Spring is here—finally!—and I for one am glad to bid farewell to winter. Economically, this winter was a season of uncertainty. The economy was sputtering, the full effects of the sequester had been realized, new housing starts had plummeting, home purchases evaporated, and yet the Fed continued tapering. Interest rates spiked then receded, and we have been riding a subtle rollercoaster ever since.
Nobody was quite certain what the new year would bring, and many worried that the fourth quarter slowdown in home purchases would continue throughout the first and second quarters of this year. Happily, this is not the case; the real estate sector seems to be rebounding. We began this week’s show with Bill McAfee, owner of Empire Title. As one of Colorado Springs’s most successful title companies, his understanding of the current residential real estate market is second to none.
His experience over the fourth quarter of 2013 and first quarter of 2014 matched what I noticed in my mortgage firm: the late-year interest rate spike sapped consumer confidence and had a detrimental effect on home purchases. Purchases between November and January were only a small fraction of what they had been throughout the prior year. In fact, home listings on the Pike’s Peak MLS were at their lowest level since 2007. Since January, however, listings have rebounded and are presently looking very healthy. Even better is the composition of listings and sales: since January, 66% of sales have been for homes under $250,000.
Throughout 2013, the market was reacting unpredictably to two sources of uncertainty, namely the economy and the Federal Reserve. Nobody could predict the economy’s performance, and nobody could predict the Fed’s reaction to this performance. During the last few quarters, however, the Fed has become much more predictable. No matter the news, they are determined to continue their policy of QE tapering. While interest rates are still fluctuating based on economic indicators, they are not fluctuating as wildly as they had throughout the last year.
Given the market data over the last quarter, I believe we are poised for a purchase boom during the coming spring and summer. And with the strong demand for homes below $250,000, it’s imperative that any prospective homebuyers prepare themselves now. Competition will be fierce in this segment of the real estate market, and any competitive edge could mean the difference between closing on a home or being outbid.
The question of where to start is different for different people. For those who keep their financial house in order, it means finding a real estate agent and mortgage broker. And I can help with both. As a mortgage brokerage, Garvens Mortgage Group has a comprehensive network of fantastic real estate agents. And since most selling agents give preferential treatment to pre-qualified buyers, it’s best to get your financing settled first before going out to shop for a house.
For other buyers who may have been hit hard by the recession and subsequent anemic recovery, the question of where to start may be much earlier in the process. Often it means assessing your current finances and credit. From there, you may be in for a few months of credit repair and belt-tightening; or, you may be able to proceed with a government-backed mortgage product. Regardless, it’s imperative to start this process the moment you think you’re ready to buy a home. Nothing is more frustrating that finding your dream home, only to realize your past credit mistakes or current credit profile make you unable to qualify for financing.
It’s been several years since we had a booming housing market. If this year is different, I expect to see a lot of first-time homebuyers in the market—many of whom do not understand the complexities of the real estate and mortgage industries. Things are very different than before the housing crash. If you fall into this category, you need to start educating yourself now so you’re fully prepared for your future purchase. For this reason, my team at Garvens Mortgage Group has started a monthly New Homebuyer’s Seminar specifically for, you guessed it, new home buyers. This is a no-pressure, information-only (no sales pitches!) seminar for new homebuyers to ask any questions they wish and get the information they need.
And here’s some great news: the Jay Garvens Show has, as of this week, switched to a live call-in format! So if you can’t attend the new homebuyers’ seminar, you’re now able to call into the show and have your question answered on the air. This, I hope, will be an invaluable tool not only for the caller but for the rest of the audience. So stay tuned to the show for information-packed first hours, and live call-ins to be featured during the second hour!
4-26-14 Spring has Sprung: The Purchase Wave to Come