While no U.S. cities are classified in the "bubble risk" zone, neighbors such as Toronto are experiencing increasing housing prices at a dangerous rate. In other words, income and employment levels aren't matching what is being asked to buy a home in the current housing market. And with overly priced markets so close, a corrective period could be sooner than we expect. Read more in the CNBC article below:
Toronto, London and these other major housing markets are in a risky bubble, UBS says
Diana Olick | @DianaOlick
Published 12:14 PM ET Thu, 28 Sept 2017 Updated 3:51 PM ET Thu, 28 Sept 2017CNBC.com
Home prices are rising in most major cities around the world, but in some they are rising too far, too fast.
When prices reach the so-called bubble territory, that is, overvalued in relation to fundamentals like income and employment, they are at a far greater risk of correction. While it is hard to pinpoint exactly when that correction will occur, identifying the bubbles early can offer insight and protect investors.
In the last five years, bubble risk has grown significantly in several cities, according to a new report from UBS. Toronto, Stockholm, Munich, Vancouver, British Columbia, Sydney, London, Hong Kong and Amsterdam are at "bubble risk," according to its Global Real Estate Bubble Index.
Real house prices in these cities have risen nearly 50 percent since 2011. This is far higher than local economic growth and inflation rates, and incomes and rents have risen less than 10 percent in these cities during the same period.
While no U.S. cities make that highest "bubble risk" category in the index, San Francisco and Los Angeles are considered "overvalued." Prices in San Francisco are up almost 65 percent since 2011, but has "limited bubble risk, given its strong economic fundamentals amid the astonishing boom of tech companies," according to the report.
The reasons for strong price appreciation are varied. In Canadian and European markets, prices have been able to rise swiftly due to historically low mortgage rates. In European cities, while prices are higher, homeowners' annual payments are below their 10-year average. In the U.S., low mortgage rates are also helping buyers afford more homes, but the real driver of prices is very low supply of homes for sale.
U.S. homebuilders still have not recovered from the housing crisis that began in the late 2000s, and are not back to producing even the historical average of new homes, never mind all the pent-up demand. The U.S. market also lost about a million homes to investors, who turned them into lucrative rentals, removing them from the potential for-sale stock.
'Superstar' city?Of course a bubble can't be proven until it bursts, but history proves the risk to these markets when home prices are decoupled from economic fundamentals of a local market.
"A change in macroeconomic momentum, a shift in investor sentiment or a major supply increase could trigger a decline in house prices," according to UBS researchers.
And then there is the "Superstar" scenario. This theory suggests that even when prices are out of whack with fundamentals, there are certain superstars, that will dominate. This holds true for movie stars and major metropolitan cities alike. UBS researchers suggest that Hong Kong, London and San Francisco are "Superstars." High net worth investors will always flock to these cities, and as long as supply doesn't exceed demand, prices are at less risk of weakening.
The one variable in all this is a big one: interest rates. Should rates begin to rise, slowly or swiftly, investors could pull back. "Also, the current affordability crisis may trigger policy responses that could end the housing party rather abruptly," according to the report.
Housing policy in Vancouver, specifically a tax on foreign investors in real estate, was designed to cool the overheating home prices there. As a result, more investors set their sights south, to Seattle, which now leads all U.S. markets for home price appreciation.
The housing market has been seemingly unstoppable in 2017. But that all could be coming to an end. Buyers more and more are being confronted with a similar issue: Plenty of houses, but out of the average buyer's price range. What does this mean for the housing market? As discussed below, there are huge implications because of the high supply of expensive homes but the high demand for reasonably priced homes. To put things simply, the two aren't meshing up. Many people are finding themselves stuck in the rental pattern and unable to buy. Read more about this dilemma below:
Stop sugarcoating the housing market: Economist warns that buyers face increasing troubles
Diana Olick | @DianaOlickPublished 1:02 PM ET Tue, 26 Sept 2017 Updated 2:00 PM ET Tue, 26 Sept 2017
From a broad view, the U.S. housing market looks very healthy. Demand is high, employment and wages are growing, and mortgage rates are low.
But the nation's housing market is assuredly unhealthy; in fact, it is increasingly mismatched with today's buyers. While the big numbers don't lie, they don't tell the real truth about the affordability and availability of U.S. housing for the bulk of would-be buyers.
