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July 2012 – Real Estate Market Update


Real Estate Market Update
Buyers Furious, Sellers Curious
A monthly market analysis capturing the observations and insights of the 8z Team
As the market heats up this summer, the effects on buyers and sellers could not be more be divergent.  In short, buyers are furious and sellers are curious.
While furious may be too strong a word, buyers are growing increasingly frustrated. They are frustrated with the lack of homes from which to choose. They are frustrated when they learn that the buyers’ market full of good deals that prevailed for years is over in all but a few areas and sellers have regained the upper hand at the negotiating table.
Markets along the Front Range remained hot. The total volume of real estate sold in June was up 28.1% compared to June of last year. Year to date, Front Range sales volume has increased 21.3%. 
(Figures above in millions)
The suppy of inventory remained a very tight 3.2 months in June. The market needs more new listings to satisfy the growing demand of ready, willing and able buyers.
Buyers are frustrated at how quickly they have to move on any attractive new listing, often needing to make an offer on the first day on the market just to be in the game. They are frustrated when they lose out to another offer on a house they love. In fact, this is the situation in which the word furious is the most accurate description of what buyers may be feeling.
On the other end of the spectrum, sellers, and homeowners who are potential sellers, are becoming increasingly curious. They are curious about what their home might be worth in this recovering market of rising home values. “If prices are up 5%, just how much is my home worth?”
Homeowners are letting themselves think about real estate again after years of blocking it from their minds. They are even letting themselves dream about what they would buy if they sold their existing home.
At this point, many are just curious and not yet ready to make the leap of listing their home for sale. Based on the small number of new listings hitting the market, it appears that the majority are taking a wait and see attitude, perhaps with an eye toward next year’s spring market.
This may make sense from a personal planning standpoint, but the market stats say that now is a great time to sell. The market is starved for inventory, especially non-distressed, resale homes in good condition. In many neighborhoods, there simply are no homes on the market that are not already under contract.
The overall supply of inventory in all markets along the Front Range currently stands at 3.2 months, far below a the 6 month benchmark of a balanced market. Sales volume was strong in June, increasing 28.1% compared to June last year. However, we may be starting to see that the lack of inventory is holding the market back and depressing sales volume since many ready, willing and able buyers simply cannot find a home to purchase.
The market stats for Boulder County tell a similar story. Inventory is a tight 3.7 months, compared to 6.6 months of supply at this time last year. Sales volume was up a healthy 29.8% over last June and up 13.6% compared to May. Again, the lack of homes on the market may be keeping volumes lower than if we had a 6 month supply. Overall, the market continues to perform better than many predicted. Stories in national news outlets claiming the bust is over and a housing recovery is underway are becoming common. At the same time, the threat of shadow inventory from the banks flooding the market still looms.
Rather than worry about the “national real estate market”, we prefer to focus on our local market. Fortunately, our local market decoupled from the national market months ago, and we have been in recovery mode for well over a year now. Barring a macroeconomic event of massive proportions, we expect our local market to continue to perform well for the remainder of the year, and home prices to consolidate and hold onto gains of 3-5% by year end, with 10% appreciation possible in some micro markets.
John Rebchook
Inside Real Estate News by John Rebchook
A monthly conversation with John Rebchook, Editor of InsideRealEstateNews.com and former Editor of the Rocky Mountain News, and Lane Hornung, President of 8z Real Estate.
It’s been well-publicized that the seller increasingly is sitting in the catbird seat in the Front Range housing market.
Bidding wars erupt frequently, sometimes driving up the selling price beyond the asking price, especially in some hot neighborhoods.
While it varies from neighborhood to neighborhood and the price of the home, overall there is about a three-month supply of unsold homes on the market.
 Previously in this column, we addressed how prospective buyers need to strategically, economically and emotionally prepare themselves to compete for a home in today’s market.
But what about the flip-side? Is it all bunnies and rainbows for sellers?
Steps sellers need to take in today’s market is this month’s topic.
John: Lane, we focused on the plight of the buyer in today’s market, but what about the seller?
Lane: It certainly is better to be a seller today than it was a year ago or two years ago or three years ago. But that doesn’t mean you still don’t face challenges, or you don’t have to be smart about how you approach the market.
John: Challenges? So it’s not enough just to plant a “For Sale” sign in the front yard and list the home on MLS?
Lane: I think some of the challenge is that buyers, for the most part, are still looking for houses that are ready to move into – turnkey condition, showroom-condition. However you want to describe it.
I’m not talking about distressed sales. I’m not talking about investors looking to buy and flip homes, where the condition might not matter.
These are buyers who are not necessarily looking for a great financial deal, but for a great home.
John: Do you think given how frothy the market is that sellers can become complacent, or even a bit cocky?
Lane: I think a seller can get a little cocky. For the past several years, the question was can you sell your home?
Today, if you live in a neighborhood where nine out of 10 homes listed are under contract, chances are you will be able to sell your home. The challenge is that you need to present your house in a way to maximize your price and your net.
Your Realtor can help you on this. He or she might be able to advise you on how to spend $1,000 or $2,000 to get $10,000 more when you sell it. I think most people would be very happy to get 5x on their investment.
John: So maybe it is a good idea to spend some money replacing fading carpet or paint walls?
Lane: Even before you think of cosmetic changes, make sure your home is extremely clean and there is no clutter.
A weekend with a bottle of 409 and a sponge might translate into $10,000 more for your home. I think most people would be willing to spend a weekend of heavy-duty cleaning to make $10,000.
John: Other thoughts?
Lane: While it’s true that the market has shifted, and buyers may not have the luxury of running spread sheets that dissect the price per square foot so they can beat up sellers during negotiations.
That said, if you are a seller, you can set your sights higher than simply not getting beat up on price. You can aim for two or three buyers interested in, or even bidding on your home.  To make that happen, you have to make the home as visually and emotionally appealing as possible.
It’s like having four guys wanting to dance with the same girl on the high school dance floor. Your goal is to have four people saying, “I not only like this home, I have to have this home.” When that happens, you just don’t sell your home, you maximize your net.
John: Are there any emotional aspects of selling in this market?
Lane: You have to be prepared for your home to sell quickly. As soon as you put your home on the market, think of it as no longer your home. Putting it under contract and the closing are just the process, the mechanics of the transaction.
Emotionally, it is easier to part with your home the moment you list it. If you’re able to let go, you’re also more apt to allow your Realtor to create a showing condition that appeals to prospective buyers.
John: Thanks, Lane.
Marsha Badger
Mobile: (303) 818-1390

