Here’s an article from the Rocky Mountain News discussing Rates, Home Sales and Housing Bubbles.

Rising rates won’t stunt home sales, builder says

By John Rebchook, Rocky Mountain News
November 10, 2005

Mortgage rates will rise to 8.5 percent in two years but won’t trigger a massive slowdown in Denver-area home sales or a housing bubble, Pat Hamill, CEO and president of Oakwood Homes, said Wednesday.

Hamill said rates were that high in 1995 and 1998, which were good years for home sales in the Denver area. But Hamill also pointed out that rates actually were falling during those years. Thirty-year, fixed- rate mortgages now are hovering around 6.5 percent.

Economic growth and job creation are far more important than higher rates, Hamill said.

Hamill was among the speakers at the 2005 Rocky Mountain Commercial Real Estate Expo Fall Forecast, held by the University of Denver’s Franklin L. Burns School of Real Estate and Construction Management.

Other speakers gave mostly rosy outlooks for the office, industrial, apartment, retail and land markets.

“We’re finally clawing our way out of the trough,” said Natasha Felten, president of Colorado Commercial Cos.

Hamill said one reason there won’t be a housing bubble is that homes aren’t as liquid as stocks. Even if home values fall, most people won’t be forced to sell, which is what often happens when stock prices drop, he said.

Also, speculators – who are artificially driving up home prices in other markets, such as California and Las Vegas – no longer are a factor in Denver, he said.

And home buyers in the U.S., on average, pay a smaller portion of their salaries to buy homes than do homeowners in other parts of the world, making them less vulnerable to falling values, Hamill said.

In the U.S., a typical buyer spends the equivalent of 3 1/2 times their annual income to buy a home, while in England, an average buyer spends seven times their income, he said.

People stretching to buy homes in hot markets such as California and Las Vegas, though, may be getting close to what U.K. homeowners pay, he said.

“We’re going to see that in our lifetime,” Hamill said.

rebchookj@RockyMountainNews.com or 303-892-5207

Copyright 2005, Rocky Mountain News. All Rights Reserved.

However, according to the National Association of Home Builder’s website, they predict rates to be 6.6% in 2007.

Check out this neat site: www.housingmaps.com

It combines two internet favorites: craigslist real estate and google maps.

Live Strong!

Choosing the right person to represent you in negotiating your home purchase is a major decision. Whenever you see the designation of Realtor® (with a registered trademark) you can rest assured that person is a member of the National Association of Realtors® (NAR), and has a commitment to meeting the standards of the organization. My team and I have a network of Denver professionals that have done a great job for our clients in the past, and we can provide you with a referral to a qualified representative, and pre-approval to shop as a cash buyer.

How will you know which Denver Realtor® is right for you?

Seek to work with an experienced Denver Real Estate professional that works with buyers on a regular basis. A real pro will go the extra mile to show you that they will look out for your best interest and gain your respect. Sincerity is a key word here. This type of Denver Real Estate Agent will act promptly to get you information about their team and their methods of doing business, along with quotes and references from past clients.

Once you set an appointment to meet with a Denver Real Estate Agent and his/her team, they should be rolling out the red carpet for you. You should have a personal introduction to each person you are expected to have contact with throughout the buying process. They should go out of their way to establish a long-term relationship with you, rather than thinking of you as a one-time transaction.

An experienced buyer’s representative will ask many questions regarding your goals rather than tell you what they think you want to hear. He/she will also take your finances into consideration so that they can help you make the purchase you qualify for. They will seek to exceed your expectations in every way by having a system in place that provides complete customer satisfaction.

What can an experienced Denver Realtor® do for you?

An experienced professional will have access to the computerized Multiple Listing Service (MLS), which changes daily. He or she can provide you with new listings to consider as they become available, and will also include important demographics and market value information on the area you are seeking to buy a home. This person will serve as a strong negotiator on your behalf and provide guidance every step of the way. In the long run, using a trained professional will save you time and money. It is important to let your Denver Real Estate Agent know what your goals are so he/she can eliminate the listings that do not meet your criteria.

In recent years, it’s impossible to turn on the television or read the headlines without seeing a warning of impending doom. The media claims that the housing bubble is growing too big, and it’s about to burst! This pessimism has sold a lot of news stories, but it has also created many false concerns for first-time and move-up home buyers as well as investors. We keep hearing about this horrible catastrophe, yet the real estate market continues to boom. Why is that? Because the media neglected to consider one very important factor that is driving our current economic recovery: demographics.

The real estate boom began when mortgage interest rates fell into the single digits, making housing much more affordable. While this certainly contributed to home sales, there are additional causes we can isolate. Dr. David Lereah is a best-selling author and the Chief Economist for the National Association of REALTORS® (NAR). In a recent interview, Dr. Lereah revealed, “The biggest factor that affects real estate today, and has made it immune to some cyclical changes in the economy, has been demographics.”

The most significant and frequently mentioned demographic is the “Baby Boom” generation, which refers to children born in the years following World War II. Economic forecasting expert and author, Harry Dent, has written extensively about how property buying habits occur in a predictable fashion as a generation ages. From needing an apartment in college, to buying a starter home and eventually trading up to something larger, it is all cyclical. Since the Baby Boom generation is the largest so far, their impact has been far greater than the generations that proceeded them.

