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Home Sales Expected to Soar Through 2018: What Buyers Need to Know

by Clare Trapasso

By now just about every would-be buyer out there knows there simply aren't enough homes for sale these days to appease the hordes of competition. But despite the shortages, rising prices, and bidding wars, more homes are expected to be sold this year than in more than a decade.

In 2017, the number of sales of existing homes (which have previously been lived in) is expected to rise about 3.5%, to 5.64 million, according to the midyear forecast from the National Association of Realtors®. The group predicts that existing-home purchases will rise an additional 2.8% in 2018, to 5.8 million.

"The combination of the stock market being at record highs, 16 million new jobs created since 2010, pent-up household formation, and rising consumer confidence are giving more households the assurance and ability to purchase a home," NAR Chief Economist Lawrence Yun said in a statement. "However, prices are still rising too fast in many areas and are outpacing incomes."

Related Articles

What Slowing New Home Construction Means for the Housing Market
Existing-Home Sales Hit Highest Numbers Since Recession
Think Home Prices Are High Now? Why They're Likely to Keep Going Up

Sales of brand-new homes, which builders can't seem to put up fast enough, are expected to jump 10.7%, from 560,000 in 2016 to 620,000 this year, according to NAR. They're expected to rise an additional 8% in 2018, to 670,000 sales.

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New homes are typically more expensive than existing homes, as builders must contend with shortages of land and labor, plus rising costs of materials and difficulty obtaining financing.

The price tags of all homes are expected to keep rising. NAR predicts prices will jump 5% in 2017 and an additional 3.5% in 2018.

"As a result, buyers are compromising on the number of rooms, length of a commute, or other home qualities," says Senior Economist Joseph Kirchner of realtor.com®. "Meanwhile, builders are mostly building for the mid- to upper-price range. This mismatch in supply and demand is making affordability more acute for those with modest incomes."

In some white-hot markets along the coasts, prices are rising by double digits because of the dearth of homes. That's led many current homeowners who might be interested in trading up to a larger, nicer home in their area to hold off—because those homes are simply out of their price range.

Bidding wars have gotten so bad in Seattle that buyers are driving up prices 30% over asking in some cases, says local real estate broker Chris Bajuk, of HomeSmart Real Estate Associates. (Seattle prices were up 12.2% year over year in February, according to the latest S&P CoreLogic Case-Schiller report.)

"It is crazy," Bajuk says. "There's strong demand and lack of supply."

Buyers are coping by putting ever-higher percentages of their incomes toward homeownership—even when it means eating at home every night and doing without new clothes or annual beach vacations. Sometimes they're spending half of their take-home pay on housing, he says.

Others are purchasing homes farther from the city center where they work, settling for smaller homes or even purchasing residences in need of some work.

“They may need to spend more of their disposable income," Bajuk says. "Or they may need to lower their expectations on what kind of home they get."

Clare Trapasso is the senior news editor of realtor.com and an adjunct journalism professor. She previously wrote for a Financial Times publication and the New York Daily News. Contact her at clare.trapasso@move.com.
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What should you do when you are here in Summit County?

by Allison Simson

Happy Tuesday Morning to YOU! 

Tuesday, June 20th  is the first official day of summer- the longest day of the year - but summer is in full-swing here in the high country!  The glorious warm, summer days are precious up here so we start counting early! 

What should you do when you are here??

Click on the Summit County Summer Events Calendar for all the fun!  

See you on the trails!

Powered by: Summit This Week.

 

 

 

The TRUTH Behind the RENT vs. BUY Debate

by KCM Blog

The TRUTH Behind the RENT vs. BUY Debate

[The TRUTH Behind the RENT vs. BUY Debate | MyKCM]

In a blog post published last Friday, CNBC’s Diana Olnick reported on the latest results of the FAU Buy vs. Rent Index. The index examines the entire US housing market and then isolates 23 major markets for comparison. The researchers at FAU use a “‘horse race’ comparison between an individual that is buying a home and an individual that rents a similar-quality home and reinvests all monies otherwise invested in homeownership.”

Having read both the index and the blog post, we would like to clear up any confusion that may exist. There are three major points that we would like to counter:

1. The Title

The CNBC blog post was titled, “Don’t put your money in a house, says a new report.” The title of the press release about the report on FAU’s website was “FAU Buy vs. Rent Index Shows Rising Prices and Mortgage Rates Moving Housing Markets in the Direction of Renting.”

