Let’s address the elephant in the real-estate-market-room: the Federal Reserve dropped interest rates to zero.
So… What does that mean?
The reason the Fed has dropped rates to zero is to support the economy during the nation’s current self-quarantine. It’s looking like COVID-19 is not going away anytime soon, and the economy is feeling that impact in several ways.
With everyone holed up to avoid the virus, consumer spending is down. Making up 70% of the GDP, consumer spending’s dip is negatively affecting industries such as travel, entertainment, hospitality, and dining. This loss of business may lead to the laying off of workers in those industries, in turn creating a further lack of spending. Last week, we shifted from a bull market to a bear market, meaning stock markets are down at least 20% from recent highs. Investors are converting to cash and to other, safer investments due to this consumer spending concern.
The drop to zero is also to provide easier access to business and personal borrowing to weather this financial storm. It will provide businesses the opportunity to acquire short-term loans to help maintain payroll, keep employees, and keep doors open.
It’s important to note that mortgage interest rates are not necessarily directly correlated with the Fed’s rates. While mortgage rates are still at an all-time low, this doesn’t mean they will continue decreasing (however, this is still possible).
The good news in this is that the housing market remains strong. We ended February with a supply of 4,835 homes on the market (attached and detached). To add context to this, the record high for February was back in 2006, where we ended with 25,484 active homes on the market, while heading into a recession! So, demand is still high, and supply is still very low.
The buyer side of the market continues to be competitive, often with multiple offers over list price. With COVID-19 spreading, we anticipate a buyer slowdown as buyers avoid public places, like open house tours. However, this also presents an opportunity to continue (or begin) your home search in a less competitive environment, at least temporarily. Once the virus begins to stabilize and financial markets start to recover, you can bet it will be a mad dash to start touring listings.
Sellers remain in the power seat in this market in almost all price points — this is with the exception of homes over one million, where buyers are able to take back the process a bit more.
So, with the safety of our clients and our employees as our priority at this time, all Love Your Hood Brokers will be taking the recommended precautions against COVID-19. If anyone at Love Your Hood becomes sick, you can rest easy knowing they will be home, and another one of our amazing (and healthy!) team members will assist you with any property tours. We are also available to do virtual video tours of properties for you while you stay safely at home — please reach out to us to schedule one.
Here are the precautionary measures we will be taking to ensure that your home buying and/or selling journey is not affected:
- We will carry disinfectant wipes to clean all surface areas — particularly lockboxes, keys, and doorknobs.
- We will ask you to please refrain from touching any surfaces when touring homes.
- If you’re showing signs of illness, please let us know. We can do a video tour on any available home.
- Our entire team will be working from home as much as possible to do our part in slowing the spread of the virus and flattening the curve.
- All meetings will be done via conference calls or virtual video chat.
We encourage you to visit the Centers for Disease Control and Prevention website for additional information regarding COVID-19.
With regards (and washed hands),
Your neighbors at Love Your Hood
Source: Andrew Dodson of the Denver Business Journal
Beginning this January, real estate agents will no longer be allowed to market listings as “coming soon.” The driving force behind this? Agents will try to market to their network and score both sides of the transaction. This new rule creates an even playing field for all buyers and agents, but some brokers aren’t happy with the change.
Source: the Colorado Real Estate Journal
The age old question, revisited: should I rent or should I buy? Here, the author presents statistics that illustrate Denver’s current preference of renting over buying. In the last 10 years, home prices have exceeded rental increases by 24%, requiring far less cash to execute a lease than to transfer a deed. But one thing to note: you don’t need to wait until you have 20% saved up to purchase a home — conventional home loans start with as little as 5% down! In fact, there are other loan products that can bring the down payment even lower.
Source: Aldo Svaldi of the Denver Post
If you were to search “overpricing a home” on Google, you’d find pages upon pages of articles and blog posts advising that it’s a bad idea. A year ago, one could get away with overpricing a home since putting it on the market alone would garner positive attention. Today, things have changed. Highlighting his reasoning with real time Denver market statistics, this article’s author advises slightly under-pricing a home when listing it these days. Agents and buyers not only know what the home is worth; they also know that a listing price must accurately represent the home’s worth in order to see a quick sale.
“There’s speculators buying up houses:” Denver’s East Colfax braces for transit, density and displacement
Source: Andrew Kenney of the Denver Post
Denver government and development reporter Andrew Kenney believes, “East Colfax is the next frontier.” From small-scale home-flippers, to development firms, to the City of Denver, investors have big plans for this neighborhood. The danger, as it always is with development, is displacement. Can the City of Denver and its housing market players revive this area’s businesses and public transportation? And, can they do it without destroying one of Denver’s last pockets of affordable housing? Read the full article below to learn more!
Curious what’s for sale in this neighborhood? Find out here:
Source: Aldo Svaldi of the Denver Post
Companies that buy homes directly from sellers in enormous quantities have surged in popularity by simplifying the process for the seller. One of the most prominent companies with this model is Opendoor, who collects data on what home buyers are looking for — and what they’re not. Carpeted floors are at the top of Opendoor’s “not” list. Read the full article to see how much money carpet could knock off your sale price and what else Opendoor recommends avoiding.
