Interesting article below on the current state of the national real estate market. In Crested Butte I believe we are realizing the bottom of the real estate market. This is due to the simple fact that short sales have become harder and harder to accomplish as banks auction the property for the full amount owed by purchasing it back from themselves. They then list the property and continue to lower the price until it sells quickly or they have multiple bids creating a bidding war. Yep, I said it, a bidding war, even in this market. They then right the loss off and collect our tax payers money to offset the loss.
These prices being set by the banks has created such a stir with investors and end users alike that they have to be the bottom as they are the lowest priced properties in the Crested Butte area. With such demand to purchase these properties at these prices tells me that buyers are satisfied that the banks are creating the bottom of the market. Call or email me if you would like some Crested Butte listings sent out to you or visit my website to search the Crested Butte MLS yourself.
Best Regards,
Corey Dwan – REALTOR
Benson Sotheby’s International Realty
P.O. Box 210
433 Sixth Street
Crested Butte, CO 81224
970-596-3219 Cell
970-325-3219 World Wide Cell
970-349-6653 Office
970-797-1810 Fax
www.CrestedButteForSale.com
Mixed Messages
By Lawrence Yun, Chief Economist, NAR Research
We got many mixed economic messages over the past month. Yes, the economy appears to be on a path towards a sustainable expansion. The economy grew by a solid 5.9 percent in the fourth quarter and is expected to expand by nearly 3 percent for the rest of the year. However, that growth in production has not yet generated jobs. The unemployment rate was unchanged at 9.7 percent in February and could actually tick higher before coming down.
And housing? The housing market is still in a delicate position. The good news is that home values appear to have stabilized. The bad news is that foreclosures remain very high and, despite various government policies enacted to slow the loss of homes, will unfortunately be that way for the rest of the year. New home sales are in the tank, but that is due to builders not putting up any construction – partly due to caution about the strength of housing demand and to the difficulty in obtaining construction loans due to extremely tight credit conditions.
On the other hand, existing-homes sales have been doing better; nearly all states recorded year-over-year sales gains in the fourth quarter of 2009, greatly spurred by the home buyer tax credit. However, the sales momentum lost a step in January and probably fell further in February due to unusually severe snowstorms in many parts of the country. The best estimate at the moment is for relatively weak first quarter existing-home sales (a 5.1 million unit annualized rate) followed by a surge in the second quarter (5.8 million) as the home buyer tax credit deadline nears.
Home sales in the second half of the year will depend on consistent job creation. In February, net payroll job cuts totaled only 36,000. While any net job loss is not a good thing, compared to the last two years when job losses averaged about 400,000 each month, the latest job loss figure appears much more comforting. The abnormal snowy weather probably held back hiring by about 100,000. In other words, jobs indeed may have actually squeaked out a gain had the weather been more normal this winter.
While the unemployment rate was unchanged at 9.7 percent, remember that the unemployment rate is based not on company payroll data but rather on asking people if they have a job. In a separate household survey (not company data), there were 308,000 job additions in February. Despite that, the unemployment rate did not fall because many more people looked for a job but still couldn’t find one. Furthermore – and less intuitive – the unemployment rate could rise in the upcoming months even as jobs get added. A person has to be looking for a job to be counted as unemployed, and there is a sizable number of people who simply stopped looking in recent months. Consequently they are not counted as one of the unemployed. As the job market improves, this part of the workforce will re-start their job search and hence will show up in the unemployment figure. It is jobs and paychecks – not any up or down change in the unemployment rate – that provide the foundation for households to potentially purchase a home. An elevated or rising unemployment rate (even as jobs are being created) can have a negative psychological impact of holding back buying even among people with jobs.
Looking closer at the all-important employment data give us some disparate views. Construction jobs took it on the chin yet again, shedding 64,000 payrolls in February. Very low new home construction and the lack of commercial real estate construction was a big factor. On the positive side, employment in rental and leasing companies rose by 400, the first increase in nearly two years. In other noteworthy sectors, the hard-hit manufacturing sector has finally added jobs. Still, since the high mark of 17.5 million workers in the sector, there are now only 11.5 million workers in manufacturing. Jobs in the professional business service sector (including accounting, management consulting, and law offices) rose by 51,000 in the past month – a fifth consecutive monthly gain which may hint at a potential recovery for office space demand for commercial REALTORS®. Temporary help employment also rose for a fifth straight month. Because many companies first turn to temp jobs when coming out of a recession, this rising trend should imply permanent job creations starting in few months.
Then there is the government sector. Jobs in state government rose by 6,000 but those in local government fell by 31,000. There will be pressure throughout this year for further job cuts as most state and local governments are running relatively high budget deficits and generally have to balance their books by law. Meanwhile, the federal government keeps on hiring. There is nothing like a stimulus package and expansion of government programs to add jobs, particularly in the D.C. Region. Federal government employment rose by 7,000 in February and by 66,000 over the past year. It’s a safe bet that the D.C. area will get its cut of all the taxpayer dollars that are sent to Washington.
The average hourly earnings of all private sector employees rose by 3 cents to $22.46. From one year ago, wages are up by only 1.9 percent, the slowest gain in about 5 years. However, because the cost of living, as measured by the Consumer Price Index (CPI) fell slightly in 2009, the low wage gain still implies a gain in purchasing power. Of course, that is no solace for people without a job. Weak wage growth will keep the lid on consumer price inflation. This also means that the Federal Reserve can continue to remain very accommodative in its monetary policy. After all is said and done the 30-year average mortgage rate will not rise above 6 percent in 2010.
Signs of improving employment prospects will likely lead some people cramped in apartments with several roommates or with parents to start searching for their own place. This unleashing of household formation is expected in 2010 because household formation had been suppressed big time over the past two years. History tells us that household formation generally does not remain suppressed for three straight years, and there always tends to be a nice pop in new households as the economy begins to recover. Assuming this past pattern is realized in 2010, there can be a nice growth in both home sales demand and rental demand.
One other thought. In this “year of the Census” we should also watch those population numbers. With about 4 million live births, 2 million deaths, and about 1 million newly arriving immigrants each year, there will be a steady demand for homes – eventually. Historically, the net number of home-owning households rises by one million each year. The 2 million weddings and 1 million divorces each year also lead to changes Signs of improving employment prospects will likely lead some people renting apartments to start searching for their own place. in living patterns. Furthermore, current homeowners will be looking for a new place to live every 7 to 10 years. As a result, over the next 10 years, there will be anywhere from 50 to 70 million home sales.
How those sales are divided by years will be determined by various underlying factors such as mortgage rates and the number of jobs. Assuming that the membership of the National Association of REALTORS® remains steady at its current level of 1.2 million over the next decade, on average there could be 100 transaction sides per member over the next decade. REALTORS® have different methods of doing business so there will naturally be great variations as to who will “book” more than the average number of transaction sides. One thing is clear, however. According to NAR’s survey of home buyers and home sellers, 80 percent of clients indicated that they would recommend their REALTOR® to other family members, friends, and colleagues. That is definitely worth repeating and remembering: clients are happy not with just any agent, but their own specific REALTOR®. Plan your business with this in mind.
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