it, leaving space for a buyer couple and their agent to tour the home without bumping into each other, and space for their imaginations to make it their own. You don’t have to go “Stager drastic” but take a hard look, be objective, and see what you can live without. Painting always pays for itself and statistics show that springing for a staging company is often a good investment.
Rental Vacancies– The rental market is stronger than it has ever been in metro Denver. The vacancy rate for 1- to 4-unit properties is an extremely low 2 percent. That’s a drop from the already 4.7% we’d been experiencing for the past few years. On top of this, rents are rising faster than ever, up 30% in the past three years. With rents equaling a mortgage payment, we’re seeing more renters making the decision to buy. Why live waiting for another rent increase, tough competition and another application process without building any equity? Many homeowners who lost their homes in the downturn and have been renting, are becoming eligible to purchase once again. This is great news for the market and will certainly lead to more sales in 2016, though the influx of buyers insures a continuing seller’s market.
Interest rates– No one knows exactly what interest rates will do in the future but my best guess is that they may rise a little in 2016, but only a little. Remember that the Federal Reserve has control over only short-term, not long-term interest rates. Even if the Fed raises rates, that doesn’t directly affect the 30-year home buyer interest rate you are concerned with. Long-term interest rates are affected by the bond market (as bond prices decrease, interest rates increase) which, frankly, is not predictable. Understand though that interest rates are at near 50-year lows so they are highly unlikely to fall any further. All we know for sure is that someday they will go up.
The Economy– No matter what you may hear in the months leading up to the election (places hands over ears), right now the metro Denver economy is very strong. This is fueling our terrific real estate market and the rising population of our city. The unemployment rate is extremely low, about 3.5 percent. Inflation will stay in the range of 1-2 percent, our population is rising at a rate of 50,000 people/year and consumer confidence continues to rise. Nothing can be better for the housing market than a strong and steady economy.
Mortgage -The single most important number for a home buyer is their FICO score. For good or bad, your FICO plays a major role in your ability to finance your home purchase. Your credit score is a snapshot taken by the three leading credit bureaus, TransUnion, Equifax and Experian, to help lenders determine what sort of credit risk you are. Your FICO is a number between 300 and 850 and is calculated by a complex algorithm assessing your past credit history. Most home lenders will consider a score over 700 to be excellent while scores below 600 are considered poor. The better the score the more credit will be extended, at better terms, with a lower interest rate. The best credit terms are extended to consumers with scores above 740. Therefore, it’s critical to understand what your FICO is and what you can do to improve your score. When I work with buyers I help them understand the factors affecting their score so they can work to improve them. I can’t think of a better investment in your future than to spend a little time working on your FICO score.
Here are a few tips I give my clients:
1.Don’t max out your cards, try to keep them under 50% of available credit. Running high balances can severely impact your FICO.
2.Continue paying your bills on time.
3.Don’t apply for new credit or cancel an old card because length of credit helps.
4.Pay down high balances.
5.Dispute and resolve any inaccurate items in your credit report.
6.Invest in a credit monitoring company to track the changes to your score.
From Page 4
4. The Investor Real Estate Market: Denver is still a great place to invest in real estate. The fix and flip market is strong for those who can find underpriced homes to buy and repair. They’re out there but it takes tools, patience, and work to find them. Once you get one fixed up, selling is the easy part because of the lack of competing inventory. The buy and hold market will continue to be extremely profitable for long-term investors. Interest rates and vacancy rates are still near record lows and rents continue to rise – a record 10.8 percent per year the past three years. It’s not difficult to buy a rental property in today’s environment and put it on the path to be paid off in 12-15 years. Just think how your life would change if you owned a couple of rental properties free and clear! For building long-term wealth it’s tough to compete with rental property ownership. That’s the one thing that will never change. CLICK ON MAP TO ENLARGE
Need more info? Boy you are a real estate geek! (and I love it) CLICK LINK for the metrics from Matrix. 15-0705 DSF Data CITY – Copy
If you would like a personal real estate consultation, have any questions about the market, your home’s value or need more specific information about your neighborhood please give me a call.
Until next month… use your sunscreen!
