Good News For Sellers : Housing Starts Fall To 1-Year Low In May 2010

Single-family housing starts plummeted to a one-year low in May, just 30 days after soaring to a 20-month high.  It's no wonder home builders are confused.

Against a revised April figure, Housing Starts fell 97,000 units in May, a figure representing almost one-fifth of the total market size.

It's the worst showing for Housing Starts since May 2009, a surprise to builders and economists alike.

Furthermore, single-family Building Permits plunged in May, too -- down 10 percent from April. A permit is a certification from local government that authorizes home construction.

Housing permits are a precursor to Housing Starts with 82% of homes starting construction within 60 days of permit-issuance. Fewer permits, therefore, directly reduces the number of new homes coming to market in the coming months.

For home buyers in Henderson , this should create a sense of urgency.

Home prices are based on supply and demand and supply appears to be falling about the same time that economists predict a surge in home demand.  It could spell rising home prices and a complete loss of negotiation power with home sellers.

For now, though, home affordability remains high with properties cheap and mortgage rates near all-time lows. If you plan to buy a home later this year, the May 2010 Housing Starts data may be a reason to move up your timeframe a bit.

Uncharted Territory- the End of the Tax Credit

The end of April marked an historic event.

Think about it.  Never before in American history has there been a homebuyers' tax credit.  On April 30th, it expired.

We are in uncharted territory

If you were planning on buying your first home, or even replacing the home that you had lived in for 5 of the last 8 years, you would get FREE money from the government if you were under contract by the last day of April.  That contract would have to close by the end of this month to qualify for the tax credit.

So, what impact will this have on our market?  No one actually knows.  The first deadline for the credit was scheduled for the end of November, 2009.  Eager first time homebuyers rushed to the closing table to make the November 30 deadline- in spite of the holiday weekend that bumped right into the deadline.

This time, however, the impact seemed slightly less notable.  Many houses went under contract well before the April 30 deadline, and closings were spread out over April, May and June.  There is speculation that some home sales were "borrowed" from the coming months because of the tax credit, and this certainly has some merit.  

Meanwhile, showings of for sale properties dropped.  If you are trying to sell a home, you have seen this effect.  It's time to sit tight and have patience.  

As I said, we are in uncharted territory.

How Many Showings Does it Take?

When selling your home, one of the "moving targets" is the number of showings to expect.  Not surprisingly, the number of showings goes down during the holidays and during cold winter months when the weather is unpredictable.  But different price points will also experience different levels of activity.

Following is a breakdown by price level of home many showings per month we experienced in the Denver Metro market for the first quarter of 2010:

• Overall, the number of showings per month for all price categories was 8.7 per home.
• Homes under $250,000 saw an average of 10.5 showings per month, with the $50k-100k range seeing the highest number of showings per month at 15.
• Homes from $250k-300k saw an average of 7.4 showings per month.  Homes from $350k-400k were at 3.7 showings per month.
• Homes in the higher price ranges, from $400,000 up, saw an average of 4.8 showings per month.

The good news for those selling homes in the $250k-400k price range is that the number of showings increased year over year: from 4.7 in 2009 to 6.1 for 2010.  Homes above that range increased from 3.4 to 4.8.  Homes priced in the lower ranges held steady at 10.5 showings per month.

Buyers are getting back out there, which is good news for all homeowners.  With renewed interest and activity in residential real estate, we will see a ripple effect throughout the economy.

I Thought You Said That House Was Under Contract?

What Does “Under Contract” Mean?  What Comes Next?

Recently, I was driving through our neighborhood with a buyer.  He was very interested in a property a few months ago, and had been considering making an offer.  When I called the listing agent to let her know of our intent, she told me it had just gone “under contract” and was no longer available.  When we drove past this property last week, the sign was still in the front yard.  “I thought you said that home wasn’t available?” he asked.  And it’s not.  It is still “under contract”.

  How properties go Under Contract, and what happens next. 

When a buyer finds the right home, he or she makes an offer.  This is presented on the Colorado Contract to Buy and Sell.  It is a detailed contract with a schedule of dates, room for contingencies, attachments, concessions, offer price, financing arrangements and appraisal requirements, among other things.  It is 12 pages long, and is designed to protect both buyer and seller during what is often the largest sales transaction private parties ever make.

When buyers purchase a home, they want the assurance that they have thoroughly researched their purchase before the sale is final, and that no other buyer can purchase the property out from under them during this time.  If the buyer and seller can agree on the initial terms, both parties will sign a binding contract that allows the buyer to do this research.  The property is then “under contract”.  This period usually lasts from 30-60 days.  A short sale listing can take longer- sometimes several months.

The buyer is then responsible for doing this research, and there is a time limit and an Earnest Money deposit submitted so that the seller is protected.  

These steps include applying for a loan, having a certified inspection of the property, obtaining title and title insurance, obtaining property insurance, reviewing any HOA documents, reviewing Improvement Location Certificates or surveys of property boundaries and making sure the property appraises.

The For Sale sign remains in place during this process because the sale is not yet completed.  Often times, the Realtor will place an “under contract” banner on the sign.  The idea is that it “ain’t over ‘til it’s over,” so the sign remains in place until funds have been transferred and keys are passed to the buyers.

Real Estate Buzz: Activity for February 2010

The action in Belle Creek is really picking up!  Thankfully, many of the "For Sale" homes in our neighborhood are being sold.  This is great news whether you are thinking of selling or not.  When existing inventory clears our, it means less vacancy, and eventually, higher home values for the Belle Creek Real Estate Market.
Here is a snapshot of what we saw in February:
3 houses went under contract in Belle Creek in February.  This means that there is a signed agreement between the buyers and sellers to purchase the home within a given period of time (anywhere from 30-60 days, usually).  During this time, the buyers will secure financing and inspect the property and the sellers agree to take it off the active market.  Earnest money has been given to the home sellers by the home buyers as a show of good faith and their intent to see the contract through.
The properties under contract are:

• 9645 East 105th Avenue
• 9443 East 106th Drive
• 10933 Belle Creek Boulevard

These are what are known as pending sales.  Pending sales are a leading indicator- they show us what is likely to happen over the coming months.  The downside to pending or under contract sales is that we do not know what the offer price is or what the actual sales price will be until the sales close.

That said, there were 2 closed sales in Belle Creek this February!  They were:

• 10967 Beeler Street.  Listed at $210,000, sold for $212,500
• 10745 Boston Street.  Listed at $225,000, sold for $220,000

Market Update in Belle Creek

Belle Creek has been hopping this week!  Here's the rundown for the first week of February:

• There are currently 6 actively listed properties in Belle Creek
• In the last week, 3 properties have gone under contract!
• In the last week, there was 1 newly sold property:  10967 Beeler Street sold for $212,500 on February 1.

To see available properties in Belle Creek, or in any Denver metro neighborhood, 24 hours a day, please visit my website.