It’s a New Year…But Is It a New Housing Market?
We’ve all been reading the conflicting headlines. Some say 2010 will have its challenges. Others say 2010 will be the start of good things to come. But what’s the truth? How can we read through the pessimism and for that matter, the rose colored glasses, to determine what is the truth?
Well, as we all know, only time will truly tell.
But in this forum, I have the ability to offer my insight and share what I believe the coming year will bring. Together, we’ll weed through the headlines and I’ll offer my honest, unbiased opinion. And a year from now, we’ll look back on this edition of Weekly Market Watch to determine if my hunch was correct or if I should’ve kept my opinions with the rest of the weeds.
• Overall. I think 2010 will be the year we begin to build a foundation. Many experts are predicting that the recession is nearly complete, if it isn’t already as measured by a decline in negative growth. But the recovery is going to depend on stimulus spending and doing more to facilitate job growth. As Leslie Appleton Young said, “If we don’t create more direct policies to get people back to work, this could go on much long.”
• Let’s start with foreclosures. No, I don’t think we’re out of the woods yet. I think we have a lot of work ahead of us and much of that has to do with the state of the overall economy. Unemployment is still high and while I think we’re better, we’re not healed. The latest U.S. Bureau of Unemployment Figures show that unemployment rates were higher in November 2009 than for the same period in 2008 in all 372 metropolitan areas. What happens when people lose their jobs? They typically aren’t able to pay their mortgages. There are also many people out there with adjustable rate mortgages that just haven’t yet adjusted. If the government doesn’t step in and those mortgages adjust, many people will find themselves in a short sale or foreclosure situation. Fortunately the good news is that the government is putting more pressure on the banks to work with homeowners and my hope is that if that, combined with the government’s own work to help homeowners in trouble, I think we’re on a better path with these foreclosures than we were a year ago.
• Interest rates. There are a lot of schools of thoughts with relation to the future of interest rates. I tend to agree with many economists who believe that last year’s record low interest rates, where some were able to secure a 30 year fixed rate mortgage for under 5%, may be a thing of the past. Do I see them taking a surge in 2010? No, probably not. CNBC Reporter Diana Olick wrote, “Unless the government decides to extend its Fannie-Freddie purchase program or do something else to juice the credit markets, mortgage rates will rise steadily, probably leveling off somewhere around six percent” and I tend to agree with that philosophy. Still a good place to be. But having said that, I encourage you to review my February 2009 Reality Check piece in which I shared how increases in purchasing power can affect a buyer’s purchasing power. I have updated it with the latest numbers and if you are considering buying, you may want to consider doing so before interest rates start making their way up. Even a small hike in rates can dramatically affect your purchasing power.
• The hottest market? The entry level market is by and large the hottest segment of the housing market right now and in all honesty, probably will continue to be in 2010. But, it was also the first to experience the downturn so it is certainly easy to suspect that it would be the first to recover. What we know about the entry level market is this:
o Homes saw a great deal of depreciation in this market
o This market was most affected by foreclosures and short sales
o Affordability is especially high in this market
o The inventory is low in the entry level market in many areas
I don’t see much of this changing in 2010.
I do see a trickle affect coming from the entry level market into the move-up market. Many homeowners are looking to take advantage of the $6,500 existing homeowner tax credit as well as the opportunity to cash in on a buyer’s market in the entry level and a seller’s market in the move-up region. It really is a perfect storm for this group and I hope more move-up buyers will consider that. Fortunately, we have our Move-Up Marketer program which helps to educate move-up buyers about the opportunities in today’s market.
The luxury market is a very different market indeed. It was the last to be affected by the market changes and in all likelihood it will be the last to recover. Having said that, there are some very interesting pockets of success. It really depends on the house, the neighborhood and the overall demand for that market. We’ve seen instances where a million dollar home comes on the market only to be snatched up within a few days. Then, others, just sit. It really comes down to what the market will bear.
In the end, regardless of what the market may or may not be in the coming year, the bottom line is, it may be a really great time to buy. Attractive interest rates. Increased affordability. Tax credits. Higher inventories in some market. In many instances, there hasn’t been a better opportunity to buy in decades. Please don’t lose sight of that. If you are in a position to buy and are considering do so, please do explore your options. I believe 2010 will be a year of building a solid foundation on which to build. Don’t wait until it is too late.
