Real Estate forecast hopeful

 LOVELAND - The Group Inc. Real Estate’s annual real estate forecast Monday night was upbeat compared to other recent economic forecasts.The Group predicts an improvement in the real estate market over last year. Speakers also emphasized that national real estate reports are not indicative of what’s happening in Northern Colorado.

Most national data and media coverage is not relevant to local markets, said Chuck McNeal, chairman of The Group Companies.

“The real estate sector has been the whipping point for the media for quite awhile now,” he said, adding that about 1 percent of homes are in foreclosure. National foreclosure woes aren’t mirrored in the Northern Colorado region.

McNeal compared local and national real estate markets to weather. Northern Colorado residents don’t focus on a national forecast so, he questioned, why focus on national real estate trends?

In addition to the old real estate adage, ‘location, location, location,’ McNeal said more people need to think ‘local, local, local,’ as that will be a main driver in 2008’s real estate market.

More than 1,000 people attended the Group’s annual real estate forecast Monday night at the Budweiser Events Center at the Ranch.

In 2008, The Group predicts 3,685 home sales in the Fort Collins/Wellington area and 1,800 in Loveland, bringing the total to 8,350 for the Northern Colorado region. That estimate will make for a good 2008, but it won’t be a record year. And the number of expected sales will be lower than the 8,421 sales in 2007 and the 8,786 in 2006.

“We believe it is inevitable our markets will return to equilibrium,” he said, stressing that real estate needs to be thought of on a cyclical cycle. “It won’t happen right away. In fact, the next six months may feel like the last six months; but once we reach critical mass on that, it’ll be a dramatic rebound.”

The upcoming year also presents good opportunities for investment homes, especially in Fort Collins because Colorado State University is located there.

The Group’s entire real estate forecast went against the grain of other recent predictions by providing a more optimistic outlook for the year.

Only a few weeks ago, several regional economists predicted a recession for Northern Colorado, saying it’s not if a recession happens but when.

Sharianne Daily, president and CEO of The Group Inc., said a 1.5 percent increase in employment in 2007 will also help drive the real estate market back up.

“We continue to attract the best and the brightest in employees and companies in the region,” Daily said

Fort Collins Afforable Living

Afforable Living Location: Fort Collins, CO Great value for the price. Don’t miss this one! Perfect starter home or investment. Quiet area, nice deck looking out over open field. Ready to move in except for a little painting. Brand new furnace, and water heater still has 2 years left on warranty Photo Gallery Information Contact Information Jerry Taylor 970-690-8637 Pricing Asking Price: $149,900 Flexibility: Negotiable Property Location 606 Lupine Drive Fort Collins, CO 80525 Links eRealtyCo Website Features Bedrooms: 3 Bathrooms: 2 Parking: One car garage Year Built: 1984 Subdivision: Meadows at Redwood Lot Size: 0.15 acres Garage Size: 305 sq. ft. School District: Poudre Square Footage: 1239 Agent Name: Jerry Taylor/Lisa Voelker Broker: eRealtyCo MLS #: 557081 Attributes Appliances Range/Oven Full Refrigerator Dishwasher Sink Disposal Interior Amenities Fireplace Vaulted Ceilings Exterior Amenities Patio Fenced Yard Grass Lawn Powered by vFlyer.com EQUAL HOUSING OPPORTUNITY VFLYER ID: 1474543

Flat-Fee Defies Traditional Brokerage

WINDSOR - The fallout from the subprime lending market, and the near-disastrous foreclosure epidemic that resulted, plus fears of a nationwide recession that has buyers playing waiting games, are causing residential brokers to improvise and innovate.

So, taking a page from a residential real estate business model developed in Seattle and a handful of other big, metropolitan markets, Windsor broker Jerry Taylor has applied his software development experience in a new flat-fee, Internet-based real estate venture called eRealtyCo, found on the Web at erealtyco.net.

Likewise, H. Craig Plantz, another Windsor agent who is the managing broker for Resident Realty, is operating OwnersRealty.com, an online residential clearing house that puts properties on the MLS, and offers other services, for a $99 fee.

With a typical 6 percent commission in the offing for most traditional brokerage sales, sellers of a mid-priced home in Northern Colorado could bear charges ranging from $12,000 to $18,000 - a pretty big bite of the selling price.

Taylor, who spent 20 years in the software development business before turning to real estate as a career, said his new service is geared toward “doing things in a leading edge way.” His $2,000 flat fee - although 20 times higher than his competitor’s - still undercuts the standard commissions by a goodly amount.