Five Essential Things You Need To Know About the 2015 Summer Home Buying Market
This year has kicked off with an array of experts trumpeting the Denver housing market’s strength and resilience. Inventory is at record lows, home prices continue to rise, and foreclosure activity has ebbed to lows not seen since before the 2007 downturn. Spring and summer is the time for selling houses. The months of April, May, June, and July typically account for more than 40 percent of all housing transactions annually, thanks in large part to good weather.
1.Inventory shortages: “The story of the day is on the inventory front,” stresses Lawrence Yun, chief economist of the National Association of Realtors (NAR). It’s a sentiment echoed by many. The number of available homes in metro Denver has plunged to a record low, thanks to both an abnormally small supply of existing homes for sale and a dearth of new construction not keeping pace with the current demand.
2. Increased Competition: In addition to a dwindling supply of available homes, the number of buyers has surged. And not just traditional buyers – investors have comprised a sizeable chunk of the buyer pool since the downturn and continue to do so. Real estate investors are responsible for about 25 percent of the existing home sales each month. You, the prospective buyer, need to be prepared to move fast if you find a property you’d like to buy. “Buyers need to be patient because many will be outbid by others and might have to bid on multiple homes,” cautions Jed Kolko, chief economist of Trulia. Yes, indeed.
3.Cash is Still King: Given the steep competition, all-cash buyers who can close a deal relatively quickly offer great incentive to sellers. “Cash will still be king if there are multiple bids because from a seller’s view, they want a deal with fewer hiccups, “says Yun. My sellers are surprised to hear that about 30 percent of home sales each month are all-cash purchases.
4.The Good News: Lending Tree chief executive Doug Leboda says in light of the recently unveiled new home-lending standards, lenders are slowly starting to make it slightly easier to get approved. Talk to a couple of lenders, they’ll tell you things have improved over the past few years on the loan front.
5.More Good News: We are seeing a definite correction in the appraisal business. A few years ago appraisers were consistently under-valuing properties, reacting to the over-conservative nature of their shell-shocked underwriter patrons. Today we are seeing the vast majority of appraisals coming in at value, killing far fewer deals than in the past.
Buyers– If you’ve been considering buying a home it’s critical to understand the amazing tax benefits you’ll enjoy. Talk to your CPA to get professional advice, but here’s a brief look at some of the tax benefits of home ownership:
1.The Purchase. The IRS says that in most cases loan discount points and origination fees are tax deductible to the buyer, regardless of who pays them.
2.Mortgage Interest. In general, you can deduct interest charged on a loan used to acquire or improve your principal residence in the year that it is paid. In the early years of a loan, most of your monthly payment is interest, so this can really add up. If you are in a 28 percent federal tax bracket, this can have the effect of lowering your borrowing costs by almost a third.
3.The Sale. If you have owned and occupied your principal residence for at least two of the past five years, you can earn up to $500,000 on the sale of that house and pay no federal income tax whatsoever. That’s assuming you are married – singles get up to $250,000 tax free. You can do this as often as every two years for the rest of your life with no limit on the number of times you do it! The one restriction is that you MUST own and occupy the house as your principal residence.
Sellers– Month after month in this newsletter we have discussed the incredible strength in our housing market. If you’re looking to sell your home this should be very welcome news! The inventory of homes on the market is at an all-time low and prices continue to climb. Call me and I’ll be happy to run a complimentary Comparative Market Analysis on your home to let you know what it might be worth. It’s great information and costs you nothing.
Investors -For years our clients have been buying rental properties in metro Denver to build their long-term wealth. Our record low vacancy rate is a big driver of why rental property has performed so well. First, the lower the vacancy rate the higher the demand for the property. More demand means landlords can be more selective with prospective tenants and can also charge higher rents. Rents have skyrocketed the past few years because the vacancy rates have remained so low. One of the reasons vacancy rates are so low is that many people still cannot qualify for a loan. I don’t expect this to change in the foreseeable future. We’ve had a huge shakeout in the lending industry and lending guidelines are still much stricter than they were a few years ago. Until lending standards ease up more I expect vacancy rates to remain low and keep my investor clients happy. If you’ve ever thought of investing in a condo or house as a rental property call me and I can show you what the numbers look like and what options you might have. Graphic Mortgage The mortgage market continues to remain strong with historically low interest rates. Low rates combined with low home inventory are making this a great time to sell your home and move up to a larger home with the same or lower monthly payment. We have several recent examples of clients selling their current homes and purchasing new ones costing $40,000 – $50,000 more with the exact same monthly payment. Drop me a line and I’ll do a free analysis to see if this might be a good scenario for you to take advantage of!