Sorry to be so long-winded but I wanted to give you a really good glimpse at the coming year. Now, let’s take a look at this week in real estate:
Boulder/Longmont—Boulder reported, as one might expect, Christmas week put a huge dent in all numbers. Over the past two weeks we see that new listings are down 62%, sales are down 46% and showings are down 52%. Here's to 2010!!Longmont reported 2010 is going to be a good year for buyers. The tax credits are too good to ignore so now is the time to act. Short sales are still a large part of our business. They are time consuming and frustrating but they can be a good value. They are also impacting appraisals in certain neighborhoods. Higher priced properties are still long "days on market.” If you want or need to buy a home this is one of the best times. Interest rates are low, prices are low and motivated sellers are ready to negotiate and the tax credit not to be missed.
Evergreen/Conifer—Evergreen reported we had a total of one new listing for the week & four listings that went under contract including two parcels of lands. We had a total of 23 showings during the week. Activity is down due to normal seasonal activity however most agents are reporting that both buyers and sellers will resume activity after the year end holidays are over. Listings are expected to come back on the market beginning mid-January for the spring selling season. Conifer reported there were no new listings taken during the reporting period. One of our listings went under contract. The number of showings is declining due to seasonal trends but is expected to return to normal levels beginning in mid-January. Property values have not recovered along the 285 corridor and large numbers of bank REOs and short sales remain on the market.
Denver Central – With the extension of the tax credit to 2010 there has been an increase in first time buyers looking for property to take advantage of the $8000 credit. We've also had several existing homeowners contact us for information on the $6500 tax credit. We continue to see inventory shortages in the Denver market which has created multiple offer situations in the lower end market. The inventory is substantially lower than it's highpoint in 2007. Over 50% of the home sales in the Denver metro area are under $250,000. If you're looking to sell a home that is priced under $300,00 this is a great time to sell. This is definitely the perfect market to move up to a higher priced home. Your financial gain in getting a higher priced property for less should be a big reason to make a move now & take advantage of the slower high-end market. Overall we are very encouraged and excited about the future of real estate in 2010.
Devonshire—No information reported.
Douglas County— Showings were down in December and this is the norm during the last two weeks of the year. We have several agents very excited about the new year as they have several clients ready to list their homes as well as buyers ready to move forward in their quest for a new home. Sellers & buyers are feeling confident that this is the time to either list their home or buy. Several of our agents have received a number of phone calls regarding the tax breaks & activity is picking up. With numerous buyers ready to purchase, we feel there will be great activity at our upcoming open houses.
El Paso County— Colorado Springs reports the Springs saw a dramatic drop in activity the week of Christmas but it seems to be ramping up once again. We've seen an increase in showings and hopefully that will lead to an increase in listing/sales activity this coming week. Military relocation referrals have been steady the last two weeks but are still less than we have been seeing on a weekly basis. With the new year upon us, we're ramping up for an increase in sales over 2009.
Larimer County— It's pretty slow going out there right now and we've seen a decrease in activity in both contracts and new listings. Though there was a slight bump in listings just after the first of January as sellers decided to put their homes on the market in the new year. Our agents are out showing properties and we're seeing new interest due to the extension of the tax credit. Our median single family home sales price is right around $220,000 & our median attached dwelling sales price is right around $145,000. Decent inventory & historically low interest rates should give current home owners or buyers a great chance to move-up or purchase their first home.
North Metro— No information reported.
Parker— This was an interesting and challenging year for real estate. The buyers were still out there, just a little more savvy and cautious. The homes in the Parker area continued to sell and the homes that were priced correctly sold quickly, sometimes with multiple offers netting higher than asking price. 2010 should produce the same type of activity and even more buyers due to the extension of the tax credit. Parker & the surrounding area will continue to be desirable for relocation with the numbers of jobs projected to increase in the southern areas of metro Denver. The number of foreclosed homes coming on the market will directly impact prices & length of time on the market so sellers will need to stay aggressive in order to sell their homes.
Southeast Metro— Welsome to 2010! We're off to a fabulous start at the SE Metro office. A record 72 showings were set the day after New Year's Day! Inventory continues to decrease & buyer traffic is on the rise. A record number of homes sold in December and we are confident & optimistic about the 1st quarter of the year. We're very excited about the merger of Century 21 Advantage Plus agents to our team. Here's to an exciting & prosperous 2010!
West Lakewood— No information reported.
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