“When the market started going down, I began thinking of ways to innovate,” Taylor said. “The progression to the Internet is nothing new, but the flat fee is. I’m looking to help people out and save them a ton of money.”

I questioned some of the members of the Fort Collins Board of Realtors at their awards luncheon earlier this month about these new, online, flat-fee products, and their response was both predictable and reasonable. Service, they said. Service, service, service.

At least Taylor, whose eRealtyCo is based on the success of Seattle-based Redfin.com, is aware of the objections. After all, as he pointed out, the big brokerages in Seattle are in an all-out war to preserve their interests in the face of Redfin’s growing presence and reputation among home sellers and buyers there.

His defense against the criticism from other brokers is a simple one: Exposure on his site, MLS listing, contract preparation and brokerage services are no different than those provided by the mainstream real estate people.

“The only thing we don’t do is open houses,” he said.

Both of the flat-fee services differ from the numerous for-sale-by-owner, or FSBO, real estate services in that each provides access to the region’s multiple listing service, a crucial link to buyers and other brokers that FSBOs are barred from.

Prior to acquiring licenses to use Resident Realty’s systems and software programs, Plantz was president of Colorado Real Estate Online, a company he built then sold to E.W. Scripps Co.

His pitch to prospective clients is linked closely to his rock-bottom fee.

“If they try my service for a month and aren’t happy, they can quit and all it will cost them is $99,” he said. “This gives them an opportunity to judge for themselves.”

Editor Tom Hacker covers real estate for the Northern Colorado Business Report. He can be reached at 970-221-5400, ext. 223 or at thacker@ncbr.com.

Where are mortgage rates headed?

An inflation-inspired popup in rates is reversing on news of a weakening economy. Mortgages are still above 6 percent (they touched 6.25 percent at Christmas Eve worst), and markets will now hold until the release of all-powerful payroll numbers on Friday, Jan. 4.

The inflation news before Christmas was disturbing: The indicator was a technical one (”core personal consumption expenditure deflator”), but a Fed favorite jumping the 2 percent top-of-target range. Not by much, 2.2 percent year-over-year, but 2.9 percent in the last three quarters. “Headline” overall CPI is north of 4 percent, felt by everyone.

New claims for unemployment insurance are in an unmistakable uptrend, at 350,000 weekly within 20,000 of the level at onset of the last two recessions.

November data is old, but indicative: Orders for durable goods crept to a 0.1 percent gain versus 2.2 percent forecast, and personal spending soared by 1.1 percent, personal savings going negative by 0.5 percent — hardly a sustainable party. Markets reacted to Friday’s report of a 9 percent collapse in new-home sales as bad news; it is not — we need these “incentive” discounters to take a couple of years off.

New Year predictions? Don’t be silly. Not for 2008.

Instead, herewith a “bracketing” forecast, the probability borders of happy and poor outcomes set by today’s mid-range optimists and pessimists. Outliers — the wacky fringe — need not apply (which excludes at least half of the commentariat).

First, on recessions in general: They are rare. Since the worst in modern times, the double-bottom ‘79-’82 affair, we’ve had only two, both short and shallow affairs, 1991 and 2001.

If you watch nothing else, watch the job market. Sensible optimists call for job “stability,” meaning marginal gains and a gradually rising unemployment rate, the consumer staying in the game. Heard everywhere: “Historically, it’s a bad idea to bet against the consumer.” Reluctant pessimists counter that the job market is a lagging component of the economy, breaking after the start of recession.

Inflation. So long as oil, commodity and food prices behave as they have, it will be hard to find an optimist. In this case, bracketing goes to the world economy, and is three-sided. Economic optimists, many believing that a go-go world has “de-coupled” from the United States, are the inflation worrywarts; the slowdowners think that inflation is another lagging component and will fall back. The third bracket, pushing in from the cutesy sideline, says “stagflation.” (I’ll be judgmental, here: Stagflation was coined in the ’70s during very high inflation and unemployment, both insignificant today by comparison. The stagflationists just can’t make up their minds.)

Credit crunch. The hopeful see markets digesting trillions in bad assets “in a couple of quarters” — Goldman Sachs. The non-apocalyptic skeptics see an impaired system short of credit suppressing growth for years — Goldman Sachs (different guy).

