Vol 34, No 5 - May 2010

Real Estate Insider

A Publication Of The Group, Inc.

Vol. 34, No. 5

May 2010

Survey finds home ownership is preferred for most Americans Market conditions notwithstanding, nearly two-thirds of Americans still prefer to own a home rather than rent, according to results of the recent Fannie Mae National Housing Survey. The survey, conducted over December 2009 and January 2010, assessed attitudes about home ownership, household finances and overall confidence in the OTHER NOTABLE RESULTS economy.

FROM THE SURVEY INCLUDE: “Despite the recent downturn in the housing sector, Americans continue to value home ownership and think about their homes in ways that go much deeper than the financial investment,” said Mike Williams, President and CEO of Fannie Mae.

Housing demand may be building Short Sale program Economic indicators

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Overall, there were indications of faith in the real estate market. While only 31 percent believed the economy was on the right track, 80 percent considered home ownership to be important to the economy, 44 percent said their personal financial situation would improve over the next year, 64 percent said it was a good time to buy a house, and 31 percent thought it was a very good time to buy a house.

While the survey found that Americans see home ownership as a premium investment, incentives for ownership run deeper. For instance, safety (43 percent) and quality of schools (33 percent) were cited as strong attractions for ownership.

Percent of those holding a 30-year fixed mortgage were satisfied with their financing, while just 68 percent with adjustable rate mortgages were satisfied.

Percent of renters believe owning makes more sense than renting.

Percent of owners said buying a home is one of the safest ways to invest, while just 17 percent believed buying stocks was safe.

Percent of renters said they plan to buy in the future.

Percent of respondents, including 70 percent of those who are delinquent on their mortgages, believe it’s not acceptable to stop making payments on underwater mortgages.

Source: Fannie Mae National Housing Survey

Reading tea leaves: Demand for housing may be building The precursor to residential real estate activity is pent-up demand for housing. And signs of pent-up demand are beginning to emerge from a variety of sources. Some indicators include: Demographics: Census estimates show that Northern Colorado has experienced consistent population growth through the past decade. Nevertheless, the number of home sales in 2009 was roughly the same as in 1997. Assuming that interest in home ownership hasn’t changed since then (see the previous story), it’s apparent there are homebuyers-in-waiting once the economy regains its footing.

More demographics: The latest census estimates show population growth during 2009 in Northern Colorado and statewide. Larimer County grew 1.9 percent last year, while Weld County grew 2.7 percent.

Colorado grew by 1.8 percent last year, making it the fourth-fastest growing state in the country.

Household size: While population continues to rise nationally, the number of households in the United States declined by 1.2 million between 2005 and 2009. Experts say job losses have forced families to combine households, but that an improving economy should cause household formation to return to normal, prompting young adults to seek home ownership.

Rental market: Apartment vacancy rates in Fort Collins (6.3 percent), Loveland (6.6 percent), and Greeley (7.4 percent), are all below the statewide average of 7.9 percent, and monthly lease rates have increased in Northern Colorado cities.

Economic upside: Most economists believe the recession is behind us and that the economy bottomed out last fall. And based on many outside observers, Northern Colorado seems a prime location for an economic revival to start first. Forbes magazine recently ranked Fort Collins the fourth-best city in the country for business and careers.

Fort Collins-Loveland top performer among small Mountain West cities Fort Collins-Loveland tied with Boulder as the top performing economy among small metropolitan areas in the Intermountain West for 2009, according to the latest report from Brookings Mountain West. Greeley ranked No. 5 on the list.

The ranking, which evaluated economic performance between the fourth quarter of 2008 and the fourth quarter 2009, was based on employment growth, gross metropolitan product, and home price appreciation.

Brookings Mountain West, based in Las Vegas, is a public policy think tank backed by the Brookings Institution.

That’s a lot for a lot High real estate prices usually attract yawns in Southern California, but a Houston oil executive raised some eyebrows recently when he paid $12 million for an 11,246-square-foot beachfront lot in Dana Point, CA. That’s the equivalent of $46.5 million per acre, which is a record deal. Still, the lot isn’t even the most expensive in the Headlands Reserve development. An 11,773-square-foot lot is on the market for $17.25 million.

