Prices up, sales down -- what gives?

Not surprisingly, sales of existing homes took a dive in July after the expiration of the home buyer tax credit. But home prices continued to rise, if only slightly. The reason is that interest rates for a 30-year fixed mortgage have never been lower, meaning that buyers can afford more expensive homes.

In the Western region, sales fell 25% in July, but the median price rose 3.3%, compared with July of 2009 to $224,800. Statistics for Boulder showed a more sluggish market. Volume of single family home sales in July fell almost 29% compared to July of 2009 and the median home price rose less than 1% to $524,500.

Lawrence Yun, NAR chief economist, said a soft sales pace likely will continue for a few additional months. “Consumers rationally jumped into the market before the deadline for the home buyer tax credit expired. Since May, after the deadline, contract signings have been notably lower and a pause period for home sales is likely to last through September,” he said. “However, given the rock-bottom mortgage interest rates and historically high housing affordability conditions, the pace of a sales recovery could pick up quickly, provided the economy consistently adds jobs.

Interest rates for a 30-year mortgage have never been lower. Last week, Freddie Mac reported the 30-year fixed was down to 4.42 percent. To understand just how significantly low these rates are, look at the orange line on this chart (in the 1980s, rates climbed up into the teens).

Reproduced with the permission of Mortgage-X.com

There's Gold in Them Thar Hills! Great Bargains in the Mountains

If you've been toying with the idea of buying a summer cabin, now is the time. There are great deals to be had in Boulder, Gilpin and Larimer counties, starting at less than $100,000 for a home on a forested acre or a cabin on a creek.

I've been having a great time escaping the summer heat and driving the mountains with my friends/clients who are also gold miners. Their claim is near Gold Hill and we looked at a home near Rollinsville just off Gold Road. So, I've got gold on my mind.

The price of gold may be rising, but the real jackpot in the mountains is real estate. When prices for homes drop below the cost of construction (with the land thrown in for free), it really starts making sense.

Of course, there's risk involved as well. The cost of a new septic system can run in the tens of thousands of dollars. Boulder County is requiring outdated systems to be replaced within one year of any sale. So if the seller won't pay for it, the buyer will have to.

Gilpin County, on the other hand, has some great bargains just minutes away from Nederland, plus their property taxes are much lower.

If you'd like to head to the hills to hunt for some real estate gold, please give me a call at 303-473-2773.

$$$ for Non-Profits: 15% of my commissions donated

During a recession charities get hit twice -- fewer donations and increased needs for things like food banks, shelter and counseling. So, I've committed to donate 15% of my net commissions to charities. And as my client, you can choose your favorite charity, as long as it has 501C3 status.

Rest assured, you will still get 100% of my high-quality service as a home buyer or seller. As you've probably heard, it's a great time to buy real estate. There are some good deals out there and historically low interest rates mean you have more buying power. So, you can "do well" and "do good" at the same time!

Here are some of my favorite local non-profits:
Community Cycles
Voices For Children CASA
Emergency Family Assistance Association
Humane Society of Boulder Valley
The Community Foundation
One Freedom, Inc.


For a fairly complete list of non-profits in the Boulder Valley, go the directory on the Community Foundation's Page:
http://www.commfound.org/cultureofgiving/nonprofits

How's Real Estate Doing? A Flatirons Market Snapshot

"How's the market?" I get asked this question all the time, so I thought I'd share some statistics and insight into my local market -- the neighborhood covered by Flatirons Elementary (where my daughters have attended).

In general, sales are slow, with fewer homes sold than in previous years (34 last year, compared with 89 in 2006). This year got off to a good start, with 16 homes sold in the first four months (see list below), compared with only 10 in the same period of 2009.

As of May 13, there were 54 active listings, of which 6 were under contract -- about a year- to 18-month's worth of inventory.Values are holding relatively steady, with the price per square foot close to what it was in 2007 and up slightly from 2008.

