Phil's Blog

Case Shiller released their latest Home Price Index yesterday. The headlines that followed were true but, in our opinion, a little misleading. Here are some of the highlights of the report that have dominated major media coverage:

• Home prices rose 5.5% in the 12 months ending in November 2012 (the latest data available).
• In the 12 months ended in November, prices rose in 19 of 20 cities.
• Housing is clearly recovering. Prices are rising as are both new and existing home sales.

Great news for the housing industry. Realize however that all the highlights mentioned above refer to year-over-year comparisons.

What is NOT Being Reported

There is another finding in the report that hasn’t garnered many headlines – month-over-month prices are softening.

There is no doubt that prices are up over the same time period last year. However, home price movement is seasonal. During the winter months for each of the last three years, prices have softened. That is taking place again this winter. As the report states:

“Winter is usually a weak period for housing which explains why we now see about half the cities with falling month-to-month prices compared to 20 out of 20 seeing rising prices last summer.”

This does not mean the housing recovery is slowing. It just means that home values are following their historic trend. As explained in the report:

“The better annual (year-over-year) price changes also point to seasonal weakness rather than a reversal in the housing market.”

If you are thinking of selling, you really need to know what will happen to home values in the short term. Prices, based on history, will soften over the next several months in many markets. Therefore, if your plan is to move by next summer, waiting for higher prices before putting your house on the market may not make sense.

Many homeowners are waiting until the Spring ‘buying season’ to list their homes for sale. Here are five reasons why that might not make sense this year:

1.) Demand Is High

Homes are selling at a pace not seen since 2007. The most recent Existing Home Sales Report by the National Association of Realtors (NAR) showed that annual sales in 2012 increased 9.2% over 2011. There are buyers out there right now and they are serious about purchasing.

2.) Supply Is Low

The monthly supply of houses for sale is at its lowest point (4.4 months) since May of 2005. The current month’s supply is down 21.6% from the same time last year. Historically, inventory increases dramatically in the spring. Selling now when demand is high and supply is low may garner you your best price.

3.) New Construction Is Coming Back

Over the last several years, most homeowners selling their home did not have to compete with a new construction project around the block. As the market is recovering, more and more builders are jumping back in. These ‘shiny’ new homes will again become competition as they are an attractive alternative to many purchasers.

4.) Interest Rates Are Projected to Inch Up

The Mortgage Bankers’ Association has projected mortgage interest rates will inch up approximately one full point in 2013. Whether you are moving up or moving down, your housing expense will be more a year from now if a mortgage is necessary to purchase your next home.

5.) Timelines Will Be Shorter

The dramatic increase in transactions caused many challenges to the process of buying or selling a home in 2012. We waited for inspections, dealt with last minute appraisals and prayed that the bank didn’t ask for ‘just one more piece of paper’ before issuing a commitment on the mortgage. There are fewer transactions this time of year. That means that timetables on each component of the home buying process will be friendlier for those involved in transactions over the next 90 days.

These are five good reasons why you should consider listing your house today instead of waiting.

GLENWOOD SPRINGS—Every day, Phil Weir and Bob Hinkey, two Realtors with longstanding local experience, see that Glenwood Springs’s real estate market is steadily improving. But neither Realtor anticipates residential or commercial real estate to make the drastic upward moves it made pre-2008 as we head into 2013 and beyond.

“People [used to have] the incredible idea that real estate values always go up,” said Weir, who recently launched Western Slope Real Estate Group after selling real estate in the Roaring Fork Valley during the ‘80s and ‘90s, moving out of the country then returning in 2008 to work for Mason Morse Real Estate. “Everybody thought they were untouchable. They thought you could buy something for $75,000 and turn around and sell it the next year for $150,000. It doesn’t work that way anymore.”

Weir, who focuses primarily on residential property, said it’s a whole new game now.

“It’s a big, big slap,” he said. “Real estate can no longer be associated with two words: ‘appreciation’ and ‘investment.’ People used to buy a property and then sell it two years later, and it always went up. Now we’re realizing that’s not the case anymore.”

And for Bob Hinkey, an owner/broker with Bullock Hinkey Real Estate, the commercial market operates differently than it used to, too.

“Generally, the [commercial] market is really soft,” Hinkey said. “We’re at about 35 to 40 percent of where we were four years ago.”

Hinkey said banks are more cautious about lending money to purchase a commercial property (“they’re more concerned about the monthly expenses involved in maintaining a building,” he said) but that commercial leasing has improved in the wake of an otherwise soft market.

“It’s fairly strong,” Hinkey said of the number of signed commercial leases.

Residential: Mom and Dad’s house

Weir said that the country – and the local market – seem to be returning to the values that people living in the mid-20th century had about home ownership.

“Mom and Dad used to buy a house to live in,” he said, referring to the motivation of home ownership when a house was purchased, not as an investment but as a long-term, and sometimes lifetime, place to call home.

During 2006-08 when real estate values were peaking, many buyers were purchasing homes they couldn’t afford, and when the downturn hit, property was unloaded at huge losses.

“In Aspen Glen, there was a bunch of stuff that had been priced at $2 million selling for $800,000,” Weir said. “With foreclosures and short sales, incredible stuff was moving through inventory.”

Now, Weir said, the local market has probably reached a point where it’s stopped going down. There’s not much on the market, which is causing prices to rise slightly.

“Because of the scarcity of supply, prices are starting to come up a little bit,” he said. “But it won’t ever be like [the high-end prices of] 2008. That was once in a lifetime.”

Weir said one positive trend he’s seen during the past couple of years is that more people have been able to afford real estate with prices lowering to affordable levels for many people.

“In the past year and a half,” he said, “I’ve sold seven houses to seven teachers. They’ve been in the $190,000 range. And that’s a good thing.”

