4 Current Myths About the Real Estate Market

interesting things to think about...

cnnmoney.com

There's a lot of chatter about the real estate market. A lot of people are saying the housing recovery is moving full steam ahead. Then there are others who warn we're getting into another housing bubble, which could end disastrously once again. Still others say -- no, wait! -- a housing slowdown is imminent. A lot remains to be seen, but some common talking points have emerged -- and they aren't necessarily true. Here are four myths about the real estate market that a lot of people buy into:

1. Real estate is still a great long-term investment. Sorry, but no. "In real terms (adjusted for inflation), house prices today are roughly where they've been since the 1950s, aside from a few booms that have come and gone," said Trulia chief economist Jed Kolko. This chart based on the methodology used to calculate the Case-Shiller Home Price Index shows how close today's home prices are to 1950s prices. You'll also notice that, outside of minor ups and downs (and, of course, excluding the most recent housing boom and bust, which was pretty dramatic), home values have remained pretty steady over time. Zillow chief economist Stan Humphries points out that, historically, home values have appreciated at an average of 3 percent a year -- that's pretty slow growth. "Typically, housing is more stable, so you don't make as much money over the long term," Humphries said.

2. People are giving up on the suburbs. Widely reported statistics from the U.S. Census Bureau last year had us all thinking that, for the first time in decades, cities were growing faster than the suburbs. So wait, people don't want to live in the suburbs anymore? Not so fast. The Washington Post found holes in the theory, noting that "urban cores are still much, much smaller than the suburbs, which means they can show higher growth rates even if they're adding far fewer people in absolute terms." Trulia did its own research, analyzing growth in "suburban" neighborhoods versus "urban" neighborhoods from September 2011 to September 2012 in the country's 50 biggest metros. (The site based "suburban" and "urban" on neighborhood density and analyzed U.S. Postal Service data on how many occupied homes were receiving mail.) Trulia found that the suburbs grew much faster than urban centers, 0.73 percent to 0.35 percent, respectively.

3. We're seeing a permanent shift to renting. That's not what recent studies show. A recent survey by Prudential Real Estate found that 96 percent of American consumers consider homeownership important. Most young people want to own a home, too, with 77 percent of people between the ages of 25 and 44 saying that it's "very important." Trulia did its own survey, finding that 93 percent of Millennials who rent plan to buy a home in the future. Additionally, a January survey by homebuilding company PulteGroup showed that 6 in 10 renters who want to own a home plan to buy in the next two years. But ...

4. Buying is again better than renting. It's true that buying has become more affordable than renting in most U.S. metros -- under certain circumstances. If you're willing to stay put for a while -- say, five years or more -- then buying makes more sense in many places. But if you're going to move after a year or two, don't buy. "It really depends on where you live and your personal situation," Humphries said. Zillow recently analyzed the "break-even horizon" for owning versus renting (how many years it takes before owning becomes more financially advantageous than renting), and it's not all good news. Though in more than 75 percent of metros it would take three years or less to break even, Humphries said to consider the case of two California towns. In Mill Valley, just north of San Francisco, it takes 8.8 years to break even; in Menlo Park, where home prices are about the same, it takes 14.1 years to break even. Unless you know that you'll live in a home for that long in those cities, stick to renting.

Supply of Denver-area homes for sale at 23-year low

interesting article from Denver Business Journal

The number of homes available for sale in metro Denver dropped to the lowest level for a January in 23 years, according to a Metrolist Inc. report issued Friday.
That inventory level stood at 7,094 homes, 8 percent less than in December and 32 percent less than January 2012, the report shows, further bolstering the emerging seller’s market.
Though at 2,953 the number of homes sold in January was 13 percent lower than the previous month, it was still 20 percent higher than a year ago. And the number of homes that went under contract last month jumped 43 percent from December.
“The Denver area has not seen a January like the one that we just finished for years and years and years,” Gary Bauer, an independent Littleton Realtor and chairman of Metrolist Inc., said via email. “January is traditionally slower than December; but in this case, the number of homes placed under contract is up 43 percent month over month.”
The length of time it took to sell a home here continued to decline as the days on the market average dropped to 78, which was 25 percent shorter than the 104-day average posted in January 2012.
Average sales price for those homes dropped 5 percent from December to $274,754, but that average was still 11 percent higher than January 2012’s $248,037.
“Prices are back up to pre-recession levels and homes that have been priced appropriately are receiving multiple bids and closing at much faster rates,” Kirby Slunaker, CEO and president of Metrolist, said in a release.
Bauer’s report, which is based on Metrolist data, shows the weekly sales rate at 14.43 homes, which is the highest rate on record since 1990.
“We’re seeing a general sense of optimism within all facets of the housing industry and these numbers support what we’ve been hearing from local real estate professionals,” Slunaker said.
Metrolist noted 850 new homes went on the market in January.
Based in Greenwood Village, Metrolist is metro Denver’ multiple listing service provider, a database of home sales activity for real estate professionals.