First, several reports out this week point to both continued heat in home values as well as pushback from homebuyers. Prices remain nearly 6 percent higher than they were a year ago, nationally, with some local markets seeing double-digit annual price gains. Those prices are being driven by a severe lack of supply at the low end of the market, which is where the most demand exists. That means lower-priced homes are seeing bigger price gains than higher-priced homes because of the competition.
At the same time, sales are falling, again, because there are too few homes on the low end, and the homes that are available are very expensive.
"It sets up a situation in which the housing market looks largely healthy from a 50,000-foot view, but on the ground, the situation is much different, especially for younger, first-time buyers and/or buyers of more modest means," wrote Svenja Gudell, chief economist at Zillow in a response to the latest home-price data. "Supply is low in general, but half of what is available to buy is priced in the top one-third of the market."
Supply on the low end is tight because during the housing crash investors large and small bought hundreds of thousands of foreclosed properties and turned them into rentals. There are currently 8 million more renter-occupied homes than there were in 2007, the peak of the housing boom, according to the U.S. Census.
Investors could take the opportunity of high prices and high demand to sell these properties, but today's high rents offer them better returns.
Low supply of homes for sale might also seem like a great opportunity for the nation's homebuilders. Yes, they went through an epic housing crash, but they have since consolidated market share and righted their balance sheets. Homebuilders are simply not building enough inexpensive houses that the market needs.
That is why sales of newly built homes, like existing homes, have been disappointing. The latest read on August new home sales from the U.S. Census surprised analysts with a 3.4 percent monthly drop, along with a rise in inventory. The homes are there, they're just not selling, and it's not hard to figure out why.
"The recent home sales data has reflected a slower pace and I continue to believe it's due to more a push back on pricing," wrote Peter Boockvar, chief market analyst with the Lindsey Group, in a response to the data release.
Just 2 percent of newly built homes sold in August were priced under $150,000, and just 14 percent priced under $200,000. Compare that with the existing home market, where more than half of homes sold in August were priced under $250,000.
Builders say they would like to build more affordable homes but cannot because the math doesn't work. The costs of land, labor, materials and regulatory compliance are just too high. In addition, younger homebuyers want to live closer to urban areas, not in the far-out exurbs, where builder costs are far lower.
"It's time we stopped sugarcoating the truth with this data — the simple fact is that we are severely underproducing housing in this country, relative both to basic demographics and currently high demand from buyers," wrote Gudell, who notes that inventory is stuck at roughly mid-1990s levels, but the country has grown by more than 60 million people since then. "Buying conditions, in theory, are great right now: Jobs and incomes are growing, and rock-bottom mortgage interest rates are helping keep financing costs low. What's missing from the equation is a lack of homes actually available to buy at a price point that's reasonable for most buyers."
The trouble is, even though the market is woefully mismatched, home prices will not come down as long as there are some buyers out there willing and able to spend more and more money for less and less house.
"We expect price pressure to remain pretty strong well into the fall," said Nela Richardson, chief economist at Redfin. "First-time buyers are struggling to find a footing in this market. The first-time buyer share is down from historical levels, but the thing is, you don't need everyone to buy a house in this market. As long as there are one or two buyers who can afford, and those buyers can be investors, then the sale will go through, and that's what we're seeing at some level."
So, what does all this mean for the economy and personal wealth? It means the renter nation will persist and fewer Americans will be able to save and grow their money in a home. It also means rents will continue to rise due to high demand, leaving more Americans with less disposable income to spend.
In other words, it's not healthy.
The CNBC article by Diana Olick, Homebuyers rush to riskier mortgages as home prices heat up, supports the fact that home prices continue to increase. Along with an increase in home prices, however, is an increase in mortgages. While they have been very favorable to the buyer, slowly, mortgages are starting to get a little less attractive. What does this mean? It could have an increase on the housing market in that the demand for these high priced homes could drop. Read more below:
Homebuyers rush to riskier mortgages as home prices heat up
Diana Olick | @DianaOlick
Published 3 Hours Ago Updated 1 Hour Ago
Home prices are heating up yet again, and that is sending more potential buyers looking for ways to afford a monthly mortgage payment.
