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June 2012 – Real Estate Market Update


 

Real Estate Market Update
Sellers retaking upper hand as markets heat up
A monthly market analysis capturing the observations and insights of the 8z Team
With many markets along the Front Range heating up, as evidenced by surging sales volumes, dwindling inventory and rising prices, sellers have begun to reassert themselves.
In many neighborhoods, the days of sellers having to bide their time, wait patiently and hope that their home would be the lucky one chosen out of dozens of listings by the one active buyer in their market are over.
Markets along the Front Range are heating up. The total volume of real estate sold in May surged 33.9% compared to May of last year. Year to date, Front Range sales volume is up 19.8%.
(Figures above in millions)
Just when we thought the suppy of inventory couldn’t possibly get tighter, it did! Even though there was the typical uptick in new listings in May, these listings were quickly aborbed by buyers. 
The tables have turned astonishingly quickly. In many local markets, sellers are now the ones doing the choosing, tapping the one lucky buyer out of many in multiple offer situations that are becoming increasingly common. Of course, not all listings sell in a day or receive offers above asking price. But there is no doubt that the market is shifting from a buyers’ market to a sellers’ market, and this month we will highlight some of the dynamics to consider if you are a seller or thinking about selling in this market environment. First off, it may be a sellers’ market, but it’s still a rational market. This is not a market where any listing sells. Listings that do not show well and/or are overpriced, are not selling in a day, a week, a month, or ever.
Today’s buyers are well informed and understandably post-bubble cautious. They simply pass on overpriced listings and place them in the stagnant pool of stale listings that still make up a sizable portion of our current inventory.
Buyers are willing to wait for new listings that are realistically priced, have a “10 out of 10” showing condition, and are move-in ready.  These are the listings that active buyers swarm to. These listings sell quickly at prices and terms favorable to the sellers. Sellers need to ensure that their home is one of these listings by taking the time to prep their home before it hits the market, possibly investing a few dollars to make it move-in ready. In fact, due to the lack of inventory, these are the exact market conditions in which spending a few dollars to update or polish a home can increase the selling price by much more than the cost of the update.
This market desperately needs more quality listings.There was a slight increase in May in the number of new listings, but not enough to meet existing demand. New listings were quickly gobbled up by hungry buyers and the supply of inventory constricted to 3.2 months for all Front Range markets in May.

The increase is sales volumes that we’ve seen every month thus far in 2012 actually accelerated in May, with volume surging 33.9% compared to last May along the Front Range.

Boulder County followed suit. Sales volume was up 51.1% (fyi, that’s a big increase), and the supply of inventory tightened to 4.2 months, its lowest level this year.

A final thought: real estate markets are dynamic and difficult to predict.  As quickly as we shifted to a sellers’ market, we could just as quickly shift back to a buyers’ market. Macro-economic conditions remain uncertain. Timing the market is difficult, if not impossible. The true drivers of real estate decisions, whether to buy or sell or simply do nothing, are your personal situation and needs. As always, let me know if I can help.

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 not easy being a buyer in today’s Front Range housing market.
The supply of unsold homes is at a 12-year low and demand is up more than 20 percent from a year ago.
By some estimates, for homes below $300,000 – $400,000 or more in some trendy areas – there are three buyers for each home.
While it is possible that the supply of homes could suddenly skyrocket, it has only done that once from May to June since 1990.
But if you think being a buyer is a tough job, imagine how hard it is to be a casual buyer.
That is the jumping off point for this month’s conversation between Lane Hornung, CEO and founder of 8z Real Estate and COhomefinder.com.

John: Lane, if over beer and brats a neighbor tells me he is going to casually go house-hunting in today’s market, would it be OK for me to chuckle?

