Thursday, May 7, 2009

Stress Test Reveals There’s More Work to Be Done By the Banks But The Local Real Estate Market Continues to Thrive!

This week the results of the long-awaited Stress Test on the banks were released. What the government hoped to accomplish through this Stress Test was to determine how much more capital the banking sector would need to withstand the recession—much of which was caused by residential mortgages and other consumer loans such as credit cards. The result was that 10 of the nation’s 19 largest banks will need to raise a total of $74.6 billion in capital. The Stress Test revealed that banks like Goldman Sachs and J.P. Morgan seemed to be better positioned than Citigroup and Bank of America.

At this point, according to Kiplinger, “The stronger banks will actively do what they can to return any money borrowed from the government to get out from under restrictions on dividends and executive compensation. Their ability to sell common stock to the public is far better than their weaker counterparts, who may have to privately sell stock to investors or raise capital with so-called mandatory convertible preferred shares.”

According to industry analysts, it seems that until the banks get back on their feet, credit will continue to be tight. That leaves the Federal Reserve responsible for filling in the gaps with its own lending programs aimed at jump-starting lending.

On a brighter note, however, the real estate sector of our economy continues to show some positive signs—a good symbol that the programs that the government has put in place are helping. USA Today reported earlier this week that “More homes for sale are attracting multiple offers as buyers pursue lower-price homes and banks low-ball asking prices to attract competing bids on foreclosures.” It’s exactly what we’ve seen locally. Just as I revealed in an earlier blog posting, the first time, entry level home buyer market is fueling this recovery. It’s something we certainly forecasted and it’s finally coming to fruition. Now, we’re seeing, in many markets, multiple offers on starter homes and even some frustrated buyers who are scratching their heads and wondering what happened to the buyer’s market. We warned that the change could come before we knew it and in some price ranges, it might’ve already come and went.

Here are some links to some interesting, positive news stories from the week:

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

  • Boulder/Longmont—Our Boulder office reports that activity has been very steady the past few weeks in all three categories, showings, sales and listings. Agents are reporting more buyers in the marketplace but they are being very cautious and want to see a great many listings before deciding. Underwriters and appraisers are being more cautious as well. Getting deals to close remains more challenging than in the past. Short sales remain a major market factor in the area. The Longmont office reports that showings are becoming more consistent. Listings are selling in days when they are priced right. Good clean listings are hard to find for buyers right now. The price range from $150,000 to $250,000 is very competitive and these homes are not staying on the market for very long. The loan process is still a confusing one for buyers. It is not the slam process it was in the past. New times = New rules. Prequalification is the best way to go. Open houses are seeing good traffic.
  • Evergreen/Conifer—There were four new listings during the week for a total of 33 for the month. Three listings went under contract in the $575,000 range and one in the $1,000,000 range in Evergreen. The other was vacant land. A total of 19 homes under contract for the month. Showing activity showed a dramatic improvement following several straight weekends of snow. There were 71 showings for the week for a total of 244 for the month. The Conifer office reported that there were no new listings during the week. One listing went under contract during the past week, bank REO. Two buyers went under contract in the $250,000 range in Centennial with multiple offers. Other was a buyer from a floor call that went under contract on a home in Conifer listed at $1,000,000. Showing activity showed dramatic improvement following several straight weekends of snow, for a total of 52 showings.
  • Denver Central—We are seeing an increase in under contracts and multiple offers. We continue to see drops in inventory.
  • Devonshire—No information reported.
  • Douglas County—Our Southwest Metro office reported that showings have continued to increase. We have had two clients who have closed on their properties and have amended their tax returns and received their $8,000 refund. We are seeing buyers wanting to take advantage of the $8,000 and as a result are seeing lots of activity with Agents and buyers. Our open houses continue to be successful and our Agents have flyers with the information on the $8,000 credit. Many Agents have picked up buyers from their open houses and floor has been great, too. We seem to be making a turn.
  • El Paso County—Colorado Springs is still bustling with activity. Inventory seems to be remaining steady but buyers are out in droves. Currently and Fort Hood, TX is a moving seminar for troops coming to Fort Carson. CBRB was selected as the only real estate company to be represented at the conference. They estimate between 6,000 to 8,000 troops and their families will be moving here this year. We are also representing a team moving from Scotland to work at a local technological company. Home prices are remaining steady & homes under $200,000 are still leading in sales volume.
  • Larimer County—The market is steady with inventory growing and more buyers taking advantage of the first time home buyer incentive. Showing activity is steady especially in the lower price points. Two Agents reported an under contract home in less than five days at the $200,000 price point. Homes in the $450,000 plus market are struggling and the primary culprit seems to be the jumbo interest rates. With FHA financing hovering under or around 5%, it looks to be the best deal out there. Buyers are cashing in on this tremendous rate. Cash heavy investors are also taking advantage of good deals in the market.
  • North Metro—Activity continues to be strong. Our Agents are going out on numerous listing appointments and buyer appointments. Inventory decreased which is creating multiple offer situations on homes for the buyers. There are many short sale properties on the market.
  • Parker—After two crazy weeks showings have decreased slightly. We are still up on new listings, contracts written and closings year over year about 20%. Compared to the Denver Metro market which is down about 16% this is still great news. The lower price range homes are still selling quick if priced right. The high end homes are sitting on the market for a long time unless priced very aggressively.
  • Southeast Metro—No information reported.
  • West Lakewood— The Agents in the West office are very, very busy listing and selling homes. Sellers need to be realistic when pricing and staging their homes. Buyers are realizing that they are not going to "steal" a home. Offers being accepted are fair and reasonable. We are seeing some movement in the higher price ranges.

What do we do with this information? Spread the word! It’s one thing for me to talk about a recovering market but it’s another when even the most pessimistic analysts are doing the same. The stories above share the real story. All of our offices are reporting similar stories and as I visit our offices and talk with our Agents, I’m hearing the same scenario: the market is changing.

The window of opportunity has been open and it has been inviting buyers in for months. Now, the buyers are acting and if you were sitting, cooling your jets, it may be time to start your engine! Don’t wait until you’re kicking yourself and saying, “I should’ve bought a lot more real estate.”

Until next week,
Make it a great one,

Chris Mygatt
President
Coldwell Banker Residential Brokerage Colorado

Posted by at

No comments:

Post a Comment

Subscribe to: Post Comments (Atom)