The number of adjustable-rate mortgage originations jumped just over 40 percent from the first quarter of this year to the second, according to analysis by Inside Mortgage Finance. ARMs offer lower interest rates than fixed-rate loans, and today's ARMs usually have a fixed period of at least five years. That means the rate can change after five years. Still ARMs are considered riskier than the classic 30-year fixed mortgage.
The average contract interest rate on 30-year-fixed mortgages with conforming balances was 4.11 percent last week, according to the Mortgage Bankers Association. Compare that with the rate on a five-year ARM, which was 3.38 percent. The rate on an adjustable-rate loan, by definition, will change after the fixed period, moving higher or lower, depending on the broader market rate.
ARM demand usually rises from the first quarter to the second quarter, because spring is the busiest season for homebuying, and it's when families dominate the market, searching for bigger, higher-priced homes. Still, the jump in ARMs in the spring of 2016 was 15 percent compared with this year's 40 percent jump. This makes the case that buyers this year are struggling with affordability and opting for a lower-rate product.
While mortgage rates remain very low, historically speaking, they have been inching up. The vast majority of homebuyers favored the safety of the 30-year-fixed rate mortgage since the housing crash, but weakening affordability is now changing that.
Home prices have been rising steadily for the past three years, and while it looked like the gains were flattening recently, they appear to be heating up again. Prices nationally jumped 6.9 percent in August compared with August of 2016, the biggest gain in three years. The annual gain in July was 6.7 percent, according to CoreLogic.
"One thing that's helped to fuel demand, and certainly home price growth, as much as the lean inventory of for-sale homes is that mortgage rates have really cooperated," said Frank Nothaft, chief economist at CoreLogic.
Home prices have been rising far faster than inflation, but Nothaft predicts the gains will actually ease next year, if, as he expects, mortgage rates rise. That will be the tipping point, he said, although others argue that tight supply of homes for sale, especially on the low end, will keep prices lofty despite higher mortgage rates.
Already, close to half of the nation's top 50 housing markets are overvalued, in relation to income and employment growth.
"Prices are being driven up by very tight market conditions," noted Matthew Pointon, property economist at Capital Economics. "On a per capita basis, the number of existing homes for sale is at a record low, and buyers are therefore having to up their offers to secure a home."
Pointon said home prices should actually be rising by more than 10 percent, given the tight supply, but tight mortgage lending standards are restricting that growth.
"Cautious appraisals are preventing desperate buyers from bidding too much for a home, as are strict debt-to-income ratios," he said.
While ARM loans are often blamed for the epic housing crash in the late 2000s, the current ARMs are nothing like those of the past. Products like negative amortization loans, which offered very low rates up front but then tacked that initial savings amount onto the loan itself, no longer exist.
Loans must now be fully documented and underwritten to the full length of the loan in order to make sure borrowers can pay even if the rate goes up. Lenders must also make it very clear to borrowers that their rate is only fixed for a certain term, and that it will likely go up after that term, given the current trajectory of rates overall. That, again, was not the case in the past.
The housing market in Colorado has boomed in the past year and so have the million dollar homes. Today, you can buy stunning homes in and around the metro area. Louisville, Castle Pines, Cherry Creek and even Arvada are homes to multi million dollar beauties. Check out these elaborate homes in the Denver Business Journal article, What Can You Buy in Colorado's Housing Market if Cost Was No Object, below:
What you can buy in Colorado's housing market if cost is no object (Photos)
By Caitlin Hendee – Associate Editor, Denver Business Journal
Aug 7, 2017, 14:49pm When money isn't a factor, the options for homes are almost limitless.
For example, for the $1 million to $3 million range, you can scoop up anything from a designer home in Westminster; to a private, gated house in Arvada, complete with Koi pond and smart home technology; to a custom home right next to downtown Louisville.
Or, for that $5 million mark, you can have a home in Littleton with an elevator or a golf community home nestled in Castle Pines or a Greenwood Village estate complete with guest house and basketball court.
For truly limitless budgets, such as $10 million or more, homes run the gamut: from a $10.5 million penthouse in Cherry Creek, to sprawling ranches in Telluride and Kremmling, and everything in between.