Condo owner steamed over downstairs smoker A condominium owner in Boston recently sued her real estate broker when she found out her neighbor downstairs was a smoker. An asthmatic, the plaintiff claimed the broker should have disclosed that the neighbor smoked. However, in February a jury sided with the broker, rejecting the claim that the broker should have disclosed the neighbor’s habit.

Gallagher Amendment keeps lid on property taxes in Colorado Ever wonder why your property tax rates—though not total bill—keep shrinking on a regular basis?

Thank the Gallagher Amendment, which was implemented in 1982. That year, residential property was responsible for only 45 percent of the total property value in the state. Because of the hot housing market during the past 20 years, residential property now accounts for 75 percent of the state’s total property value but only about 45 percent of the tax bill. The amendment requires that residential property values can only represent 45 percent of total assessed property value in Colorado. Subsequently, if home values rise faster than business property values, residential tax rates must decline to maintain the 45/55 ratio. As a result, assessment rates on residential property has declined from 21 percent in 1982 to 7.96 percent last year.

Government Unveils New Short Sale Program The Northern Colorado economy is outperforming the national average, but some local homeowners have found themselves ‘underwater’ – owing more on their home than it can be sold for at today’s market value. Many troubled borrowers assume foreclosure is imminent, not realizing there may be other options with less consequence. One option is a short sale which occurs when a negotiation is entered into with the mortgage company to accept less than the full balance of the loan.

The Home Affordable Foreclosure Alternative (HAFA) program, overseen by the US Treasury Department is designed to aid eligible homeowners by pre-approving short sales before listing and release them from future liability for future mortgage debt. HAFA provides financial incentives to lenders and homeowners for participating in the program; lenders receive a servicing bonus and homeowners can receive relocation assistance.

To qualify the following criteria must be met: • The owner has a financial hardship and default is reasonably foreseeable.

• The property is the borrower’s principal residence.

• The loan is a first-lien mortgage originated on or before 1/1/2009.

• The borrower’s total monthly mortgage payment exceeds 31 percent of the borrower’s gross income.

• The unpaid principal balance is equal to or less than $729,750.

• The mortgage is not owned or guaranteed by Fannie Mae or Freddie Mac.

SHORT SALE

A short sale can be complicated. We have a team of specialists at The Group to help determine if a short sale is an option and to guide the homeowner through the process. Call me if you have questions or would like to receive a copy of our ‘Short Sale Kit.’

If you know someone who would like to receive this newsletter, please call me.

Harmony Office 970.229.0700 2803 E. Harmony Road, Fort Collins, CO 80528 Horsetooth Office 970.223.0700 Mulberry Office 970.221.0700

Greeley Office 970.392.0700 Loveland Office 970.663.0700

Centerra Office 970.613.0700

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A monthly snapshot of Northern Colorado’s economic health

Likely Direction in Next 6 Months Mortgage Rates April ’10 5.07%

April ’09 4.81%

April ’08 5.97%

Forecast

Most experts believe rates will increase throughout the year

Existing Single-Family Home Sales Fort Collins Area 1Q 2010 442 1Q 2009 367 1Q 2008 468

Greeley Area 382 425 419

Loveland Area 236 219 273

Windsor Area 100 85 100

Buyers who took advantage of the Tax Credit will close in the second quarter

Single-Family Home Inventory Fort Collins Area 1Q 2010 1,614 1Q 2009 1,502 1Q 2008 1,546

Greeley Area 1,066 1,098 1,552

Loveland Area 950 948 1,092

Windsor Area 424 461 544

Inventory levels in the summer tend to be slightly lower than the spring

Average Existing Single-Family Sales Price Fort Collins Area Greeley Area 1Q 2010 $253,992 $152,547 1Q 2009 $263,363 $144,008 1Q 2008 $283,137 $168,157

Loveland Area $235,115 $242,253 $242,968

Windsor Area $320,975 $302,371 $302,967

Commercial Vacancy Rates March ’10 March ’09 Fort Collins Greeley Loveland Windsor Fort Collins Greeley Loveland Windsor Area Area Area Area Area Area Area Area Industrial 7% 10% 19%

9%

7% 10%

7%

1% Retail

9% 11%

6% 24%

7%

7%

6% 10% Office 13%

8% 12%

6% 11%

7% 14%

3% Sources: Sperry Van Ness/The Group Commercial, The Group Guaranteed Mortgage, IRES.

Prices will remain flat

Commercial vacancy rates should remain relatively constant