Should I Buy A Home Now?

Should I buy a home now or should I wait for the market to cool a bit?  This is a question that I am frequently asked by buyers.  It is a valid question and one that should be considered.  What has happened to the market, if you have been looking for the last six months, in Northern Colorado? 

An image of money, showing the bottom line when considering should I buy a home now

In the last six months interest rates have gone up nearly 2 points.  Also prices have gone up 7 to 9 percent.  That means that you’re buying power is significantly diminished. In January and into February of 2022 interest rates were between 3% and 3.5%.  Now that same buyer is looking at interest rates at 5.375% to 5.5%.  That means the payment for a house priced at $425,000 has potentially gone up $110 per hundred thousand.  That can mean a house payment going from approximately $1750 to $2200.  That makes a heck of a difference!  This does not take into account the increase in prices that we have been seeing and how that would impact your payment.

Why Move Now?

Buyers that are in a position to make a move right now are encouraged to do so.  Interest rates are rising and are projected to continue that trend throughout 2022.  With interest rates creeping up and property values continuing to climb, waiting can cost you money.  It may just price you out of the market. Low interest rates and rising home values make for an opportunity.  Since 1988 rent has increased at a rate of 3.5% per year, according to the National Association of Realtors.  If you owned a home, priced at $425,000, after 5 years of ownership you will likely have over $165,000 in equity. If you are paying rent, on that same home every month you are not earning $165,000, instead your landlord is.

Should I Buy A Home Now: Supply and Demand

In Northern Colorado the demand continues to outpace supply.  This is supply and demand.  Too many buyers, plus not enough homes, equals rising home prices. It is a good idea to take this time, make a plan and budget for a purchase.  Meet with a recommended lender and verify that your credit is clean and you are ready to buy. Do an application and lock your rate now.  Bottom line is that interest rates are going up, they could come down some but home prices will continue to rise.

Contact us today if you have questions or if you are ready to begin the home buying process.

Is a Housing Crash Likely?

One question that I am frequently ask is if the real estate market will undergo a massive correction?  Is a housing crash likely to happen in Northern Colorado? Buyers are particularly concerned about this.  Many buyers can remember the housing crisis that occurred in the mid to late 2000’s.  If the buyers themselves cannot remember that crisis they have parents that can.  Do you need to be concerned about this when considering buying a home?  Here is what you need to know about real estate market corrections.

Contributing Factors

Many of the factors that were present and that contributed to the housing crisis are not present today.  Mortgage loans are not as easy to get today as they were then.  We no longer have the stated income loans.  There also is not the speculation in the market that there was then.  There were a lot of crazy deals happening that contributed to the crisis. Today we have real buyers wanting to buy a home to live in.

Is a Housing Crash Likely? Supply and Demand Matters

How do I know for sure that we will not have a market crash?  I look as several factors.  One thing to look at is to see what supply and demand in the market is like.  We have great demand for homes.  It is not uncommon for a home that comes in the market to have several buyers write offers to buy the home.  Only one buyer can have their offer accepted and purchase the home.  That means that all of the other buyers that wrote contract on that home that did not get accepted are often times continuing to look and trying to buy a home. This is happening due to limited inventory of homes for sale. We do not have enough sellers that are wanting to sell and do not have enough new homes that are being built to meet the demand.

Demand in our market also comes from the desirability of our area to live in.  This has only increased during the pandemic.  The pandemic made it more common for folks to be able to work from home.  If you can work from anywhere, why not live in a place that you want to live.  That brought many people to Northern Colorado to live here and work remotely. Because of this we also had an increase demand.

Long Term Investors

Another factor that can demonstrate the strength of our real estate market is to look at the number of investors that are purchasing homes to use as rentals and the strength of the rental market.  Our rental market remains strong with a vacancy rate of less than 2% and consistently higher rents being charged. This makes Northern Colorado a great place to invest in real estate and this also adds to the demand for real estate to purchase.