Now, we all know headlines can attract readers and the stronger the headline the more readership you can attract, but after dissecting the report, this headline may have gone too far. The FAU report notes that rising home prices and the threat of increasing mortgage rates could make the decision of whether to rent or to buy a harder one in three metros, but does not say not to buy a home.

2. Mortgage Interest Rates are Rising

According to Freddie Mac, mortgage interest rates reached their lowest mark of 2017 last week at 3.89%. Interest rates have hovered around 4% for the majority of 2017, giving many buyers relief from rising home prices and helping with affordability.

While experts predict that rates will increase by the end of 2017, the latest projections have softened, with Freddie Mac predicting that rates will rise to 4.3% in Q4.

3. “Renting may be a better option than buying, according to the report.”

Of the 23 metros that the study reports on, 11 of them are firmly in buy territory, including New York, Boston, Chicago, Cleveland, and more. This means that in nearly half of all the major cities in the US, it makes more financial sense to buy a home than to continue renting one.

In 9 of the remaining metros, the decision as to whether to rent or buy is closer to a toss-up right now. This means that all things being equal, the cost to rent or buy is nearly the same. That leaves the decision up to the individual or family as to whether they want to renew their lease or buy a home of their own.

The 3 remaining metros Dallas, Denver and Houston, have experienced high levels of price appreciation and have been reported to be in rent territory for well over a year now, so that’s not news…

Beer & Cookies

One of the three authors of the study, Dr. Ken Johnson has long reported on homeownership and the decision between renting and buying a home. The methodology behind the report goes on to explain that even in a market where a renter would be able to spend less on housing, they would have to be disciplined enough to reinvest their remaining income in stocks/bonds/other investments for renting a home to be a more attractive alternative to buying.

Johnson himself has said:

“However, in perhaps a more realistic setting where renters can spend on consumption (beer, cookies, education, healthcare, etc.), ownership is the clear winner in wealth accumulation. Said another way, homeownership is a self-imposed savings plan on the part of those that choose to own.” 

Bottom Line

In the end, you and your family are the only ones who can decide if homeownership is the right path to go down. Real estate is local and every market is different. Let’s get together to discuss what’s really going on in your area and how we can help you make the best, most informed decision for you and your family.

3 Reasons the Housing Market is NOT in a Bubble

by Allison Simson

With housing prices appreciating at levels that far exceed historical norms, some are fearful that the market is heading for another bubble. To alleviate that fear, we just need to look back at the reasons that caused the bubble ten years ago.

Last decade, demand for housing was artificially propped up because mortgage lending standards were way too lenient. People that were not qualified to purchase were able to obtain a mortgage anyway. Prices began to skyrocket. This increase in demand caused homebuilders in many markets to overbuild.

Eventually, the excess in new construction and the flooding of the market with distressed properties (foreclosures & short sales), caused by the lack of appropriate lending standards, led to the housing crash.

Where we are today…

1. If we look at lending standards based on the Mortgage Credit Availability Index released monthly by the Mortgage Bankers Association, we can see that, though standards have become more reasonable over the last few years, they are nowhere near where they were in the early 2000s.

2. If we look at new construction, we can see that builders are not “over building.” Average annual housing starts in the first quarter of this year were not just below numbers recorded in 2002-2006, they are below starts going all the way back to 1980.

3. If we look at home prices, most homes haven’t even returned to prices seen a decade ago. Trulia just released a report that explained:

“When it comes to the value of individual homes, the U.S. housing market has yet to recover. In fact, just 34.2% of homes nationally have seen their value surpass their pre-recession peak.”

Bottom Line

Mortgage lending standards are appropriate, new construction is below what is necessary and home prices haven’t even recovered. It appears fears of a housing bubble are over-exaggerated.

Homeownership Is a Good Financial Investment!

by KCM Blog

According to a recent report by Trulia, “buying is cheaper than renting in 100 of the largest metro areas by an average of 33.1%.” The report may have some people thinking about buying a home instead of signing another lease extension, but does that make sense from a financial perspective?

Ralph McLaughlin, Trulia’s Chief Economist explains:

“Owning a home is one of the most common ways households build long-term wealth, as it acts like a forced savings account. Instead of paying your landlord, you can pay yourself in the long run through paying down a mortgage on a house.”