But statistics can be deceptive, especially with a small sample size. If you look at specific homes that have sold several times in the past four years, you will see a slight softening of prices. For example, the home at 874 9th Street sold in 2006 for $613,000 and again last May for $605,000. Another home near 13th and Cascade sold in 2007 for $1,345,000 and is currently listed at $1,275,000 and under contract. With fewer fish in the sea, some home sellers are baiting buyers with lower prices. On the other hand, attractive or unique properties that are priced well can get gobbled up quickly.

Here's what has sold in the first four months of 2010 in the Flatirons market:















If you are interested in buying or selling your home -- in the Flatirons area or anywhere else in Boulder, please feel free to contact me for a custom market report. Call me at 303-473-2773 or email me at Monique@MoniqueCole.com.

FHA loans to get more expensive - April 5 deadline

This came in from a mortgage broker who I have worked with in the past:

Just a reminder if you are working with a first time home buyer or someone planning to use FHA for their loan; the costs for the mortgage insurance premium will be increasing in 26 more days.
Take advantage of the lower costs now by ordering your FHA case number before April 5th.

FHA loans have been the most competitive options for low down loans (only 3.5%), poor to average credit borrowers, and for condominium purchases with less than 20% down.
After April 5th, they will not be as competitive.

If you have a client that fits into one of these options and have questions, feel free to call or email.

Cheers,
Mike Echery

7.3% of Boulder and Longmont Mortgages "Underwater"

While we're in nowhere near the situation of Nevada, where 70% of properties are worth less than their loan amounts, about 7.3% of Boulder and Longmont real estate mortgages are "underwater," according to a report by First American CoreLogic and an article in the Boulder County Business Report. Negative equity is at 23.5 percent in the Denver/Aurora/Broomfield metro area, and at 8.9 percent in the Fort Collins/Loveland metro area, the study said. Colorado's negative equity figure stands at 20.2 percent.

A negative equity situation becomes problematic when a homeowner needs to sell because of relocation job loss, or other hardship. Options include a short sale, foreclosure or bringing cash to closing.

New Construction Down, Renovations Steady in Boulder Valley

The value of building permits for new construction fell by 58% in Boulder and Broomfield Counties in 2009, even though the number of permits fell only 3%, according to "Building permit values fall 40 percent in Boulder Valley" in the Boulder County Business Report. This supports the logic that in tough times, people stay put and renovate or add on, instead of moving into a new home or office.

Avoiding Foreclosure - Part IV of series

The perfect storm of adjustable mortgages, declining home sales, and job loss have led to a rise in foreclosures. Short sales and foreclosures now represent 30% of all real estate sales in the country. But just because you're falling behind in your mortgage payments, you do have alternatives.

The consequences of foreclosure on homeowners are terrible -- loss of home and equity, damage to credit (lowers score 200 points or more and stays on report for seven years), and the less tangible emotional toll. Neighbors suffer as well, through lowered property values and vacant properties, which can attract vandals and squatters.

Even though the fear of foreclosure can be paralyzing, the worst thing that you can do is nothing. Thankfully, there are an increasing number of resources and new government efforts to support homeowners at risk (see resource list at bottom of post). Your first step should to contact a housing counselor, financial adviser and/or attorney. Explain your situation ask for advice on how to proceed. Depending on a number of factors, including your income and assets, the value of your house, and your loan terms, they may advise one of the following options:

• Refinance
• Lender workout
• Sell your home (bringing cash to closing if necessary)
  
• Short sale
• Deed in lieu of foreclosure
• Bankruptcy

Some homeowners have had success contacting their mortgage company's workout department, negotiating a change in the terms of their loan so that their payments are affordable. You may need to write what is known as a "hardship letter," describing the reasons you are no longer able to afford payments and suggesting a solution. Some common "hardships" include:

• Income loss or reduction
• Death of homeowner or spouse
• Forced relocation
• Medical bills
• Payment increase (i.e. adjustable rate)
• Business failure
• Incarceration

If a Work Out is not an option, your next consideration might be a short sale (discussed in Part II of this series), where you and the lender agree to sell your home at a loss (to you and the lender). A short sale MAY only reduce your credit score by 50 points, although each loan and borrower is different and it could have the same credit impact as a foreclosure.