Appreciation

One other thing to look at to determine the strength of a market is to look at the appreciation that the market is seeing.  During the housing crisis Fort Collins had one year where we had depreciated values of homes.  Just one year and it was less than one percent.  Appreciation has been in the double digits in recent years and is expected to slow some but remain strong.

So, is a Housing Crash Likely? The real estate market in Northern Colorado is strong and all indicators are that it will remain so. The Council of Residential Specialists also thinks this trend will maintain nationwide.  Don’t wonder when the sky will fall.  Invest in your future and buy a home. Contact Us today to get the ball rolling.

Can You Compete With Cash Buyers

Cash is King! We have all heard this saying but how close to the truth is it?  Do sellers ALWAYS accept cash offers?  Can you compete with Cash Buyers?  Let’s dig into this and find out just how cash is viewed in our market.

What Amount of Home Buyers Pay Cash?

Looking at home sales for the year (2021) in Fort Collins there have been a total of 555 cash sales that were accepted by sellers.  That amounts to 19.2 percent of the market being cash offers. This is an increase over previous years.  Nationally in the spring of 2021, 25 % of home sales were made with cash. That is a notable increase over 15 % in 2019 and 20 % in 2020.  Based on this information from the Council of Residential Specialists, it appears that buyers that have the ability to pay cash for a property are. This has the potential for getting their offers accepted over those buyers that must get financing.  Clearly, there are more cash offers being seen by sellers. 

Advantages of Cash

What are the advantages to a seller to accept a cash offer over an offer that requires financing?  One of the major advantages of an all-cash transaction is speed.  Buyers with cash in hand don’t need to wait for financing that could require about 30 days to close. Cash buyers can also wave some contingencies such as appraisal or the sale of a previous home.  Sellers who want a quick closing may find this very appealing.  Other sellers may feel rushed by this and not find it quite as attractive.  Not having the requirement of an appraisal, may certainly be appealing. Especially if the offer that the seller has received is significantly over asking. 

So Can You Compete With Cash Buyers?

Just because a seller has received a cash offer does not mean that it is the “best” offer.  In working with cash buyers, I often need to remind them not to get cocky.  Remember that proof of funds will need to be provided.  If your funds are tied up in your home and you will need to sell that in order to purchase your offer may not be as attractive as someone who is getting financing.  As a cash buyer you need to understand just how competitive the market is.  Just because you are paying cash does not mean that you will be able to purchase the property for a lower price.  If you plan to pay cash for your purchase it is important to know how liquid the funds are that you will be using to purchase. How long will it take to have that cash in hand? 

Planning to Compete

Sellers do NOT always accept cash offers.  You can write an offer that can be seen as just as attractive to the seller as a cash offer.  It will be important that you are working with a strong, well known, local lender.  You must also recognize the importance of being pre-APPROVED!   There are ways that your lender can have you appear like a cash offer even when you are getting a loan.  There are tricks out there.  Be careful not to misrepresent yourself.  Remember that a good solid offer, well written that is offering an attractive amount, getting a loan from a local lender can get accepted over a cash offer. 

Make sure that your agent finds out what is important to the seller and be sure to include that in your offer.  It may take a tiny bit of luck too, but you can get your offer accepted. Contact Us today so we can work together to create a plan of attack. This will allow you to be in the most competitive position possible regardless of your financing.

What Are The Predictions For Real Estate In 2022?

One of the things that has been realized during the last few years is just how difficult the real estate market is to predict.  Many people thought that during the height of the pandemic we would experience a housing-induced recession.  Instead, we had a boom in demand that we had not seen since the mid 2000’s.  We have seen double digit home appreciation and low mortgage rates in 2021. Will we see a repeat in 2022, and what are the predictions for real estate in 2022? 

The Crystal Ball

What are the predictions from the real estate experts and economists for the 2022 market?  Will it be hot or cold?  Most are saying that the real estate market will remain strong.  We will continue to have strong demand that will be tempered some what by the problem of affordability.  There will be slower growth and appreciation but still positive growth.  There will be more inventory on the market and with mortgage interest rates predicted to remain low, but rising somewhat.  Unlike the low interest rates around 3% they are predicted to remain low but move up over 3 and closer to 4%.  There are predictions that we will continue to see rising employment and growing demand in the market which could see home prices rise in the high single digits rather than the double digit increases that we have seen.  

