Good Timing Equals Luck In Real Estate

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Good Timing Equals Luck In Real Estate

Steve BlankAt this point, most everyone knows the real estate market has not only rebounded, but is progressing at a comfortable and believable pace. Denver’s economy was one of the first to see lower unemployment, new construction, diminished foreclosures, and along with the natural allure of Colorado, a genuine sense of progress.

Nationally, the economic climate is improving in many categories, as well over the past two years. Denver has been consistently ranked as one of the top 3 to 5 metropolitan cities for real estate growth and investment.

Over the past year locally, the average time it takes for a house to sell has ranged from 24 to 29 days on the market, shattering past records. The good news is that those figures are about to change for sound and healthy reasons. The economic laws of supply and demand would be the most significant factor why homes have been selling so quickly.

For a variety of reasons, demand for homes has far exceeded record level lows of available inventory. In 2008, just prior to the recession, Denver was overbuilt and had approximately 30,000 homes (attached and detached) available for sale. In contrast, the Denver multi-list reported less than 5,000 available homes for sale this past spring. Currently, that number is closer to 8,000 and rising, creating a less frenzied market for both buyers and sellers.

So when we hear prices are not rising at the same pace, it’s taking a little longer to sell a home, and there are more homes available; this is great news in terms of achieving a more balanced and healthy market.

According to a recent Realtor.com survey, the 20 hottest markets in the country were determined by “the median age of inventory in each market”, and were ranked by the number of views per listing on Realtor.com. In July, eleven of the top 20 markets were in California, with four located in Texas. Metro-Denver was ranked #2. A major reason for high-level demand in “for sale” homes is the cost of a rental home.

On August 4th, The Denver Post reported that the average rental rate for a 3-bed home in metro Denver rose 14% (yr over yr) to $1,863/mo. According to a recent Realty Trac analysis, house payments have become more affordable than rent in 76% of the national markets. It goes on to say, “From a purely affordability standpoint, renters who have enough money for a 10% down payment are better off buying”.

Freddie Mac (secondary money market-gov’t conservatorship) in March released a 3% down mortgage product which has become popular, and is less expensive than the similar FHA product. And better news for the luxury market, as lenders try to re-capture their slice of the high-end mortgage market.

J.P. Morgan Chase just announced they are loosening underwriting guidelines for jumbo loans while lowering their minimum credit score and down payment requirements for loans up to $3 million. This decision follows similar steps by Wells Fargo, Bank of America and other high-end lenders.

Jumbo loan originations were up 58% over the first half of 2014 and accounted for 20% of all mortgages, up from 5.5% in 2009. Some lenders are allowing 15% down payments on loans to $3 million and credit scores below 740, but not lower than 680. And please don’t fall asleep when I mention low interest rates. They will be higher in the near future.

Making a purchase and/or selling your home should always be stimulated by a combination of sound financial and personal reasons. I offer a few for your consideration:

  1. Equity and Profit – You’ll never see your rent money again (nuff said). Values in Denver have increased over 30% since the beginning of 2012.
  2. Savings Plan – As values rise over time and you pay off hundreds of dollars with each payment; it’s a heck of a forced savings account.
  3. Leveraging – Say you put down a 20% down payment. Your return percentage is based on the full (100%) value of the property.
  4. Tax breaks – The U.S. tax code lets you deduct mortgage interest and property taxes.
  5. More or better space – Kids, pets, hobbies, parents, office requirements, roommates…no explanation necessary.
  6. Freedom and stability – It’s your home, decorate any way you want! You can enjoy and appreciate knowing your neighborhood, schools, stores, and meaningful relationships.

The smarter you become in assessing your personal and financial needs and desires, the luckier you will get in real estate.

For more information, contact LIV SIR downtown managing broker, Steve Blank, at 303.520.5558. To service all of your real estate needs visit www.livsothebysrealty.com

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