Recent proposals could affect U.S. employees who have been out of the country, people heading for foreclosure, and anyone wanting to purchase a home.  Veterans who served overseas for at least 90 days in 2009 may receive an extra six months to take advantage of the $8,000 tax credit for first-time buyers offered during 2009.  A similar extension may affect all people who were out of the country serving in the military, intelligence or foreign services.

Moreover, congressional leaders are working with the White House to expand the tax credit that expires on November 30, 2009.  Various options are on the table.  Some kind of tax credit may become available to all homebuyers until May or even August.  Additionally, there is talk about removing income restrictions.  During 2009, only taxpayers who had incomes of $75,000 or lower could claim the full $8,000 tax credit.

Congressional analysts figure that the tax credit has cost about $1 billion a month in lost tax revenues.  Moody’s chief economist Mark Zandi claims that the tax credit is responsible for almost 400,000 sales of new and existing homes out of the total 1.4 million that sold.  If the tax credit expires soon, Zandi figures that there will be further downward pressure put on house prices.

When the real estate market is moving along, it helps other parts of the economy.  Lawrence Yun, chief economist for the National Association of Realtors claims that each house sold yielded $63,000 spent on goods and services including moving vans and furnishings.

In another arena, the U.S. Department of Treasury is launching a new program to help homeowners escape foreclosure.  Its program, known as Home Affordable Foreclosure Alternatives (HAFA), will offer financial incentives to servicers and borrowers as well as associated secondary investors, in order to facilitate a short sale or deed in lieu of the property.

An improving economic picture is starting to accelerate interest rates.  However, they are still very low.  For example, a $250,000 real estate purchase with 20 percent down in a 30-year fixed product is running 5.125 – 5.250 percent with 1.25 – 0.25 percent points.  FHA assists buyers to get into a $200,000 home with 3.5 percent down at 5.000 – 5.250 percent interest with 0.75 – 0.00 percent points.

That is incentive enough for many.

For more information about real estate in the greater metro area, including farms and horse properties, call Michael Paul of Realty Oasis at (303) 268-6052.

Mid September 2009, interest rates improved, going back to the low 5-percent range.  For buyers using 1.00 point and a 20-percent down payment on $250,000 Denver home purchases, the 30-Year Fixed Rate is 5.125 percent.  The 30-Year Fixed Rate for $600,000 purchases of Denver real estate with a Jumbo Loan is 6.125 percent.

Additionally, the scales are tipping toward ownership as a bargain.  An AP Study conducted by Marcus & Millichap Real Estate Investment revealed that the gap between median mortgage prices and median rent has dropped substantially.  M&M studied 45 metro areas.  In 2006, the gap was $777 so it paid to keep on renting.  In 2009, however, the average gap is only $221.  In Cleveland, Atlanta, Indianapolis, and St. Louis, the average gap proved to be less than $100.

We highly recommend that buyers work with experienced real estate agents and reputable mortgage brokers to find the right real estate for their budgets.  Since the gap varies by market and neighborhood, professionals are best able to help first-time buyers find the right homes.  Experienced lenders must be able to deal successfully with limited time to meet the deadline for the $8,000 tax credit.  Closing must happen before November 30, 2009.

News of lower interest rates is good news considering that there has been simultaneous pressure because of $70 Billion in Treasury debt auctions, especially 3- and 10-Year Notes and 30-Year Bonds.  On another note, consumer spending and consumer credit are down.  Consumer spending is 70 percent of the Gross Domestic Product.  There is cause to be cautious about consumer spending.  Today, the Dow Jones is at 9,841 as it continues to shy away from the 10,000 mark.  Unfortunately, the Dollar has weakened relative to the Yen and Euro.

So why buy real estate this fall?

1.    Interest rates are low but will go up as nation seeks to pay off its debt

2.    A $8,000 Tax Credit is on the table

3.    Home prices are still down but are edging up

4.    Homes offer shelter and a long-term investment

For more information about real estate in the greater metro area, including farms and horse properties, call Michael Paul of Realty Oasis at (303) 268-6052.

Standard & Poors

In the Standard & Poors/Case-Shiller Home Price Index, Denver reported its third consecutive month of positive real estate returns in May 2009.  From April 2009 to May 2009, Denver home prices increased 1.5 percent.