Commercial: A car dealership kind of town

Both Weir and Hinkey agree that commercial real estate behaves far differently from residential property. And within commercial property, nothing is moving as well as Glenwood’s car dealerships.

Hinkey has a unique perspective in this area. In addition to being an owner and broker with Bullock Hinkey, he’s been a commercial/fleet sales representative at Berthod Motors for decades.

“Glenwood Springs is really becoming the Western Slope’s car town,” Hinkey said of the range and number of automotive dealers. Berthod is currently adding a large addition to its dealership on 27th Street and South Grand Avenue in south Glenwood Springs, and a Chevrolet dealership just opened on Highway 6 in West Glenwood as other dealerships are moving and expanding.

“There’s a need for [dealerships],” said Hinkey, “and it’s a good time for it. It’s a good thing for the town, for our local workers, and a good thing for our tax base.”

Although commercial properties may a bit behind residential sales, buyers seeing a good opportunity are picking up real estate at good prices.

“Buffalo Valley just sold,” said Hinkey of the restaurant and motel off of Highway 82 south of Glenwood. “The fellow who bought it stole it. It’s a terrific property. He got a great deal.”

The former Sopris Restaurant near Cattle Creek on Highway 82 has been closed since 2009 after it re-opened as the nightclub Dos Hermanos. Hinkey said that building will not share a similar fate as Buffalo Valley.

“It’ll get torn down,” he said of the western style structure that’s part of the stalled Bear Chase development, though Hinkey didn’t know when demolition might occur. “It’s in bad shape.”

What lies ahead:

As far as the future goes, Hinkey said that commercial properties are generally the last segment of the real estate market to come back, though smaller, single-user commercial buildings – in the 1,000- to 2,000-square-foot range – generally fare better.

Currently, Weir said, the inventory is low and the buyers are becoming more interested.

“Things are selling,” he said. “Houses in the $300,000 to $400,000 range are getting snapped up. People are looking. And more and more, Glenwood has caught on as a second-home area. Aspen is too expensive, so I’m seeing people buying here, like at Ironbridge, and renting out their houses until they’re ready to live here part-time themselves.”

Ultimately, Weir said that the 2008 downturn has shown that real estate cannot be looked at as it once was.

“The future? I think we’ll see prices go up based on inflation,” he said. “But we’re not going to see houses refinanced so people can go on vacations. I think we’ve realized that an artificial boom is not based on real estate being an actual commodity to count on.”

Why I’m a REALTOR - And Why You Should Care December 9, 2012 By Anthony Gilbert Leave a Comment There’s a common misconception that real estate agents only care about “the money” - their commissions. All commission-based compensation structures are an “easy target,” no matter the industry. Particularly in real estate however, the discussions tend to revolve around the expense of using an agent, rather than the benefits. This focus on "price" has led to "discount" agents and limited service listings (where the seller pays only to be entered into the MLS). While those options clearly have a place in the market, I do not believe they truly match the needs of most buyers or sellers. Whether they know this or not, is another matter. Why the Focus on Commissions? I believe potential clients (mostly home sellers) focus on commission because too many agents overlook the importance of first establishing trust - followed by a frank and detailed discussion regarding the benefits of our services. Agents also often make the mistake of steering potential clients towards their own (the agent’s) biases and beliefs without any data to back-up their opinions, and worse... without truly listening to, or at least validating the desires of the client. Furthermore, buyers and sellers all too often overlook the importance of assessing the personal and professional qualities of the agent. All agents are not created equal, and beyond knowing “real estate,” it’s just as important (if not more so) to know what truly motivates the agent to do a good job - besides just “getting paid.” Why should you care? Well... because sooner or later in the course of the home buying or selling process, there will likely be multiple occasions when you’ll take comfort in knowing your REALTOR truly has your back! Earning the Business & Setting Expectations When meeting with a prospective client for the first time, the possibility of compensation never enters my mind. Seriously... it’s the farthest thing from it at that moment. Rather, my focus is demonstrating a high-level of professionalism, integrity and competence, while conveying to the potential client how my services will benefit them. Notice I often say “prospective client” and “potential client.” When first meeting people, while I’m completely confident in my abilities, I do not presume they will choose to work with me at that time - even if they’ve been referred. In fact, I’m often the first agent to suggest to home buyers that they “interview” more than one agent to find the right fit. Why? Because I strongly feel that all business must be earned - I do not feel I’m “entitled” to someone’s business just because I hold a real estate license. More to the point however, I want to make sure all of my potential clients recognize that the process of choosing an agent should in fact be a conscious decision. I’m not comfortable being an agent “by default.” It is for this reason that I prefer a friendly and casual meeting before getting down to business, with the primary goal of simply getting to know each other. Of course, I realize that’s not always possible. Why I Became a Real Estate Agent It probably goes without saying, that I like to have money in the bank just as anyone else. However, I am very proud to say that my priority is squarely with my clients, keeping-track and following-up on all fronts to make sure everything is in place for closings to happen on schedule. Yes... some elements (such as lending and the other agent’s duties) are out of my control; but I can certainly attempt to make sure that all the other parties are working for the same common goal - and that includes motivating the client to take care of their own responsibilities too. At the close of each transaction, I’m reminded of why I became a Real Estate Agent - and it positively has NOTHING to do with commissions. Beyond my true interests in real estate, the primary motivating factor is simple - it’s the genuine satisfaction I feel knowing I’ve played an important role in the client’s home buying or selling experience. Of course, the ultimate thrill is when clients sincerely express their appreciation to me - and better yet, when they refer me to family and friends. Thus at the end of the day, the true “reward” is not the commission; rather, it’s the simple validation from clients and others that I really have done a good job.