New Homes Sales Gain in June, But Gains Are Relative

After a down month in May, the sales of newly-built homes appears back on track.
As published by the Census Bureau, June's New Home Sales report showed:

1. A 24 percent sales volume increase from the month prior
2. A 2-month drop in the supply of newly-built home

There are now just 210,000 new homes for sale nationwide.
June's data is a major improvement over May, but it's possible that the true "new home market" may be softer than the statistics suggest.  This is for several reasons.
First, we're comparing June's sales data to the worst month in New Home Sales history.
In May, sales of new homes totaled just 267,000 units nationwide. That's one-quarter fewer sales than in the previous worst month in New Home Sales history. May's sales levels were awful by any measure but June's improvement to 330,000 units remains second-worst sales levels ever posted.
Second, although much improved, June's new home supply of 7.6 months is elevated versus the historical norm near 6.0 months.  The last year has averaged 7.7 months.
For buyers of new homes in Henderson, Colorado, this combination of low sales volume and higher-than-normal inventory may be a positive.  It's the main reason why homebuilder confidence is reeling and the downturn has opened some doors for big discounts and deals. Free upgrades and closing cost credits can make a well-priced home even more attractive.
Plus, with mortgage rates at all-time lows and expected to rise, home affordability is may never be better.

Sagging Homebuilder Confidence Opens The Door For Good Deals

Builder confidence in the housing market slipped this month, according to the National Association of Homebuilders' monthly Housing Market Index.
The Housing Market Index is actually a weighted composite of 3 separate surveys. One measures current single-family sales; one measures projected single-family sales; and one measures traffic of prospective buyers.
All three surveys were down in July:

• Single-Family Sales : From 17 (June) to 15 (July)
• Single-Family Project : From 22 (June) to 21 (July)
• Buyer Foot Traffic : From 13 (June) to 10 (July)

The HMI's July reading of 14 puts confidence at its lowest point since April 2009.
For home buyers in Henderson, Colorado , a drop in builder confidence could create an opportunity for negotiation.
Remember, it wasn't too long ago that most builders were flush with home inventory, unable to find willing buyers. To help move product at that time, builders dropped prices and offered incentives including free upgrades. If confidence continues to sag going forward, home purchase deals of that nature may return -- especially as the foreclosure market gets larger.
See, in the past, builders' main competition for buyers were the existing home sellers.  Today, builders compete with the existing home sellers and the banks with REO.
It's a terrific time to be a home buyer, in other words -- sellers are fighting for you. It's no wonder sellers have little leverage anymore. Couple that with all-time low mortgage rates and affordability for homes is at an all-time high.
If you're planning to buy a home later this year, you may want to consider moving up your time frame. The market looks ripe for good deals this summer.

June's Jobs Report Wasn't As Bad As The Headlines (And How You Can Take Advantage)

In June, for the first time since December 2009, the U.S. workforce shrank.
According to the Bureau of Labor Statistics, the economy shed 125,000 jobs last month even as the Unemployment Rate dropped to 9.5 percent. The drop in the Unemployment Rate is being attributed to fewer Americans looking for work.
At first glance, the jobs report looks weak but a deeper look shows something different.
Excluding the 225,000 government Census workers that recently left the workforce, the total number of employed persons actually grew by 83,000 in June. That's 50,000 more working Americans as compared to May.
And, since the start of the year, the U.S. workforce has grown by 857,000.
Jobs growth is closely tied to economic growth because more working Americans means more disposable income which, in turn, stokes consumer spending. Job growth is better than job loss.
Consumer spending makes up the majority of the U.S. economy so as consumer spending grows, investor mentality tends to shifts toward "return on principal" (i.e. stock markets) from "safety of principal" (i.e. bond markets).
A move like this is often bad for home affordability because falling demand for bonds is tied to higher mortgage rates. In addition, with the growing number of Americans earning a paycheck, demand for homes is likely to increase, thereby helping to push home prices higher.
Overall, therefore, the jobs report should be bad for rate shoppers and home buyers in Denver. Except the markets aren't reacting that way. For now, mortgage rates are slightly improved since the jobs report's release.
Perhaps Wall Street is watching the wrong figures, but don't let that be your loss. If you're shopping for a mortgage, a home, or both, now may be your best time to make a move- while rates are still low, with home prices down- before traders change their tune.
Because when markets change, it'll likely happen fast.