$100M Calif. mansion has unusual sale requirement

odd contract contingency items...commented on in Denver Post article...

 

HILLSBOROUGH, Calif.—As if the $100 million asking price wasn't deterrent enough, the owner of a mansion for sale in a ritzy San Francisco suburb says the buyer can move in only after his death.

The unusual arrangement is for a 16,000-square-foot Mediterranean-style home on more than 45 acres in Hillsborough.

The San Mateo County Times reports the owner, 76-year-old Christian de Guigne (deh GHEEN-yay) IV, was born and raised in the home and doesn't plan to turn it over to the new owner until he dies.

Sotheby's International Realty agent Gregg Lynn says the arrangement was common for property traded up until the 20th century. He called the estate a once-in-a-lifetime opportunity.

Another home nearby recently sold for $117.5 million.

Home Prices in 2012: Best Year-on-Year Gain in Six Years

interesting article from rismedia

CoreLogic®, a leading residential property information, analytics and services provider, recently released its December CoreLogic HPI® report. Home prices nationwide, including distressed sales, increased on a year-over-year basis by 8.3 percent in December 2012 compared to December 2011. This change represents the biggest increase since May 2006 and the 10th consecutive monthly increase in home prices nationally. On a month-over-month basis, including distressed sales, home prices increased by 0.4 percent in December 2012 compared to November 2012. The HPI analysis shows that all but four states are experiencing year-over-year price gains.
Excluding distressed sales, home prices increased on a

As Inventories Shrink, So Do Seller Concessions

interesting article from RIS Media 2.9.2013

With inventories down and prices up, sellers are ending the costly incentives they have been forced to offer buyers during the six-year long buyers’ market. Concession-free transactions make deal-making simple on both sides of the table.
There’s no better gauge of the onset of a seller’s market than the demise of concessions that were considered essential to attract buyer interest just a few months ago.

Median Age by State 2010

Interesting info...click on map to enlarge it.

 

 

 

Metro Denver apartments scarce as rents soar

rental rates and rentals are tougher to find....

 

Denver Post

1.31.2013

 

Metro Denver apartments remain scarce with the apartment vacancy rate in the area falling to 4.9 percent in the fourth quarter of 2012 compared to 5.4 percent in the fourth quarter of 2011.

According to a report released Thursday by the Apartment Association of Metro Denver and the Colorado Division of Housing, 2012's fourth quarter vacancy rate was the lowest reported during the fourth quarter of any year since 2000.

The vacancy rate was 4.7 percent in 2000.

However, the vacancy rate in the Denver metro area in the fourth quarter of 2012 was better than the third quarter when it was 4.3 percent.

With the lower vacancy rates, rents skyrocketed.

During the fourth quarter of 2012, the average rent in metro Denver rose to $978, increasing 4.9 percent, or $46, from 2011's fourth-quarter average rent of $932.

However, the average rent in the third quarter of 2012 was higher at $986.

Average rents for all counties were: Adams, $893; Arapahoe, $950; Boulder/Broomfield, $1,103; Denver, $985; Douglas, $1,186 and Jefferson, $941 .

Not all types of units were equally in demand.

"The average rent in efficiency apartments outpaced other types of units, rising by more than 10 percent in metro Denver," said Ryan McMaken, an economist for the Colorado Division of Housing. "This suggests that people are looking for the smallest, least expensive unit the can find in many cases, and that drives up rents for the smaller units too."

Ron Thorpe, professor of Real Estate at the Burns School of Real Estate and Construction Management at the University of Denver, said that for the past 13 quarters, the vacancy rate has fallen when compared to the same quarter a year earlier, The last time the quarterly vacancy rate rose year over year was during the third quarter of 2009, said Thorpe, the author of the report.

Vacancy rates dropped from the fourth quarter of 2011 to the fourth quarter of 2012 in Adams, Arapahoe, Douglas and Jefferson counties and the in the Boulder-Broomfield area.

However, in Denver, the vacancy rate rose in Denver where a large number of new apartment communities have been built.

As to Denver, Thorpe said there were some vacancies in "brand new communities that haven't completed the lease-up process.

"Most new construction is taking place in only a few of the most in-demand submarkets right now, so low vacancy rate will continue to be the norm for many neighborhoods in the short term," said Thorpe.

The report said that given the limited number of new additions to the apartment inventory in the last two years, and especially during the last year, the recent trend in Denver metro unemployment rate, normal seasonal vacancy changes, continued immigration and an increase in metro area population, a "continued historically low vacancy rate was expected."

"Historically, the vacancy rate is higher in the fourth and first quarters than the second and third quarters, which we see again this year."

The report noted that overall average rent for the last 10 years has increased from around $800 in 2002 to more than $978 in the fourth quarter of 2012.