First American CoreLogic

According to a July 22, 2009 article in the Denver Business Journal, “Both metro Denver and the state of Colorado outperformed most of the rest of the country when it comes to prices of home resales.”  The report from First American CoreLogic is called the LoanPerformance Home Price Index (HOI).  It includes data from sales of Denver single-family homes as well as condominiums and townhomes in Denver.

Nationally since May 2008, the Denver – Aurora – Bloomfield area by end of May 2009 had registered only a 1.86 decrease in home prices.  Compare that with a couple of metro areas in California and Florida that registered home-price decreases of 29.72 percent and 29.43 percent respectively.

Denver Metrolist

Data maintained by Denver Metrolist reflects most of the real estate activity in the Denver market.  At the end of June, 20,853 homes were for sale, a five-month supply.  Numbers showed improvement in every statistical category during June 2009.  With regards to residential and condominium sales figures, the:

• Average sold price increased 6.3 percent
• Sales volume increased 15.4 percent
• Pending sales increased 6.0 percent
• Average list price increased 0.6 percent to $482,482
• Percentage of listings sold increased 14.9 percent

The August 2009 issue of Metro Brokers Real Estate Advisor reminds us that real estate sales are local.  They vary by state, zip code, and subdivision as well as by price range.  Metrolist figures for Denver Metro home sales for June 2009 by price point reveal the following about lower-priced and high-end homes.

For example, 1,900 homes sold for under $200,000 after an average 78.8 days on the market.  Since 2008, that represents only a 4.6 percent decrease in average sold price.  Another 1,699 homes sold for between $200,000 and $400,000 after 81.7 days on the market representing less than one percent decrease over the past year.  Fifty homes sold for over $1M after an average 241.8 days on the market.  That is a 9.1 percent increase in selling prices for these more-expensive homes since 2008.

Federal Housing Finance Agency

This think tank reported that prices in Colorado and the mountain states slipped only 10.1 percent from May 2008 to May 2009, and that is good news!

For more information about real estate in the Greater Metro area including rural farms and horse properties, call Michael Paul of Realty Oasis at (303) 268-6052.

First-time buyers may apply the tax credit outlined in the Recovery Act of 2009 if they close on their homes by December 1, 2009.  The decision by HUD Secretary Shaun Donovan allowing homebuyers in Colorado and the USA to use the $8,000 tax credit in conjunction with FHA financing will primarily boost the sale of starter homes.  It will also create a domino effect as growing families upgrade.  The $8,000 tax credit may assist first-time buyers as well as buyers who have not owned real estate in three years with their down payments and closing costs.

The FHA mortgage program requires borrowers to come to closing with a 3.5-percent down payment.  Having an $8,000 to fulfill this obligation allows buyers who are otherwise strapped without gift money or family and friends to borrow from to enter the housing market during 2009.

Here is how it works.  Certain approved organizations, “eligible government agency and instrumentalities of government,” may provide bridge loans using the $8,000 tax credit for repayment.   FHA-approved lenders and non-profit organizations along with all government agencies up to 10 percent of the purchase price.  To facilitate home sales, these entities along with state housing finance agencies may also provide longer-term loans secured by second liens.

Next, let us look at the interest rates increasing about .500 percent last week.  They continue to be in the low 5-percent range for conventional, conforming loans.  The government is apparently selling enormous supplies of treasuries, which are competing with Mortgage Backed Securities (MBS) as safe investments.  The MBS market is the financial instrument that determines mortgage rates.

To avoid future interest rate hikes, it is imperative for current buyers to have a rate-lock strategy in place.  First-time buyers especially do not want to wait until interest rate hikes eat up the benefits of their tax credits.

For more information about real estate in the greater metro area, including farms and horse properties, call Michael Paul of Realty Oasis at (303) 268-6052.

Foreclosed homes in the greater Denver region are a different ball of yarn.  It is critical to work with a lender and a Realtor® who has experience with bank foreclosures.  That is because there are so many critical details.  For instance, property ownership changes when a bank forecloses a parcel of Denver property.  When properties have changed ownership in the past year, specific Flipping Guidelines affect the resale.

Eyeing a foreclosed property is not a rush project.  Generally, the purchase of foreclosed properties in Denver takes longer than normal transactions do.  The bank may take one day or 90 days to decide to accept or reject an offer.  Most of the time, once a contract is accepted, a foreclosed property sale takes at least three or four more weeks to close. 