Was The Pending Home Sales Report Really That Bad? It Depends Who You Ask -- Buyer Or Seller.

The Pending Home Sales Index plunged in May 2010, just one month after the expiration of the federal home buyer tax credit program.
The Pending Home Sales Index is now at a record-low level.
A "pending home sale" is an existing home under contract to sell, but not yet closed. According to the National Association of Realtors®, 80 percent of homes under contract close within 60 days.
Because of this timeline, we can expect the summer's Existing Home Sales to be weak, too. With fewer homes going under contract, fewer homes can close.
On the surface, May's Pending Home Sales Index looks like terrible news for housing. And, if you're a seller, it just might be. But, if you're a buyer, the story reads differently.  Just consider the market conditions.
A broad look at the housing market shows:

1. Home supplies are rising in most markets
2. Home sales are falling in most markets
3. Mortgage rates are at all-time lows

In other words, in most markets, more sellers are competing for fewer buyers, and the "winning" buyers are financing their homes at the lowest rates in history.
It's an excellent time to be a home buyer in Denver.

May 2010 Existing Home Sales Is Better Than The Headline Data Suggests

Existing Home Sales dropped in May for the first time in 3 months but still managed to post its second-highest since November 2009, buoyed by the expiring federal tax credit program.
An "existing home" is a home that cannot be considered new construction; a resale of an existing home.  Existing Home Sales fell 2.2 percent in May.
The press is calling the drop in sales "unexpected" and disappointing, but a deeper look at the data shows the news isn't as bad as it first appears.
First, on a regional basis, sales were mostly solid. Only the Northeast region posted a loss. The West even managed a gain.

• Northeast : -18.3 percent
• Midwest : 0.0 percent
• South : +0.5 percent
• West : +4.9 percent

Second, the supply of homes for sale dropped to 8.3 in May and, because home prices are based on supply and demand, this is a positive for pricing.
By comparison, in 2008, the average existing home inventory was 10.4 months.
And, lastly, in May, first-time home buyers represented 46 percent of all buyers. The number was likely buoyed by the tax credit program but that doesn't damper the fact that first-time buyers provide a support floor for the housing market.  Keep in mind that, in a 'normal' market, first time homebuyers make up about 1/3 of homebuyers.
First-time buyers in Denver enable "existing owners" to move-up to bigger homes, which, in turn, trickles up to the mid-size and jumbo markets.
Analysts expected more from May's numbers and that may explain why the reaction to the data is generally negative.  However, in many cities, home resales did just fine.

The Home Buyer Tax Credit Extension Has Not Been Passed Into Law (Yet)

As its June 30, 2010 closing deadline approaches, the federal home buyer tax credit is back in the news.
Unfortunately, the headlines are misleading.
Contrary to what you may have read (or heard), the federal home buyer tax credit has not been extended past June 30, 2010. At least not yet. And here's why there's confusion.
Look at these headlines from earlier this week:

• Senate Extends Date On Home-Buying Tax Credit (Philadelphia Inquirer)
• U.S. Senate Approves Extension Of Home Buyer Tax Credit (NASDAQ)
• Senate Approves Home Tax Credit Extension (Reuters)

Nothing above is factually incorrect, but each neglects a key piece of the country's law-making process -- it takes more than the Senate to pass a law. For a bill to become a law, it must pass the Senate and the House of Representatives and then it must be ratified by the President.
To date, we've only cleared just one of those 3 steps.
This means that the federal home buyer tax credit has not been formally extended. As of now, it's still in discussion.  Ultimately, though, if the extension does pass, it's expected to extend the closing date deadline for Henderson and Denver home buyers beyond the original June 30, 2010 date into September 2010.
Homeowners must still have been in contract as of April 30, 2010 to claim up to $8,000 in federal tax credits.