Housing. Given an absence of optimists, I’ll speak for the missing: Foreclosures will rise until 2011, but damage to the overall economy from housing alone (as opposed to the wreck in the financial system) will be less than forecast, as will be credit losses. Prices will stabilize in most Bubble Zones in 2008. Pick your own pessimist.

The Fed. Bernanke’s solution to failure as a communicator is to stop trying. Hence, all is guesswork. Truly expert monetary mechanics are in a fierce argument, unable to tell if the Fed is fire-hosing cash to float the economy (and failing), or syringing just enough into banks to keep them alive. The range of serious opinion includes: Bernanke is a courageous, modern-day Volcker who will let the economy slide as far as he can to squelch inflation; or, now at the limit of the Fed’s traditional power, is a passive Chairman. Quite incredible that we cannot tell which.

The World. Biggest forecast gap of all. Globalists expect strength to pull all through the credit wreck; old-timers look for Europe then Asia to follow the U.S. into the tank, then the U.S. to pull everybody out in 2009. I have increasing fondness for old guys.

Lou Barnes is a mortgage broker and nationally syndicated columnist based in Boulder, Colo. He can be reached at lbarnes@boulderwest.com.

Desperate homeowner seeks foreclosure alternative

Q: I am at my wit’s end. My adjustable-rate mortgage (ARM) has reset and my mortgage has increased by $400. I also have a second mortgage and am unable to pay what I owe on my student loans each month.

I know I need to sell my home, but I also need to put floors down before I sell it. I had the carpet removed shortly after buying the house and want to place down laminate floors on top of the plywood. Here’s the problem: After I put in the floors, I don’t think I can get what I paid for the house.

Right now, I am current on my first and second mortgage, but I am running low on money. I am a medical professional, but I’m a single parent and there is not enough money go around.

What exactly is a short sale? Do they work? How about a deed in lieu of foreclosure? How hard will that hit my credit and for how long? Can I ask the lenders to readjust the loan? I hope you have answers for me.

A: You’re in a difficult situation, and I’m not sure how much help is out there for you.

First, you may have heard about the interest reset relief program that is starting up as of Jan. 1, 2008. You must be current on your mortgage (which you are) and you must have less than 3 percent equity in your property (which it sounds like you might have). However, you must have a loan that will have an interest rate reset starting Jan. 1, 2008. Because your loan has already reset, it’s possible you won’t qualify for this.

Still, it’s worth a shot, but you’ll have to do the work. Call the federal government’s toll-free mortgage crisis help line at (88 995-HOPE to see if you qualify for assistance.

If not, then you have to figure out your next steps. Can you find a way to either bring in more cash (rent out a bedroom in your house?) or reduce expenses until you get through this crisis?

I’d hate to see you do a short sale (where you sell the home for less than the loan amount) or a foreclosure (which will stay on your credit history for up to seven years), or even a deed-in-lieu of foreclosure (where the bank accepts the deed in lieu of you paying off the loan).

You’d be better off trying to trim your expenses or bring in extra income to put down the flooring you need and wait out the current mortgage crisis. Staying in your home will be the least costly choice, both in terms of cash and your credit. I hope you can find a way to make it happen.

No matter what, please talk to a housing counselor at the Department of Housing and Urban Development. You may qualify to refinance your mortgage at a lower rate through the new FHA Secure plan. Go online to www.hud.gov/news/fhasecure.cfm to get contact information or call toll-free (800) CALL-FHA for more information.

Q: I am looking at a fairly major renovation of a home I have lived in since 1981. I paid $60,000 for the house, and there is no mortgage. If I put the house on the market (with some inexpensive curb-appeal-type spiffing up), I think it would be listed in the area of $325,000.

I’m guessing that the renovation costs would run about $300,000, and the house would then sell for $450,000. I plan on continuing to live there for at least another 10 years.

Should I sell the house or should I stay and finance the renovation? Shall I get a construction loan followed by a 15-year mortgage? What about a home equity loan or line of credit? Does my age or income matter?

A: Your numbers are interesting, if they’re accurate. For simplicity’s sake, let’s assume they are.

If you sell your house today for $325,000, you’ll have a rough profit of $250,000, which you could keep tax-free. If you improve the property, the house would be worth $450,000, for a net profit of around $90,000.

Why would you do all of this work for a much smaller profit? Wouldn’t you be better selling your property, pocketing the cash and buying something else? If you sold your home, do you know how much you would have to pay for another home? Could you sell the home and buy another for less money? If you bought another home in the price range of $350,000 to $400,000, you’d have some price appreciation over the next few years, and you’d start the clock ticking on the next $250,000 in profits that you could keep tax-free.

