It’s Time to Pick Ourselves Up and Dust Ourselves Off…Yes We Can!

Regardless of your political persuasion, Tuesday’s inauguration of the 44th President of the United States was one for the history books and I think we all agree that we hope that the change President Obama has promised will come sooner rather than later.

In the words of our new President during his inaugural address, “Starting today, we must pick ourselves up, dust ourselves off and begin again the work of remaking America. For everywhere we look, there is work to be done. The state of the economy calls for action, bold and swift, and we will act—not only to create new jobs, but to lay a new foundation for growth.”

There’s no question, Obama has his work cut out for him. This week CNN reported, “The scope and intensity of problems facing President Obama are similar only to those that Franklin D. Roosevelt faced in 1933.”

Obama is expected to hit the ground running. History shows that the first year of a President’s term is most critical. At some point, he will own the problems he has inherited and so time is of the essence; he knows he must take immediate action.

In the short run, Obama has pledged to work with Congress to implement aggressive policies—including as I referenced last week, making better use of the TARP funds—to prevent foreclosures and strengthen existing home sales. With the second half of the TARP funds now available to him (totaling some $350 billion) we should see the beginning use of those dollars sometime within his first 100 days in office. Obama has promised to devote $50 billion to $100 billion to a new foreclosure prevention program, leaving him between $250 billion and $300 billion of TARP money to address the continuing credit crisis.

As Obama was being sworn in, the world as we know it continued. One of the current issues most affecting our market is the drop in mortgage loan limits for conventional financing as of the end of 2008. This is dramatically hurting home sales and trade-up activity in higher price ranges. According to NAR, “The latest existing home sales data shows transactions under $400,000 are 3 percent below a year ago. However, sales of homes priced at $750,000 or more have declined a whopping 47 percent.” Buyers who need jumbo mortgages must pay interest rates that are nearly 2 percentage points higher than conventional financing; as a result, the high-end market is very slow and buyers in higher price ranges are at a severe disadvantage.

Currently NAR is pushing for the permanent increase of mortgage loan limits to that $729,750 cap. According to a statement released this week by NAR, “To illustrate in dollar terms if mortgage limits are permanently raised to $729,750…the mortgage payment on such a loan would drop by $942 per month by lowering interest rates 2 percentage points. Over the life of a 30-year loan, the homeowner would save $338,000.”

Especially here in our market, we need the increased loan limits so people in all prices are able to purchase. I am a firm believer that every segment of the housing market needs a turnaround to spark an overall housing recovery.

With this information in tow, let’s take a look at this week in real estate, including the release of our January luxury home release—which will be distributed to Colorado media today: http://www.myrecafe.com/accessible/viewDocument.aspx?documentID=5560