Good News For Sellers : Housing Starts Fall To 1-Year Low In May 2010

Single-family housing starts plummeted to a one-year low in May, just 30 days after soaring to a 20-month high.  It's no wonder home builders are confused.
Against a revised April figure, Housing Starts fell 97,000 units in May, a figure representing almost one-fifth of the total market size.
It's the worst showing for Housing Starts since May 2009, a surprise to builders and economists alike.
Furthermore, single-family Building Permits plunged in May, too -- down 10 percent from April. A permit is a certification from local government that authorizes home construction.
Housing permits are a precursor to Housing Starts with 82% of homes starting construction within 60 days of permit-issuance. Fewer permits, therefore, directly reduces the number of new homes coming to market in the coming months.
For home buyers in Henderson , this should create a sense of urgency.
Home prices are based on supply and demand and supply appears to be falling about the same time that economists predict a surge in home demand.  It could spell rising home prices and a complete loss of negotiation power with home sellers.
For now, though, home affordability remains high with properties cheap and mortgage rates near all-time lows. If you plan to buy a home later this year, the May 2010 Housing Starts data may be a reason to move up your timeframe a bit.

Bank Reposessions Reach Record Levels For The Second Straight Month

According to foreclosure-tracking firm RealtyTrac.com, bank repossessions reached record levels for the second straight month in May, topping 93,000 properties nationwide.
As compared to May 2009, all 50 states now show an increase in annual REO activity.
Data like that won't surprise today's active home buyers in Brighton or Denver.  Foreclosed homes are prevalent, available and accounted for one-third of all home resales made in April.
Furthermore, total foreclosure actions -- the sum of REO, default notices, and foreclosure auctions in May -- topped 300,000 for the 15th straight month.
Foreclosures remain a huge influence on the housing market.
However, two interesting trends emerged in the data:

1. 9 of the top 10 metro areas for foreclosure posted annual activity decreases
2. Each of the top 4 states for Foreclosures per Household posted annual activity decreases

We can infer, therefore, that foreclosure activity may be in permanent decline in the areas hardest hit through 2007, 2008, and 2009.  In 2010, the data shows, foreclosures are waning.
This is reason for optimism -- especially as FHA delinquencies slow nationwide. As fewer homeowners go delinquent, the pace of foreclosures will slow further and that should help boost home values on every block in the country.
If you've been considered bank-owned homes for your own purchase, give a look at the RealtyTrac foreclosure report.  It's provides insight on a state-by-state level, and in the nation's largest metropolitan areas.

Then, to complement your research, talk to your real estate about the foreclosure market and what opportunities may exist.   Competition for bank-owned homes can be fierce at times, but there's plenty of "deals" out there.
You just have to know where to look.

Uncharted Territory- the End of the Tax Credit

The end of April marked an historic event.

Think about it.  Never before in American history has there been a homebuyers' tax credit.  On April 30th, it expired.

We are in uncharted territory

If you were planning on buying your first home, or even replacing the home that you had lived in for 5 of the last 8 years, you would get FREE money from the government if you were under contract by the last day of April.  That contract would have to close by the end of this month to qualify for the tax credit.

So, what impact will this have on our market?  No one actually knows.  The first deadline for the credit was scheduled for the end of November, 2009.  Eager first time homebuyers rushed to the closing table to make the November 30 deadline- in spite of the holiday weekend that bumped right into the deadline.

This time, however, the impact seemed slightly less notable.  Many houses went under contract well before the April 30 deadline, and closings were spread out over April, May and June.  There is speculation that some home sales were "borrowed" from the coming months because of the tax credit, and this certainly has some merit.  

Meanwhile, showings of for sale properties dropped.  If you are trying to sell a home, you have seen this effect.  It's time to sit tight and have patience.  

As I said, we are in uncharted territory.

Asking for Referrals the Right Way!

