RE/MAX Advanced Archives - Fort Collins Homes

First-Time Buyer Challenges in Colorado’s Housing Market

Tips for first time home buyers in 2021 - Town Square Real Estate - Town Square Real Estate

Everybody is asking, “When’s a good time to buy?”

According to the National Association of REALTORS®, first-time buyers median age hit 36 last year, the oldest on NAR’s record. In 1981, it was 29.

First-time buyers are receiving fewer financial gifts or personal loans from their family, roughly 22% in 2022, compared with 28% in 2021. This may explain why the share of first-time buyers compared with all buyers has shrunk slightly.

Some first-time homebuyers get indirect financial support when they move directly from the family home into their own home. Without a rent payment obligation, they have the opportunity to save for a down payment when living at home.

Even as home prices and interest rates in Colorado remain high, many first-time buyers are ready to buy for this simple reason: rents rarely decrease

Clearing The Hurdles To Homeownership
Federal loans like FHA and Veterans Affairs (VA) home loans require little to no down payment. The Colorado Housing and Finance Authority offers grants for down payments, if buyers take a homebuyers class and meet certain income limits.

In 2019, Bank of America committed $5 billion to help its low- to moderate-income clients make their first purchase. Two years ago, the bank increased its Community Homeownership Commitment program to $15 billion. Eligible applicants can receive a $7,500 grant for closing costs, plus up to 3% or $10,000 for a down payment.

As interest rates have risen, the popular “2-1 buydown” loan offers a lower interest rate in the first two years of the loan before adjusting to a higher rate in year three. Buyers qualify at the higher third year rate. If interest rates fall in the next few years, buyers can refinance at a lower rate.

More First-Time Buyer Challenges
Buyers may feel they’ll never get to home ownership because of debt, lower incomes or low credit scores.

For credit scores below 580, a knowledgeable lender can put together a plan to help a potential buyer raise their scores above 620.

CHFA, the Colorado Housing and Finance Authority, saw an increase in first-time buyers starting in 2015, as Colorado’s population increased, but incomes in recent years did not keep up with home prices. CHFA’s first-time buyer numbers have since declined due to the drop in affordable homes for sale plus rising interest rates.

Low- and moderate-income buyers find it difficult to compete with cash offers and non-first-time buyers with cash from equity in their homes.

An FHA loan also means higher monthly payments because of mortgage insurance (that protects the bank in case the borrower defaults). Some sellers also believe the FHA loan can involve strict conditions, such as being required to repair peeling exterior paint, and therefore bypass offers made with FHA financing.

Trying to time the housing market is like trying to time the stock market. You’re going to have hits and misses. Look at your budget and do what is right for you.

Working with a knowledgeable lender is critical to preparing and planning the financing for a first-time buyers. Contact me for more information about programs for first-time buyers.

Source: coloradosun.com

Mortgage Recast vs. Refinance: Which is Better?

Mortgage Types and How Each One Works

Homeowners can restructure their loan and reduce their monthly payment with either a mortgage recast or refinance.

What Is A Mortgage Recast?
When recasting your mortgage, you’ll make a lump-sum payment to reduce your principal balance. The lower loan balance will generate a lower monthly payment while the loan term and interest rate stay the same.

Recasting can be a viable option for those who come into a windfall, like a work bonus or inheritance.

Every mortgage lender has its own rules around recasting. Lenders may require the borrower to have a positive payment history, and may have a minimum lump sum payment amount.

Mortgage recasting is a fairly simple process that doesn’t require a credit check or home appraisal, and the average cost can be $200-$500.

Here’s an example: For a $275,000 conventional 30 year mortgage with a 4% interest rate, the monthly payment (principal plus interest) is $1,313. A recast with a $40,000 principal reduction will reduce the payment to $1,122.

If your recast unlocks enough home equity, it could even eliminate your need for mortgage insurance.

What Is A Mortgage Refinance?
Refinancing your mortgage involves acquiring a new loan to pay off the outstanding balance on your existing mortgage. Refinancing is often done to secure a lower interest rate and monthly payment.

Keep in mind that extending the repayment timeline will reduce your monthly payment but increase the amount of interest paid over time.