To get an idea of how far your money goes in Colorado's summer market, the DBJ rounded up homes currently on the market in 30 Colorado cities and communities based on people who have limitless budgets.
Many homes are priced between $1 million to $5 million in the metro. Some mountain town estates carry price-tags of $3 million, $10 million and sometimes more than $20 million.
> Click the image above to view photos of homes for people with a limitless budget. (Editor's note: Homes in each city/community have three photos or more included in the gallery).
We have talked about apps to help sellers sell their homes faster, but what about good apps to make the home buying process easier? Below are some apps that might help you.
Get Zillow on the app. This app will help you access information about any home you are looking for. It will also provide you with an interactive map and home value estimate. Make searching for your dream home easier and get it at your fingertips.
Redfin is the app to use when you know you have narrowed down the homes you are interested in. Redfin predicts how fast the home might sell, which saves you the heartache of potentially being too late.
Realtor.com is great when searching for homes based on the area. You will be able to find homes in the school district and neighborhood you are looking for.
Know that the city and neighborhood you are looking to buy in is safe. Dwellr arms you with statistics posted by the U.S. Census Bureau on demographics and more.If you are interested in the businesses and attractions near your location, try AroundMe. This will give you a better sense of what life would look like in the day to day.
GreatSchools is an app that will help you learn more about the schools in the area. This is a huge resource for young families looking to move.
Let's make home buying a little less stressful and a little more fun. Doorsteps Swipe is like Tinder. See pictures of homes you like and swipe right. Not doing it for you? Swipe left and move on. It's not the app to base your buying decision on, but it is a great app to start the process of looking and figuring out what kinds of homes you like.
WalkScore is an app to use if being able to walk to amenities is a must. This is especially helpful in large cities or in communities with restaurants and more. It will also offer you Bike Scores as well.
Trulia categorizes homes based on features. If a new kitchen is important to you, you can click to look at houses that fit that criteria.
HomeSnap isn't just a tool for sellers, but for buyers as well. Take a photo of a home you are interested and you will get all of the details about that home right at your fingertips.
Buying your first home can be overwhelming. There are a lot of factors that go into play that make the process nerve-racking and exciting at the same time. So, how should you prepare?David Weliver at Money Under 30 gives us some steps to take to make the first time homebuying processes easier. Read below or click Buying Your First Home? Make Sure You're Financially Prepared With These Steps to learn more.
Buying Your First Home? Make Sure You’re Financially Prepared With These Steps
By David Weliver • June 27, 2017
Getting ready to buy your first house can be daunting. Credit scores, down payments, and mortgages are all on your mind. Here’s a guide to help you get ready to make one of the biggest purchases of your life.
Buying your first home can be one of the most exhilarating — and stressful — moments of your life. But armed with the right information, you can shop for a house, apply for a mortgage, and close the deal with confidence.
Step 1: Determine how much house you can afford
The first thing to do before buying a home is to make sure it’s the right time to do so. Generally speaking, owning a home pays off financially if you will live in it for at least five years. Otherwise, there’s nothing wrong with renting. Your actual numbers may vary, but you can play with scenarios using our rent vs buy calculator.
You might disagree, but I don’t believe you should treat your home as an investment. Yes, hopefully it will appreciate over time. But you should buy it because you want a home, not an investment.
That means you should never stretch to buy your primary residence thinking you can take cash out or flip it for a quick profit in a few years. Only buy a house that you can afford today!
Although it may not always be feasible if you live in an expensive real estate market, try to keep your total housing payment under 30 percent of your gross monthly income. When you spend much more than that on your mortgage, you risk becoming “house poor” — you might live in a beautiful home but find it difficult to save or even cover other monthly expenses.
Step 2: Prepare your finances for the mortgage process
The last thing you want to do is find your dream home only to discover you’re not financially qualified to buy it. To guarantee you’re financially ready to buy your first home, you’ll need good credit, cash to close, and a verifiable income.
Check your credit
Hopefully this isn’t a a surprise, but getting a mortgage requires a good credit score. It’s a good time to check your credit reports for errors and possibly invest in a few months of a daily credit score monitoring service.
A fast way to improve your score by a few points is to pay down credit card balances and stop using them for two months before you apply for a mortgage. Also, you’ll want to avoid applying for credit (for example, a new credit card or car loan) until after you’ve closed on your new home.
