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Economic News

by Allison Simson

 

Spring skiing is here in full force...with another foot of fresh powder dumped on Summit County over the past 3 days!  Crazy!   

With all the economic uncertainty in the world right now, it's difficult to discern what is really happening!  I received this "Market Insight" newsletter from Jeff and Rene' Kneller of Mountain Equity Mortgage and thought I'd pass along some information from it that I hope you'll find interesting and useful. 

Market Insight: Despite all the focus on government debt in Europe, it’s important to note that the problems are more than just financial; there is also a ton of political capital at risk. The stronger and more fiscally conservative Euro member countries like Germany and France do not want to pick up the tab for poor performing countries like Ireland, Greece, Portugal and many others standing in line behind them. And as news flows out of Europe - either good or bad - Mortgage Bonds and home loan rates here in the US will move in sympathy.

One news item that pressured Bonds lower last week was word that inflation in the United Kingdom (UK) jumped to the highest level in two years in February. Remember, inflation is the archenemy of Bonds, and
inflation around the globe seeps into the US.

In fact, we’re already seeing it as Producer Prices (which look at wholesale inflation) are running at very hot levels... with prices up 3.3% in just the last three months. If pricing pressures don't recede for producers of goods and services, companies will have one of two choices:

Either: Absorb the higher cost of goods - and, thereby, hurt earnings growth

Or: Pass those increased costs onto consumers - thereby, creating consumer inflation

Both of those scenarios would be bad for Stocks and Bonds. And since home loan rates are tied to Mortgage Backed Securities - which are a type of Bond - those scenarios would also be bad for home loan rates.

Speaking of Mortgage Backed Securities, last week the Treasury Department announced it is going to begin selling some of its massive Mortgage Backed Securities holdings. This is important to anyone looking to purchase or refinance a home. That’s because this announcement immediately pushed Bond prices significantly lower, as Traders tried to get their own positions sold. Think of it as a financial game of musical chairs... in which no one wants to be the last one standing with a mitt full of Mortgage Backed Securities. This isn’t the last we’ll hear about this - and since home loan rates are tied to Mortgage Backed Securities, this creates the potential for home loan rates to rise in the near future.

Fortunately, home loan rates are still at very attractive levels for now, despite the Bond market taking a hit for most of last week. So if you’ve been thinking about purchasing or refinancing a home, this is the time to see how you can benefit before rates possibly move higher. Because as bad as it was to lose some Bond pricing in the last few days, prices could move significantly worse depending on how they hold on to technical support.

CHECK OUT THE INDUSTRY ESSENTIALS BELOW TO LEARN MORE ABOUT THIS WEEK’S FORECAST.

Rate Review

In Freddie Mac Primary Mortgage Mkt Survey (for the week ending March 25th) in which the 30-yr fixed-rate mortgage (FRM) avg. 4.81%.

The 15-year FRM this week avg 4.04%.

The five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) avg 3.623%.

The one-year Treasury-indexed ARM avg 3.21%
 

Enjoy the week and, as always, we appreciate your continued referrals and support!    

 

And Here's Your Morning Coffee!

 

 

 

 

 

 

Don't sell without presale inspection

by Allison Simson

Sellers can save with alternatives to major fix-up work

A successful home sale is one where buyers and sellers experience no after-closing disputes or legal claims. One way to maximize the chance of a happy ending is to have the property well inspected before the sale is consummated.

For decades, buyers have been advised to have a property they are seriously considering buying inspected by professionals. In recent years, many sellers have had presale inspections done before they put their home on the market.

The purpose of a seller inspection is not to preclude buyers from doing their own inspections. A well-inspected property keeps sellers out of trouble by making buyers aware of defects before they close the deal.

Sellers often wonder when they should have presale inspections done. If they are aware of defects they want corrected, they may want to have the work done before inspectors take a look. However, any work done after a report is issued can be disclosed to the buyers along with copies of invoices for work completed.

HOUSE HUNTING TIP: One reason for sellers to have their property pre-inspected is to make full disclosure of defects and to decide if some defects they didn't know about should be corrected before marketing. Before authorizing work, generate a list of all the items that should ideally be completed before showing your home to prospective buyers.

Get cost estimates and compare the total with your budget for "fix up for sale" work. Your real estate agent can help you prioritize the list so that you get the most return from your investment.

To find good inspectors, ask for references from acquaintances who bought or sold recently. Your real estate broker can provide you with recommendations. Be sure to check references and use contractors who know the local area. Check with the state's contractor licensing department and Better Business Bureau.

