by neil kearney | Feb 12, 2009 | For Buyers, For Sellers
You have probably seen the attached picture before – is it a picture of a young women or an old women? The answer is it depends on
how you are looking at it. How you perceive it.
One definition of reality is: “all of your experiences that determine how things appear to you”. I agree with this on many levels – I believe you make your own reality and what you know and believe as well as your past experiences effect what is “real” for you. A slum dweller in India has a much different reality than a socialite living in Beverly Hills.
The key word in the definition above is experiences. I submit that this definition is not as true as it once was. Don’t worry, I will tie in to real estate in a moment.
In the past (B.C. through the 19th century), reality was based on what one actually experienced. All inputs to opinion were very localized. For example, when there was a famine, chances were that you were hungry. Perceived reality equaled actual reality. There were no outside forces to sway your perception.
During the last century, technology in all of its forms have provided us a wider set of inputs. I guess this is called globalization. We have access to and know more about more subjects. Where we used to just be concerned with our local experience, we now are fed data on an ever-broadening spectrum of subjects. Google (verb) whatever subject you can imagine and have instant access to other’s research and opinion’s. It is no longer our own experiences that form our perceived reality it is the experiences and knowledge of others.
My point is that our perceived reality may not always equal our actual reality due to the influence of non-localized information. I run into people all the time who can’t believe the sorry state of our real estate market. The problem is that they have no actual experience with the market, their perceptions are based on outside information. We are used to making the leap from “the market is bad in Las Vegas” to “it must be bad here as well”.
Right now, the media has plenty of negative news to report. There is blood in the water and the sharks are in a frenzy. Foreclosure’s in CA, value loss in Michigan, empty buildings in Florida, etc. Bad news all around, a fact. The problem is that people take that news and equate that news to all other areas. The message is that the market is bad, the conclusion is that the market is bad everywhere.
Perception does not always equal reality. While the market in Boulder County is not stellar, it is much better than what you would think by listening to the news. Prices are holding, properties are selling and foreclosures are not a big part of our market. We are very lucky and I’m spreading the word! When you are ready to buy or sell give me a call. I’m here to help. Neil 303-818-4055
by neil kearney | Jan 5, 2009 | For Buyers, For Sellers, Real Estate 101 |
Most of the buyer’s right now in the distressed markets across the country are either first time buyers or investors. Both of these 
categories recognize that this is a perfect opportunity in which to buy.
But what about move-up buyer’s? Those who already own a home but are ready to purchase a larger home or a different type of home. Many of these would-be buyers are waiting until the prospects of selling their homes are better. Let me explain why this may not be the best strategy.
According to the National Association of Realtors the average move-up buyer purchases a home that is 50% more expensive than the house they are selling. For our example let’s assume that the Smith’s currently own a home that they think should sell for $400,000. They came up with this price because their neighbor across the street sold their house last year for $390,000 and their house is “much nicer than that house”. They have their eyes on a house in the same school district that has been listed for four months at $600,000. After our initial consultation I inform them that their house would sell within a reasonable time for $380,000. They are obviously disappointed and initially feel that they should delay the move until their house will sell for what they think it is worth. Before I leave, I take them through the following two scenarios.
Sell and Buy Now (slow market)
Sell House $380,000
Buy New House $570,000
Amount Down $130,000
Payment at 5.25% $2,429
If they decide to sell now they will need to price their home competitively in order to get it sold in a reasonable amount of time. The good news is that the house they want to buy is in a similar situation. Let’s assume each seller needs to take 5% less than they think it is worth to get the deal done. The Smith’s end up with a great house that they were able to buy for $570,000 with a total monthly payment of $2,429 excluding taxes and insurance.
Sell and Buy Next Year (strong market)
Sell House $400,000
Buy New House $600,000
Amount Down $150,000
Payment at 6.25% $2,770
If they decide to wait until everyone else is buying and selling they trade certainty and price for overall financial soundness. As the tide moves it takes all boats with it. As they gain $20,000 on their home they end up paying $30,000 more on their new house. More importantly they pay 14% more each month in interest. They also get to enjoy their new home with family and friends for an extra year.I think you would agree that the Smith’s would do well to take advantage of the opportunity that is presenting itself.
by neil kearney | Dec 30, 2008 | For Sellers
According to recent data, the U.S. savings rate of 0.4 percent for 2007, is the lowest in the world. It compares to 2.9 percent in the United Kingdom, 3.1 percent in Japan, 6.8 percent in Italy, 10.9 percent in Germany, 12.7 percent in France, 24 percent in China and 28 percent in India. We are known as a spending nation and up until very recently, it has gotten out of hand. Now we are in a spending hangover and some have confused spending and investing. I’ve talked with many people lately who are deferring to the future. Cancelling trips, delaying large purchases and putting more away for a rainy day stand in stark contrast to the not so distant days of blatant consumption.
