Real Estate Information

Hello out there,

As I announced last week over the next couple of weeks I am going to be doing weekly installments on how to invest in real property. So here we go.

First off, the two reasons you should be investing in this market.

1. Price: I just looked at the numbers for August. Sales are down and inventories are dropping, normal for this time of year, but price is holding firm. In fact prices this year have held firm or slightly increased across the boards. As jobs and the economy improve prices will continue to increase. Not over night and not next month, but over time this market will change.

2. Rates: The owner non-occupy rate sits at about 5.75 as I write this. This is about 2 points lower than just a couple of years ago. Do the math! You are looking at 20% down as rates on 10-15% are still fairly high.

So, combine current price and interest rate and this is a excellent market for investors to be participating in.

The rest of this post is geared towards the first time investor. Please feel free to comment or call me with any questions.

We have three main areas to discuss when thinking about investing: Your outcome, the rules, and your plan.

First off, I am going to start at the beginning with the end. Huh? That's right, at the end. Before you begin you have to KNOW YOUR OUTCOME!!! I cant stress this enough. Begin your plan with your WHY. Why am I doing this. There are many great reasons to invest in real property. To pay for your children's college, your retirement, current cash flow. You get the idea.

What part of your why is objective based and what part is time based or in what combination of the two will you be putting together your plan. So you know you need investment goals how do we set them?

I have a favorite acronym for goal setting. It is SMART. This stands for Specific, Measurable, Achievable, Results oriented and has a Time frame. Your assignment for the next week is to start laying the framework for your investment goals/outcome. As we move into rules and planning keep testing your goal outline to see if it is SMART.

Your other assignment for the week is to talk to a couple of financial planners or your own if you have one in place. The same with a CPA. This will become the foundation of your investment team that should include: Financial planner, CPA, Realtor (commercial or residential based on your plan), and a Mortgage Lender. This will become your core team so choose wisely. The team you assemble and the capabilities you develop to understand and apply investment plans and rules can take you far.

Till next week take care,

Mike

Do you want to sell that first home for more room or a different location but afraid of the loss you will take on the sale of your current home. Good question and a real cause for concern.  Stats tell us on average the first time buyer will stay in their home for about 4-7 years. The most common reason for moving is the need for more room to accommodate a growing family. Other reasons can include being closer to work or starting a home business.  The National Association of Realtors has been tracking homeowner stats for decades and here are some breakdowns from their research. The average home owner will spend about 50% more on their move up home, live in it the longest, and due to the time value of money, see the best chance at decent appreciation. Of course as we have seen the past few years all markets are cyclic. Watch for another blog from me in the next day or so. I found an excellent bunch of “sound bites” if you will highlighting housing markets from the past. If you are considering a move up I may have a different way of helping you look at this market.

A common concern is taking a loss on the sale of your current home. This is very real, but what if you can actually make this work to your advantage. Looking at my example, Home A is a $160,000 starter home and Home B is a $240,000 move up home.

At the peak of the market there is an $80,000 gap in the acquisition cost of buying up. In a down market with a 10% loss of equity Home B is now $216,000 and Home A is $144,000. The gap has been reduced to $72,000. The move up buyer is now $8000 closer to affording their next home then they were at the peak of the market. Of course these numbers only work if there is enough equity in Home A for the sellers to sell and still make the down payment for home B. If this describes your situation this may be a great time for you to make the move up.

Till next time,

Mike Erhardt

719-233-6453

First time buyers-Stop renting, I mean it-Stop Renting- With interest rates below 5% coupled with the pullback in home prices this is an incredible time to be buying a home.  As a matter of perspective over the past 20 years the average interest rate works out to be around 9%. There are a slew of web sites that discuss the pros and cons of buying over renting so I am not going to rehash them here. Instead let’s look at the advantages of buying now when rates are low vs. waiting.  Let’s use as our model an $180,000 home in Colorado Springs. Assume the taxes and insurance on an $180,000 to be $150($75 insurance, $75 taxes) at 4.5% the total payment principle, interest, Taxes Insurance (PITI) will be $1062. If that rate goes up to 5% your payment will increase to $1116 a difference of $54 per month. Now $54 a month, hey that’s not so bad, but over the life of a 30 year loan that works out to just over $19,000.

A far bigger problem is what happens to your buying power when interest rates increase.  Let’s say you were approved at 180K back when rates were 4.5% but you wanted to wait till the market “got better”. Well the market gets better but in the process the rates are now 5%. You are now looking for a $170,000 home vs. the $180,000 home.  This drop in the home you can afford can affect location, house size, and amenities right off the bat.

The two most common concerns I hear from potential buyers right now are:

1. We want to catch the bottom of the market. So how will we know the bottom of the market? At a minimum 2-4 months after the bottom by looking back at past housing data as the market goes back up.
2. We want to wait till the markets better.  I get both #1 and #2 this can feel like a scary time to be buying a home but here is the bottom line. Guess what the housing market will look like when the market “gets better”. Both home prices and interest rates will go up. This is a historical fact.

I don’t have a crystal ball and there are no guarantees in life but this I do know.  National Association of Realtor stats tell us that from 1968 to 2009 home prices appreciated at a rate of 5.4%. We all know this is not a straight line number based on the housing market of the past few years, but there is a time value to home ownership. Let me use my own home to illustrate. I purchased my home in 1997 for $123,000. My current payoff is $107,000. I just had it appraised for a refi I am doing at $190,000. So subtract 107K from 190K and over 13 years I have accrued $83,000 on paper in equity.  Not bad at all. Factor in the tax break we homeowners get and life is good.

Call me-It’s time to MOVE!!

Here are the 3 things that should be happening in the current housing market.

