Luxury Homes in Metro-Denver are Selling "Briskly"

(This luxury home in Greenwood Village just sold on May 28, 2013 for $3.9MM)

The Denver Business Journal is reporting that the sale of high-priced homes in metro Denver surged 33% in a year. There were 101 homes costing more than $1 million each that changed hands in May, according to the report. That's up from 93 sold in April. Although interest rates have ticked up in recent weeks following the Federal Reserve’s announcement of plans to taper its bond-buying program, rates remain near 50-year lows. 

Check these stats out according to the report:

* 14 homes costing more than $2 million closed in May, double the number sold in the same month a year earlier.

* The number of days it took to sell luxury homes continued the downward slide it’s been on all year, to 140 days in May from 155.8 days in May 2012. That average was up from April’s fast (for luxury homes) pace of 120.6 days.

* The most expensive sale in the metro Denver market in May was a nine-bedroom, 11-bath, 13,000-square-foot home in Evergreen that sold for $8.691 million.

* Denver notched the most million-dollar sales with 31, followed by Boulder with 22, Cherry Hills Village with 11 and Greenwood Village with seven.

* Sellers received an average of 94.4 percent of their asking price, up from 93.6 percent May 2012, but off from 95.7 percent in April.

Mortgage Rates Fall with Fed Announcement

Credit the Federal Reserve with lenders pulling the reigns on rising mortgage rates.

After six weeks of the 30-year, fixed-rate mortgage (FRM) inching toward the 4 percent mark, the 30-year FRM and other benchmark rates fell.

The 30-year fixed-rate mortgage (FRM) fell to 3.93 percent, with an average 0.8 point, the week ending June 20, according to Freddie Mac's weekly Primary Mortgage Market Survey.

The rate was down from 3.98 percent a week earlier, but still higher than 3.66 percent a year ago.

Frank Nothaft, Freddie Mac's vice president and chief economist said the rising rates stalled as the market waited for the Federal Reserve's June 19 Monetary Policy announcement.

Fears that the Fed was planning to end buying $85 Billion in bonds each month ($40-billing in mortgage-backed securities and $45 billion in longer-term Treasury securities) gets some of the blame for rates rising through much of May and June.

"The Fed stated that economic growth has been expanding at a moderate pace and that labor market conditions have shown further improvement, although the unemployment rate remains elevated," said Nothaft.

He added, "It noted inflation has been running below the Fed's longer-run objective as well. As a result, the Fed will continue its bond-buying program at the current pace and maintain its highly accommodative monetary policy stance."

Fed stays the course

The Fed said it would maintain efforts to keep short-term interest rates down at least until unemployment reaches 6.5 percent.

The unemployment rate in May was 7.6 percent and unchanged from May according to the U.S. Department of Labor.

The Fed predicted that unemployment will fall to 7.2 percent or 7.3 percent by the end of 2013, but may not reach the 6.5 percent level until the end of 2014, sooner than the Fed projected earlier.

Inflation, among other economic conditions, also factors into the Fed's plan to keep interest rates low.

"The Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee's 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored," according to the Fed's June 19 Monetary Policy announcement.

"The Fed also affirmed that the housing sector has strengthened further. For instance, single-family housing permits increased nearly 2 percentage points in May to an annualized pace of 649,000 homes, the most since May 2008. In addition, homebuilder confidence in June rose to its highest reading since March 2006," Nothaft said.

Meanwhile, the average interest rate on the 15-year FRM was 3.04 percent with an average 0.7 point, down from 3.10 percent last week. A year ago, the 15-year FRM averaged 2.95 percent.

Interest rates won't skyrocket

Capital Economics recently forecast rates weren't on a permanent trajectory to the moon.

Echoing a June 7 Kiplinger report for the second quarter 2013, Capital Economics' U.S. Housing reported the Eurozone isn't out of the woods yet.

Capital says another economic flare up in the Eurozone is likely to send investors to the safer-haven of Treasury bonds and that will put a lid on mortgage rates.

Stay tuned.

Meanwhile, for the 5-year Treasury-indexed hybrid adjustable rate mortgage (ARM), the average interest rate was 2.79 percent, with an average 0.5 point, unchanged from last week, and down from an average 2.95 percent a year ago.