Consumer confidence is near historical lows and the malaise of the media has begun to take a toll on families who are still in good shape. Warren Buffett’s editorial in the New York Times on October 17th said “A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful”. I think you would agree that according to this rule, this is a time to be greedy in most things. This, I believe includes real estate and I will tell you why.
Our local market was not swept up in the speculation boom that had valuations appreciating double digits per year throughout much of the country. For the past five years, we have been plodding along at roughly 3% per year while Oregon, for example, has recorded annual gains of over 11% per year. We did not boom and I believe we will not bust. The areas being hit hardest right now are still at price levels above 2003. During this time our building has slowed and recently, inventory has decreased. Rents have increased and our area is gaining population not losing it. In short, our area is not in the same position as much of the country. We have much pent up demand, good affordability and we are poised for a quick rebound. So you may ask, why not wait until you are sure the market is on the upswing? My answer to you is that you can never know when it is the best time to buy, you can only ever know when it was the best time to buy. There are also some other great benefits to buying now rather than waiting.
These include:
· Rates are low now and will go up after the recovery.
· Less competition for homes and good deals to be had.
· Relaxed pace of search vs. multiple offers.
· There is no guarantee you are going to save money by waiting, prices locally have been stable to increasing.
· The best time to buy is when others are fearful.
· You get to live in and enjoy your new home!
Let me address the first point. At this writing, interest rates are in the low 5’s, at levels that have only been touched a few times. What makes a home affordable? If a homeowner can comfortably make the payments a house is affordable. Every 1/2 point drop in interest rates is equivalent to roughly a 5% drop in price. Here is an example:
Buy Now
Price $400,000
Down Pmt. $40,000
Amt. Borrowed $360,000
Interest Rate 5.25%
Interest $23,844
Interest per mo. $1,987
Buy Later
Price $400,000
Down Pmt. $40,000
Amt. Borrowed $360,000
Interest Rate 6.5%
Interest $26,599
Interest per mo. $2,216
In fact, to have equal payments you could buy a house now that is 10% more expense rather than wait for better times when the rates increase. Not only do you take advantage of the great rates, you are sure to participate in the appreciation when the cycle turns around.
If you would like more information about your specific situation please don’t hesitate to call. I’d love to help.
by neil kearney | Aug 22, 2008 | Boulder County Housing Trends, For Buyers, For Sellers
Long Term or Short Term – That is the Question
Have you been watching the Olympics recently? I loved watching the swimming. After watching Michael Phelps exceed all expectations in a variety of events I got to thinking about how our market compares to swimming. Now before you tell me to jump in
a lake, let me take a bit of a leap to make a point. During the beginning stages of the distance races almost all of the swimmers were equal. Sometimes an unheralded swimmer would be in the lead for a time. The announces made sure to point out that it really didn’t matter what happened at the beginning of the race, the quality would show at the end of the race. When comparing distance swimmers and real estate markets what you are looking for is the ability to withstand the depletion of a tough time and come out strong in the end. Since the lending rules have changed and the stock market has been soft, real estate has been a tougher business than it normally is. The local market has been hit just like most other parts of the world have been affected. What we should be focusing on during this time is the resilience in the market. If you pay attention to the national scene you have heard stories of double-digit value decreases and huge percentages of short sale and foreclosures. Our market, while not immune has been swimming along fairly steady and looks better and better as the days move on and other markets falter. Thankfully, our market with all of its attributes is built for the long haul not just for short sprints. If you take a long term perspective you can see the value in our market and share with your clients what a great time this is to buy.
by neil kearney | May 13, 2008 | For Buyers, For Sellers
f you are confused about what caused the credit crunch listen to “The Giant Pool of Money” at http://www.thislife.org/ This American Life and NPR News teamed up to produce this report from a number of different perspectives. A great program from one of my favorite radio shows.
by neil kearney | Mar 27, 2008 | For Buyers, For Sellers, Real Estate 101
1031 Exchange of Vacation Property
The 1031 exchange is one of the greatest ways to grow real estate wealth. The 1031 is a fairly straight forward transaction used for “like kind” exchanges of property
with the goal of deferring capital gain taxes. I have personally used the 1031 exchange to sell one property and buy two a few years back. There are many great resources on the web, but I always go to
http://www.1031cpas.com/ because they have great resources and they are the intermediary I recommend.
The rules about non-owner occupied rental property are fairly straight forward and well documented. Until recently the rules about the exchange of vacation property has been vague. Here are the latest guidelines from the IRS published in February regarding the exchange of rental properties.
In order to avoid the possibility of your exchange being challenged by the IRS you must in the two year period prior to the sale:
- You must have rented the property; at a fair rental price, for at least 14 days during each 12 month period.
- You must not use the property personally for more than the greater of 14 days or 10% of the days the unit was rented during each 12 month period.
So obviously it will take some planning, bookkeeping and a paper trail to make this work. If done correctly it could save thousands in taxes and allow you to invest more into that next property.
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