Ideally, at the end of 10 years, you’d have sheltered at least $500,000 in profits tax-free. That’s a lot of cash.

Now let’s assume that despite the numbers, you still want to improve your property and then stay there for 10 years. How should you pay for your renovation?

The cheapest thing to do is pay cash. Barring that, the next-cheapest thing would be to do a cash-out refinance and get a new mortgage at today’s reasonable interest rates. You can do a home equity loan, but for as much money as you’re talking about, you’ll have an easier time with a cash-out refinance and you’ll be able to lock in the lower interest rate. As for a construction-to-permanent loan, you could do that, but the fees may be higher and you’ll have more paperwork.

I vote for a cash-out refinance, although you should still look into construction-to-permanent financing. If the company you work for has a credit union, you should start your search there because credit unions typically offer the best deals on home loans and auto loans.

Great End Unit Townhome in Loveland Colorado

 

Great End Unit Townhome!

Location: Loveland, Colorado

This 3 bedroom, 3 bath, energy efficient end unit townhome in north Loveland is surrounded by greenbelt on 2 sides. Under ground sprinkler system, programmable thermostat for energy efficiency, large master suite features full bath and walk-in closet. Central A/C and ceiling fans all add to the energy efficiency of this unit. Gas fireplace and lots of windows for extra open feeling. Located in a quiet location within the subdivision. A large crawl space for storage and access to furnace and A/C.

Information

Contact Information

Jerry Taylor

970-690-8637

Asking Price: $149,900

Property Location

1601 Oak Creek Drive
Loveland, CO 80538
View Map

Features

Bedrooms: 3

Bathrooms: 3

Parking: one car gargage

Year Built: 2001

Subdivision: Shamrock West

Garage Size: 250 sq. ft.

School District: Thompson R2J

Square Footage: 1152

Agent Name: Jerry Taylor

Broker: eRealtyCo

MLS #: 554162

Current Housing Market Good for Buyers

There are many reasons why people choose to buy homes including: pride of ownership, the ability to decorate, the ability to own pets, interest deductibility on your taxes and investment. If you are renting, you are simply helping your landlord make his mortgage payments and building his equity and investment.Certainly if you are likely to move within one to three years a home purchase may not make sense. But if Fort Collins will be your home for the indefinite and you have a stable job you should consider buying a home. Unlike other purchases, a home purchase not only is shelter for your family but also will go up in value over time. Last year a national investment analysis predicted that the Fort Collins Real Estate was one of the top 10 areas that is likely to have home sales appreciate by 25 percent in the next five years. The current housing market is presenting a tremendous opportunity to the buyer. In Fort Collins today there is a very good selection of both resale and new homes in all price ranges. Since spring is officially here we will continue to see more homes coming on the market over the next 90 days. In order to compete, many sellers in the resale homes have replaced carpet, painted, as well as remodeled baths and kitchens. Homes that are in top condition and well priced generally move quickly in our market. Resale homes often offer perks that you would not see in the new homes. They may have mature landscaping, sprinkler systems, fences, decks, enclosed porches, storage buildings, finished basements, plus a more central location closer to bike trails and city parks. Sellers that have cared well for their homes and have updated them are generally rewarded with a quick sale a top market value. Interest rates today are hovering about 6 percent for a 30-year fixed rate loan. This low interest rate gives the buyer excellent buying power. A purchaser buying a $250,000 home with a 10 percent down payment would end up with a loan of $225,000 and an estimate principal, interest, taxes, insurance and mortgage insurance payment (PITIM) of $1,573.00 per month. Closing costs generally run about 2-2.5 percent of the loan amount provided you are not paying points to buy the interest rate down. On a $225,000 loan this would generally run $4,500-$5,700 depending on the time of the month that you close. The total of your 10 percent down payment and closing cost in this example would be $29,500 to $30,700. For loans closing in 2007 the federal government is allowing mortgage insurance to be tax deductible for borrowers with a yearly income of less than $100,000. This tax benefit must be approved each year. There are numerous loan programs that allow you to get up to 100 percent financing it you qualify. If the seller is willing they can pay all or some of your closing cost to make it even easier to buy. Buyers sometimes postpone making a home purchase in order to save up a larger down payment. If interest rates rise half of one percent it will reduce your buying power and increase your monthly payment. In the example above the extra half of a percent would increase your payment by $73.98 per month. If the homes in the area are appreciating the typical buyer can not save fast enough. Assuming an annual appreciation rate of 3 percent on a $250,000 purchase, at the end of five years the value of the home would be $289,800. At the end of 10 years the value would be $335,900. If you had rented all this time at $1,200 per month assuming no increases in rent, in five years you would have paid $72,000 and in 10 years you would have paid $144,000. Chances are you would probably have seen several rent increases. In any case you certainly would not have any equity to show for it. Often we see buyer apathy in making a home purchase until the interest rates are rising or there are fewer homes on the market. If you are ready for a new home take advantage of the current market to make your move. There is an excellent supply of homes on the market in all prices ranges and categories, interest rates are still very good and there are financing programs for all situations.