Unlike recasting, refinancing does not require making a lump-sum payment toward your principal balance but there are costs involved. A home appraisal is often required, and closing costs can be 2%-5% of the loan amount. These fees may be absorbed into the new loan, paid upfront, or waived by the lender.

Deciding which of these two options is the better for you depends on your unique financial situation and how long you plan to stay in your present home.

When Recasting Might Make More Sense
• You’ve got a large amount of cash on hand that meets your lender’s eligibility requirements.
• You are satisfied with the current interest rate, loan term and lender.
• Your savings, emergency funds and retirement accounts are adequate.
• Your credit card debt is minimal. Otherwise, the cash might be better used to payoff that debt.
• You want to avoid a home appraisal, significant closing costs or a credit check.

When Refinancing May Be Your Best Bet
• Recasting is not an option with your mortgage loan.
• You lack the cash to make an upfront payment.
• Your credit score is not a concern.
• Market rates are favorable.
• Paying closing costs is worth it because refinancing will save you money in the long term.
• You want to change from an adjustable rate to a fixed rate mortgage.
• You want to replace an FHA loan with a conventional loan to eliminate mortgage insurance.
• With sufficient home equity you could access cash for other needs, such as, college funds and home remodel projects.

Give me a call to help you find a lender to provide answers to
your mortgage questions!

Source: www.sofi.com, www.realtor.com

Is It Time To Downsize?

Downsizing Your Home To Reduce Debt - Requirements & Challenges

At some point, most older adults will consider moving to a smaller space. Roughly fifty-one percent of retirees ages 50 and over move into smaller homes after retirement, while sixty-four percent of seniors say they plan to stay in their current homes.

How do you decide to stay in your home or move?

Downsizing and decluttering can make life easier and safer. It can also be stressful and emotional, especially if you’ve lived in one place for a while.

When you downsize your house, you not only cut down on spending for frequent purchases like groceries, you often end up downsizing household bills like your mortgage payment, energy costs, and maintenance requirements.

The potential windfall in the form of home equity from the sale of your present home can help you buy a home that better suits your needs today.

Questions To Ask
If you’re thinking about downsizing, consider these questions:

• Do the original reasons I bought my current house still stand, or have my needs changed since then?
• Do I really need and want the space I have right now, or could somewhere smaller be a better fit?
• What are my housing expenses right now, and how much could I save by downsizing?
• Can I afford to stay in my current home for five, ten, or twenty more years?
• Is my yard easy to maintain?
• Do I feel isolated?
• Do I have too much stuff to manage?
• Do I have a lot of equity in my home?

Why Downsize?
Knowing the benefits of downsizing may help you decide whether to move forward or not.

• A more intimate home environment. While larger homes are great when you have a family, many smaller homes offer open floor plans that also make socializing easy.
• Safety. Stairs, multiple levels, outdated bathrooms, or long driveways and walkways become more dangerous as we age. Moving to a one-floor space that’s easy to access and navigate can help you age in place longer.
• Medical needs. Seniors with chronic conditions or needing more frequent medical care may need to relocate to be near their doctor or adult day care, or move into a space that can accommodate specific medical equipment.
• Better weather. One study shows that 25 percent of older adults plan to move to a warmer climate.
• More freedom. With less financial stress and maintenance responsibilities comes more freedom to live your life outside of your home.
• Simplify your lifestyle. The less you have, the less you have to maintain. A larger home also requires a larger amount of maintenance. If you are older or living alone, that upkeep can end up taking up a large amount of your time.

Bottom Line
If you’re looking to save money, downsizing your home could help you accomplish your goal. Give me a call to discuss your housing goals for the coming year.

Sources: www.keepingcurrentmatters.com, raleighrealtyhomes.com, www.seniorliving.org

Who’s Buying And Who’s Selling?

The NATIONAL ASSOCIATION OF REALTORS® Profile of Home Buyers and Sellers is an annual survey of home buyers and sellers who recently completed a transaction, and has been published since 1981.

The annual report provides insight into detailed buying and selling behavior. Let’s take a look!

In 2021, as buyers moved to be near friends and family, or felt the need for a larger home, the average distance moved from the last home increased from 15 miles to 50 miles.