The article listed five reasons why owning a home makes financial sense:

  1. Mortgage payments can be fixed while rents go up.
  2. Equity in your home can be a financial resource later.
  3. You can build wealth without paying capital gains.
  4. A mortgage can act as a forced savings account.
  5. Overall, homeowners can enjoy greater wealth growth than renters.

Bottom Line

Before you sign another lease, let’s get together and discuss all your options.

4 Reasons to Buy This Summer!

by KCM Blog

Here are four great reasons to consider buying a home today, instead of waiting.

1. Prices Will Continue to Rise

CoreLogic’s latest Home Price Index reports that home prices have appreciated by 7.1% over the last 12 months. The same report predicts that prices will continue to increase at a rate of 4.9% over the next year.

The bottom in home prices has come and gone. Home values will continue to appreciate for years. Waiting no longer makes sense.

2. Mortgage Interest Rates Are Projected to Increase

Freddie Mac’s Primary Mortgage Market Survey shows that interest rates for a 30-year mortgage have remained around 4%. Most experts predict that they will begin to rise over the next 12 months. The Mortgage Bankers Association, Fannie Mae, Freddie Mac & the National Association of Realtors are in unison, projecting that rates will increase by this time next year.

An increase in rates will impact YOUR monthly mortgage payment. A year from now, your housing expense will increase if a mortgage is necessary to buy your next home.

3. Either Way, You are Paying a Mortgage

There are some renters who have not yet purchased a home because they are uncomfortable taking on the obligation of a mortgage. Everyone should realize that, unless you are living with your parents rent-free, you are paying a mortgage - either yours or your landlord’s.

As an owner, your mortgage payment is a form of ‘forced savings’ that allows you to have equity in your home that you can tap into later in life. As a renter, you guarantee your landlord is the person with that equity.

Are you ready to put your housing cost to work for you? 

4. It’s Time to Move on with Your Life

The ‘cost’ of a home is determined by two major components: the price of the home and the current mortgage rate. It appears that both are on the rise.

But what if they weren’t? Would you wait?

Look at the actual reason you are buying and decide if it is worth waiting. Whether you want to have a great place for your children to grow up, you want your family to be safer or you just want to have control over renovations, maybe now is the time to buy.

If the right thing for you and your family is to purchase a home this year, buying sooner rather than later could lead to substantial savings.

Do You Know the Cost of NOT Owning Your Home?

by KCM Blog

Owning a home has great financial benefits, yet many continue renting! Today, let’s look at the financial reasons why owning a home of your own has been a part of the American Dream for as long as America has existed.

Zillow recently reported that:

“With Rents continuing to climb and interest rates staying low, many renters find themselves gazing over the homeownership fence and wondering if the grass really is greener. Leaving aside, for the moment, the difficulties of saving for a down payment, let’s focus on the monthly expenses of owning a home: it turns out that renters currently paying the median rent in many markets could afford to buy a higher-quality property than the typical (read: median-valued) home without increasing their monthly expenses.”

What proof exists that owning is financially better than renting?

1. The latest Rent Vs. Buy Report from Trulia pointed out the top 5 financial benefits of homeownership:

Mortgage payments can be fixed while rents go up.
Equity in your home can be a financial resource later.
You can build wealth without paying capital gain.
A mortgage can act as a forced savings account
Overall, homeowners can enjoy greater wealth growth than renters.

2. Studies have shown that a homeowner’s net worth is 45x greater than that of a renter.

3. Just a few months ago, we explained that a family buying an average priced home at the beginning of 2017 could build more than $42,000 in family wealth over the next five years.

4. Some argue that renting eliminates the cost of taxes and home repairs, but every potential renter must realize that all the expenses the landlord incurs are already baked into the rent payment –along with a profit margin!!

Every year, Gallup surveys Americans to determine their choice for the best long-term investment. Respondents are given a choice between real estate, stocks/mutual funds, gold, savings accounts/CDs, or bonds.

For the fourth year in a row, Real Estate has come out on top as the best long-term investment! This year’s results showed that 34% of Americans chose real estate, followed by stocks at 26%. The full results are shown in the chart below.