If you’re buying a home with a spouse or other co-buyer, your mortgage lender will likely consider both buyers’ credit scores in the application process. That’s not to say you’re necessarily doomed if one person’s credit isn’t as good, but don’t count on things going off without a hitch just because one buyer has a stellar score.
Finally, remember that improving your credit score significantly can take at least six months, so get started if you need to!
Save cash for a down payment and other expenses
In addition to making sure your credit score is in order, you’ll also want to consider the cash you’ll need to make buying your first home a reality. Of course there’s your down payment — typically between 3.5 and 20 percent of the purchase price.
As you save money for your down payment, avoid the temptation to invest in the volatile stock market with money you hope to use in the next year or two. While you might be tempted to try to earn a greater return on your money than an online saving account paying one percent, the greatest risk is not having your money available when you’re ready to buy a house.
As you save, don’t underestimate how much money you’ll need — you might be surprised at how much cash you’ll need for closing.
Get your documentation in order
Finally, if you’re close to putting an offer on a home, begin to collect documents that you’ll need to verify your finances on the mortgage application: paystubs, W-2’s, bank statements and, if you have freelance or self-employment income, copies of your last two tax returns.
Step 3: Go shopping for a mortgage
Too often, home buyers leave mortgage shopping to the last minute and watch their dream home go to another bidder who had financing in order. Mortgage pre-approval is a free and non-binding process that presents you as a serious, qualified buyer when buying your first home.
Comparing two mortgages can be confusing. There are fixed-rates and adjustable rates, or ARMs, which are priced very differently. You can take out a mortgage for 30 years or as little as five years (interest rates are typically higher the longer the term of the loan).
Most buyers should look at fixed-rate mortgages and, indeed, the 30-year fixed rate mortgage is the most common kind of loan, by far. Still, it doesn’t hurt to become familiar with how mortgage rates work and the different kinds of loans that are available.
You may also want to run some scenarios through a mortgage calculator to see how different terms and rates will affect your monthly payment.
To make matters worse, mortgage lenders charge fees that aren’t necessarily reflected in the interest rate. There can be fees for appraising the home, checking your credit, and preparing documentation.
In some cases, you may be offered the option to pay “points” at closing that will reduce your interest rate. Points are essentially prepaid interest. This can be a tricky decision, but it can make sense if 1) you can afford to put down the extra cash and 2) expect to carry the mortgage for many, many years.
It can be a good habit to compare mortgage rates online regularly.
Private mortgage insurance (PMI)
If you put less than 20 percent down, your lender will likely charge you a monthly premium for what’s called private mortgage insurance, or PMI. Private mortgage insurance protects the bank in the event you default on your loan and the value of your home declines significantly.
Where to get mortgage rates and pre-approval
The only wrong way to get a mortgage is to walk into your local bank, ask for a loan officer and accept whatever rate she gives you without ever shopping around.
You can compare rates with any number of leading online mortgage lenders or find a local mortgage broker who will shop your application to multiple lenders on your behalf.
I often also recommend using the site, LendingTree to quickly get four or five competing mortgage rates from different banks. These rates will be more accurate than the ones you see in advertisements and websites because banks provide real rates based upon your credit profile and the location and value of the home you want to buy. Learn more about getting mortgage quotes and pre-approval from LendingTree.
Buying your first home is exciting, but there’s a lot to think about before you start looking. Start by getting all your finances in order, and using online tools to compare mortgage rates, and manage your credit score.
Posted by the Denver Business Journal:
A group of Broomfield residents are recommending the city implement a quarter-mile buffer zone between oil and gas wells and homes, parks, schools and bodies of water.
The 1,320-foot buffer zone, if adopted by the Broomfield City Council, would apply both to new wells being drilled in the fast-growing community and also to new development that might encroach on existing wells, according to a draft of the recommendations posted to the city’s website.
KATHLEEN LAVINE | BUSINESS JOURNAL
The recommendations take aim at many of the issues, conflicts and concerns that have risen as oil and gas operations in Colorado have grown in size and scale, and in some cases moved nearer to northern Front Range suburban communities and neighborhoods in the last few years.