Sellers should make sure they use reputable inspectors who are highly regarded within the local real estate community. They should also get written reports that can be made available to buyers before they make an offer. Verbal and checklist reports can work for buyers, if they accompany the inspectors while they're inspecting. But they don't work well for seller pre-inspections that are intended for buyers' review.

Inspections are somewhat subjective. For example, one roof inspector might feel that the life of the roof can be extended several years with $2,000 of maintenance. Another roofer could bid for an entire roof replacement for $10,000. In this case, it's often best to go ahead and have the roof maintenance work done before marketing the home. The buyers then know that they don't have to immediately replace the roof, and you save $8,000.

Sometimes sellers receive a report they don't like. For example, one seller received a termite (wood pest and organism) inspection report that said the large, wood-frame, stucco-coated stair system was dry rotted and needed to be replaced at a cost of $25,000.

The seller's agent asked the inspector if there was an alternative to completely replacing the steps. The inspector included a secondary recommendation in his report that called for resurfacing the stairs with a sealant and replacing the damaged wood from underneath for about half the price.

THE CLOSING: If you get multiple reports, make sure to make all of them available to the buyers, even the ones you don't like.  Inman News.

 

For answers to your real estate questions, call Allison at 970-468-6800. Email - [email protected]. Allison is a long time local in Summit County. Summit Real Estate – The Simson/Nenninger Team is located at the Dillon Ridge Marketplace. Allison’s long-time residency and years of real estate experience can help you make the most of any buying or selling situation. She’s a Certified Residential Specialist (CRS), the highest designation awarded to a Realtor in the residential sales field.  Her philosophy is simple, whether buying or selling, she understands that the most important real estate transaction is yours.  Want to know the value of your Summit County property? Visit www.SummitHomeValue.com   

Real estate buyers eat cost for wear-and-tear items

by Allison Simson

Home Sale Hindsight

Question: Allison, We purchased a large home in Eagles Nest, Silverthorne last year. The property overall was in good condition, with the home being only 10 years old. Now that winter is here with this year’s huge snowfall, we are finding many areas of exterior paint flaking off; a large wood deck that was painted is now rotting and lifting; and numerous interior floor tiles are cracked and lifting. Should we call our insurance company or just own up to the cost of homeownership?

Answer:  Good question! In the real estate industry, we often tout the privileges of homeownership. But owning a home also has its costs above and beyond mortgage payments and taxes, and you're more mature than the average new homeowner to acknowledge as much.

Just as it's a fact that if you live you will someday die, and if you buy a new car it will eventually get a door ding or window chip, it is the truth that if you own a home, at some point you will have to maintain and repair something, and it's not necessarily anyone's fault.

Obviously, you're concerned that the home seemed fine last year, but now has a number of items that are falling into disrepair. Several things could be behind this.

First of all, many people believe that new homes are often made with materials and methods less long-lasting than homes built a century ago were. Clearly, homebuilders disagree, but there is a real issue around the planned obsolescence of recently manufactured items and materials -- virtually all industries manufacture items to last only so long these days.

One of my favorite home inspectors used to say that if your water heater was 5 years old, it might only have five years left on it, because recent water heater models are built to last roughly 10 years. If it was 20 years old, though, it could have another 20 to go -- back then, things were not built with a planned life span -- they were built to last!

Also, if your home was specifically staged or prepared for sale -- i.e., the exterior or deck painting or tile installation -- the owners or their contractors might have elected to use lower-cost/lower-quality materials. This doesn't necessarily mean they were intentionally trying to cover up a defect in the property (although I have seen this happen, too).

If you were preparing to sell a home and wanted to show it in its best light, but weren't concerned with the paint lasting for the next 10 years, you would likely not select the most expensive, highest-quality materials, either.

This is the same reason I generally encourage homebuyers to take a repair credit and complete the actual repair themselves or via a contractor, and with materials they select, rather than asking the seller to do the repair; someone who's leaving the house will almost never choose the same-quality materials as someone who's about to move in.

Now, to your specific question of whether to call the insurance company or eat the costs, from what you've told me I'd say you'll probably have to dig into your own home maintenance fund to cover the costs.

Think of the difference between the insurance you carry on your car, and a new car's warranty. Insurance generally covers the cost of repairing your car (and your home) after a traumatic event or disaster. In the case of your home, it could be a plumbing disaster that ruins the flooring or drywall, a burglary, or some natural disaster.

A warranty, on the other hand, covers the costs of maintaining items that simply wear out or malfunction without any sort of accident, event or disaster. If you have a home warranty, it may cover your water heater or furnace if they wear out.

However, the maintenance of the particular items that are "wearing out" on your home, namely the deck and cosmetic items like paint and tile, are generally excluded from home warranty coverage policies, in my experience.