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Remember how we have been stating for months that Interest Rates are at all time lows? Well it has happened again dipping well under 4%. There truly has not been a stronger time to buy in regards to the financial side of the situation. Now might be a good time to discuss your mortgage and refinancing options.

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Data Log
 -Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, declined 5.4 percent to a seasonally adjusted annual rate of 4.37 million in June from an upwardly revised 4.62 million in May, but are 4.5 percent higher than the 4.18 million-unit level in June 2011. 


-According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to a record low 3.68 percent in June from 3.80 percent in May; the rate was 4.51 percent in June 2011; recordkeeping began in 1971.
 -The national median existing-home price for all housing types was $189,400 in June, up 7.9 percent from a year ago. This marks four back-to-back monthly price increases from a year earlier, which last occurred in February to May of 2006. June’s gain was the strongest since February 2006 when the median price rose 8.7 percent from a year prior.
-Distressed homes – foreclosures and short sales sold at deep discounts – accounted for 25 percent of June sales (13 percent were foreclosures and 12 percent were short sales), unchanged from May but down from 30 percent in June 2011. Foreclosures sold for an average discount of 18 percent below market value in June, while short sales were discounted 15 percent. 
-Total housing inventory at the end June fell another 3.2 percent to 2.39 million existing homes available for sale, which represents a 6.6-month supply at the current sales pace, up from a 6.4-month supply in May. Listed inventory is 24.4 percent below a year ago when there was a 9.1-month supply.


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