During the second half of 2022, housing affordability was an ongoing theme with both the rise in home prices and the recent rise in mortgage interest rates. That year, the share of first-time buyers shrunk to just 26 percent, the smallest share since data collection started.

In 2022, 97% of first-time buyers financed their home purchase with a down payment of six percent, similar to 2021. In comparison, the share of repeat buyers who financed their purchase dropped to 73 percent from 83 percent in 2021 with a typical down payment of 17 percent.

For 47 percent of buyers, the source of the down payment came from their savings. Thirty-eight percent of repeat buyers cited using the proceeds from the sale of a primary residence, while 22 percent of first-time buyers used a gift or loan from friends or family for the down payment.

The age of both first-time buyers and repeat buyers climbed to the highest levels reported. The typical first-time buyer in 2022 was 36 years old, rising from 33 in 2021, while the typical repeat buyer age climbed to 59 years.

Twelve percent of buyers purchased a new home, and 88 percent of buyers purchased a previously-owned home.

For buyers, 49 percent cited quality of the neighborhood as the most important factor determining the location. Convenience to friends and family and overall affordability of homes were both cited at 37 percent.

In 2022, buyers typically searched for their home for 10 weeks, an increase from eight weeks seen in the 2020 and 2021 reports. Ninety-six percent of buyers used online tools in the search process.

The typical home seller was 60 years old, an increase from 56 in 2021.

For all sellers, the most commonly cited reason for selling their home was the desire to move closer to friends and family (21 percent), moving due to retirement (11 percent), or the neighborhood becoming less desirable (11 percent).

Sellers typically lived in their home for 10 years before selling. This is an increase from eight years in the 2021 report, but reverts back to the same tenure seen in 2019 and 2020.

Source: National Association of REALTORS

Commercial And Residential Real Estate Continues To Ride The Tailwinds

Both the residential and commercial markets in Northern Colorado are robust according to industry experts, despite the headwinds of higher interest rates, a potential recession and changes in how Americans work.

Residential
The residential market experienced upheaval in the past several years with growth during the pandemic followed by a dip starting in 2022 as interest rates ticked up.

Longmont and Johnstown were among the communities topping the charts for sales over the past couple of years. Median prices are rising but not at the previous rate of growth.

The Northern Colorado population continues to grow. By 2050, the Weld County population is forecast to reach 610,000 people and the estimate for Larimer County is 495,000 people. That means more homes will be needed.

Key points:
• Inventories will remain low, but the number of potential buyers has declined because of interest rates. Homeowners with mortgage rates below current market rates are reluctant to move.
• Builders are not keeping up with demand, even though newly built homes are selling a bit slower compared to 2021 and 2022.
• Home appreciation is expected to be flat or see a slight increase.
• Inflation will taper off.
• If a recession happens, it will be a slowdown instead of a full-fledged recession.
• The market is normalizing compared to recent years that were epitomized by “rushes”. Since 2020, 75% of the people who bought houses express “buyers remorse” which could result in increased sales activity as people attempt to correct their situations.

Commercial
In comparison, the commercial market in Northern Colorado remains better than most.

Short-term interest rates, which jumped from 3% to 7.5% in a short period of time, affected construction loans and likely caused some projects to be delayed. As rates begin to level off, they will remain manageable at about 5%.

Compared to the prior year, retail commercial properties have recovered fairly well with supply and demand in balance. Fort Collins retail has completely recovered from the pandemic, and Greeley has almost recovered. Overall along the Front Range, construction of new retail is low.

The office market is the segment in most distress since the pandemic forced many office workers to move home. Nationwide, the return-to-office rate has been about 50%.

Since Northern Colorado doesn’t have as many large corporate offices as found in Denver, its vacancy rates have been lower.

Larimer office vacancies are at 5.7% and Weld’s vacancy rates are at 7.6%, compared with 15.4% in Denver.

The bright spot in commercial real estate, like last year, has been industrial and warehouse uses. Industrial rental rates are growing 4% in Weld County and 6% in Larimer, and everything that’s been built is being absorbed.

By comparison, and taking Amazon distribution center in Loveland out of the equation, industrial is seeing five times more demand than office and retail.

Call me to discuss your future ideas about buying and selling!

Source: bizwest.com