I object! Often the process of buying or selling a home is so emotional, so stressful, that our every fear is stirred up. That’s why when buying or selling a home, the home inspection is critical. Your home inspection can put you at ease, whether you are purchasing a home you want to feel good about or selling a home you want to feel is safe for the new owner. The home inspection and the resulting INSPECTION OBJECTION and RESOLUTION can be fine points of the negotiation. Of course, the sellers don’t want to reduce their proceeds and the buyers don’t want to take on the extra expense of repairs. So, where’s the middle ground?
Let’s start with a few basic questions and let the answers guide us to our home inspection answers.
To the Sellers:
1. How motivated are you to sell your home at this time, with these buyers, under the terms of the contract?
2. What is your goal in selling your house? And what effect does this sale have on your life right now? On your future?
3. If I could tell you that the goal you want in question #2 would cost you X amount of dollars, would that seem like a fair price?
4. Is the cost of the repair(s) more or less than the cost of another month, maybe two, of your mortgage payment?
To the Buyers:
1. How would you feel if you let this house go?
2. Are the repairs immediate or can they be reasonably deferred?
3. How many things are you asking the Sellers to repair or credit for? I mean, it’s one thing to ask them to replace the faulty old Zinsco electrical panel or install radon mitigation, quite another to ask for a cracked plastic outlet cover to be changed.
4. Do you feel you are safe in the house without the repairs?
It’s that last question that is the most important. Are the requested repairs, replacements or credit for such, necessary to provide or protect the health and safety of the home buyer? This is where I draw the line. If the home inspection reveals something that would cause any reasonable buyer to feel unsafe they might need to walk away from the transaction. Even if you, Mr. and Mrs. Seller have lived with it for 20 years and nothing has happened, you might as well buck up and agree to make the repairs. You’ll have to disclose the issue to the next buyer if you lose this contract now that you know about it, so the problem isn’t going away.
If the buyers have reasonable expectations of the home’s condition based on its age and understand the responsibilities of home ownership, then health & safety should be your guide. That “honey-do list” the Inspector gave you? That would be yours, not the sellers, but those hot wires or the recalled electrical panel? Definitely calls for the experts. When both parties move away from all emotional or economic considerations and apply fair and equitable logic, the questions answer themselves. Logic, who knew?
Now… back to my clients and that electrical panel.
I fell in love with this cute little brick ranch home in Denver’s Montclair neighborhood the moment I opened the door! There was a sign in the yard, FOR SALE BY OWNER but I just knew I had to list it! The front of this brick ranch home is sweetly elegant. There are three bedrooms/ two baths, beautiful hardwood floors, a very charming vintage full bath upstairs and a bright white kitchen.Your kitchen window overlooks Kittredge Park so you’ll always have the feeling of open space and natural light streaming through your windows. The basement is fully finished and has a non-conforming bedroom, nice sized great room and nifty little space for an office, study or guest room (I love the custom built-in bookshelves!). The back yard is private and just the right amount of space; not too much to keep up, but plenty of room for the gardener, the dog, or both. Enjoy a summer party under the covered patio and give me a call when you do! Did I mention the giant garage? Well it has a really nice, big garage. Click the link above to see the video and call me if you’d like to see it. Or just call and say hello!
Mid-Century Modern homes are a hot commodity in Denver. Many of them have been remodeled through the decades, often by owners who didn’t realize that what felt outdated would eventually hold the home’s value. This beautiful Mid-Century ranch home has been restored with respect for the flair and detail of 1960 without being kitchy or “retro”. Sleek lines and a serene palette make it feel young again. Situated on a hill with mountain views, this 4 bed/2 bath home is a short walk or roll to Trader Joe’s, Streets of Southglenn, Goodson Rec Center and open space. Come on by.