 

 

 

 

 

 

 

 

 

 

The study makes it a point to draw attention to the contrast of the sentiment over the last four years compared to that of 2011-2012, when gold took the top slot with 34% of the votes. Real estate and stocks took second and third place, respectively, while still in recovery from the Great Recession.

Bottom Line

As the real estate market has recovered, so has the belief of the American people in the stability of housing as a long-term investment.

 

Nearly 3,000 homeowners netted $32 million during this ski season, a doubling from the previous season, Airbnb says

Jennifer Dahir-Kanehl works 50 hours a week at a Breckenridge restaurant to pay her mortgage. This past winter she and her boyfriend eschewed a roommate, opting instead to rent a spare space through Airbnb, joining the ever-swelling tide of high country homeowners hosting short-term guests.

At the restaurant and at the hotel where her boyfriend works, it’s a struggle to keep employees who can’t find a place to live. Dahir-Kanehl knows she could rent her spare bedroom, with its separate entrance and private bathroom, to a local worker.

“But in my world, why would I have someone paying $700 when I can make $2,200 to $3,000 a month,” she said. “Long-term rentals around here are hard to find and when you do, they want $1,000 per room and no one making $10 an hour can afford that. It’s tough for the town, and its going to be way tougher before it gets better.”

Short-term vacation rentals in Colorado ski country are continuing on an explosive trajectory, generating record amounts of income for homeowners and tax revenue for municipalities.

The number of Airbnb guests in Colorado’s resort towns nearly doubled this season over the 2015-16 season, as did the earnings by hosts, revealing the relentless surge of short-term rental business that is vexing community leaders grappling with the emerging impact of the red-hot shared economy.

More than 121,000 visitors booked Airbnb homes in Avon, Breckenridge, Copper Mountain, Crested Butte, Dillon, Frisco, Keystone, Steamboat Springs, Telluride and Vail for the 2016-17 ski season. About 2,800 homeowners — a majority of them women — netted $32 million from those visitors, a doubling from the previous season, according to statistics provided by Airbnb.

Expedia-owned vacation rental platform Homeaway has seen tremendous growth in the number of homeowners offering their residences to short-term guests, with the number of Homeaway-listing hosts in towns like Avon, Frisco, Steamboat Springs, Telluride and Vail growing anywhere from 74 percent to 261 percent in the last four years.

Along with this growth comes impacts, both good and bad. The good: local homeowners banking more cash and communities harvesting windfall tax revenue as they corral renters into licensing and taxing programs. The bad: neighborhood changes as more homeowners embrace short-term over long-term and the pinched supply of rental housing for local workers as homeowners opt for the more lucrative short-term guests.

But statistics revealing those impacts are fleeting. The source of the housing crisis in the high country cannot be blamed entirely on short-term rentals, said Brian Waldes, the finance director for the town of Breckenridge, a pioneer in regulating short-term rentals.

“It does make sense, but we don’t have a ton of data to say that these short-term rentals are a major contributor for our housing crunch. It is a contributor, but we don’t think that droves of homeowners are switching over to short-term rentals,” Waldes said. “We’ve always had a large rental pool, and it’s always been hard to find housing in the mountains. We don’t think these online travel sites necessarily caused the problem.”

Breckenridge, a town of 4,750, has six hotels, three bed-and-breakfasts and 3,345 licenses for individual owners to rent their homes and condos. It’s been that way for years. The town has long leaned on its condo owners to supply housing for visitors to the second-most trafficked ski area in the country.

Taxes on those individually owned units accounts for 29 percent of the town’s total sales tax revenue, marking the largest contributor to the town’s coffers. Short-term vacation rentals are vital to Breckenridge, and the town has developed the most progressive regulations in the state. This year, the town budgeted $19 million for its affordable housing fund.

On the other side of the regulatory coin is Durango, where about 60 of the city’s 8,000 housing units are available for short-term rentals, thanks largely to policies designed to protect neighborhoods and prevent the commercialization of residential areas. Lodging taxes for the city account for about 7 percent of its total sales tax revenue, reaching $1.7 million in 2016.

And in the middle are more than a dozen high-country cities and towns — in addition to major cities across the country — tinkering with different levels of regulation for short-term rentals, from Estes Park to Georgetown, Aspen, Crested Butte and Vail. Most every community has convened a diverse task force to study the issue and every town closely examines each other’s existing regulations in a search for what fits for their community.