New Construction

What is expected in home building?  Strong demand for new construction is predicted to continue in 2022.  It is predicted to continue to be a of a shortage of construction materials and problems in the supply chain.  The lumber costs which sky rocked 250% in 2020 and caused problems of affordability in new home construction is predicted to see prices dropping, but volatility in the supply chain continuing.  

Boon For Buyers

What does all this mean for home buyers in 2022?  The real estate market is predicted to not be as difficult for buyers as it has been the last 12 to 18 months.  It is not going to be a walk in the park but not as difficult. Buyers should still expect to have to compete with other buyers, but not to the extent that they have had to.  Rather than sellers receiving 10 or more offers on a home, the seller may see 2 or 3 offers. This still means that buyers need to make sure that they are pre-approved with a reputable lender and in the strongest situation possible.  

Still A Strong Market For Sellers

What does 2022 look like for seller’s?  Predictions are that sellers will have fewer offers and homes could stay on the market a bit longer.  If you are planning on selling your home in 2022 how should you prepare for the market?  Make sure that your home is price right!  Make sure that your home looks its best.  Work on curb appeal now.  Contact Lestel now to get ideas on little things that you can do to get ready. 

In the End

No one knows for sure what will happen in 2022 but predictions from the professionals make it sound like it is going to be a good year!

Pandemic Moving

We know that the pandemic has affected the real estate market across the country.  It has caused a lot of people to decide to make a move.  Over 8.9 million people have relocated since the beginning of the pandemic.  This information is from collected from both the National Association of Realtors and the United States Postal Service from March to October of 2020.  Top ten states with the most people moving IN during this time include: New Jersey, South Carolina, Maryland, Iowa, Connecticut, Nevada, Arizona, New Mexico, Ohio and Mississippi.  The top ten states with people moving OUT include: New York over 10,000 people left New York, New York alone, Texas, District of Columbia. North Carolina, California, Pennsylvania, Illinois. Minnesota, West Virginia and Florida. Much of this moving has been out of major cities. 

Pandemic Moving, Big Gains

One of the communities that has seen the biggest gain in in pandemic moving is Williamson County, Texas.  They have seen over 3,800 people move there. Interesting since the state of Texas has had a record number of people leaving the state.

In the data

Colorado was not mentioned as one of the top 10 for people moving in or out.  I have seen many people relocating here.  If you can live anywhere while you are able to work remotely, who wouldn’t love to live here with a view of the mountains from your desk.  This has increased our demand for both properties to buy and rent.  National Association of Realtors is expecting similar patterns of moving to play out in 2021.  Remember if you know anyone that is moving.  I can connect them to a great agent anywhere.  We are a part of a great organization that includes the top four percent of agents nationwide.  This means that I can interview agents and pick the perfect person for them to work with. Contact me for assistance today.

A Northern Colorado Housing Bubble 2022?

Will there be a Northern Colorado housing bubble 2022?

This is a question that I am frequently asked. Articles like this one from the Denver Post seem to be published every week. But just what would a Northern Colorado housing bubble 2022 look like? A housing bubble is a temporary period of time that is characterized by high demand and low supply. This causes a boost in pricing. A housing bubble can be caused by a combination of low interest rates, economic prosperity and easy access to credit.

So, what is the concern with a housing bubble?

The concern is when speculators enter the market. This causes a boost in demand over and above “real” buyer demand. Speculators can be investors from out of the area and even fix and flippers. This causes an already tight market with limited supply to have even higher demand, pushing housing prices even higher. The price of housing, like any good in a free market is driven by the law of supply and demand. When the demand increases the price goes up. When the price of housing is going up faster than expected, many people fear that a Colorado housing bubble is about to burst and prices are going to come crashing down.