Flip through your home warranty policy or even give the warranty provider's toll-free line a call to make sure you don't lose out on coverage you have, but chances are good that you're going to need to put a plan (and a budget) in place for repairing the tile, replacing the deck and repainting the house.

The upside? This time, you'll choose top-quality materials and you may not have to do these items again for a very, very long time -- if ever.

 

For answers to your real estate questions, call Allison at 970-468-6800. Email - [email protected]. Allison is a long time local in Summit County. Summit Real Estate – The Simson/Nenninger Team is located at the Dillon Ridge Marketplace. Allison’s long-time residency and years of real estate experience can help you make the most of any buying or selling situation. She’s a Certified Residential Specialist (CRS), the highest designation awarded to a Realtor in the residential sales field.  Her philosophy is simple, whether buying or selling, she understands that the most important real estate transaction is yours.  Want to know the value of your Summit County property? Visit www.SummitHomeValue.com   

5 factors that affect home values

by Allison Simson

Today's buyers are less willing to overlook 'incurable' defects

Question:  Allison, we’ve heard “location, location, location” but what else affects a home’s value?

Answer:  Location has long been touted as the most important variable affecting the value of residential real estate. Recently, the S&P/Case-Shiller Home Price Indices suggested that location is still a front-runner in terms of determining valuation.

In October 2010, four cities in the 10-city composite index registered price gains from the previous year: Los Angeles (3.3 percent), San Diego (3 percent), San Francisco (2.2 percent) and Washington, D.C. (3.7 percent). In many cities around the country, like Las Vegas and Detroit, home prices continue to decline.

The front-runners listed above are coastal port-of-entry cities. Three are in California. However, the inland cities of California -- Fresno, Merced, Bakersfield and Riverside, to name a few -- are not experiencing the same relatively good price performance. They are still plagued with a surplus of foreclosure inventory and high unemployment.

A large number of foreclosures and short sales in an area can bring the overall price of homes down. It's difficult for appraisers to find non-distressed comparable sales to support higher prices because of the lack of conventional, non-distressed sales. However, if there are only a few distressed sales in an area, the distressed sales will probably not have much if any effect on the valuation of conventional sales.

Location within an area can also influence home values. Some market niches in an area are doing better than others. A niche need not be a physical location. It could be a price range. For example, well-priced listings in the $1 million to $1.4 million price range in Piedmont, Calif., have been selling relatively quickly, sometimes with more than one offer. The $3 million and above price range has not been doing as well.

HOUSE-HUNTING TIP: Today's buyers are usually willing to pay more for homes that have a good "walk to" score. That is, they are within walking distance of shops, parks, cafes and transportation. Buyers with children often prefer a location close to schools. However, the value of a home might be diminished if it is located too close to a school -- such as across the street.

Proximity to a major metropolitan area usually has a positive impact on prices, particularly when combined with a good public transportation. Employment opportunities in the area also boost home prices.

Supply and demand are up there with location in terms of impact on price. A surplus of unsold inventory gives buyers choice and a lack of a sense of urgency. Too little inventory relative to demand has the reverse effect. This usually puts an upward pressure on prices. Sellers in sought-after neighborhoods who put their homes on the market when there's little for sale often sell for more than they anticipated.

Buyers take the condition of the property into account before they make an offer to purchase. A home with a lot of deferred maintenance might put off buyers altogether, particularly in the current market. If buyers make offers on homes that have been neglected, they will factor work that needs to be done into their price.

Deferred maintenance can be corrected. Incurable defects can put a bigger damper on price, particularly in a down market. An incurable defect, like being located next to a freeway or on a busy street, is something that can't be corrected. You'll have to live with it.

In a hot market, buyers often overlook these defects because prices are rising and buyers are more willing to make compromises. In a slow market, with no urgency to buy immediately, buyers are pickier. They take their time and buy when they find the right house.

THE CLOSING: Price accommodations need to be made to overcome buyers' objections to incurable defects.

 

For answers to your real estate questions, call Allison at 970-468-6800. Email - [email protected]. Allison is a long time local in Summit County. Summit Real Estate – The Simson/Nenninger Team is located at the Dillon Ridge Marketplace. Allison’s long-time residency and years of real estate experience can help you make the most of any buying or selling situation. She’s a Certified Residential Specialist (CRS), the highest designation awarded to a Realtor in the residential sales field.  Her philosophy is simple, whether buying or selling, she understands that the most important real estate transaction is yours.  Want to know the value of your Summit County property? Visit www.SummitHomeValue.com   

Defining a true real estate recovery

by Allison Simson

Mood of the Market

Question:  Allison, we’ve heard so much about the market.  We want to sell, but want to wait until the market recovers.  Any suggestions?

