VerdeDenver

To date, sales volume for all of the south Denver neighborhoods is outstanding.  Prices where great if you are selling your home.  the sales volume could have been much higher if not for the continuing low inventory of homes for sale.  Ironically the actual sales closed volume was about the same as 2012 & 2013.  With the Inventory lower, the prices increased.  In a recent publication, The Denver Metro Association of Realtors reported that inventory had risen 6 to 7% throught the entire metro area, but that has not been the case in our south Denver neighborhoods.  Looking for a Inventory increase in the 2nd quarter which did not occur and as we have entered the 3rd quarter, inventory has not improved.  That is good news for sellers, not so good news for buyers.  The continuing low inventory is keeping prices at record levels.  There is much speculation about the low inventory of homes for sale.   For sellers looking to move within the metro market, fear of not finding a suitable replacement home, post recession loan qualifications changes & and a general feeling that rates will remain low indefinitely seem to be the major reasons that people are just staying where they are.  We expect the we will see improvemnt in listing inventory soon though as fall has historically been our second busiest season after the spring market.  If you would like a free home market report give us a call here at Verde Denver.

The NonFarm Payroll report today is creating a small rally. The economy added 192k jobs in March versus 200k surveyed and the unemployment rate held at 6.7%. The Underemployment Rate is up to 12.7% versus 12.6% in Feb and the Labor Force Participation Rate is now at 63.2%, up from 63.0%. Earlier in the week, the ADP report showed a payroll increase of 191k jobs in March versus 139k in Feb. That caused the S&P to rise to an all-time high of 1890. Bonds took a hit and the 10yr crossed over 2.80%. Today the 10yr stands at 2.75% due to the slight underperformance of today’s payroll report. It appears the ADP report caused too much optimism and now the NFP report is reversing the mood. For the week, the 10yr is up 3bps and exactly where it was 2 ½ months ago.

The data this week confirms that the economy is still moving forward, not like a race care, but rather like a large train with no ability to accelerate quickly. A train that must stay on a specific track with little flexibility and hopefully enough momentum to carry it up large grades and hopefully not too much speed that could cause it to crash. The conductor is the Fed and there is no data at this point that’s going to cause them to make any swift or sudden changes. Everything will be slow and methodical. At this point I would expect tapering to continue as planned. The market has been range trading for quite some time and feels very stale. Exactly what the Fed wants as it slowly escapes out the back.

Take a look at the chart below. For the last 7 months, the 10yr has traded between 2.5 and 3.0% generally. In the last 2 months it has bounced between 2.60 and 2.80%. The result has been positive for mortgages. With less interest rate volatility, investors in mortgages are more comfortable with long term bets on interest rates. Last week’s graph showed that mortgages are trading very tight to Treasuries. If this range holds, expect mortgages to continue to trade well. The general expectation that growth in the US will continue to advance at a slow but steady rate along with subdued inflation contribute to this low volatility environment. I don’t expect economic data to cause any change to those beliefs, at least without some warning signs. That means the market will likely continue to trade in this range if not for headline risk. Headline risk meaning some world event, outside of economic statistics, that affects the mood and attitude of the investment community. Financial crisis have run their course and the world is running out of headlines to move markets. Terrorist attacks, mother nature and unforeseen major bankruptcies or frauds are about the only events that still have the potential to unsettle markets. But until that day, we will sit on this train with very little disruption.

Should you sell? 5 Crucial Considerations

If you’ve been paying attention to the news, you’ve undoubtedly seen headlines stating that real estate prices are on the rise, and in most markets, housing has begun to bounce back. In a selected few metros, like Los Angeles, San Francisco, and New York City, the housing market isn’t just bouncing back – it’s booming! So, if you’ve been on the fence, waffling about whether or not to sell, consider these 5 things:

Equity Advantage

During the housing bust, a huge percentage of home owners saw their equity evaporate as home values dropped. Many even owed more than their houses were worth. No one wants to sell when it requires writing a check to the bank or listing as a short sale. And owners with equity definitely didn’t want to list knowing that lower sale prices would have eaten it all away. If you’ve been waiting to sell for this reason, chances are you now have a bit more positive equity in your home, thanks to recent market upswings. Maybe now is the time to consider that long-awaited sale and hopefully walk away with some equity intact.

