Tuesday, May 17, 2016

Why in the World Would I Sell Now?

A client asked me yesterday why in the world he would choose to sell now, right when values are increasing.  Wouldn't it be smarter to hold for a while longer and sell at the top of the market?

He's right.  It's always better to sell at the apex point in the marketplace, when values are higher than they've ever been, and perhaps will ever be.  It's a wonderful thought.

There is that one glaring problem, though, so I asked him outright.  "Could you tell me please exactly when that highest point in the market will be, so that I can call all of my clients and get their properties on the market just then?"

Let's look at some facts.  I always like the facts.

We don't know when the market will change, or exactly when it will peak.  We do know three things.

Firstly, we've had a wonderful run in the past couple of years on our real estate values.  Most people don't know how good it's been, so let's take a look at the numbers.  I always like looking at the numbers.

Following is a chart showing the increase in median sales prices for single family homes in the city of Boulder by month over the past three years, as compared to the median selling prices of homes in the greater marketplace and specifically in Longmont.

The blue and yellow lines are the home values based on median sales prices for the entire MLS area (mostly everything in the NE quadrant of the state north of Denver) and the city of Longmont, respectively.  Adding some detail, we see that the median sales price for homes overall increased over the past one year 10.2%.  Longmont increased about double that at 20.2%.  Very impressive.  

The red line is the city of Boulder.  Ya.  The numbers show a 38.8% increase in median sales price over the past year, now at $760,504.

Before you call your boss to quit your job, I have to warn you not to assume that your home today is worth more than 1/3 higher than last year.  That wonderful 38+ number probably means that more of the more expensive homes are now selling.  It is not necessarily the actual increase in the value of your home.  

Sorry.  Anybody can lie with carefully choreographed statistics.  So secondly, take a look at this other bit of data.

In calendar year 2015, if your home is the average home in Boulder, it increased in value a more modest 13.52%.  Very nice.  Very nice indeed.  But look more closely.

Since 1979, home values in Boulder have done very well.  Some years, we've done very, very well.  But we've not done better than 14.61% in any given year.  In fact, 2015 was the second best year in the past almost 40 years. During that almost 40 years, we've had very good times and some very bad times.  We've lived through and recovered from multiple recessions, lived through technology booms and busts, more than one or two oil and gas booms and busts, and seen about every kind of marketplace you can imagine short of a total collapse of the US markets, and that was even close in 2008.  Our population alone in Colorado increased 1,000,000 people over the past 13 years.

And 2015 was the second best year for home values.  I don't want to be the braggart in the soup line, but you have to wonder how much better it can get.

Finally, one more graph.  This one shows the number of months of inventory we have available for buyers in this current marketplace.

No matter where you are in the marketplace, there's about one month's worth of inventory available.

Explanation.  If no one else decided to sell a home, so no new listings were taken, with the current number of buyers looking to buy now, we would completely run out of available homes to see in one month.  There would be nothing whatsoever for sale.  Nothing to buy at any price.

REALTORS have traditionally thought of 5-6 months of inventory on the market at any given time as healthy.  The buyers and sellers negotiate for the selling price and terms on even ground.  More than 6 months inventory is a buyer's market.  Fewer than 5 months inventory is a seller's market.

I've sold real estate full time for a living for more than 30 years.  I've never seen this.

That's a good reason why you're seeing 38+% increase in median selling prices, and an increase in home values in excess of 13%.  That's why you may want to sell now.  

If you're thinking that sometime in the coming few short years you were planning to sell your home, think about it.  Living in a rental for a short time may be worth the inconvenience.

Call me anytime.  I'm always here for you.

Enjoy the day,
303.541.1920 office
303.859.4467 mobile


Friday, May 6, 2016

The weekly update from Freddie Mac is a bit better than last week.

Every Thursday throughout the year, as it has since 1991, Freddie Mac publishes its report on what borrowers paid for average mortgage interest rates throughout the country over the prior week.  Today's average covers Monday through Friday of this past week, and includes both 30-year and 15-year loan numbers, as well as 5/1 ARMS.

The Numbers:

This past week, the average borrower on a 30-year fixed rate qualifying loan got a 3.61% annual rate of interest, and paid 0.6% as a fee for that rate.  For that same loan over 15 years, the average fee was the same for a rate at 2.86%.  Those numbers are minimally better than one week ago.

So what does that mean for you?  Had you secured a mortgage on your home this past week, amortizing it over the next 30 years, you'd have paid $600 as a fee for every $100,000 you borrowed.  Your 3.61% rate on that loan would have resulted in a monthly payment of $455.21 for every $100,000 you borrowed.  (A savings of about $3 over one week ago)

Doing the math, if you borrowed $300,000 against your home, you'd have paid $1800 as a fee at closing to get a monthly payment of $1365.62 a month for the next 360 months.

If you chose the 15-year option, the fee this week would have been considerably less at 0.50%.  That means you would have paid only $500 for every $100,000 you borrowed.  In addition, the interest rate would still have been less at 2.86%.  For every $100,000 you borrowed, your monthly payment would be $683.87 for 180 months.  Doing the arithmetic, a $300,000 loan amount would result in a payment of $2051.61, a monthly savings of just better than $4.00 over a week ago.

When I began selling real estate in the early 1980's, interest rates were around 18%.  Your payment for that same 30-year loan at $300,000 would have been $4521.26.

Amazing.  Been thinking about buying a home?  The timing on mortgage interest rates is right.

Call me as you need.  I'm always here for you.

Enjoy the day,
Mike Moger
WK Real Estate
303.541.1920 office
303.859.4467 mobile