Friday, January 29, 2010

Significant FHA Loan Changes

The FHA just released some significant FHA loan changes. Currently, the upfront mortgage insurance (MI) premium for FHA loans is 1.75% of the loan amount. Once the new rules go into effect, that will jump to 2.25%. For example if someone is doing a FHA loan for $417,000, the upfront mortgage insurance premium will increase from $7297.50 to $9382.50. Remember that the upfront MI can be financed into the loan.

Also, the allowable seller concessions decrease from 6% of the purchase price to 3% of the purchase price. (This means that the USDA will be one of the few loan programs that allow 6% seller concessions.)

Lastly, the minimum credit score for 3.5% down may increase to 580. If someone has credit below 580 they will have to put down a minimum of 10%.

This information was gathered by Kathryn Pedersen and Holly Rogers at Yampa Valley Bank. They can be reached at 970-875-1609.

Wednesday, January 27, 2010

STEAMBOAT SPRINGS REAL ESTATE MARKET IN TRANSITION

What does a transitional market (the transition from old Steamboat to new) look like? Here in Steamboat Springs, Colorado, we are getting very mixed signals regarding the state of our real estate market. On one side, the past few weekends saw the largest number of foreclosures in the paper. On the other side, we are seeing property closings at the Steamboat base area for record price per square foot numbers
(Edgemont closings) (One Steamboat Place closings). Prices above $1,100 per square foot! These are incredible numbers for Steamboat Springs.

Personally we feel we are seeing a validation of Steamboat as a viable high end destination resort by the customers of the Vail, Aspen and Telluride type markets who recognize the long term value represented here. These buyers place a high value on the incredible family memories created in resort locations like Steamboat. They understand they are buying a very rare commodity (ski in/out property for the base area projects), and they also see the transition taking place at the base area. The developers of the Edgemont and One Steamboat Place are offering an experience never before available in Steamboat.

While the above paragraph is a great sign for Steamboat’s long term future, it does not change the near term reality for many property owners. The current economy is creating a great deal of pain, which will result in foreclosures and short sales. This trend is most likely far from over in our local market, which is a scary thought for property sellers. The next year may see lower sale prices due to distressed sellers.

Everyone loves a prosperous, fun environment and unfortunately, Steamboat was late to enter the real estate slide and will most likely be late to exit into recovery. A number of local economic fundamentals are aligning to make the next year a very difficult one for property owners. For example, a quick analysis of the daily classified section reveals very few job opportunities, but many properties for rent. This is a complete reversal from 2007.

What do we do? When do I buy? Am I getting in at the bottom? These are all questions we hear on a regular basis. Our answer is, “Find the best value that meets your needs in today’s market and make the best purchase you can”. Timing the bottom is virtually impossible and will only be clear when it is too late. What we know today is that prices have come down significantly from the peak, many sellers are in distress, inventory is high, INTEREST RATES ARE LOW and it’s a buyer’s market. It is not every day that these conditions line up. Check out our recent post on real estate values vs. interest rates from 1975 to 1993. Weighing historical data along with recent economic indicators (see our post on Randy Rowe’s round table discussion, and today may be a truly unique, long term opportunity.

If you have any questions or wish to discuss any of the items mentioned above, email chris@mybrokers.com or call 970.819.1432

Sunday, January 24, 2010

Highmark Goes To Auction

The Highmark, one of Steamboat's luxurious residences will go to auction on Thursday, March 4th. Fifteen condominiums will go to auction including 1 condo that will sell regardless of price. The rest are 2,3, and 4 bedroom condos that will sell fully furnished. The interior is furnished with top of the line Ralph Lauren inspired furniture, beds, dressers, lamps and accessories, natural slate entryway, gas fireplace with timber mantel and mountain rock surround, 9’4” volume ceilings with crown molding in the foyer, dining room, living room, and bedrooms, 8’ high panel doors,premium brass interior hardware, fluted casings with rosettes around all doors, Berber carpeting throughout living, dining, and bedroom, high-end home theater system in living room and surround sound system throughout, large open balconies with paver-tiled floors, gourmet kitchen with under-counter lighting,custom designed wood raised panel cabinetry with European-style hinges and top-of-the-line kitchen appliances including top of the line GE Monogram® appliances.
The Highmark has upscale amenities and is located only 300 yards from the gondola. Some of the amenities include valet and underground parking, health and fitness club, swim-in and swim-out heated pool and Jacuzzi, ski valet and storage, butler services, private airport transportation, etc.

