It would be easy to say that home ownership is a turkey.
- Almost a third of homes with mortgages are under water.
- The government can’t seem to figure out the right formula to jump-start the housing market and the economy.
- Fears that Congress will curtail, eliminate or phase-out the mortgage-rate deduction to reduce the deficit are more real than ever.
- Everyone agrees that the unemployment is too high, not enough people have well-paying, secure jobs, and consumer confidence it too low.
“When we talk about market data points – whether they are up, down or sideways, let’s not forget that home ownership is not just about statistics,” Lane said. “The real estate market is not like the stock market. There is a fundamental, underlying difference. Owning a home is not just about the numbers. It is about communities, quality of life and family.”
In that spirit, this month’s question and answer with InsideRealEstateNews is dedicated to what consumers can be thankful for in the local housing market.
John: Lane, at the top of the list, when groups such as Case-Shiller compare Denver to other metropolitan areas, Denver fares quite well. Your thoughts?
Lane: Clearly, along the Front Range, we can truly be thankful that our market is not being devastated like some other markets. In Detroit, for example, they are considering plowing under entire neighborhoods that have been abandoned and starting over. The median home price in Detroit has dropped from a peak of $170,000 to $70,000. In other cities and states, foreclosures are much worse than we are experiencing in the Denver and Boulder-area markets. I think it is important not to lose sight of the fact that empirically, many other markets are fundamentally in far worse shape than we are and that is something we can be thankful for.
John: How about those mortgage rates?
Lane: Rates hovering around 4 percent for a 30-year-fixed-rate, is something we can be very thankful for. It not only is helping people who are in the market to buy a home, but it is really helping the homeowner who wants to stay where they are, if they can qualify to refinance. Rates are not only low for conventional mortgages, but this is a great time to refinance a jumbo loan. You can get a 7-year ARM in the 3s. These are rates that have not been seen before. Those type of low rates can make a huge dent in what people are paying each month and that money can flow back into the economy.
John: Let me throw out one word – stability.
Lane: That’s a good one. I think if there is one word that has appeared in my columns more than any other and on a very consistent basis it is “stability.” That has been the one constant throughout the year. If home prices or sales are up 2 percent or 3 percent or down 2 percent or 3 percent, over a period of time, that is just noise. If you buy your home today or next week or next month, and the price fluctuates a bit, either way, it won’t be a blip on your radar screen 10 years from now. You’ll just be very happy that you bought at these prices and locked in these interest rates.
John: While it might be a bit of a two-edged sword, the inventory of unsold homes is basically at a 10-year low, defying earlier projections. Your take, Lane?
Lane: I think we can be very thankful that the shadow inventory has not flooded the market. There is a huge debate in the industry whether the shadow market is still coming. But what cannot be debated is that a year ago a lot of pundits and experts were sure that the shadow inventory would overwhelm the market in 2011; the belief was that so many homes owned by banks would hit the market and just crush it. I’m not saying the threat of shadow inventory flooding the market is gone for good. However, it’s indisputable that it hasn’t happened yet.
John: Anything else we can be thankful for, Lane?
Lane: There is one emerging trend related to the shadow market.
People are starting to talk about the concept of “shadow buyers.” The concept is that there is a very large group of buyers who want to take advantage of all of the great conditions out there, such as historically low interest rates and home prices well below their historic highs. These folks have good jobs, can qualify for financing, already live in Colorado, and want to purchase. What is stopping them is that they have a house to sell back where they came from and cannot purchase in Colorado until they sell their last home. Slowly though, as markets in places like Phoenix, Florida, Vegas and parts of California stabilize, these shadow buyers are starting to have success selling their homes.
I think a surge of these buyers coming out of the shadows would be a huge boost to our market. Of course, some people just don’t have the equity in their homes at this point to make a move. But we are starting to see a trend of shadow buyers completing the sale of their existing home, and I think that is something that we can be thankful for.
John: Thanks, Lane. Happy Thanksgiving.
Lane Hornung is CEO and co-founder of COhomefinder.com and 8z Real Estate. 8z Real Estate is a sponsor of InsideRealEstateNews.com. A conversation with Hornung is a monthly feature of InsideRealEstateNews.
Contact John Rebchook at JRCHOOk@gmail.com.< class="related_post_title">Related Posts:>