Is that the case in 2022? I would say that this is not likely. I see some major differences between 2022 and our last housing crisis.

What are the major differences?

1) Mortgage lending practices that brought down some of the major banks and mortgage companies during our last financial crisis have led to many regulatory changes. Federal regulators have new stricter requirements of borrowers and new requirements of lending intuitions. The Consumer Financial Protection Bureau was created to enforce these new regulations. Because of this the housing market is safer than it was 15 years ago.

2) In 2007 and 2008 the market in many parts of the country was flooded with foreclosure homes. This caused falling prices of homes. The pandemic has caused mass unemployment. However, the forbearance programs have allowed homeowners to postpone their monthly payments without penalties. Many of those unemployed homeowners resume their mortgage payments as they again become employed, avoiding foreclosure.

3) One of the major differences between the housing crisis and the pandemic is that homeowners today have EQUITY in their homes. This could prevent a Colorado housing bubble 2022 Equity is the difference between the current market value of your home and the amount that you owe on your mortgage. As prices have rises your equity increases too. During the housing crisis many home owners had the amount of their home value less than what they owed on the home.

No one can predict what will happen for sure but it is not likely that there is a Northern Colorado housing bubble in 2022. Low interest rates and demand have certainly driven prices up in 2022. You can always contact us for a free market analysis to find out where you stand. In the meantime hold on for the ride to see where we go for the rest of 2022.

Capital Gains When Selling A House

Capital gains when selling occurs when you sell real estate for more than you paid for it. The difference between the original sales purchase price paid and the new sales price is the gain. In other words:

New sales price, minus purchase price of the property, minus the cost of sale = the amount of gain on the property.

This calculation can mean that most all sellers that are selling their home in Northern Colorado would show a gain on their property. Our market has seen nice appreciation of property values in recent years and this can lead to nice gain when it comes time to sell. It is great to sell your home for top dollar, but the IRS may want a piece of the gain that you receive.

What situations do you have to pay capital gains when selling?

The government allows you to exclude $250,000 in gain for an individual home seller and exclude $500,000 in gain for a married couple. For example, lets say that you bought a property 10 years ago for $250,000 and sold the property for $850,000. You are a married couple, filling your taxes jointly, selling your home that you have lived in the home for all of the last 10 years. First, you subtract the $250,000 from the $850,00 and the number is $600,000. You are allowed by the IRS to have $500,000 in gain so you will only pay taxes on the $100,000 which is over the $500,000. How bad might the taxes on that $100,000 in gain be. There are factors that the IRS takes into account when figuring but for a rough estimate the tax could be between 10 and 20 %.

In order to be able to exclude the gain, like in the example above you need to have:

  1. Lived in the home for at least 2 of the last 5 years.
  2. The home needs to have been your primary residence.
  3. You can not have claimed that you sold a primary residence in the last two year period.
  4. If you are selling your home in less than two years, but moving due to work, health or an unforeseeable event, you still might qualify!
  5. You also may be able to minimize your capital gains tax if you are able to show receipts for home improvements.
    If this sounds complicated it really might be. This might be the year to have a CPA do your taxes. The money spent to have a professional review your tax situation might be small in comparison to the amount you save in taxes paid.

Contact us if you have specific questions about capital gains when selling a house.

Fort Collins Real Estate Market

The question that I get asked the most is, “how is the market”.  When there are things happening in the world, country and our area I hear that question even more.  People want to know if their investment is being negatively affected. Going through a global pandemic has folks asking that question even more.  In a word, the Fort Collins real estate market is GREAT. Prices continue to grow year over year in all segments of the market. This means that if you own a condo or a home you have likely seen a substantial amount of appreciation in your investment.

Median year to date home prices in Northern Colorado, through July 2020.

We are on track to see nice appreciation in the median price of all types of properties in Northern Colorado this year.  Days on the market has increased this year, but list to sales price remains strong at over 99%.  It is a great time to own a home in Northern Colorado. Remember if you have questions about the Fort Collins Real Estate Market, just call, text or email me.  The most current Fort Collins real estate numbers are available from the Fort Collins Board of Realtors. You can also contact us for a personalized home valuation.               