• Boulder County—Our Boulder office reports that listing inventory and sales activity is steady though showing activity is on the rise. In fact, showings have tripled in our area. Buyers seem to be getting motivated to capitalize on the lower interest rates. We have had reports from Agents that their listings are going under contract if they are priced correctly and competitively for the market. The offers on over-priced homes are usually right at the true market values and those that are over-priced are still sitting with a few showings. Our Longmont office reports that listing inventory and showing activity is increasing while sales activity is decreasing. Specifically, floor calls are picking up. We are also finding that sellers are asking for help with decisions concerning short sales and bankruptcy. Buyers are still looking for the best values and it is common for negotiating of the final sales price to be 10-15 percent less than the list price on even the most well priced homes.
• Clear Creek County—Our Evergreen office is reporting steady listing inventory and increasing showing activity though sales activity has decreased. We haven’t seen a large number of multiple offers though we did represent two buyers in multiple offer situations this week. One home was priced at $150,000 in Lakewood and received 14 offers. One buyer offered $10,000 over the list price and lost. Another was a $340,000 Lakewood home that received two offers and we’re still waiting to hear an answer. We had 46 showings during the week with a total of 130 month to date.
• Denver Central—Our Denver Central office reports that though we are not seeing an increase in listings, we are seeing good activity. Our floor calls are up as well as leads generated directly through calls from our Agents to sphere, farm, etc. With interest rates at all time lows, many buyers are back in the market and actively looking. We believe the increase in contacts and appointments will correlate to an increase in sales and listings in the upcoming month. The energy is good and public perception is more positive than in the past. We are also seeing growth and interests from our higher-end buyers.
• Devonshire—Steady but sure is the rule of thumb in the Devonshire office. Having said that, we are anticipating change now that the inauguration is over and we can finally move forward into 2009. We saw good showing activity this week though contracts are a little slower to be accepted. This is largely in part due to so many short sales that need bank approval. The old real estate adage holds true in this market: If it shows well and is priced well, sales will follow.
• Douglas County—Our Southwest Metro office is reporting an increase in sales activity and showing activity along with continued signs of improvement. The buyers are very interested in either starting or restarting their search for a home. Sellers are calling to list their homes in the next month. Now that the new year has begun and the inauguration is over, the phones are ringing again.
• El Paso County—Our Colorado Springs team reports increases across the board including listing activity, sales activity and showing activity.
• Elbert County—Our Parker office reports some areas of Douglas County are beginning to see a reverse trend with decreasing inventory. We are seeing a steady increase in both showing activity and sales activity. Floor calls and walk-ins are on the rise.
• Jefferson County—Our Conifer office reports listing inventory is on the rise with three new listings taken this week. We had three offers on our listings including one multiple offer situation for a bank-owned home in Bailey. We also represented one buyer in a multiple offer situation. The Morrison home was priced at $175,000. We had 32 showings during the week with a total of 83 month to date.
• Larimer County—Our Fort Collins and Loveland offices share that Northern Colorado remains well-positioned to weather our current national economic woes. Because of the diversity of our industrial opportunities such as bio-tech, renewable fuels, solars, wind as well as increased natural gas exploration—we are an attractive and affordable solution for this next generation of primary job providers. That being said, we are also seeing comparatively flat sales in our market and have become highly attractive to out-of-state buyers as well as local residents looking to trade-up. One Agent recently told of a property in Water Valley (a resort style community with golf and water sports on site) that was a four bedroom, three bath home with an eight card garage. The property was under $350,000! Clearly the time to buy is right now. Available inventory levels dropped consistently throughout 2008—so when the Spring increase in demand hits, we may see prices start to creep upwards. With interest rates remaining low, qualified buyers have more purchasing power than at any other time in our community’s history.
• North Metro—Things are heating up! We have taken more listings recently and showings are way up. Having more properties for potential buyers means sales will increase even more than recently. Sales are rising steadily partly because of so many properties. We had six multiple offers this week—both listings and sales. It was a good week!
• Southeast Metro—Our Southeast Metro at DTC office reports listing inventory and showing activity are on the rise. Plus, we had 12 multiple offers this week! For its third consecutive week, our Southeast Metro at DTC office is reporting positive signs. A trend? Let’s hope. Plus, this week we officially have proof that homes under $250,000 that are in great condition (and aren’t even short sales or REOs) can sell fast. One Agent listed a home, put it on the market on late Wednesday afternoon and began showing it on Friday. By Friday evening we had our first offer and by Saturday afternoon we had a second offer. We also received calls from eight other Agents wanting to write offers. This is important anecdote for buyers and sellers to remember. Sellers consider the fact that pricing and showing your home are keys to success in this market. Buyers, this is a good reminder that you can’t get too complacent. Yes, there are a lot of homes on the market right now but if you find a home that you like, don’t delay. Take action and make an offer or that perfect home may just pass you by.

If nothing else, this week’s change in executive leadership of the United States of America changed—even if it was slightly—consumer confidence at a time when we need it most. During his acceptance speech in November, Obama repeated in a rhetorically symbolic gesture, “Yes, we can.” If it provides any solace in this time of challenge, I would agree with the words of our now President and add:

• Yes, we can move past this challenging market.
• Yes, we can rebuild our market to its once robust roots.
• Yes, we can keep things in perspective and remember that we came from one of the hottest real estate markets of our time and today’s market is the economy and demand moving back into equilibrium.
• Yes, we can remember that with today’s low interest rates, motivated sellers and generous inventory, it’s a great time to buy!
• Yes, we can remain united and be reminded that this too shall pass.

It’s just a matter of time. So let’s collectively pick ourselves up, dust ourselves off and move forward as our future is bright.

Until next week,
Have a great one,

Chris Mygatt
President and Chief Operating Officer
Coldwell Banker Residential Brokerage Colorado