More Homeowners Have Little or No Equity Left

One of the results of the easy credit and looser financing terms that have been prevalent over the past several years has been Fort Collins Real Estate homeowners that have little or no equity in their homes.Some people bought homes with little or nothing down over the past several years.Perhaps a homeowner has refinanced several times over the past ten years, pulling equity out each time paying off cars, paying for a college education or other debts resulting in little or no equity left in the home even though they have lived there for many years and the home has appreciated greatly over that time.Some people may have taken out a loan that negatively amortizes. This means that they are not paying the full interest owed each month. This unpaid interest is added to the existing loan balance so that it is going up every month! Some people have had high appraisals done on the homes in order to allow them to borrow the money they needed to pay off other debt or perhaps to reach a certain loan to value ratio so that they would not have to pay mortgage insurance. While these scenarios helped them at the moment, it can spell trouble if they need to sell now when our local home prices have been relatively flat. It will really hurt if they have not kept up with the maintenance and update of the home and now also need to put in new carpet and paint to sell. In any of these scenarios if the homeowner finds they need to sell, they may need to bring money to closing in order to pay off the loan(s), brokerage fees, release/title fees, interest owed, prorated property tax, HOA fees and closing fees. By signing the standard Colorado Contract the seller is agreeing to pay of any loans and expenses of sale through the equity available in the property or from any other source. This means they would need to take it from savings or take out a personal loan for the amount owing, if need be. The title company will want that amount in the form of a wire transfer into their trust account or they might take a cashier’s check at closing. What does this mean to the buyer who is out looking at these homes? Unfortunately, unless your agent does a bit of detective work, you may not know that the seller must bring money to closing. If the seller refuses to bring the money to closing, the buyer may be in the position of having spent a tremendous amount of time, emotional energy and money for inspections and the appraisal on a home they cannot buy. The buyer may have made moving plans, had their van packed and given their notice on a rental. They will likely lose the interest rate lock that they have with the loan as it is generally tied to the property, closing by a specific date. Per the contract, the buyer would potentially have the right to “specific performance,” but this entails a lawsuit and some time. Even if you do not sue for specific performance, you can go after the seller for the damages that you have incurred (listed above). If the seller is in very serious financial trouble, he or she might claim bankruptcy and you would be hard-pressed to get your expenses reimbursed. Some sellers want to negotiate a short sale with their lender. In other words they want to see if the lender will take less than the balance owing on the loan. As you look at the listings in the MLS you will see listings that say, “this sale is subject to a short sale”. Even if the seller is able to negotiate a short sale, the lender is likely to go after the seller for the deficit after the closing. Generally, before a lender will even consider accepting a short sale, the borrower must be behind in their payments. Legal counsel should be sought by the seller to determine how this will impact their credit and what other options they may have. The seller and his or her agent are obligated to disclose a short sale, and will likely have an addendum to the contract that cancels the sale if an acceptable agreement with the lender cannot be made. A short sale is likely to take several weeks to negotiate with the lender. If the seller is unable to negotiate their short pay, the buyer once again may be in the position of having lost time and money trying to buy the home. If a buyer is negotiating to purchase a home where the seller will need to bring money to closing, I would suggest that the seller be required to put the funds that they will need to bring to closing in escrow with the title company so that the buyers are assured that they will not waste their time and effort. The buyer’s lender verifies the buyer’s down payment funds prior to closing but there is no mechanism to assure the buyer that the seller can perform. It is incumbent of listing agents to do a net sheet for the seller at the time of listing at a reasonable sales price. If you can see that the seller has little or no equity and will need to bring money to closing, this discussion can occur before a buyer is involved. Once an offer comes in, another net sheet should be done so the seller clearly understands what his or her position is.