If you would like to participate in this auction or need additional information please do not hesitate to give us a call or send an email.
chris@mybrokers.com, 970-819-1432 or amybrown@mybrokers.com, 970-846-2114

Tuesday, January 19, 2010

STEAMBOAT SPRINGS COMMUNITY INDICATOR TOOL

The Steamboat Pilot & Today, in conjunction with Yampa Valley Partners, is pleased to offer the Community Indicators Tool to Routt County. The goal of this tool is to enhance the use of a wide variety of data so citizens, business leaders and public officials have accurate and current information for public debate and decision making.

Monday, January 18, 2010

TIMBERS RESORTS OPENS ONE STEAMBOAT PLACE

Timbers Resorts opens One Steamboat Place in Colorado
Published: 15-Jan-2010

Timbers Resorts, a US-based developer of small, private, luxury resort properties, has inaugurated One Steamboat Place, a much-anticipated resort development at the base of majestic Mt. Werner in Steamboat Springs, Colorado.

Link to the full article

Sunday, January 17, 2010

STEAMBOAT KIDS PLAYING IN THE PARK!

Yesterday was one of those great days we parents get to experience. I was skiing with my wife, good friends and our children. All the kids have now crossed the point where they are truly fun to ski with. No more waiting around. Us adults are actually having to catch up. Here is a quick clip of my 7 year old hitting the rails. The best part is, this is normal for most Steamboat seven year olds.

Friday, January 15, 2010

What Happens When Mortgage Rates Rise

As we mentioned in our last post, we are expecting mortgage rates to increase. Also, we know that there are a lot of people waiting for prices to go down before they purchase. Kathryn and Holly at Yampa Valley Bank put together an example of what increasing rates do to the cost of home ownership.

For a loan amount of $240,000 and a purchase price of $300,000 with 20% down
The principal and interest payment at 5% is $1,288.37.

If the rates increase to 5.5% the same payment ($1,288.37) would result in a loan amount of $226,910 or $13,000 less. With 20% down this is a purchase price of $283,635.

If the rates increase to 6% the same payment ($1,288.37) would result in a loan amount of $214,890 or $25,110 less With 20% down this is a purchase price of $268,612.
(This is a purchase price drop of 10%)

Since rising interest rates occurs after inflation has entered the economy, a quick look at our past post - WHAT HAPPENS TO HOME PRICES WHEN INFLATION RISES? - tells us about the historic relationship between prices and interest rates. In summary, history tells us that once inflation enters the economy, it has been good to be a property owner.

Wednesday, January 13, 2010

Projections Indicate Rates Will Rise In 2010

Kathryn and Holly at Yampa Valley Bank have been listening to teleconferences about projections for the mortgage market in 2010. Here is the bottom line – rates will be going up. Why?

The Fed has committed to buy mortgage bonds through 3/31/10. They have already slowed their purchasing and we have seen the consequences in the slightly higher long term rates. There is not much hope of an extension of the purchasing program. It is estimated that the Fed is currently purchasing 75% (!!) of the mortgage bonds, so if they are not purchasing bonds, rates will be higher even if other players step up their buying.

With short term rates being so low (Fed Funds rate is ¼%) it is easy for large institutions to borrow low and then invest in mortgage bonds, and make money on the spread. If short term rates start to increase, this will diminish mortgage bonds purchasing even further and push rates higher.