Finally, for the week ending June 20, Freddie Mac reported the 1-year Treasury-indexed ARM averaged 2.57 percent, with an average 0.4 point, down from 2.58 percent last week, and down from 2.74 percent a year ago.

(Source: Realty Times)

Buying Cheaper Than Renting Til Mortgage Rates Hit 5%-10%

According to chief economist Jed Kolko, with rents and home prices where they are now, interest rates would have to reach 5%-10% (depending on the city) for rent to be cheaper than buying. 

The recent rise in mortgage rates has made buying a house a little more expensive: the increase in the 30-year fixed rate over the past month from 3.4% to 3.9% (Freddie Mac) raised the monthly payment on a $200,000 mortgage by $56, or 6%. However, because mortgage rates are still near long-term lows, and because prices fell so much after the housing bubble burst and remain low relative to rents even after recent price increases, buying is still much cheaper than renting. That means that the recent jump in rates doesn’t change the rent-versus-buy math much.

Rates are likely to keep rising, but how far must rates rise before buying a home starts to look expensive relative to renting? To answer this, Trulia updated our Rent vs. Buy analysis with the latest asking prices and rents from March, April, and May 2013. Following our standard approach, we calculated the cost of buying and renting for identical sets of properties, including maintenance, insurance, taxes, closing costs, down payment, sales proceeds, and, of course, the monthly mortgage payment on a 30-year fixed-rate loan with 20% down and monthly rent. We assume people will stay in their homes for 7 years, deduct their mortgage interest and property tax payments at the 25% tax bracket, and get modest home price appreciation (see the detailed methodology and example here). Here’s what we found:

Buying remains cheaper than renting so long as mortgage rates are below 10.5%. At 3.9%, the current 30-year fixed rate according to Freddie Mac, buying is 41% cheaper than renting nationally. With a 5% mortgage rate, buying is still 34% cheaper than renting nationally. Mortgage rates would have to rise a huge amount – to 10.5% – to tip the math in favor of renting, which isn’t impossible. Rates were that high throughout the 1980s, but have been consistently below 10.5% since May 1990.

Each local market, of course, has its own mortgage rate “tipping point” when renting becomes cheaper than buying a home. In Denver, buying is a whopping 53% cheaper than renting at the current mortgage rates. Even at 3.9%, buying is cheaper than renting in all of the 100 largest metros, which means the tipping point is above 3.9% everywhere. The tipping point is lowest in San Jose, which would tip in favor of renting if rates reach 5.2%. It’s between 5% and 6% in San Francisco and Honolulu, and between 6% and 7% in New York and Orange County, CA.

Denver: The Fastest Real Estate Market in the United States

According to the Denver Post, Denver's real estate market is the fastest in the country. Denver had the highest share of homes selling within seven days or fewer in April among the U.S.'s major metro areas, according to a report Tuesday from ZipRealty.

Nearly four in 10 Denver-metro-area homes put on the market sold within seven days in April, up from 22 percent in April 2012. Of the two dozen metro areas that ZipRealty studied, the average share that sold within a week was 22 percent.

Denver homes spent a median 11 days on the market in April before selling, which tied with Washington, D.C., for the fastest turnover, according to ZipRealty, an online real-estate brokerage based in Emeryville, Calif.

"We're seeing sales close quickly — in 32 days on average — at nearly full list price," said Lanny Baker, president and CEO of Zip Realty, in a statement.

The tight market, however, isn't translating into strong gains for metro Denver in sales prices as much as elsewhere. The median home-sales price for metro Denver in April was $264,462, a 10 percent increase from a year earlier.

That gain was robust but lagged behind the 16.4 percent gain averaged in the 24 metro areas, which were led by a 46 percent increase in the San Francisco Bay Area and a 33 percent jump in Las Vegas.

Distressed sales, which include foreclosures, fell to 10 percent of the total from 19 percent a year earlier.

The number of new listings increased 10 percent to 8,636 in April compared with April 2012. But the month-end inventory was 34 percent lower than a year ago, reflecting the rising number of sales.

Nearly every sale, 98.9 percent, was at list price or higher in the metro areas surveyed, ZipRealty reported.

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