Innovative Colorado Real Estate

We hosted a First Time Homebuyer seminar last week and the majority of our audience was primarily interested in the First Time Homebuyer Tax Credit of $8,000. I can’t say I blame them either. After all, $8,000 is real money and not just for first timers. Without getting too political I think it is safe to say that most people agree that government stimulus is getting mixed reviews – some of it is working and some of it, well, not so much. Listen up Congress: This $8,000 tax credit is something that is working and needs to get extended. Now, most people agree that will happen, but when will it happen is the question.

Mr. Congressman – This Is Not Cash for Clunkers
So the feds decided to keep Cash for Clunkers alive, which may or may not have been a good thing, but they waited until the last minute. We can’t afford to wait for the government to extend the homebuyer credit. Here is how it breaks down. If you don’t have a property under contract by early October, you are risking you won’t be able to close by November 30th and claim your tax credit. And, if you want to consider buying a short sale (they are hard to avoid) then forget about it unless you are under contract already. It would be a shame to see qualified homebuyers sitting on the sidelines because they don’t know if they will get their tax credit. What can we do? Write your congressman and tell them to act now to extend the tax credit! While you’re at it, ask that the new tax credit be increased to $15,000 and be available to everyone, not just first time homebuyers. Its worth a try.

Interest Rates and Affordability
The real crime is that homebuyers may be sitting on the sidelines and it is the perfect time to buy a home (in most markets). Interest rates are at historical lows and property is affordable again. In fact, the National Association of Realtors released their latest “Affordability Index” this morning, which is at 158.5 for July – a huge indication of how great this buyer’s market is. Basically, an index of 100 means that a family with the median income makes enough money to qualify for the median priced home. So, an index of 158.5 means that same family has 158.5% of the income necessary to qualify for that median priced home. I would argue that even without the home buyer tax credit, this is still a great time to buy. You should still write your congressman though ;0)

When it comes to housing news, we seem to be on a roller coaster ride driven by a variety of contributors, including global banks, big city newspapers and blogging real estate professionals. What does it all mean to you? What is happening in the overall market is not as important as what is happening in your household. Here’s some recent news and what it may mean to you…

Underwater?

If you owe more money on your home than it is worth, you are considered underwater. Deutsche Bank released a report this week that estimates as many as 48% of homeowners with mortgages will be underwater by the first quarter of 2011. Depending on where you live and your particular situation you may already be underwater, but that is not necessarily a reason to panic. If you live in one of the “recovering” markets like we have here in Denver, then things are looking up. Median prices here are higher than they were a year ago and activity in the lower price ranges is strong.

If you like where you live and you can afford your payment, then your best bet is probably to sit tight and wait it out. If you can refinance, talk to a mortgage professional right away because rates will go up eventually, just like housing values.

If you would like to move and take advantage of the buyer’s market, don’t let your current home value keep you from investigating this opportunity. Sometimes it is better to “take a hit” or go to the closing table with a check than to miss out on buying the home you really want to be in.

If you are struggling to make your payment, are worried about foreclosure and you have a legitimate hardship, then you may want to consider a short sale. Many banks will try to offer you a loan modification first, but be careful since entering a “loan mod” program may delay your ability to short sale if you need to. Selling your home short is often the best way to avoid foreclosure and will put you in a position to buy another home in a much shorter period of time. If you decide to go the short sale route, make sure you work with a real estate broker who is a short sale specialist (like us). These are difficult transactions and require professional expertise and full-time attention to the details.

Where is the bottom?

The New York time recently reported this: “Home building and home prices, which have fallen for almost 3 years, appear to have almost no place to go but up.” Now, it really depends on what part of the county you live in whether you believe this or not, but for the most part this is probably a true statement. Once again, here in Denver, we are fortunate to be in the beginning stages of a recovery and our value are going up.

If you’re a seller, depending on your price range, this doesn’t mean you’ll be able to sell your home. For example, we have over 7 years of inventory in SE Denver over $1,000,000. Even if prices stabilize at this price level, it will be a long time before those inventories come down. So, if you are considering selling, refer to the Underwater section above.

If you’re a buyer, then what are you waiting for? Even if we are not at a bottom, if you wait for it to go down further then chances are you’ll miss it. And, with historically low interest rates and first-time homebuyer incentives, this is the perfect storm. The saying is “buy low, sell high”, not “buy at the bottom, sell at the top”. If you know how to do the latter, can we get together for lunch sometime?

Unemployment and Housing

Now this is news that is really promising. Today the Labor Department released better than expected employment news with job losses slowing and an actual drop in the unemployment rate. It was only a one tenth of one percent improvement (9.5% to 9.4%), but still better than expected. And, despite the White House stating that we can still expect 10% unemployment, the stock market rallied and as I type this blog the DOW is up 160 points. The bad news is that interest rates are up too, but you can’t have it all. And, if you were waiting for rates to go below 5% again, then you probably don’t understand how lucky we are to have rates under 7%.

The bottom line is that unemployment is the biggest problem for the housing market. If people don’t have jobs, they can’t qualify for loans and buy homes, keeping demand flat. So, if we are truly seeing the end of rising unemployment, then here comes the rebound and if you’re on the sidelines you’re going to miss it!