1. First time buyers should be looking at buying vs. renting. The housing market looks all scary right now because the tax credit went away and the sales numbers dropped and the economy looks uncertain on the nightly news. All this to shall pass. Always does. Just don’t feel that way when you are in the middle of it. If you feel you have job security and can qualify for a loan its time to jump. The only things that will happen as the market improves will be home prices and interest rates will improve and not for you the buyer. Overall prices held there own all of this year so far. Look for more info in my blog post 8/31/2010
2. 2.        Move up Buyers. If you have the equity in your current home and can price to sell in this market it is time to move up.  Looking for a better location? Run out of bedrooms?  The time to make the change is before the “market gets better” not during or after. Look for my blog post 9/3/2010 as I break down by price range what’s been selling the past couple of years and why this is your market!
3. 3.       Buy and hold investors.  On 9/6/2010 I will post my thoughts on the investment side. Loans are better than a couple of years ago for owner non-occupy and there are still good deals to be had. Well also take a look at some of the long term projections for the next ten years as the echo boomers take over the lions share of home buying and the impact this will have as we run into the next up cycle.

In last week’s market review of June I promised I would track what I felt were inflated price and sales numbers due to the closings still taking place from the tax credit. As the tax credit fades out and the economic recovery slows check out this quote from Pete Flint of Trulia and the graph to follow.

“Sellers are feeling the heat this summer as the economic recovery simmers down and home inventory levels climb,” says Pete Flint, co-founder and CEO of Trulia. “We’re seeing more and more sellers reduce their home listing prices to attract potential buyers, who definitely have the upper hand in negotiations this season. The slow start to the summer season is a major concern that we are heading towards a double-dip in the second half of this year.”

Our inventory has increased so price, condition, and location will still carry the day. New update as of 7/27/2010: stats being trotted out this morning in the national news feeds are comparing last years lows to this years highs and blowing off the pullback the market is experiencing as I write this. This is the danger in stats and how they are used! The fact is as a realtor in the trenches as I comp homes for new listing and set showings for current buyers I am seeing the same thing Trulia is-Prices have gone soft as buyer demand has dropped.

Here is the first part of the chart, call me with any questions. 719-233-6453 Mike Erhardt

Welcome back to another installment of all thing Colorado Springs with your host Me. As many of you know I have been a member of Colorado Business Leads for over 5 years now. I had a chance, last week, to sit down and meet with one of our newer members Michele Hanley the owner of Escapes and Escapades Travel. One of Micheles specialties is group travel. Churches, family reunions, high school or sports groups you name it. Some of Micheles favorite destinations include Europe and the South Pacific. She also has a special certification for travel in Italy. If you book her for Italy let me know-I was stationed in Naples in the early 90's and I may have to see if she needs an assistant for that trip. For more information and a link to her web page just go to the links section of my web site and click on Business Partners.

Till next time,

MIke

Hello and welcome either back or you have discovered my blog for the first time. Here is the June 2010 market update. Lets start out with an overview of the graph year to date.

Pretty standard increase in total actives and sales as we transition from spring into the "lets get moved before the kids start school in the fall" selling season. One trend of interest. Look at the new listing pullback after April. A bit of seller trepidation after the tax credit. Although showing traffic did take a hit right after the credit expired overall sales are up 3.6% from June 2009. This is still a bubble from closings on homes under contract in April that met the deadline and closed in June. Tracking sales and price over the next couple of months will be a better indicator of the overall market health as the effects of the tax credit go away.

Here's what I can tell you about the overall health of the current resale inventory. Trying to find homes to show buyers was a total pain at times last year. Many sellers were on the sidelines and a large percentage of listings were short sales and foreclosures.

Even with the pullback new listings are up 4.6% from June 2009. If pricing holds steady this trend should continue.

This will be the number I track over the next few months as we try to gage the effect of the tax credit going away.

To sum things up. If pricing holds steady and interest rates stay at the historic lows they are at currently. It is time to buy! Another factor is the rate of new foreclosures is slowing this past couple of months. Fewer foreclosure means less negative impact on current prices. All that will happen going foreword is both prices and interest rates will continue to creep up. If these trends ring true folks will look back in 2011 and say oops we missed it!

So once again, if you have credit and job security its time to buy. Call Me!

Until next time, Take care,

Mike

Hey there,

Stop by my open house Sat 7/10/2010 from 1-4 PM I will have the June market update (look for blog beg. next week) and bottles of my homemade cajun spice mix to hand out.

 But most important-come check out this house. Close to gate 20 Ft. Carson in the Hertitage sub-division. New carpet was just installed and a killer refinish of the Kitchen hardwood. For more details and photos check out this listing here on my website.

See you there,

MIke

Hello out there in Real Estate land,

Been lots of confusion this past couple of weeks about the tax credit extension. This is how things sit as of now. The extension applies only to folks under contract by the deadline that have not closed yet. With one very large exception. If you have been overseas military during a certain time frame the deadline has been extended for you for a year. Call me for details. To many folks contracted for short sales and foreclosures and could not get them closed before the deadline. Rather than have those buyers just walk the government gave out the extension. On the one hand this was a good thing as we took more distressed properties out the market. This was a stroke of luck as even with the new programs out there home buyers and sellers are still finding short sales to be a tough road most of the time.

At this time I am not hearing of any new tax credits comming down the pipeline. Of course we have not had any advanced notice in the past so well see how things shake out.

June market numbers should be posted in the next 5-7 days and I will post those when we get them.

Till next time,

MIke

Hello there,

As many of you know I have been a member of Colorado Business Leads for about 5 years. Great group of business owners. Just recieved heads up from Tara Patty, our photographer, that she is running her Senior High School photo special till the end of July. Complete your photo session by July 31 and recieve a set of 56 wallet size as a bonus. Tara can be reached at:

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