Remember that lenders want to avoid foreclosure almost as much as homeowners do because they lose $50,000 per foreclosure, on average.

Help is out there and it's free. Beware of foreclosure rescue scams that charge a fee to negotiate with lenders. Get started on your path to avoiding foreclosure with one of the resources here:

Colorado Foreclosure HOTLINE (877) 601-HOPE or (877) 601-4673 Boulder County Housing Counseling Offices http://www.bouldercounty.org/hhs/housingcounseling.htm Phone: 720-564-2279 Email: hcinfo@bouldercounty.org Locations: · Boulder: 2525 13th Street #204, Boulder 80304 · Longmont: 385 Kimbark Street, Longmont 80501 The Making Home Affordable Program http://makinghomeaffordable.gov/ Hope Now (An Alliance of Lenders Helping Homeowners) https://www.hopenow.com/ How to Write a Hardship Letter http://www.afscanhelp.com/hardship-1.cfm

Bank-Owned / REO Sales - Boulder Foreclosures, Part III

When most people think of investing in foreclosure properties, this is what they have in mind. As we discussed in Part I, most homes sold by the public trustee at foreclosure auction are bought by the lender holding the mortgage. Because banks are in the business of lending money, not owning real estate, they want to sell them as fast as possible and unload their "REO" (Real Estate Owned) properties. So, they find a broker who will list them in the MLS.

This is where, in my opinion, the REAL bargains are to be had because the banks are so motivated to sell. Consider a cute 1920s bungalow near 6th and Hawthorne in North Boulder that sold last September for $400,000. It was small, less than 700 square feet, but had a detached studio in the backyard. Plus, the lot was 6,738 square feet -- most likely big enough to build on. The same property sold in 2004 for $579,000, and it's been a long time since homes on build-able lots west of Broadway sold for less than $400,000.

Bank-owned homes are not limited to the lower end of the market here. A unique, architect-designed home on Linden Avenue sold last November for $953,000. It had been appraised at $1.75 million just a few months prior.

However, (you knew that was coming, right?) there are plenty of bank-owned properties that fit the stereotype of the foreclosure -- overgrown yard, holes in the roof, nasty carpets, missing appliances, or "needs TLC," to use a common real estate euphemism. They will be vacant and often "winterized," with the water and heat turned off. The ones that are in good condition and priced well generally sell fast, often with multiple offers at once. So, you need to be ready to make an offer quickly, but also do your due diligence and careful inspections.

Bank-owned or REO transactions are similar to traditional real estate sales, except that a representative from the lender, not a homeowner, will be on the seller's side. They don't take as long to close as short sales, and sometimes the lender/seller will offer the buyer a new loan on the home at an attractive interest rate. There's not much of a Seller's Disclosure in this case because the bank has no knowledge of the condition of the home (they didn't live there, after all). Also, they generally deliver a different type of deed -- a "special," rather than "general," warranty deed, which offers fewer guarantees to the buyer, necessitating a good title insurance policy.

You never know when you might find a diamond in the rough, disguised as a bank-owned property. Peel back the nasty carpets and there might be oak floors underneath. If the home has "good bones" and you have the wherewithal and financing to fix it up, it can be a great investment, or a great home. There are seven bank-owned homes currently on the market in Boulder, ranging in price from $429,000 to $1.6 million, and 20 in Longmont between $145,000 and $629,000. Let me know if you'd like more information or if you'd like me to create a custom search for you, so you can start tracking bank-owned homes. Just call me at 303-449-2959.

Short Sales - Boulder Foreclosures, Part II

Have you ever seen a real estate listing that said "subject to bank approval" or "short sale"? This means that the list price of the home is less than the amount owed in mortgage(s). If it sells, the bank will be "shorted" on the loan, not to mention that the sellers will lose any equity they once had in the property. A short sale is an alternative to foreclosure, saving the bank the money and hassle of the foreclosure process, and -- hopefully -- is less detrimental to the sellers' credit. The sellers must be in default on their loan -- have missed several payments -- in order to qualify for a short sale.