Record Low Mortgage Rates

Record Low Interest RatesThis week the rate for 30 year fixed mortgage hit an all time record low mortgage rates since data for this rate began being tracked in 1971. According to Forbes, the 30 year fixed rate reached a low of 3.07% and the 15 year 2.56%. This represents a great opportunity to either purchase a home. Or to get locked in to these never before seen low rates, or to refinance your existing home mortgage. In either case we can put you in touch with a great local lender. If you are looking to refinance we can provide you with comparable sales. This helps to insure that you are able to appraise for the highest value.

If you purchased a home with less than 20% down you likely have mortgage insurance however you may have 20% equity in the home at this point. You could refinance your mortgage, remove your PMI and have a lower interest rate. What could you do with a couple hundred extra dollars in your pocket each month, or the thousands of dollars you will save over the life of your loan? There is what you need to know about record low mortgage rates. As always, we are here, contact us and let us know how we can help you.

How Is The Real Estate Market?

So, How is the real estate market? That is a very important question to have the answer to if you are considering stepping into the market after things open back up the end of April.  This is good information to know whether you are a buyer or a seller. Remember that the real estate market varies place to place. 

Some parts of the country will be affected more by this Pandemic than others. 

In Colorado on 4/10/2020 real estate was deemed non-essential.  It took Colorado Association of Realtors (CAR) several days to get clarification from the Colorado Attorney General on what that meant.  Additionally, we learned on 4/14 that we were not to have open houses or show property. Realtors were allowed to have walk throughs of properties already under contract and manage the sale of a property. 

Moving Forward

What has happened over the course of the past few days is that realtors are providing clients with as much information, photos, virtual tours, 3-D tours and disclosures on properties so that they would feel comfortable writing an offer on a property sight unseen.  Once the contract had been negotiated and accepted then the buyer and agent could see the property and do a walk through.  For the two buyers that I wrote contracts for using this method, both are moving through the process to closing.  Only surprises at walk through were happy, good surprises.

What is the market like right now for our area?  I have been tracking two numbers for the six weeks and would like to show you how those two numbers have been changing.  I have been tracking new listings on the market and under contracts in Fort Collins and Loveland area.  For the week starting March 8th and going to the 14th and every week after that I will show you those two numbers.

Current Market 2020

  • Week 1 New listings    3/8 – 3/14     129                       Under Contracts      75
  • 2nd Week New           3/15 – 3/21    122                       U/C                            68
  • 3rd Week New             3/21 – 3/28    106                      U/C                            57
  • 4th Week New            3/29 – 4/4     130                      U/C                            46
  • 5th Week New             4/5 – 4/11      109                      U/C                            39
  • 6th Week New            4/12 – 4/18    59                        U/C                            59

This information shows that even after the Attorney General ordered that real estate was non-essential that real estate was happening.  Additionally, houses were being listed for sale and going under contract. The number of homes coming on the market has been pretty steadily declining.  The number of homes going under contract has been going down with the exception of last week. 

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Looking Ahead

One of the big questions now is what will happen after the “Stay at Home” order is lifted.  I think that real estate will bounce back.  Whether that bounce is a V shape graph, rebounding quickly or a U shape graph, with us rebounding more slowly we will have to wait and see.  I believe that housing will rebound.  We live in Fort Collins, Colorado.  One of the most desirable places to live.  People have spent more time in their homes in the last six weeks than many of them ever have. 

Many may have decided that “home” is not for them.  Moreover, that means they are ready to move.  Many have said that we have pend up demand out there.  I have talked to lenders that have told me that they are busy as can be with buyers getting pre-approved.  Additionally, they want to be ready when the “Stay at Home” order is lifted. This is good news for us all.  So how is the real estate market? Time will tell…but I think that the future of real estate is bright! Contact us for a personalized market analysis of your property.