With several parties involved, it takes quite an effort to ensure an easy closing.  First off, the lender must send closing papers to the title company at least 72 hours in advance.  Other players on the chessboard include the appraiser, surveyor, inspector, flood certification company, insurance company, tax certifier, processer, underwriter, home warranty company, the title company, the escrow officer, and the bank—to name a few.

Buyers who have the time to deal with a foreclosure transaction must understand price negotiation.  A good Realtor can verify upfront any limitations that the bank may be imposing.  Realize that the bank most likely has already reduced the price of the property below market value.  Just as important, other buyers are also looking for good deals and the bank may have several offers.  Some banks will pay the buyer’s closing costs, possibly by raising the price, others will not.

Repairs, inspections, and appraisals are imperative to accessing the correct value of the property.  Inspections ensure that major systems are working.  That will include heating, air conditioning, foundation, roof, and plumbing.  Buyers are smart to hire their own inspectors to be sure that the major systems are in good condition.  Before an appraisal or inspection, it is important for the buyer to be certain that all of the utilities and water are on in order to test their functioning.  Banks who hold foreclosed properties will not do repairs.

For more information about real estate in the greater metro area, including farms and horse properties, call Michael Paul of Realty Oasis at (303) 268-6052.

Beginning with the Refinancing Initiative, we will discuss two initiatives that may directly affect owners of Denver Colorado real estate.  The refinancing initiative is designed to assist responsible homeowners who:

1. Own and currently occupy a one-to-four-unit home in Denver or elsewhere
2. Have a mortgage that is owned or controlled by Fannie Mae or Freddie Mac
3. Are current on mortgage payments (See Modification Initiative below if payments are delinquent.)
4. Owe the same or slightly less than the current value of the real estate (The first mortgage must not exceed 105 percent of the current market value of the property.  Borrowers with more than one mortgage may also be eligible.) 
5. Have a stable income that will support the new mortgage payments

Refinancing may not lower payments.  However, all of the loans being refinanced under the plan will have a 30- or 15-year term with a fixed interest rate.  Consequently, homeowners may be able to avoid future mortgage payment increases and reduce the amount of interest paid over the life of the loan, thus saving quite a bit of money over time.  No extra costs, such as the cost of an appraisal, may be included in the refinanced amount. 

Now a few words about the Modification Initiative:  This program begins with a trial modification at a new interest rate and payment.  If everything works out, after 3 months a permanent modification will agreement lower the interest rate to a fixed rate for five years.  In year six, the rate increases gradually until it reaches a rate cap that is determined by the market interest rate on the date that the modification is finalized.

To apply for a Home Affordable Modification, homeowners must own and occupy a one- to four-unit home, have taken out the loan before January 1, 2009, and have unpaid principal that is equal to or less than $729,750 (for one unit properties).  The mortgage payment, including taxes, insurance and association dues, must be more than 31 percent of the gross monthly income.  Because of extenuating circumstances, these homeowners must no longer be able to afford the mortgage payments. 

We advise all interested homeowners to seek the advice of their lenders or talk to Lori Richardson of Cherry Creek Mortgage to ferret out the options available in the Stimulus Package.  As usual, homeowners must be prepared to provide recent pay stubs, income tax return, any information pertaining to a second mortgage, account balances and minimum monthly credit card payments, account balances and monthly payments on other debt.

For more information about real estate in the greater metro area, including farms and horse properties, call Michael Paul of Realty Oasis at (303) 268-6052.

The government plans to explain details of the Homeowner Affordability and Stability Plan on March 4, 2009.  What we do know now is that it outlines three initiatives for owners of real estate in Denver and the U.S.A.

1. Refinancing program targeted for those without 20-percent home equity
2. Program to lower monthly payments
3. Support for low mortgage rates

The refinancing program is specifically targeted to people without 20-percent home equity—those who are not able to refinance because they do not have enough equity to qualify.  In order to take advantage of the historically low interest rates, this segment of homeowners is being thrown a life buoy.  According to an e-communication by Lori Richardson of Cherry Creek Mortgage Company, the people must be “creditworthy” and “responsible” folks who do not have 20 percent or who owe more than their home is worth.

These people will be able to refinance their mortgages into 30-year or 15-year fixed-rate loan products based on current market rates.  The provision is open to homeowners who have conforming loans which are guaranteed by Fannie Mae and Freddie Mac and who owe up to 5 percent more than their home is worth.  This could help homeowners reduce house payments by hundreds or thousands of dollars each year. 