The main difference between a short sale and a normal transaction is that the sellers AND their lender(s) have to sign off on the purchase contract. Because there are so many homes in pre-foreclosure, most banks are swamped with short sale offers -- picture some harried bank employee with stacks of 20-page offers on their desk. It can take weeks to even get an answer back on an offer, and sometimes many months to close. Plus, the homeowners may have mixed feelings about the transaction because they will not be getting a check at closing. Patience and persistence are the names of the game.

So, why would anyone want to buy a short sale? For starters, they can be a bargain. Take, for example, a short sale on 15th Street in North Boulder that closed on the last day of 2009 for $595,000. The 5-bedroom, 3-bath home built in 1993 sits on a large, almost 15,000 square-foot lot. Even though property tax assessments are no substitute for appraisals, considering this home was assessed at $815,500, I think it's safe to assume the buyers on this deal got a six-figure discount on this home.

Another short sale example is a Kalmia Court 2-bedroom, 2-bath condo that sold last summer for $278,000, compared with two comparable sales in the building of right around $300,000.

However, not all short sale opportunities are created equally. Buyers need to look carefully at the condition of the home, and the limits of their patience, before considering a short sale. Also, be sure your buyer's broker is on-board and knowledgeable about short sales. Banks sometimes reduce the commissions, meaning your broker may be less than enthusiastic about showing you these homes. Be open with your broker and discuss other options for compensation if there is a short sale opportunity that you don't want to miss out on.

Still confused? Please feel free to call me at 303-449-2959 and I can explain the process further.

At the Auction - Boulder Foreclosures, Part I

Last Wednesday at 10 am, I found myself in the office of the Boulder County Trustee, awaiting the foreclosure auction. It was a packed house with about 30 people crowded into the small space, most of whom, by the looks of their Carhart jackets, were contractors.

The atmosphere was casual and I got the sense a lot of the attendees were regulars. Two men near me chatted about a great deal one of them got on a home recently.

On Monday afternoon I had printed out the pre-sale list from the trustee’s website, which includes the bid by the lender on the property. The bank must make their bid by noon on Monday, and the list is posted that afternoon.

On this particular Wednesday, 13 of the 14 homes up for auction were sold to the lenders. Things got exciting with one home on Sumner Street in Longmont with two parties bidding. The bank’s opening bid was just over $100,000, and the two parties drove the price up to $120,000 in increments of $1-$5,000.

The winning bidder had a deadline of 1:00 pm that day to deliver funds – in cash, cashier’s check or wire transfer -- in order to receive the Certificate of Purchase. However, a CP is not the same thing as a deed. Holders of liens, including second mortgages and home equity loans, have the right to redeem the property by paying the holder of the Certificate of Purchase what they paid, plus interest.

This redemption period can be tricky for investors, and it can drag on for months. The shortest period is 15 days. The itch to get started on the fix and flip is strong, but purchasers will not be paid for any improvements if a lien holder redeems the property. A Boulder County Trustee representative told me there’s a lawsuit underway right now over $3,000 worth of HVAC work done by a Certificate of Purchase holder, before the bank redeemed the property.

So, back to the Sumner Street property. Was it a good deal? Maybe. The 2-bedroom, 1.5-bath home sold in 2003 for $180,172, but then foreclosed and sold to the bank for $153,000 in 2005. The bank sold the home for $164,500 in 2006, before it was foreclosed again. Remember, the winning bid was $120,000.

I think we can assume the winning bidder knew what she was doing. Just the day before her holding company had sold another home in Longmont for $169,900 that they had bought at auction last June for $101,500. They have another home in Greeley under contract with a list price of $94,900 that they bought at auction last July for just under $61,000.

