July 2010 Welcome to Jay's Real Report (on Real Estate), an update on current trends and market conditions for homeowners, buyers, sellers, investors and real estate professionals. Keeping reading for a common sense analysis of what's happening in today's real estate market. Please send your comments and questions to jaysandstrom@aol.com. Mortgage rates for the long run Mortgage rates are at their lowest since 1971, a time span that covers a few wars and a few presidents! How long will it last? My take is that we're going to see low mortgage rates for an extended period of time, at least until the job market starts to improve significantly. Let me share with you the economic gyrations behind the low rates. The money market is like any other market, it's based on supply and demand. The Federal Reserve was actively buying mortgage-backed securities (MBS) through last April, and they made it known in advance that they were going to quit buying mortgages. There was great trepidation that once they quit buying those securities, demand would disappear and rates would go up. Surprise! Since April, rates have come down because demand for new mortgages dropped, coinciding with the end of the tax credit. Remember, lower demand = lower interest rates. Interestingly, there are still investors interested in buying mortgage backed securities. Money lenders must keep rates lower to keep borrowers in the market. In addition to the end of the tax credit, high unemployment continues and there is lots of nervousness about jobs. People out of work can't qualify for loans, and those who can qualify are afraid to try because the economic uncertainty. Recovering all the jobs that have been lost in this recession will take time. The employment numbers will get better very gradually. Only as the job picture improves, will you see better sentiment about job security. Therefore, demand for new mortgage money will be tame for the foreseeable future. For those who haven't yet "re-fied," it may be worth considering now. Case Shiller: metro prices up 6th straight month The Case-Shiller home price index measures year-to-year sale prices of similar homes, and Denver shines again as one of the strongest markets in the nation, up 4.4% April '09 to April '10, a sixth straight month of positive price valuations. But expect home values to dip a little starting in July, which won't be reported on until the end of August. We will see a downward trend in home prices through the rest of 2010 in Denver and most of the other top 20 markets. But I do not believe it will be a dramatic dip. From end of July to end of December, I predict values will slip in the 2-5% range. Remember that Case-Shiller measures home prices of like value, over the previous 12 months. Watch for prices through 2011 to be very stable and flat. Let me consult you on the most effective pricing strategy for your property. Call me at 303-870-5763. Foreclosures a fading factor A couple of new reports show that the foreclosure crisis is fading into the background as a factor in the local market. RealtyTrac.com shows foreclosures statewide at an 18-month low in May 2010. This moderate downward trend is expected to continue. John Rebchook's InsideRealEstateNews.com reports that the brief rush in loan modifications are down by 50 percent since the beginning of the year. Loan modifications were a bigger news story than an actual factor in the local market. The real key to keeping someone in their home has always been employment. Job rates have stabilized in the metro Denver area, but one wonders about the factor of "discouraged workers" who have simply stopped looking. As I mentioned above, recreating jobs will take time. Summer's real estate vacation? What are sellers and buyers thinking about in the heat of the summer? The typical pattern is that many people are on their vacations in July, and in August there's a mad scramble to get deals done before settling in for the fall. After September when the late summer contracts are closed, residential real estate activity trails off through the end of the year. Also, due to the "tax credit effect" of moving buyers into the market earlier, sales activity may be even slower than normal through the end of the year. Timing is everything when it comes to buying or selling in the metro Denver market. Contact me for sound counsel on the timing of your real estate strategy at 303-870-5763 or jaysandstrom@aol.com. The most "real" of most Americans' personal wealth is usually composed of land and structures. Whether you are selling, buying, or investing in real estate, please consider me your primary real estate broker and consultant. I want to put my experience to work for you. Call me at 303-870-5763, or send your questions to jaysandstrom@aol.com. Sincerely, Jay Sandstrom