There are limitations and fine print as usual including the exclusion of prepayment penalties and balloon payments.  We’ll wait for more information on March 4.

The purpose of the Stability Initiative is to reduce foreclosures and to stabilize home prices in neighborhoods.  It does not apply to investment properties, however.  Struggling homeowners who have wanted to sell their homes may be helped with this initiative.  Homeowners do not have to be delinquent to apply for this program.

As the homes have dropped in value, the initiative rewards lenders who help reduce the amount that borrowers must pay each month.  Lenders are encouraged to lower interest rates to as low as 2 percent or to reduce payments by extending the term of the loan.  They may also choose to lower the principal owed and the government will share in the expense. 

In support of low mortgage rates, the Homeowner Affordability and Stability Plan will increase funding to Fannie Mae and Freddie Mac to help maintain mortgage affordability for responsible homeowners and confidence in the mortgage market.  Many homeowners will hopefully be saved by these measures.

For more information about farms, horse properties, and real estate in the greater metro area, call Michael Paul of Realty Oasis at (303) 268-6052.

Even so, buyers of Denver CO real estate must scrutinize the trends, the neighborhoods, and have their final pick inspected.  Your professional real-estate agent has access to knowledge about all of the areas including employment and educational information.  Additionally, real-estate professionals can find out about future developments, new laws and rules, and other factors that could affect your decision.  If a fixer-upper is being considered, then it is best to obtain two or three estimates for the time and materials required to bring the home up to snuff.  Unseen costs can ruin the entire investment.

Even if housing prices remain relatively stagnant, time is on the side of the homeowner.  The worst 10-year home-price return was 2.5 percent between 1963 and 2005, according to MONEY Magazine in January 2008.  In many cases, this plus factor remains true, even if the monthly mortgage payment is more than the monthly rent payment would be.  However, people with unstable incomes may want to shy away from the long-term commitment to mortgage payments.

Retirement also present a unique set of variables.  Boomers looking to sell their primary homes and downsize may be surprised to learn that they could be better off turning the entire proceeds into a fixed annuity.  Renting may save homeowner expenses such as maintenance, association fees, and property taxes and all of these costs need to be carefully factored into the equation.

A retiring couple sells a $350,000 mortgage-free home, planning to pick up a retirement home for $175,000.  Net gain will be about $152,000.  Putting that money into an annuity, the couple would get a lifetime $10,500 each year.  Now, if they decide to rent instead, they would have about $329,000 to put into the annuity, netting about $23,000 a year.  However, purchasing still beats renting if they purchase the right retirement home in the right place as described above and hold onto it for several years.

For more information about farms, horse properties, and real estate in the greater metro area, call Michael Paul of Realty Oasis at (303) 268-6052.

“Buy American. I am.”  We echo Warren Buffet’s comments in the October 17, 2008 issue of the New York Times.  With the stock market still on the roller-coaster ride of a lifetime, folks continue to pull their money out in cash equivalents.  However, real cash value is sure to deteriorate with the likely inflation caused by the Federal Reserve printing paper money for bailout appeasement.

Buffet explains the simple rule that dictates his buying principles.  “Be fearful when others are greedy, and be greedy when others are fearful.”  So, too, in today’s fearful market, he’s been moving his own personal investments from U.S. Government Bonds to U.S. equities.

The prices are definitely right today to invest in sound American companies and real estate.  Although in the short term, all may appear weak, the pillar companies and surrounding land are strong enough over time to endure the temporary quakes of the economy.  Buffet ventures to say that “most major companies will be setting new profit records 5, 10 and 20 years from now.” 

Nationwide, elements of the economy, especially the banking, manufacturing, and housing sectors, continue to look pretty bleak.  The fearful buyer will miss out on current deals, coupled with the unbelievably low interest rates.  Some people do remember the 18-percent interest on mortgages during the early 80s, but more and more are too young to believe that interest rates could ever go that high.

The Mile High City, with better rankings for business and employment, holds more promise for your hard-earned cash.  A diverse selection of solid companies is woven into our landscape and the local real estate market is already rebounding in many areas.

For more information about farms, horse properties, and real estate in the area, call Michael Paul of Realty Oasis at (303) 268-6052.