Too Big for Your Own Good

You’ve grossly outgrown your current home – the house you’re in is either way too small after that 2nd or 3rd child, or an elderly parent has moved in. If you’re in a home that’s too small for your immediate – and future – needs, this is the time to consider the jump to something a bit larger. Sale prices are solid, the spring selling season is upon us, and you can take advantage of current interest rates before they start to climb.

Incredible Shrinking Family

What if you’ve recently joined empty nester club? Maybe your oldest child has headed off college, and you’ve realized it’s time to pack up that extra bedroom and ditch all that square footage. Selling now and downsizing has many perks – lower costs and less cleaning and maintence, to name a few – so go for it, and take advantage of a move that enhances your new lifestyle.

Interest Rates Could Light a Fire

Interest rates aren’t going anywhere but up, so if you’re wondering when it would be the best time to get a good mortgage for a new home once you’ve sold your old one, the answer is NOW. Rates are at historic lows and aren’t likely to go anywhere but north in the foreseeable future. Sell now, buy, and get in on those low rates for the long term.

Sell When You Need to, Don’t Chase the Market

When it comes to selling advice, the bottom line is: List when you need to. If you really need to sell your current home for a specific reason, including job changes, divorce, children, health issues, marriage, etc., don’t try and chase the market in either direction. When you sell and subsequently buy another house, there’s good news: if you’re selling low, then you’ll be buying low. And if you’re selling high, well, then you’ll be buying high. It’s a wash. Come to terms with the current market, and sell your home for its current fair-market value. And when you move on, be sure to buy a house you can afford, both now and in the future.

Cut energy expenses further

While you are in the mood to reduce energy consumption, call your electric utility and/or your heating-fuel company to ask about financial incentives for installing energy-efficient appliances or improvements. Some utilities subsidize the cost of improvements: adding insulation or weatherstripping, or installing that programmable thermostat, for example. Others give rebates for purchasing Energy Star appliances such as water heaters, air conditioners, dehumidifiers, heat pumps and fans. Also, remember to take the federal tax credit for such purchases. See the entire list at the Energy Star site. Senior citizens may qualify for additional subsidies.

Finally, it’s spring. To celebrate, do a few improvements indoors — tweaking your home’s energy efficiency and getting doors to operate smoothly — and then get outdoors to do some work that shows off your home’s exterior. Install a new screen door or repair an old one. Maintain fireplaces and gas appliances while avoiding the scammers who pop out of the woodwork like bugs this season. Repair fences. Remove stubborn stains from concrete garage floors, patios and sidewalks. And try one or all of our eight cheap and fun ways to give your home’s entrance some exciting

Inside

Install a programmable thermostat

Energy is wasted when you push up the temperature when the room feels cold or turn down the heat manually when it’s too warm. You can save about $180 a year with one of these

The market only heard three words from the meeting – ‘about six months’. That puts any potential interest rate hike well into 2014, much earlier than expected. The argument now is whether or not six months was a misstatement and Ms. Yellen needs to be more careful with her words or is she more transparent than Bernanke and spoke her mind. It’s probably a little of both. She may draw a straight line between where she sees the economy now and where she expects it to be in six months but I don’t think anybody else had the same opinion. I’ve never seen a straight line. The market reacted very strongly to what appeared to be a more hawkish Fed. Too many people expecting a dovish tone and the market reacted quite negatively. The markets have remained relatively calm for the past few days so I don’t think the messenger is getting shot this time. It was her first meeting.

With interest rates no longer being tied to specific data and the Fed taking the more qualitative versus quantitative approach, there are some data points however that need to be followed carefully. The unemployment rate, GDP growth and PCE will all be hot topics for the remainder of the year. The Fed anticipates the unemployment rate to end 2014 between 6.1 and 6.3%, 2015 at 5.6 to 5.9% and 2016 between 5.2 and 5.6%. Those forecasts are better than their forecasts from December. Currently the unemployment rate stands at 6.7%. GDP growth is expected to end 2014 between 2.8 and 3.0%, 2015 between 3.0 and 3.2% and 2016 between 2.5 and 3.0%; relatively unchanged from their last forecasts. The revised GDP for Q4 2013 was 2.4% so growth will need to accelerate. Lastly is the PCE (personal consumption expenditures) measure. What’s the difference between CPI and PCE? CPI is an inflation measure based upon the same basket of goods, effectively measuring price changes of the same items. PCE measures price increases over a changing bag of goods, which is a better reflection of price changes adjusted by changing demand. Who cares how much the price of VCR changed if everyone stopped buying VCR’s. Fed expectations for PCE inflation is 1.5-1.6% by end of 2014, 1.5-2.0% by end of 2015 and 1.7-2.0% by end of 2016. The PCE in January for reference was 1.1%, once again inflation needs to pick up some speed.