I just got an email from another agent here in town.  At the end of her signature, in quotation marks no less, it says Oh, by the way....  and asks her nearest and dearest to refer anyone who is thinking of buying or selling their home.  This made me cringe.
It wasn't the quotation marks.  It wasn't the folksy, off-hand style (Oh! By the way!  I just thought of something!!).  It wasn't the fact that everyone from her best friends to her clients, to her business partners will get this request.
It is all of those things together.
Amazingly, I got an Article by Dirk Zeller today about just this very thing.  It is about asking for referrals from people you know.
The whole article is worth reading, but one of the standout quotes was:

Don’t merely use a throw away line like “Oh, by the way” before you ask for the referral. This tactic cheapens the referral process rather than raising it to the high level of honor and respect it deserves.  The client can see right through this cheap technique.

Wow.  He read my mind!  In a nutshell, if you respect your business and your clients, take the time to do things right.  You are asking them to let you into their circle, and what's more, you are asking them to vouch for your professionalism and trustworthiness.  This is a 2 way street, so show them the consideration you are asking them to show you, and you will see your referral business boom.

How Many Showings Does it Take?

When selling your home, one of the "moving targets" is the number of showings to expect.  Not surprisingly, the number of showings goes down during the holidays and during cold winter months when the weather is unpredictable.  But different price points will also experience different levels of activity.
Following is a breakdown by price level of home many showings per month we experienced in the Denver Metro market for the first quarter of 2010:

• Overall, the number of showings per month for all price categories was 8.7 per home.
• Homes under $250,000 saw an average of 10.5 showings per month, with the $50k-100k range seeing the highest number of showings per month at 15.
• Homes from $250k-300k saw an average of 7.4 showings per month.  Homes from $350k-400k were at 3.7 showings per month.
• Homes in the higher price ranges, from $400,000 up, saw an average of 4.8 showings per month.

The good news for those selling homes in the $250k-400k price range is that the number of showings increased year over year: from 4.7 in 2009 to 6.1 for 2010.  Homes above that range increased from 3.4 to 4.8.  Homes priced in the lower ranges held steady at 10.5 showings per month.
Buyers are getting back out there, which is good news for all homeowners.  With renewed interest and activity in residential real estate, we will see a ripple effect throughout the economy.

Hey- I Thought You Said that House was Under Contract?

What Does “Under Contract” Mean?  What Comes Next?

Recently, I was driving through our neighborhood with a buyer.  He was very interested in a property a few months ago, and had been considering making an offer.  When I called the listing agent to let her know of our intent, she told me it had just gone “under contract” and was no longer available.  When we drove past this property last week, the sign was still in the front yard.  “I thought you said that home wasn’t available?” he asked.  And it’s not.  It is still “under contract”.

  How properties go Under Contract, and what happens next. 

When a buyer finds the right home, he or she makes an offer.  This is presented on the Colorado Contract to Buy and Sell.  It is a detailed contract with a schedule of dates, room for contingencies, attachments, concessions, offer price, financing arrangements and appraisal requirements, among other things.  It is 12 pages long, and is designed to protect both buyer and seller during what is often the largest sales transaction private parties ever make.

When buyers purchase a home, they want the assurance that they have thoroughly researched their purchase before the sale is final, and that no other buyer can purchase the property out from under them during this time.  If the buyer and seller can agree on the initial terms, both parties will sign a binding contract that allows the buyer to do this research.  The property is then “under contract”.  This period usually lasts from 30-60 days.  A short sale listing can take longer- sometimes several months.

The buyer is then responsible for doing this research, and there is a time limit and an Earnest Money deposit submitted so that the seller is protected.  

These steps include applying for a loan, having a certified inspection of the property, obtaining title and title insurance, obtaining property insurance, reviewing any HOA documents, reviewing Improvement Location Certificates or surveys of property boundaries and making sure the property appraises.

The For Sale sign remains in place during this process because the sale is not yet completed.  Often times, the Realtor will place an “under contract” banner on the sign.  The idea is that it “ain’t over ‘til it’s over,” so the sign remains in place until funds have been transferred and keys are passed to the buyers.