Still, once you factor in improvement costs, broker commissions, and closing costs, the profit margin is, well, marginal. Before jumping in, I would recommend considering the hassles of buying at foreclosure auction:

• Can’t inspect the home before purchase -- what if there are foundation problems?
• Need to have total purchase price in cash that day by 1:00 pm
  
• Have to honor any leases, giving month-to-month renters 60-day notice
• Home might be redeemed by lien holders
• Homeowners may need to be evicted

Next week, I’ll write about other opportunities to invest in “distressed” real estate, including bank-owned or REO properties and short sales.

Boulder 2009 Real Estate in Review, 2010 preview

Compared to the rest of the nation, Boulder's real estate values are weathering the housing crisis fairly well. The 2009 median sales price of a single-family residence was $525,000, down just 2.4% from the previous year, which was down 2.2% from 2007. We have not yet fallen to 2005 values when the median sales price was $519,000, but we have declined from the peak in 2007 of $550,000.

Although the inventory of homes for sale is on the decline, listings are competing for a smaller pool of buyers. Only 563 single-family homes sold in 2009, 24 percent fewer than in 2008 and almost half the 1,014 homes sold in 2004.

In Boulder's market for attached dwellings (condos and town homes), median prices are holding steady at $242,000, about the same value as 2006 and 2007, but have dropped 5.1% from the recent peak of $255,000 in 2008.

There is still movement in this market, but fewer sales with 628 closings of condos and town homes in 2009, a 15% decline from 2008.

This year started with a bang, with 29 single family homes sold in January, compared with 21 in January of 2009. The high-end market is also showing signs of life with 6 homes sold for over $1 million in January, including a $4.2 million sale.

The number of sales were up this January for condos and town homes as well, with 18 closings compared with 14 in January of 2009.

Financing is widely available for qualified buyers in all price categories. Even fixed jumbo loan rates (over $417,000 in Boulder) are at historic lows.

All this translates as follows. Sellers need to spruce up their homes and list them at the right price with a real estate broker who knows how to market their home in this competitive market. Buyers will find great choices, favorable interest rates, and tax credits -- why wait?

Tax Credit - NOT Just for First-Timers

The deadline of April 30 is fast approaching for the homebuyer’s tax credit. Even current homeowners can receive up to $6,500 and first-timers up to $8,000.

The popular income tax credit was set to expire last November, but it was extended and expanded to include long-time homeowners. Under the new law, eligible taxpayers must buy or enter into a binding contract to purchase a principal residence by April 30, 2010 and close by June 30, 2010.

Details:

• April 30, 2010: Deadline to purchase or go under contract on a home.
• June 30, 2010: Deadline to close on the purchase
• Current homeowners can qualify for up to $6,500 if they have owned and used the same home as a principal or primary residence for at least five consecutive years of the eight-year period ending on the date of purchase of a new primary residence.
• The new law raises the income limits for people who purchase homes after Nov. 6, 2009. The full credit will be available to taxpayers with modified adjusted gross incomes (MAGI) up to $125,000, or $225,000 for joint filers.
• Those with MAGI between $125,000 and $145,000, or $225,000 and $245,000 for joint filers, are eligible for a reduced credit.
• For all qualifying purchases in 2010, taxpayers have the option of claiming the credit on either their 2009 or 2010 tax returns.
• The maximum credit amount remains at $8,000 for a first-time homebuyer – that is, a buyer who has not owned a primary residence during the three years up to the date of purchase.

For purchases that occur after Nov. 6, 2010, several new restrictions go into effect:

• Dependents are not eligible to claim the credit.
• No credit is available if the purchase price of a home is more than $800,000.
• A purchaser must be at least 18 years of age on the date of purchase.

For Members of the Military:

• Members of the Armed Forces and certain federal employees serving outside the U.S. have an extra year to buy a principal residence in the U.S. and still qualify for the credit. An eligible taxpayer must buy or enter into a binding contract to buy a home by April 30, 2011, and settle on the purchase by June 30, 2011.

There is still time to take advantage of this historic tax credit. Please call me at 303-815-2926 so we can start your home search now in Boulder, Colorado.

News release 2009-108 has the details, as do two new IRS videos in English and Spanish.