How will homes being foreclosed in my neighborhood affect my home
value for the future?
What is the current supply/demand of homes?
So, How’s the Market, Aug, 2010
All real estate data taken from Metrolist, Inc, on Aug 5-8, 2010. Denver, Colorado.
“What are the Most Important Facts Buyers and Sellers want to know about
Today’s Real Estate Market?”
There are 5 important questions posed to Real Estate Professionals from the buyers and
sellers in today’s marketplace that help them decide about what to do in their real estate
future. The consumer will ask about “How’s the Market” and it’s the brokers’ job to
share the real factual answers to provide the consumers the correct data to overcome the
fear of entering the market and take advantage of what could be the most opportunistic
housing market in Denver history.
Question 1
Answer:
Since foreclosed properties are typically sold, “As Is” buyers are
purchasing at slightly below market values which will affect the value of homes in the
same neighborhood for the short term. However, most neighborhoods have a small
percentage of sales that are foreclosures. In fact, foreclosed sales average 7% of homes
selling today and most neighborhoods have another 6% of short sales occurring. This
leaves 87% of all sales in most neighborhoods selling at market value holding the value
of your home closer to the current market conditions.
Rational Thought:
Foreclosures sales or short sales do negatively affect value
in the eyes of the homeowners living in the neighborhood. However, like any other non-
arms length transaction the reduction in value will be dictated by the number of
foreclosed properties in relationship to other sales over the last 90 days. Since most
banking experts and foreclosure services are stating that any additional numbers of
additional foreclosures entering the market are at the peak, the market will see less
valuation fluctuations moving forward then we’ve seen the last 36 months.
Question 2
Answer:
Knowing the supply and demand of any product predicts what the
opportunities are in the market. For example, there is a 5.45 month supply of homes
below $250,000 which means prices are going up in the lower price ranges. Conversely,
homes priced between $1 million and $1.5 million have a 26 month supply. What do you
think is happening to prices in that price range? Let me get a specific buyer supply/
demand number for your home?
Rational Thought:
Residential real estate is a very local market condition
better measured down to specific neighborhoods. One neighborhood could have a
different supply and demand dynamic than the entire market. When a homeowner asks
the question of supply and demand they are trying to “time” the market to maximize their
investment.
Metro Area Denver Single Family Supply and Demand for August 2010
Sold SF YTD
7.31.10
10146
6450
1098
298
174
48
23
5
13
Annualized SF Sold
Data for 2010
16364
10403
1771
481
281
78
37
8
21
Months Supply
5.45
8.55
14.5
24.99
26.35
45.07
39.56
162
82.85
SF Homes
Price
0-250K
250-500K
500-750K
750-1M
1-1.5M
1.5-2M
2-2.5M
2.5-3M
3M+
Question 3
Answer:
Prices have stabilized and interest rates are at 45 year lows. You
couldn’t have more buying power than today. In fact with rates at 4.25% today you will
typically save more than $30,000 over your ownership period if you buy today!
Rational Thought:
A buyer buying today has tremendous buying power. If
you take a $300,000 mortgage at 4.25%, the PI payment is $1,471 per month. If the rate
were to increase to 6.25% in 2011, which is still considered a historically low interest
rate, the PI payment is $1,838 per month or $367 more dollars! If the average person
lives in their home 7 years, that extra amount would equal $30,828 more money in
payments over the life of living in the home. What could a homeowner do with an extra
$30K+ in their pocket? They could save it, pay down principal, or invest in other
instruments.
Question 4
Answer:
This will be home sale that will sell for less than the mortgage
amounts owed against the property. This can help the homeowner sell when they are
distressed vs. waiting for a foreclosure. The shorter the marketing period or smaller
reduction in value helps maintain higher property values in the neighborhood vs. a
foreclosure and eliminates a vacant property on the street. Although nobody wants to see
someone be financially distressed, if a homeowner has a legitimate hardship, this is an
avenue banks and sellers of properties are using to solve the problem of not be able to pay
the mortgage.
Rational Thought:
Short sales do help homeowners get out from the large
payment with dignity. Although the homeowner could be responsible for the deficiency
of money not paid, this amount typically is smaller than if a foreclosure occurred. Short
sales help the lien holders garner some dollars now vs. trying to secure money via
foreclosure, which takes time. Short sales help other homeowners in the neighborhood
because the values do not drop as much. Many banks have figured the loss is less on a
short sale than a foreclosure, so the lending institutions have gotten better systems to
accept short sales.
Question 5
Active Listings
8.5.10
7943
7415
2141
1002
617
293
122
108
145
Is it a Good Time to Buy?
What’s a Short Sale?
How do I best protect my investment dollars in my home?
Consider Alternative financing methods if you have a property valued above
$500,000. Seek the advice of a professional to describe your options.
Position the pricing strategy of your home so it becomes attractive to buyers.
Have the best conditioned property on the market.
Lock your interest rate in to a low rate now if you plan on closing within 45
days. Buyers should not have an extra fee to lock the rate.
There are different financing packages. Pick the one that gives you the best
way to increase your equity position, like a 15 year mortgage or flexible
prepay principal type loans.
Know what the neighborhood supply and demand is to make an informed
buying decision.
Over 92 properties a day are closing in Denver. Find where buyers and sellers
need your help and work that market.
138 properties go under contract any given day, are your daily activities
getting you in front of buyers?
Learn about Absorption Rate Pricing of Homes and know the Supply and
Demand of the market and sub-markets.
Answer:
Part of my role as your real estate professional is to help you
improve the equity in your home. There are several ways to create a stronger equity
position and we can create a personalized Real Estate Financial Plan that I am versed in to
help you better improve the equity of your home.
Rational Thought:
Equity in future home ownership will be successfully
achieved by positively altering the principal payments of a loan, not just waiting for
appreciation to occur. Prepaying an equal principal amount per month reduces a 30 year
amortized loan by more than half the time. By adding just one full payment per year to
prepay the principal each year will reduce a 30 year loan to 22.4 years. Of course
utilizing a 15 year amortized loan achieves a similar type of savings to the homeowner.
Paying principal not interest is the secret to achieve higher equity positions. Equity gives
the homeowner lots of options for the future.
What should sellers do in today’s market?
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What should buyers do in today’s market?
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What should Real Estate Professionals do in today’s market?
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Good Selling!