Now that Boomers have moved into their top earning years, they continue to push the housing market to new levels. They are purchasing larger primary residences as well as vacation homes and investment properties. The statistics for 2004 reflect this trend, with 36% of home sales going toward second homes and 23% of sales going toward investment properties.

Demographic trends don’t end there:

• Immigration - There has been a large influx of immigrants over the past three decades. According to Lereah, it typically takes at least a generation for immigrants to become fully active in the home buying market.
• Children of Baby Boomers - This generation is now in their twenties and looking to purchase their first homes.
• Retirees - While the demand for housing is expanding, the supply is decreasing. With advancements in medicine and treatments of disease, retirees are living longer. This means that they are occupying their homes for more years, which decreases the supply of homes available for purchase.

In addition to the demographic factors listed above, real estate has been a rewarding investment. Stocks and bonds have not performed as well as investors were used to, while real estate has exceeded expectations. In an uncertain world, people are more comfortable investing their money in property which will appreciate.

So if the current boom can primarily be explained by the factors we just discussed, how do we know whether it will continue?

Dr. Lereah says, “We are in the Golden Age of Real Estate.” Even if the economy should slow and interest rates increase slightly in the coming years, the demand for houses is still strong. The biggest impact that such a change would have is to decrease the rate of price appreciation. While this may sound ominous, it really isn’t.

The media likes to refer to the real estate boom in terms of bubbles and balloons. In keeping with that analogy, Lereah indicates that local markets may react to higher interest rates by letting some air out of the balloon. The double digit price appreciation we’ve been experiencing could decrease over the next year or two to a more typical 4-6% range. This is still a higher rate of return than found in the stock market, all things considered.

So if you are looking to purchase a second home or investment property, where might be a good location to focus your attention? Ideally, where the Baby Boomers are planning to retire. The demand for housing in these areas continues to grow. Over the past year, some of the highest price appreciation took place in the resort areas of Florida.

The next time you turn on the television or read the headlines, be secure in the knowledge that the sky is not falling.

Additional Resources:
Are You Missing the Real Estate Boom?: Why Home Values and Other Real Estate Investments Will Climb Through The End of The Decade – And How to Profit From Them – by Dr. David Lereah

I created this blog to cover Denver Real Estate. I live in Denver, I own a home in Denver, I work in Denver, so who better to help you buy a home in Denver. I’m not a realtor but if your realtor is an idiot, I’ll help you find one who actually knows what they’re doing.Live Strong!

First and foremost, I need to state that I work with a handful of realtors. I like the realtors I work with but for the most part they’re a different breed. On Saturday, August 6, the Rocky Mountain News had an article in their Business section that basically said people are flocking to the real estate profession in droves.

Record 45,764 brokers vie for slice of Colorado home sales

By John Rebchook, Rocky Mountain News

Ron Buss, 47, chucked his corporate perks and an income “of well over six figures” to become a residential real estate agent. Jessica Padilla, 25, started selling homes after the company where she worked filed for bankruptcy.

The two rookie residential real estate agents got into the profession for totally different reasons, but both are among the record 45,764 licensed brokers in Colorado trying to grab a piece of the roiling housing market.

Read more…

Points come in two varieties, origination and discount points. Generally a “point” is a fee that the lender charges to buy down the interest rate and is equal to one percent of the loan amount. “Discount points” vary inversely with the rate quoted-that is, the lower the rate quoted, the higher the amount of points charged. Discount points are used to adjust the yield on the loan to the institution providing the money. Origination points, such as is common for FHA and VA loans, are generally charged by the lender to offset the lender costs of administering the transaction.

Does it make sense to pay the points? The answer is…it depends. There are many factors to consider. One of the primary items to review is the overall long term cost of a zero-point loan versus a loan with points. One easy way to determine the value of paying points is to determine how many months (payments) it will take to recoup the original expense. The math is easy. Simply, divide the cost of the points by the monthly savings to arrive at the number of months it will take for yourinvestment in points to pay for itself. Here is an easy example:

The example is a simple approach to compare the difference between a zero-point loan and a loan with points. However, there can be other factors to consider. Some consumers may try to calculate tax implications of the different amount of points and interest paid and the subsequent tax deductions. Other borrowers may consider the present ‘value’ of the dollars spent on points today, versus the future ‘value’ of the dollars if they were invested instead of being paid to the lender. A great majority of consumers will be able to determine the advantages or disadvantages of a zero-point loan by using the above scenario.

NO COST LOANS There is no free lunch, even in mortgage lending. Every real estate financing transaction has costs for processing the application, appraising the subject property, administering the transaction escrow, securing title insurance, etc. In a typical “no-cost loan” the lender agrees to pay all of the costs of the transaction for the borrower in exchange for the borrowerpaying a higher price for the loan. Depending on the individual borrower’s circumstance, this may or may not be a “good deal.”

You will make the right financial decisions today if you have a plan for your future. In other words, your mortgage professional can plan your mortgage around your goals and aspirations. If you plan to move or refinance your mortgage loan within the next five years you most likely should not pay points. If, however, you know you are going to be in this home for a long period of time, you can definitely save money by paying the points. Take a few minutes and think about where you are going to be in the next 3-5 years. The answers you come up with will help you make the right decision about paying points.