Answer:  This is the million (or billion!) dollar question isn’t it!  Our esteemed 33rd president, Harry S. Truman, once said, "It's a recession when your neighbor loses his job; it's a depression when you lose yours." In the vein of everything old becoming new again, it seems that this eye-of-the-beholder issue has never rung truer than when it comes to pinpointing when the current/recent real estate recession began, and when it ended (or will end, depending on your point of view).

The Standard & Poor's Case-Shiller Home Price Indices calls recession and recovery in terms of peaks, troughs and the rises and falls thereto and therefrom. The Case-Shiller called the top of the market in 2006 or 2007, depending on the market, and the bottom of the national housing market in the spring of 2009; the Case-Shiller is primed to mark another nationwide bottom -- the second dip -- any moment now.

Last fall, a committee that studies business cycles for the National Bureau of Economic Research raised more than a few eyebrows when it declared that technically, the recession had been over for more than a year. The NBER's Business Cycle Dating Committee said the recession began in December 2007, and ended 18 months later when the economy stopped contracting and began to expand again.

But for many individual Americans who own homes, the Truman definition rules their personal sense of when the recession began. That is, the housing crisis became real only when the prospective listing agents told them what the comparable sales looked like for their home, when they received a notice from the county that their property taxes were being reduced (without having applied for a reduction in their home's assessed value), when they lost their job and realized they couldn't sell the place for what they owed on it, or when their mortgage payment began increasing and they realized they couldn't refinance the loan because the place wouldn't appraise at their current loan balance.

While the housing bubble's deflation occurred in a geographically spotty manner over a year's time, which made it even tougher for the average Jane to pinpoint -- it was still more of an encapsulated event -- than recovery will be. Media outlets and real estate data reports have proliferated faster than Android apps, so that recovery and its absence are alternatively heralded, predicted or dismissed on a weekly or even daily basis in various outlets.

The Case-Shiller ostensibly views recovery as a return of home values to their mid-decade peaks, while former Fed Chair Alan Greenspan recently said recovery wouldn't be here until housing prices rise another 10 percent from the status quo.

All these definitions have turned the issue of when the real estate recovery was, is or will be into an economic Tower of Babel, with every analyst and report shouting out about a different definition of recovery, so that no one really understands what the other is talking about.

And in the minds of homebuyers, sellers and homeowners, this disconnect is exponentially gappier, because their positions on what recovery is is largely driven by their own perceived interests, as I realized in a recent conversation on my Facebook page about the Obama administration's proposal to phase Fannie Mae and Freddie Mac entirely out of existence.

I had sketched out a number of implications to the proposal -- including hikes in loan costs, interest rates, down-payment requirements and, generally speaking, the barrier to entry to homeownership. But I'd also mentioned that the Fannie/Freddie bailout has U.S. taxpayers $130 billion in the hole, and counting, and that the proposal provides a set of options to resolve the troubling and ideally, very temporary, current state of affairs, in which 90 percent of the home loans originated on today's market are backed in some way by the federal government.

Most real estate professionals and virtually all prospective homebuyers thought this was outrageous and would cripple the market. Those viewing the matter from their perspective as taxpayers thought that for the government to do anything but phase Fannie and Freddie out would be the real outrage. "But recovery will take longer," cried the first group, "or never happen at all," indicating that their definition of recovery was probably tied to a rise in home values or sales activity. The other group thinks recovery, by definition, will include a stable market, not propped up by the government, where homebuyers and refinancing homeowners are required to document some serious creditworthiness and put significant swathes of their own skin in the game when they take mortgages.

In his 1980 presidential election campaign, Ronald Reagan appended a definition of recovery onto Truman's definitions of recession and depression: Recovery, Reagan said, "is when Jimmy Carter loses his" job -- as U.S. president.

In today's American economy, there is no single person whose position in or out of any office will generate the housing market's recovery. The fact is, many homeowners won't think the market has recovered until it gets back to their mental target value for their home; and some buyers won't think recovery is here until they've been priced out. In every household, there is a single person whose sense of what recovery is will dictate whether it has been achieved in his or her mind: you.  Inman News. 

 

 

For answers to your real estate questions, call Allison at 970-468-6800. Email - [email protected]. Allison is a long time local in Summit County. Summit Real Estate – The Simson/Nenninger Team is located at the Dillon Ridge Marketplace. Allison’s long-time residency and years of real estate experience can help you make the most of any buying or selling situation.  Want to know the value of your Summit County property? Visit www.SummitHomeValue.com   

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Summit Real Estate
The Bright Choice
330 Dillon Ridge Way, Suite 10
Dillon CO 80435
970-468-6800
800-262-8442
Fax: 970-468-2195

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