From A Slow Crawl…To a Brisk Walk

I heard someone earlier this week say that the housing market has gone from a slow crawl to a brisk walk. I think that is the perfect metaphor to explain the recent changes in the real estate market. The market is coming back. It’s not roaring, but it’s coming back.

This week, according to Reuters.com, U.S. mortgage applications jumped as record low interest rates spurred a surge in demand for home refinancing loans. The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, increased 32.2 percent to 1,159.4 for the week ended March 20. Refinancing accounted for 78.5 percent of all applications.

Furthermore, interest rates on mortgages fell after the Federal Reserve last week said it would buy Treasury securities for the first time in more than four decades as well as more than double its planned purchases of mortgage-related securities. Reuters.com reported that “Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 4.63 percent, down 0.26 percentage point from the previous week, reaching a record low….Interest rates were well below year-ago levels of 5.74 percent.”

Meanwhile, according to Realty Times, housing starts took a surprise jump of 22 percent in February over January's depressed levels. Most of the increase was attributable to apartments and condominiums, but single family starts were up by one percentage point, and new home permits were up by 11 percent, after months of sharp declines.

Existing home sales are also seeing some good trends. NAR reported this week that sales activity for single family, townhomes, condominiums and co-ops rose 5.1 percent to a seasonally adjusted annual rate of 4.72 million units in February from a pace of 4.49 million units in January.

Last week I recommended that you watch Coldwell Banker president and CEO, Jim Gillespie on CNBC’s “Roadmap to Rebound” which focused on the state of the housing market. If you missed it, Gillespie stated that “the government could do a lot more than they are already doing in order to get the real estate market moving again.” Congressmen and economists continually say that in order to get the economy going, we need to first get real estate going. Gillespie believes that two key changes are needed in order to get the economy moving, and the first item that needs to be addressed is to set a fixed-rate mortgage. “Lowering the interest rate to 4% to 4.5% for 12 months is one way to get the inventory moving.” Along with setting a fixed-rate mortgage, increasing the tax credit to $15,000 and including all buyers of primary residences will help move buyers along and get the market to shift.

Gillespie also stated that the demand side needs to be looked at closely, because once we start to burn off the inventory that we currently have, prices will begin to stabilize and go up again, which will help those in distressed situations. “Fifty-five percent of loan modifications have failed after six months because jobs are not being created and homeowners are losing the jobs they have,” says Gillespie. “In order to create jobs, we need to create demand, both of which will get the housing market and economy moving.”

I for one appreciate seeing our leadership team speaking out on our behalf, serving as the visionaries for our industry. It’s enlightening and certainly makes me proud.

Now, let’s take a look at this week in real estate:

• Boulder/Longmont—Our Boulder office reports that the past few weeks have been a bit slow with properties going under contract. The feedback from the Agents is that with all the talk and hopes that the stimulus items will include further reductions in the interest rates before they commit to writing an offer. While we are still actively taking listings, ONLY the homes that are priced well are being shown and getting offers. The homes that are priced at a value to the public are getting multiple offers allowing for the seller to get more than what they originally priced. The Longmont office reports that showings were off 6% from the previous week. Calls into the office from potential sellers and buyers were up. Buyers are using many methods of searching for properties. They are reading specialty home sales magazines, newspapers and using the Internet. Some buyers are realizing that well priced properties need quick action, they are sold quickly. Overall, days on market have decreased 11% year over year.
• Evergreen/Conifer—Our Evergreen office reported it had a total of two new listings for the week. Two listings went under contract, one was a short sale. Two buyers went under contract—both are short sales. Three other offers are pending acceptance—one is an REO and the other two were short sales with multiple offers. One Agent was preparing to make an offer on a bank owned property but was unable to submit because the bank stopped taking offers after 18 were submitted. The listing was in the $150,000 price range in Denver. We had 83 showings for the week.
• Denver Central—Our Denver Central office reported that spring is adding many new observers to open houses and the low rates combined with the new tax incentives have many buyers anxious to tie up a property to add to the interest deductions they get normally. They know the longer they are in the home the more interest is available to deduct for 2009 tax year. With the new additional incentives it makes for a nice bonus around April 2010.
• Devonshire—What a strange market. We are seeing homes go under contract at a slower pace but once under, they don't seem to be falling as frequently as before. Buyers seem to be doing their due diligence before going into contract. One of our professionals in the office is counseling her clients that in this age of "restructuring,” purchase a home because it's a place that you want to remain and in a neighborhood that you love. Do not purchase a home for the quick money you will make on it. These comments seem to have real value and we see inventory decreasing. It's a perfect time to buy the home you want in the area you love. Seeing homes selling spurs sellers to get their homes on the market. Things are looking up and we look forward to an active spring/summer season.
• Douglas County—Our Southwest Metro office reports that showings this past weekend were the best yet! Our open house activity was fantastic with Agents having such busy open houses that some ran out of flyers! Buyers seem anxious to find homes and our Agents are busy writing offers. It seems as though sellers and buyers are beginning to see a little light at the end of the tunnel. There is excitement around the office and among the Agents.
• El Paso County—Our Colorado Springs office reports that open houses are still active. We’re seeing lots of buyers in town just checking things out to see if they want to accept a transfer to Colorado Springs. USAA transferees from Sacramento are getting several options for relocating as are some Lockheed people from San Jose. Foreclosures are slowing down as are short sales. Buyers get frustrated when they try one and avoid them after that. Lenders are tightening up finally.
• Larimer County—Our Fort Collins/Loveland office reports that as predicted, showings during Spring Break week in Larimer County increased dramatically with many families remaining in town and weather cooperating beautifully. We are expecting to see an uptick in contracts in the following week especially with 30 yr fixed rates now in the 4.6% range. Despite continued unsettling economic news on both local and national fronts, Northern Colorado enjoyed a key job creation groundbreaking ceremony of their 2nd blades plant and 1st nacelle assembly plant in neighboring Weld County. At full capacity, these two operations will employ over 1300 people in the area.
• North Metro—The North Metro office notes that the market under $250,000 is very hot right now. Inventory is low and several homes are getting multiple offers. Interest rates are low and buyers have gotten off the fence.
• Parker—Listings as well as showings were up again last week. The traffic through open houses is way above average. For the first time in months we see stable values in some communities. Canterberry Crossing, Stonegate and other established neighborhoods show a drastic increase in sales activity. More and more, energy priced listings receive multiple offers. We continue to watch the trend closely and are confident that we will be able to announce a shifting market for some areas in Douglas County soon.
• Southeast Metro—Showing activity continues to increase. Our office set 660 showings last week! Several market adjustments were put into place on our listings. Lots of traffic at open houses and buyers are making offers quicker as inventory continues to decrease in the price range $200,000 to $300,000. Outer areas are still sluggish as inventory is at a stand still.
• West Lakewood—One buyer had 20% down, excellent credit asked for $2000 in seller concessions. The seller countered without the concession and the buyer took the counter offer. We are seeing a reduction in the number of bank owned listings that are coming on the market. Showings are up substantially as are visitors to open houses. More offers are coming in. A lot of first time buyers in the market are now taking advantage of the $8000 tax credit. One Agent put three of her listings under contract and is writing on one of her own listings with her buyer.

After a week of positive indicators, my best advice is for buyers to get out there. There are some fantastic deals out there right now and as more people begin to realize it, competition will come back and begin to drive activity. You know what they say about the early bird!

The weather over the next few days is going to be cold and wintery—even after my message last week in which I kicked off spring. Stay warm and safe and have a wonderful weekend!

Until next week,
Make it a great one,

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