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Is the market just a deer in the headlights? We have a new Fed Chair, tapering continues without hesitation, the Fed has moved to a qualitative (subjective) approach from a purely quantitative approach, there are huge weather disruptions, emerging markets are struggling, mortgage applications are at a 5yr low, inflation is uncomfortably low and all the while the market ceases to move. Today the 10yr stands at 2.68. Three weeks ago it closed at 2.68 and five weeks ago it close at 2.71. Normally this would be a traders market, lots of uncertainty about the future, plenty of volatility and a very actively traded market. Today the market is thinly traded, liquidity is quite low and dollar prices are pretty constant.

What’s causing this sudden calm? Is it weather or Janet Yellen or inconclusive data, perhaps a calm before the next storm or perhaps the storm was already felt in 2013 instead? In actuality, all play a role to some degree, but for now I pay my compliments to the Fed. To move to a qualitative approach while simultaneously removing a massive amount of stimulus and keeping volatility near zero was genius in its simplicity. The risks all still exist and we should all be aware of those risk. And so we have to ask ourselves after this important and successful first move by the Fed, is the Fed asking the right questions? Are they a step ahead or behind the risks at hand and do they have the tools at their disposal to address and combat the underlying issues?

One of the bigger risks I see is what becomes of the Mortgage-Backed Securities market once the Fed stops gobbling up all of the production every day. Are there enough buyers to support that market and to keep dollar prices from falling? Thankfully the Fed is aware and addressing that risk. One of NAF’s trading partners was invited to meet with the Fed yesterday. Three traders and fourteen people from the Fed. While I don’t want to draw any conclusions from the meeting, I would say it’s a good sign that number one, there were fourteen of them, and number two, they asked all the right questions. Decisions often come from politicians and it’s hard to predict what those decisions will be, but it is always important to be asking the right questions. The Fed appears to gathering all of the information it needs to make the right decision.

There has been a lot of talk about weather and its impact on the economy. Almost every poor economic data point has been blamed upon weather; so much so that many have started to question how much has weather really played a factor. It’s one of those excuses that could blind the market of the potential reality that it’s more about the economy than the weather. Janet Yellen addressed the weather yesterday in the most effective manner by being honest in saying that it’s likely the weather but at the same time it can be very difficult to determine how much is weather related versus a weak economic outlook. Way to acknowledge both sides. She also said that there would have to be a significant change in their assessment of the economy to slow the pace of tapering asset purchases.

So where do we go from here? In my humble opinion, I think the market is at greater risk of rates rising than failing further. Rates have come down 35bps since the end of 2013 and the Fed has basically told the market they are not going to flinch first. Ms. Yellen all but said the data will have to be very weak. Slightly weak data will be pushed aside, blamed by weather, ignored to some degree and they will continue to taper. Where is their flinching point? How bad is bad? If the data is somewhat positive, watch out as the market is expecting weather impacted moderately weak data. If it is weak, get ready for arguments over the ten levels of weakness. What are the varying degrees of weakness and how weak is too weak?

Jobs and the unemployment rate come out next week. The way things have gone recently, unless the number is a huge surprise, it might not have the impact it typically does on the market.

Another reason to Expect a strong Market for 2014 In Platt Park.  Continued popularity Of our very urban neighborhood.  it's hard to Imagine ever seeing the suburbs as the first point of destination for most people in Denver.  The advantages to living closer to the city with all the amenities and charm it has to offer will continue to attract those who can afford living in our oh... so popular neighborhood.

Here is my fourth reason to look forward to a strong market here is Platt Park for 2014. Continued Low Interest rates. Interest rates are still at historically low levels.  yes, they have risen a bit and will likely continue to nudge upward but the overwhelming expection is they will stay in 4.5 to 5% range this year.  People will bummed they missed the 3- 4% days but it's still a great reason to purchase your home this year.