Tuesday, July 22, 2014

The Current Supply/Demand for Denver Home Inventory

You are hearing everywhere that the available home inventory is low. It has also been reported that there have been fewer homes sales so far this year. This makes it look like both supply and demand are down for the year.
In reality, neither is true. It can all be confusing so here is a blog post to unravel the mystery.
In short, the decrease in home sales is a bit of a mirage. Due to lags in reporting, the true number of sales for January through June of 2014 will not be known for a few more weeks. When all is said and done, we'll be with a percent or two of last year's numbers.
  Thus, while inventory is historically low, this is not because there are fewer sellers. For all practical purposes, we've had the same number of sellers this year as last year. Supply is steady even though inventory is low.
At the same time, buyer demand is through the roof and much higher than the sale numbers show. This is because of the "multiple offer" situation. A high percentage of homes that come on the market have multiple offers. For every one that sells, two or three other buyers are left to continue their search. If there was more inventory, we'd have 20% or 30 % or more sales so far this year.
Bottom Line: Supply is steady, not down. Demand is up, big time. Read more about the whole market situation HERE.
Remember:I have detailed statistics on what the market is doing in each zip code in metro Denver for both single-family and multi-family homes. Call me if you'd like a report for your type of house in your specific zip code.

Source : Colorado Home Realty

Monday, July 14, 2014

Seller Strategies for Finding A Replacement Home

Right now, sellers can sell quickly and for more than their home has ever been worth in many cases and still have options to implement strategies to protect themselves in case they cannot find an appropriate, exciting or acceptable replacement home. Here are some of those strategies:

  • Have home totally prepared, ready to go to market, then find replacement home.  Working with a great agent means the sellers home is staged, pictures taken, brochures done, price determined and an effective CMA ready to present to the listing agent on the purchase of another home (this requires trust and partnership between home owner and agent as agent will have already invested a significant amount in preparation for marketing of the home and seller must be committed to the process).  The moment a seller finds the right replacement home, they get it under contract and immediately place their home on the market. PROS: lower risk of not finding replacement home.  CONS: must be more aggressive in asking price on current home, reduced negotiating power on the purchase of new home, requires lots of explanation and education of agent and seller on other and of transaction.
  • Purchase new home prior to selling current home.  If sellers lender will qualify them to own two homes, use equity in current home to purchase the replacement home.  The seller takes out an Equity line of credit against the current home to use as down payment against the purchase of a new home.  PROS: take time to find replacement home, not rushed to get out of current home, tremendous negotiating power in purchase of new home, assuming appreciation continues at similar pace, the seller actually achieves appreciation on the ownership of both properties.  CONS: must qualify for owning two homes, must carry note on two homes, risk of owning two homes longer than anticipated.  (given the appreciating market we are in, if a seller can afford to do so, this is the most financially beneficial strategy).  Alternative forms of this strategy might include borrowing against retirement and replacing those funds upon sale of current home, or other forms of accessing capital if a seller can afford to purchase prior to selling.
  • Sell current home and take time.  While this is definitely a hassle, when sellers look at this strategy it actually makes a lot of sense.  Sellers sell their home, focus on getting top dollar for that home and put the vast majority of their belongings in a short term storage facility. Sellers then move into a short term rental (which has its own challenges right now, but there are options) and take their time to find the right replacement home.  If someone is looking at a 10-20 year move, is it worth 15 days to 3 months of short term rental and hassle to find the right home?  only the seller can decide the answer to that question.  PROS: most money for current home and appropriate time to find great replacement home.  CONS: hassle.
  • (Most Applicable for Most Sellers) Sellers put their current home on the market and select the offer to purchase that allows the seller the greatest flexibility in finding a replacement home.  Sellers can write into a counter proposal to any prospective buyer for a longer closing time frame AND that seller has 2 or 3 weeks (or whatever seller chooses to ask for) to find a suitable replacement home.  In the event that seller does not notify the buyer that a suitable replacement home has been found and placed under contract by “X” date, the current contract terminates.  PROS: great confidence for the seller to place the home on  the market and know they have opportunity to find a great replacement home.  CONS: lose some negotiating ability with buyers.
Get excited about more inventory, low interest rates and the opportunity to save a tremendous amount of money over the ownership period of the next home.
This might be the seller’s perfect storm.