Surprising Parker, Colorado Statistic
Just doing my job!
In the process of looking for possible homes for a client in the Parker area, I conducted a search for recent sales with the idea that those statistics would be an indication of what to expect in the “for sale” category over the next few months.
What were the criteria?
Pretty general. $400,000 to $600,000 on a minimum half acre site.
And the results were?
Drum roll. Eight homes. SEVEN of the eight were “lender owned” homes and most were new construction in the same community. The sales prices were 30% to 40% under the original asking prices.
Is there a message?
Perhaps two. One is that homes more distant from employment centers are always hit the hardest in a real estate recession. Second is that there are some really good deals out there as long as you can see yourself in the home for 5-7 years.
Want some expert assistance?
I am a 20-year exclusive buyer’s agent (EBA) who always and only represents the interests of my buyer clients.
Russ Murray 303-721-1100, ext. 1 russ@buyerbroker-denver.com
Your Home – Shelter or Investment?
I have a conversation frequently with my clients regarding the projected appreciation of their home value. I always say that I help people to purchase homes and shelter, not investments. Many have friends and person experiences where house values have increased 10%, 15% and even 20% in one year. I have observed those years. Funny thing is that owners are much less likely to mention the last three years when much of those gains disappeared.
What is the reality of home appreciation?
I have tracked several representative homes in a number of markets over 20-year periods. That is longer than many people own homes but is representative of a longer term look at the market. Looking at an example of a home in a south suburban Denver area neighborhood, I find a purchase at just under $200,000 in 1990 and a value today, in 2010 of just under $400,000. At first glance, that looks pretty good. Value up by 100%.
However, what it really represents is appreciation of about 4.0% per year. And that is without considering the repairs, replacements and updates that would be typical over a 20-year hold. There are many other factors to consider but those are outside the purpose of this discussion. What I am trying to establish here is a realistic look at changes in house values. There are some neighborhoods that have done a little better over a similar period and some that have done worse.
How should this affect my decision about purchasing?
Well, you can probably see that over an extended period that you will have enjoyed shelter and had the enjoyment of being a home owner. The value of that shelter has kept up with inflation. Certainly better than a car that immediately begins to depreciate and has little value after being used for 20 years.
You may get lucky and turn over your home during one of those 3 to 5 year periods of major appreciation. You must also be prepared for the flat and depreciation times as well.
With a realistic look to the future you can make an informed decision. Contact me if you have questions regarding your home purchase.
Russ Murray, Exclusive Buyer’s Agent 303-721-1100, ext.1 russ@buyerbroker-denver.com
Considering New Construction In The Denver Area?
New Can Be Nice!
What have the builders done?
Well, if we take a look back to the beginning of the decade, single family new construction starts were at 15,000 units per year. For calendar year 2009 the new start figure was 2,400 (not a misprint). That is a huge reduction. It does indicate that this time around the builders are not getting so far ahead of demand that they have huge amounts of excess inventory. It is also significant to observe that several large regional and national builders have left the denver market. Many smaller builders are simply out of business.
How does that affect you as a potential new home buyer?
If you have your heart set on a new home where you get to select a site and all of the options and and finishes, then you should expect that you will be paying more than if you purchased a very similar home constructed in the last 3-5 years. How much more will depend on your negotiations with the builder. They builders will not build below cost, but they do want to keep their activity, employees and subcontrators busy so will build a lot closer to “cost” than in the past. If you find a new home that is esentially complete, there may be some room to negotiate price, additional upgrades or perhaps landscape.
Is there a better/best decision?
Over a 3-5 year ownership, you will probably be ahead by negotiating a purchase of an existing newer home. It will probably have basic landscape and window coverings in place and components should not be “wearing out” over that period.
How can I make that determination?
With an experienced agent on your side you can evaluate both options and then know what the financial difference is between the new vs. the existing. For some buyers, the incremental cost of “new” is simply worth it.
You can contact me for assistance. I am familiar with the builders and how to negotiate with them.
Russ Murray 303-721-1100, ext. 1 russ@buyerbroker-denver.com
Whose Figures to Trust?
Which Trend to Believe?
Which Trend to Believe?
There are many sources.