Lane: I think it would perfectly understandable to crack a smile. Buying a home in the today’s market is a serious business.
John: It’s obviously changed from just a few years ago, when there was a glut of homes on the market, hasn’t it?
Lane: I think even seasoned Realtors, who have weathered many different real estate cycles, have been taken by surprise how quickly the market has changed from one where there seemed to be an endless supply of homes to one where there is a huge shortage – depending on the price range and neighborhood, of course. For a long time, there was no need to have a sense of urgency among people who wanted to buy a home. In those days, you could be more of a casual house hunter. You might not have found a home, but there would always be more to consider, or the one or two homes you were considering would still be available next week, or next month for that matter, so you could take your time.
John: So what does it take to successfully buy a home under today’s existing condition?
Lane: I think a buyer, much like a Realtor, has to have a laser-like focus. As I said before, I have found that it helps to write down what you want in a home. That’s not to say you can’t change it, but it seems to give you an outline, a guide, if you will, of what you are looking for in a home. And, of course, you should be pre-qualified by a lender, so you have a realistic idea of what you can afford.
John: It seems that in this market, communicating with your Realtor has never been more important.
Lane: That is correct. If your Realtor finds a new listing on a Wednesday, it might be too late if you decide to look at it on the weekend. I know that 8z REALTORs are running hot sheets 3 or 4 times a day to make sure that they are on top of any new listing as it hits the market. Hours matter. Even with that, many brokers are working with buyers who simply can’t find a home to purchase due to the tight inventory or they have lost out multiple times in multiple offer situations. In order to rustle some more inventory, brokers are calling homeowners who couldn’t sell their home a year ago to ask if they would reconsider selling it or mailing letters.  Many sellers are surprised to learn that their home value has increased.
John: Should a prospective buyer feel pressured by the market to buy a home that he or she really doesn’t want?
Lane: Absolutely not. For one thing, it is a big investment. In most cases, a buyer will need to own the home for several years before they are likely able to sell it for a profit, after all of their expenses. There are exceptions to that, but if at all possible, from a dollars-and-cents point of view, they should look at buying a home as a longer-term investment, not as a way to make a quick buck. Of course, even more important than the financial aspect, they are buying a home, a place to live, so they need to get it right. That is why it is critical that buyers work closely with their agent to get very clear about what they are looking for in a home. This clarity allows buyers to move quickly and confidently when the right home comes along.
John: So how do they avoid buyer’s remorse?
Lane: That is where their Realtor can serve an important role. Buying a home is an emotional event under the best of circumstances and it is more stressful given current market conditions.
A good agent can be an objective sounding board and help you determine if this is the right home for you based on the criteria that you have defined.
And typically, there is another house out there that will meet your needs. It may not be on the market right now and you may have to wait a month or two, but it is very likely out there.
Trust me on this. I can’t tell you how many buyers I know who were upset and depressed when they lost a home, only to find one a week, or a month, or six months later that better met their needs.
John: Thanks, Lane.
Marsha Badger
Mobile: (303) 818-1390
MarshaBadger@8z.com

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Data Log
– Limited supplies of housing inventory held back existing home sales in May, but sales maintained a strong lead over year-ago levels and home prices are on a sustained uptrend in all regions, according to the National Association of Realtors®.
– Total existing-home sales, which are completed transactions that include single family homes, townhomes, condominiums and co-ops, declined 1.5 percent to a seasonally adjusted annual rate of 4.55 million in May from 4.62 million in April, but are 9.6 percent above the 4.15 million-unit pace in May 2011.
 – According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage declined to a record low 3.80 percent in May from 3.91 percent in April; the rate was 4.64 percent in May 2011; recordkeeping began in 1971.
– The national median existing-home price for all housing types rose 7.9 percent to $182,600 in May from a year ago, the third consecutive month of year over year price gains. The last time there were three back-to-back price increases from the same month a year earlier was from March to May of 2006.
– Distressed homes – foreclosures and short sales sold at deep discounts – accounted for 25 percent of May sales (15 percent were foreclosures and 10 percent were short sales), down from 28 percent in April and 31 percent in May 2011. Foreclosures sold for an average discount of 19 percent below market value in May, while short sales were discounted 14 percent.
– First-time buyers accounted for 34 percent of purchasers in May, compared with 35 percent in April and 36 percent in May 2011.
– All-cash sales slipped to 28 percent of transactions in May from 29 percent in April; they were 30 percent in May 2011. Investors, who account for the bulk of cash sales, purchased 17 percent of homes in May, down from 20 percent in April and 19 percent in May 2011.
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