This is one more reason to purchase NOW or sellers might want to reduce their prices now before rates do deteriorate. A higher rate means less purchasing power. Forecasts show that the 30 year fixed rate may be in the mid 6’s by the end of 2010 with a volatile rate market throughout the year.

Kathryn Pedersen and Holly Rogers can be reached at 970-875-1609

Tuesday, January 12, 2010

One Steamboat Place Opens Its Doors

This Sunday there was a great article about One Steamboat Place hosting it's first guests. Finally the anticipation is over. Robin Craigen of Moving Mountain Chalets had a great quote regarding the One Steamboat Place development, “The clientele at One Steamboat Place is one we’ve been drawing to Steamboat in increasing numbers to Steamboat Springs. It’s like nothing Steamboat has ever had before. We’ve looked at Aspen, Deer Valley and Vail, and we feel it will be perceived as a value for luxury.” This is a comment we have made to clients many times over. While we are going through a very difficult time today, the future for Steamboat is still bright and potentially brighter than most areas. Click here to read the entire article

Tuesday, January 5, 2010

WOW! BIG SNOW ON BUFF PASS NEAR STEAMBOAT

This past weekend I finally got out on the sleds. What a sick day to start the season. Easily 4' of fresh untracked powder in many spots. 6 of us headed out at 10am with high expectations and man were they far exceeded when we got there. The trails were barely visible and the snow was untouched in many areas. Nothing like full on face shots every time you turn the sled!! Here are a few pictures:



Sunday, January 3, 2010

WHAT HAPPENS TO HOME PRICES WHEN INFLATION RISES?

What happens to home prices when Inflation rises?

This has been a question on my mind for a long time. Unfortunately I did not have a great resource for accessing this information until a very good friend of mine invited me to a special presentation by Randy Rowe , President of Green Courte Partners. Mr. Rowe’s presentation to a select group of the Steamboat Springs real estate community was focused on what current economic indicators were telling us vs. the opinions. During this presentation, the main question swirling in my mind was, “If the United States is about to enter an inflationary environment, leading to higher asset values, further leading to higher interest rates, what is the long term effect on residential real estate prices?” Fortunately, Mr. Rowe had access to this data and provided me with the following chart:




This chart compares the OFHEO home price index and the 30-year, fixed-rate mortgage from 1975 (the first year the OHFEO home price index was produced) through 1981 (rising rate environment), and 1981 through December 1995 (declining interest rate environment). WOW, exactly what I was looking for. Take a look at this chart for a moment and there should be a few questions that pop into your head.

1. Rising rates should cause a decrease in a buyer’s purchasing power, therefore capping or cause a decrease in the price index. Why don’t we see this?
2. I thought during the early 90’s we there was a very bad real estate market where home values dropped precipitously. Why is this not shown?

These were my first thoughts, obviously prompting me to ask my curious questions. It appears there must be other economic variables during rising rate environments that offset the lost buying power (of course I want to know what that is and will be a future chart/blog if I can get the information). Also, during the early 90’s, the commercial real estate market took a far greater hit than residential. There most likely were local market retracements in value, but across the broad index residential values remained somewhat stable.

What does this mean for today’s buyers of real estate? No one knows for sure, so all you can do is take action based on the most likely scenario or the scenario that presents the least amount of risk. It is a fact that real estate values have declined significantly from their highs, correcting by as much as 50% in some markets. If it is assumed that going forward we will resume a more normal appreciation, buying real estate that you wish to own for personal use looks like a much better idea than in 2006/2007. Just due to an increasing population, decreased residential construction and depressed values, you can make the case that buying today makes sense. The other big variable is interest rates. Looking at the chart above, it is clear that a 5% 30-year mortgage is way below the historical average. Locking in long term rates today may prove to be a very prudent decision (possibly the best decision of all mentioned above).

If this creates any questions, please email or call me. I’ll enjoy finding the answers.