Saturday Reporter-Herald November 13, 2010 E1
Real Estate Matters
www.homeandrealtyguide.com • Saturday, November 13, 2010 • Reporter-Herald
Living Smarter
Interest rates drop again — but will the market perk up? ILYCE GLINK TRIBUNE MEDIA SERVICES
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he average quote for a 30year fixed rate mortgage on Zillow’s mortgage marketplace last week was 4.14 percent. The average rate quoted for a 15year loan was 3.6 percent. And for those willing to take a flier on a 5/1 adjustable rate mortgage (ARM), the average quote was 2.96 percent. Imagine getting a loan fixed for 5 years at under 3 percent. It’s hard to believe. What’s even harder to believe is that the Federal Reserve Bank has decided to spend $600 billion buying bonds, a program known as “QE2,” short for the second round of quantitative easing. The goal of the program is to lower long-term interest rates. The economic reasoning behind the purchases is that if long-term interest rates go down, economic activity will pick up, jobs will be created and the economic recovery will begin in earnest. And when that happens, those lower rates will spur the housing market to recover. Will it work? It might, if everyone acts on those super-low interest rates. But will businesses hire more workers and make additional investments simply because the cost of borrowing drops another one-half of a percent? Is there a really big difference between borrowing money at 4 percent versus 3.5 percent? Lower interest rates seem less likely to spur a business to act than landing a new client or an additional piece of business. When it comes to mortgage refinancing, the same principal applies. There is a finite number of homeowners who can refinance to take advantage of the super-low interest rates, because most don’t have enough equity in their homes, or their credit scores are shot, or they don’t have enough cash on hand to pay the closing costs or fees. Many of those who do have the cash, credit and equity necessary have already refinanced at record-low interest rates. Some have already refinanced a couple of times, as interest rates dropped. Is it worthwhile to refinance again if you’ll only save $50 or $60 per month, but it will take two to four years to pay back the costs of the refinance with the savings the new lower rate will generate? And what about the costs you paid to refinance the last time? At some point, the potential savings isn’t worth the effort. I See Glink /Page E4
Photo courtesy of Midtown Homes
The Granby at Boise Village North is priced at $174,900.
People move to homes under $250,000 and seek efficient design JENNIFER LEHMAN SPECIAL SECTIONS REPORTER
Local realtors have seen an increase in people downsizing and looking for homes below the $250s. People are looking to downsize because they want to “live smarter,” said Keller Williams Realtor Vicky Briggs. “I think people are so much more aware of what the economy is doing, she said. “I think they are just trying to be smart and conservative.” In November, Midtown Homes’ Boise Village North closed on 10 homes, their highest month of closings all year. Of those 10 closings, seven of those are downsizing buyers, said Rollin Goering, Midtown Homes Listings Broker. “(Downsizing is) definitely a trend that has increased in this last year specifically,” Goering said. Boise Village focuses on homes under $220,000 and has seen an increase in homes purchased under $210,000, Goering said. A lower level of mainte-
nance and lower utility bills are two of the most common reasons people are downsizing, Goering said. People are also downsizing that are relocating from other areas to be closer to family, he said. After the first-time homebuyer tax credit expired on April 30, Midtown saw an older demographic looking to downsize “come out of the woodwork,” Goering said, something that has been pretty consistent from May until now. With the first-time home buyer tax credit, sales were big between January and April and after they expired Midtown saw a surge in home purchases from an older demographic looking to downsize. Between the first-time homebuyers and the empty nesters moving into smaller spaces, there are also a number of middle aged families with kids downsizing, Goering said. It’s not just the older demographic, but middle-age people with families are making the choice to reduce their monthly cost in home payment, utilities and gas cost as some relocate closer to their jobs, Goering said. “Ever ybody’s trying to save money,” said Russ Batz, Associate Broker with RE/MAX Alliance in Loveland. Everybody’s been affected by the economy with people losing their retirement and utility costs going up, he said. This desire to save is impacting the way homes are be-
ing built and what people are looking for when they downsize, he said. Batz said there are mainly two types of buyers right now, first-time homebuyers, the number of which is at an all time high, he said, and baby boomers looking to retire. Overall people are looking to save money and spend less time maintaining their homes. Retiring baby boomers are seeking single story homes while more first time homebuyers, seeking efficient use of space. “Layout flexibility is king,” Batz said. People are looking for a second or third bedroom to double as a home office, and prefer a great room over a formal dining room. For first-time home buyers they don’t want a foyer that goes up two stories, he said, they see it as a waste of energy to heat that unused space. They would rather have a bonus room. For the older demographics looking to move to a smaller space, quality is still important, Batz said, people just don’t want to have to clean or maintain big spaces or big yards. Batz said people want to focus more on enjoying their lives and less time cleaning, inside and out. They are wanting to spend more time with their favorite people. Batz said there are variations on these ideas, but when lumped together they are heavy enough “to have an af-
fect on way home builders are building homes.” While the demand in these lower-priced homes has increased, homebuyers at Boise have also been able to move on their contingency (contingency is the option of not gaining possession of a new home until the current home has sold) and sell their current home where as in the past couple of years they would have to sit and wait. Goering said this means the market is healthier in general and that homes are moving at all price points, allowing people to downsize if they want to. Batz believes there has been an uptick in higher-priced homes in Loveland and the state, but that in general, larger homes stay in the market a lot longer because fewer people want them and fewer people can afford them. “For sellers, if your house is priced appropriately, it will move, Briggs said. “For buyers you have to be quick because those good things will move quickly.” Homes are still moving, she said. “Our market is still a good market you just have to be smart in today’s market.” For those that do want a large home and a large yard, now they are often getting a bargain, Batz said. Homebuyers are getting more square foot per dollar. But bigger homes require more maintenance and cost and most people don’t want that, Batz said.
Inside this week’s Home & Real Estate
Property of the Week 3105 Hudson Dr.
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Featured Home Plan Springwood is a spacious ranch home
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Front Range Gardening Director y Page E5
Carol O’Meara on hiring arborists to keep valuable trees healthy
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