Many local media use figures from the MLS as compiled by a real estate broker and information from industry trade groups. As I read those reports, particularly beginning in late 2006, it was clear to me that the “compiler” was looking at the figures differently than I was seeing the same data. I was reporting in my monthly communication to my clients that I was seeing a slow down in volume and in price increases and many other licensees were talking about price increases and the strong market. Going into 2007, I was very busy while at the same time seeing more inventory and more negotiation. My clients were able to make decisions based on what was really happening, not what was reported.
All real estate is local.
Yeah, I know you’ve heard that about politics too. It is at least equally so for real estate. Even with the overall decrease in Denver area home values over the past few years there are pockets that have done much better along with those areas that have fared worse thant the averages. What you care about is the neighborhood where you are living or purchasing. Be certain that if you are purchasing that your broker evaluates your prospective home using sales in the immediate area. It is very easy to go outside and support a higher price. If you have been diligent in your reasearch and hired an Exclusive Buyer’s Agent (EBA) then you should have someone on your side who will be doing just that.
Area trends do have value.
It is worth knowing what is happening in the overall market as those trends can have some effect on all neighborhoods and are an indication of the condition of the area economy. So, back to the original question, whose figures to believe? I have looked at reports based on MLS data, Zillow data and Standard & Poors/Case-Shiller data. It is my opinion that the “S & P/Case-Shiller” methodology and therefore the results are most accurate. It is the only system that tracks “same house sales”, has built in filters for anomolies and considers whether the sale is a “lender/seller” or a consumer seller. The other two consider all sales and can be skewed by several extremely high dollar sales or by a proliferation of non-market transactions.
So, what is happening in the Denver area?
According to Case-Shiller, Denver is one of only four of the twenty cities that they track that showed overall price increases from November 2008 to November 2009 (The most recent month that has been released). Overall, the Denver changes show considerably less “swing” than does the 20-city index. Also, and very interesting’ is that the same graph is heading into positive territory.
Is it a good time to purchase in the Denver area?
Probably so for many neighborhoods. Check your target area very carefully as there are still areas where values continue to decrease. Better yet, engage me to assist with your purchase and know that I will always be on your side.
Russ Murray 303-721-1100 russ@buyerbroker-denver.com
The Pundits Missed Something! and How’s That Tax Credit Working?
You read/heard it where?
December 2009 Real Estate Results
I do not agree with the way that the December real estate results are being interpreted by most of the media. The theme seems to be that the extension of the first-time buyer tax credit should have caused December results to meet or exceed the results of prior months. The problem with that conclusion is not having considered how long it really takes to get from contract to closing. (more about that in a subsequent post) That time has increased with new underwriting and appraisal requirements so what we formerly could always do in 30 days is now taking longer. By the time the extension was approved, there simply were not enough days left to get a transaction closed in December and because the new deadline was April 30th, there was little incentive to move quickly.
“Cash For Clunkers” and “First Time Home Buyer Tax Credit”
What these two programs have in common is that they seem to have adjusted only the timing of most purchases, not the actual decision. Edmunds.com evaluated the CARS program and, adjusting for the autos that would have been purchased regardless of the credit, found that the cost per car to the taxpayers was about $14,000. The anecdotal history in our office for home purchases is similar. Of about ten first time buyer transactions following the announcement, only one person seems to have purchased because of the credit. When you think about the process, it just makes sense. The $8,000 could not be used forthe purchase and most of these first-time buyers are short on cash so the buyers had to be consumers who had already accumulated their needed funds. In terms of timing, once these clients had decided to purchase, the tax credit certainly was the carrot to get them to close by November 30th.
Unintended Consequences
As we approached mid-October, probably the latest a contract could be written with a guarantee of a November closing, we did observe that sellers with homes that were ready realized the date predicament and became less negotiable. I had to tell several buyers that they may have just “financed” the $8,000. Still a pretty good deal at 5% or less!
Going forward looks better. With the credit now decreasing at $2,000 per month after April 30th rather than just expiring, we should see less desperation on the part of buyers and more market-driven negotiations.
Have Questions or Comments?
Please leave any comments or questions. I am interested in your experience as a buyer or a broker (on either side of the transaction)
If you are thinking of a purchase in the Denver area in 2010, please contact me. I am an experienced Exclusive Buyer’s Agent (EBA) and will always be your advocate.
Russ Murray russ@buyerbroker-denver.com 303-721-1100, ext 1