They include suggestions about lights, noise, the quality of the air, water and soil, traffic and setbacks.
They’re expected to go to the city council in late August or early September.
The Denver Business Journal has written a series of stories about how Broomfield is dealing with oil and gas issues related to a proposal by Denver’s Extraction Oil & Gas Inc. (Nasdaq: XOG).
The committee said the recommendations are intended to support the goal of eliminating as many older walls as possible, push drilling as far from residential areas as possible and ensure that oil and gas is done “in a manner that prioritizes the protection of human health, safety and welfare.”
The committee also said it recognizes the rights of the people who own the minerals, but said the health and safety of Broomfield residents “is paramount.”
“While recognizing that mineral owners have property rights, the health and safety of Broomfield residents is paramount, and maintaining the qualities Broomfield is known for is integral to our position," the committee said.
The 14-member committee has spent months working on a update to the city’s existing master plan via a new chapter on how oil and gas development might occur in the city.
The 13-page set of draft recommendations include proposals on setback that would:
The opposite issue, how close new homes can be built near older wells, was thrown into sharp relief after the April 17 home explosion in Firestone that killed two men.
That explosion was caused by raw natural gas that leaked into the home through an old pipeline that was supposed to be abandoned. The home, built in 2015, was 178 feet from the well, drilled in 1993.
The setbacks of new homes from old wells vary widely: 150 feet in Firestone and Dacono, 200 feet in Frederick and Broomfield, 350 feet in Louisville and Lafayette, and 750 feet in Longmont, according to survey of municipal codes by the Boulder Daily Camera.
Whether the recommendation, as it applies to new oil and gas wells being 1,320 feet from existing or planned development, is legal, is questionable.
Colorado law says the state has authority over oil and gas operations, including the location of those operations. The state’s buffer zone is 500 feet between new oil and gas wells and existing homes.
But the state doesn’t have authority over how close new homes, schools are parks can be to an existing oil and gas well — meaning Broomfield’s elected officials can choose to widen the city’s existing buffer zone to 1,320 feet.
The 14-member committee noted in its draft that the recommendations were a work in progress and that some of the action steps might “be beyond [Broomfield’s] current legal authorities.”
But, the committee said, the recommendations are based on the “collective judgment” of the members of the committee and “may be used to pursue state and federal regulatory changes.”
A public meeting on the recommendations is scheduled for 6 p.m., July 20 at the Paul Derda Recreation Center, 13201 Lowell Blvd. The city council will have the final say on the update to Broomfield’s master plan.
Dan Haley, president and CEO of the Colorado Oil & Gas Association, a trade group, said there are legal concerns around the recommendations — but he noted the draft recommendations are just that, a draft.
“There are legal concerns around the draft recommendations put forth by the Broomfield Oil and Gas Comprehensive Plan Update Committee, but there is still time within their process for a thorough legal and technical review in order to reach a workable plan,” Haley said.
“My hat goes off to the members of the committee for all their hard work over the past several months," Haley added. "If we can be helpful to the committee’s ongoing efforts, we want to be."
The committee was set up after an outcry by Broomfield residents and officials to a plan by Denver’s Extraction Oil & Gas Inc. (Nasdaq: XOG) to drill in the city.
The company’s current plan calls for 99 horizontal wells to be drilled from four pads scattered across two miles of the Northwest Parkway east of I-25, plus 40 wells drilled from a fifth pad a few miles north of the parkway in unincorporated Weld County.
Extraction executives have sat in on the committee’s meetings, which has had presentations from state and federal officials on industry regulations and practices.
“We are thrilled that the task force has come out with the draft recommendations and is nearing the completion of the process,” Extractionspokesman Brian Cain said.
The company is planning to start negotiating an amendment to its existing memorandum of understanding with the city soon, Cain said.
“We recognized that the language [in the recommendations] is only a draft and is meant to apply to oil and gas development over the next 20 years — there’s a lot to be done yet on this draft,” he said.
The draft recommendations also included:
Iron Works Village, a 136-unit residential development in Englewood, broke ground this week and will deliver its first homes early next year.
The project, which includes single-family detached homes as well as townhomes and duplexes, is the largest new for-sale residential development to occur in Englewood in 50 years, according to builder BLVD Builders.