“There isn’t a magic bullet. This is one of these things where there are a variety of best practices and a variety of approaches, but they are as different as night and day. It’s not a cookie-cutter approach,” said Sam Mamet, the head of the Colorado Municipal League. “There are a lot of communities dealing with it, but they are doing it differently because of differing needs.”

Short-term rental taxable sales from privately owned units in Breckenridge climbed from $97.6 million in 2014 to $127.5 million in 2016. Airbnb shows 45,600 guests booked accommodations around Breckenridge for the 2016-17 ski season, delivering to area hosts $12.6 million, exponentially more than any Colorado ski-town hosts on the website. Homeaway shows the number of Breckenridge-area listings has grown 73 percent from 2013 to 2017.

Lois Montague and her husband, Kent, this past winter decided to rent out the ground-floor, two-bedroom apartment in the house they built 20 years ago just outside Breckenridge. They thought they could bolster their retirement income by hosting visitors. It rented nearly every night this past winter, allowing 73-year-old Lois to ski 100 days and 78-year-old Kent to get 111 days on the hill.

“We have had people from all over the world, every walk of life you can imagine,” said Lois, who handles all the cleaning and bookings through Airbnb. “Breckenridge doesn’t have enough hotels, so we feel like we are filling a niche.”

She’s read the newspaper reports on the dearth of local worker housing. She’d rent long term, but sometimes her kids and grandkids come up and stay for a week or two. Plus, there’s the money.

“I know that Summit County and Breckenridge in particular have asked repeatedly through the news media that we consider renting the property out long-term to employees,” she said. “But the employees can’t afford what we are getting for rent. I feel bad, but I guess I don’t feel quite that bad.”

Airbnb has partnered with 275 governments around the word to collect and remit local lodging taxes. In February, the site began collecting state taxes for the state of Colorado, building upon existing tax-collecting agreements with Boulder, Snowmass Village, Steamboat Springs, Colorado Springs, and Golden.

“We want to help hosts pay taxes. Our community of hosts want to pay their fair share,” said Airbnb spokeswoman Jasmine Mora.

Even with Airbnb’s release of data, it’s hard to get a good grasp of how short-term rentals are influencing Colorado’s resort towns. Ralf Garrison, whose Denver-based DesiMetrics group surveys property management companies and hoteliers across the West to identify lodging trends, called short-term rentals “a Rubik’s Cube.”

“Rental-by-owner these days is probably the most disruptive and least understood influence in the vacation lodging marketplace,” he said.

There’s no reliable indicators. Some owners rent their second homes all the time. Others rent when they aren’t using it. Owners with a high net worth tend to not rent at all. Then many owners list across multiple platforms, meaning the number of listings rarely mirrors the number of available units for rent.

There are several pistons firing off the same crankshaft, said Garrison, who in presentations to municipalities eager for statistical support of any impact from short-term rentals, tends to elevate short-term rentals as critical “hot beds” that can fuel a region’s economic vibrancy.

“The highest and best use of some of these units is as a short-term rental,” Garrison said.

Now hotels and property management companies are listing properties on Homeaway, VRBO and Airbnb, and those sites are becoming distribution channels for traditional lodging.

“For those of us who love puzzles, we are having fun,” Garrison said. “It’s really hard to solve until you get the hang of it and we all are slowly figuring it out.”

Summit Real Estate's Recommended Service Providers List

by Allison Simson

Happy Tuesday to YOU! 

People are always asking us for recommendations of who to use for everything from carpet cleaning to window replacement to who does the best nails!  Over the years, we have worked with many companies and have put together a list of people we've worked with who are just great. Plain and simple. 

We've had so many requests for this list that I thought I would pass is along to you here: 

http://www.summitrealestate.com/SRE-Recommended-Service-Providers

Please share with us your experience, if you do decide to utilize a provider from our list. We love hearing confirmation that these are indeed valuable recommendations.

If this list doesn't have the service you are looking for, please contact us! Chances are “We gotta guy” for you. We are fortunate to have an embedded team with a wide network in Summit County.

We are in the business of helping you anyway we can. It is our pleasure to share with you those who have our team’s seal of approval!

P.S. If you are in Summit County, and are not on the list, give us a call. Let's chat. 

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Allison Simson, Owner/Broker, is a licensed Colorado Real Estate Broker