Source: Tara Siegel Bernard of the New York Times
Throughout the US there are countless people who would love to buy a home, but continue to pay that rent check to their landlord every month instead. Why is this?
For the average aspiring homeowner, the largest obstacle to overcome is the down payment. Several companies, including San Francisco-based Unison, have found an opportunity in this challenge: shared equity.
Shared equity allows homeowners to split their down payment with an investor in exchange for a piece of the appreciation when the home sells.
How shared equity benefits homeowners:
- Increase buying power
- Retain some of your savings and buy a home
- Avoid costly private mortgage insurance and high interest rates
The average loan to value (the percentage borrowed to purchase a home) for a first-time homeowner is 92.6%. Homebuyers who borrow more than 80% of a home’s value upfront are seen as risky by lenders. Traditionally, they overcome this with unfavorable interest rates and mortgage insurance. Shared equity allows for buyers to afford a large enough downpayment to avoid these costs.
The downside? By sharing equity with a firm like Unison, a home buyer saves upfront but ends up giving up a cut of their proceeds from sale if their home has increased in value.
Regardless of whether you are the type to give up some of your equity to allow an outside investor to alleviate some of the capital-intensiveness of home buying, shared equity is catching on. Unison invested alongside 450 homebuyers last year, and they project to invest with roughly 2,500-3,000 more people in 2018.
Check out the full article to dig deeper into the mechanics of shared equity.
Source: Sally Mamdooh of the Denver Channel
While browsing listing sites for a rental property to call home, Stephanie and Matthew Leschen stumbled upon a Trulia listing they thought could be the one. A man claiming to be the listing agent sent the Leschen’s a security code to the home, and they went to tour the place by themselves. Several conversations and a $3,400 later, Matthew and Stephanie found out they were the victims of a rental scam.
Unfortunately, this is not the only instance of such a scam. Watch the video below to see the rest of the Leschen’s story, and incorporate our tips for avoiding a scam into your next search for a rental home.
Tips for avoiding a rental scam
Do your research.
Trulia, like many apartment listing services, is widely used and trusted. However, this does not prevent scammers from posing as real estate agents. View the listing agency’s website and verify their legitimacy by searching for reviews and testimonials from other independent sources.
Beware of agents who ask for money before they show you an apartment or home.
An “admission” cost for a showing or open house should be an immediate red flag.
Meet with a landlord or listing agent in person.
A legitimate agency will always be willing to send an agent or manager out to a property to meet with you.
Beware of unusually high fees or security deposits.
Application fees are commonplace in a competitive market. However, if you are asked to pay a security deposit that is several times higher than one month’s rent, or to pay fees that seem unreasonably high, this is cause for concern. A legitimate agency will clearly explain any and all deposits and fees for you.
Admittedly, before venturing into real estate as a profession, selling a home without representation crossed my mind a few times. Now, I frequently take calls about For Sale By Owner (FSBO) listings and inquiries on properties where the buyer only wants to talk to the listing agent because they are representing themselves. Having peeked behind the curtain to see the intricacies of the real estate transaction, I’m glad to have hired a Realtor® to guide my way to the closing table.
Selling Your Home without a Realtor®
When selling your home, the “commission carrot” can cloud your judgement and tempt you to go it alone. A good real estate broker will provide value that far exceeds the fee charged at the closing table. Here are the three main steps in the home selling process where utilizing a professional can most benefit you:
The biggest mistake owners make is setting the listing price incorrectly. They usually base their pricing on the internet, typically by Zillow’s Zestimates. Big mistake. Nearly 25% of Zestimates are off by more than 10% from the sale price. Zillow even states in the fine print that these estimates are a starting point for determining value. Overprice your home, and the phone might not ring after your listing goes live. Underprice it, and you may leave money on the table at closing.
You found the perfect home and simply must have it! Your real estate broker is going to present your very strong offer to the seller’s broker and found out that there are several other offers on the home. You are very emotionally tied to getting this home. In this hot real estate market where homes can go within hours of being listed, some buyers are desperate to get the home they want. They may have written offers on several homes but weren’t successful. Writing a letter to the seller “pleading their situation” has occasionally been a tactic of buyers in such situations. Should you as a buyer write a letter to the seller in an emotional appeal for the seller to accept your offer? Consider the following.
What a Buyer’s Letter Is + When to Present It
A buyer’s letter to the seller is just that: a letter written by the buyer to the seller of the home that the buyer wants to purchase to encourage the seller to accept his offer. Letters are most often used when competition for homes is strong, there are multiple offers on a home, or when the buyer feels there is a special reason that the seller should accept his offer. The buyer may explain how this home fits him perfectly, what it would mean to his family to live there, tell the seller how well the home would be taken care of or restored, complement the seller on particular features of the home, etc., all aimed to get the seller to accept his offer. The buyer may also talk about his solid finances, job status, down payment, etc. to confirm his financial strength to purchase the home. The letter should be presented by the broker at the same time as the offer is being presented to the seller.
In some instances a seller may request a letter from prospective buyers. A buyer can include any of the items in the previous paragraph as well as a photo of the buyer and family. However, the seller must be cautious about basing his decision on any discrimination that could violate the Fair Housing Act.