COURTESY | IRON WORKS VILLAGE
Iron Works Village, at 601 Bates Ave., is being built on the site of the former General Iron foundry, which was once important to commerce in Denver and Englewood.
Pre-sales for homes there are underway now. Townhomes will start in the mid-$300,000 range, duplexes will start in the mid-$400,000 range and detached single-family homes will start in the high $400,000 range.
Denver-based Pel-Ona Architects and Urbanists designed the homes.
“The homes at Iron Works are street-facing and community-oriented. What we believe in crafting these plans is there needs to be some unity in the heart of the house.” Pele-Ona co-founder Ronnie Pelusio said.
“These houses use principles of historic neighborhoods in a modern way," Pelusio said. "They honor the historic shapes of houses. But they have open floor plans and use modern technologies and building assemblies that live up to current-day sustainability needs.”
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Molly Armbrister covers real estate and construction for the Denver Business Journal. Phone: 303-803-9232.
Denver 7 News answers the question: Is Denver's real estate market a bubble ready to burst?
Learn more below:
DENVER – Denver real estate is expensive and it just keeps getting more so, which has many people asking: Are we in another bubble that’s about to burst?
Since the last housing bubble burst with the great recession in 2007 or so, Denver's economy has recovered better than most cities its size and home prices have increased by 60 percent on average, with some neighborhoods closer to 200 percent.
The average sale price of a home in the Denver area was $439,161 in April, a new record high that puts home prices at 40 percent or more above pre-recession levels, according to Steve Danyliw, a Denver-area real estate agent and the chairman of the Denver Metro Association of Realtors Market Trends Committee. But he’s not ready to press the “panic” button just yet.
“There’s no bubble or anything like that,” Danyliw said.
Though home prices have been quickly rising, we’re not seeing some of the other warning signs that were present before the housing crash 10 years ago.
“We’re a very healthy market, financially speaking,” Danyliw said. “The underlying fundamentals of the market are different today versus then.”
One major difference is the number of foreclosures. Denver saw a slight uptick in the number of foreclosed homes last year, but we are still far below what we saw at the height of the housing crisis. In 2007, for example, Denver processed more than 8,000 foreclosure cases. Last year, that number was just 720.
“We’re looking at financially healthy homeowners,” Danyliw said. “The number of properties in jeopardy of being potential foreclosures…it’s just not there.”
Though Danyliw doesn’t think we’re in a bubble, he says there are some signs that the market will slow down. The number of sales that make it to closing is down year-over-year and Danyliw said he’s seen an increase in the number of buyers who back out after a home goes under contract.
A big reason for that is the high prices in the market right now and the fact that there just aren’t a lot of homes to choose from. Buyers often feel like they have to settle for homes that don’t have everything they want or need, Danyliw said.
Increases in home prices are outpacing income growth in the metro area and that trend simply isn’t sustainable, as home ownership gets further out of reach for many people.
“At some point, things are going to have to give,” Danyliw said.
A forecast from geographic data company Location, Inc. predicts an average drop in home prices of 9 percent or so over the next five years, starting in late 2019.
Making the decision to remodel your home is a big one. Having someone you can trust is of utmost importance. Realtor Magazine gives us some tips to consider when looking to hire a contractor. Learn more on how to protect your home, your finances and get the results you are looking for below:
1. Get at least three written estimates
2. Check references, if possible, view earlier jobs for contractor completed.
3. Check with the local Chamber of Commerce or Better Business Bureau for complaints.
4. Be sure the contract states exactly what is to be done and how change orders will be handled.
5. Make as small of a down payment as possible so you won't lose a lot if the contractor fails to complete the job.
6. Be sure that the contractor has the necessary permits, licenses, and insurance.
7. Check that the contact states when the work will be completed and what recourse you have if it isn't. Also, remember that in many instances you can cancel a contract within three business days of signing it.
8. Ask if the contractor's workers will do the entire job or whether subcontractors will be involved too.
9. Get the contractor to indemnify you if work does not meet any local building codes or regulations.
10. Be sure that the contract specifies the contractor will clean up after the job and be responsible for any damage.
11. Guarantee that the materials will be used meet your specifications.
12. Don't make the final payment until you're satisfied with the work.
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