Memorial Day 2013

There are a few in the Boise real estate market, but they’re definitely not abundant in MLS.

Exceptions exist in the production-level market segment (think CBH and Hubble Homes), but when you get into the $250,000 and up price range, they’re scarce.

That’s due to a combination of strong demand and the fact that lenders remain stingy about making spec home construction loans.

Lenders who offer construction financing to builders would rather make a loan for a home that has been pre-sold instead of loaning for a spec home.

Most new home buyers are finding that they must buy a to-be-built home and wait for it to be finished.

As an example, I am currently involved in a build job in Nampa that will take five months to complete.

I tried to find a clean, sharp existing home for that buyer, but we soon concluded that my client’s best alternative was to have a home built.

The upside, for them, is that they get a brand-new home with a warranty and they were able to select everything they wanted.

As foreclosures were completed, foreclosure (aka REO) listings became abundant in MLS.

Fortunately, our market recovery is well underway and REO listings are now a very small part of our overall listing inventory.

As of this morning, there are only 47 available REO listings in MLS.

Takeaways

• We are seeing very few new REO listings.
• REO listings comprise just 2.5% of our current available listings in MLS.
• Good REO listings sell immediately.
• Most lenders now prefer the short sale process vs. foreclosing.

Data pertains to Ada County single-family homes on lot or acreage.  Data does not include condo or townhome properties.

Lot costs are spiraling upward due to increased demand and short supply.

Material costs are rising rapidly too as new construction expands rapidly throughout the country.

Framing lumber, sheetrock, concrete, shingles, and other components are literally rising every month in many instances.

Then, there’s labor.

Homes are built with subcontractors and good subs are in short supply, with many of them moving to the oil fields of North Dakota.

I am hearing that some builders are now including “escalation clauses” in their build job contracts, allowing them to increase the sales price if their costs increase.

Others are building estimated price increases into the prices they quote buyers.

If you’re considering building, procrastination is not your friend!

But, our current interest rate environment will not last forever.

Our national economy is slowly improving and we can probably expect higher interest rates in the not too distant future.

Curious about how higher rates will affect monthly payments?

Here are some comparisons of monthly principal/interest monthly payments at varying interest rates, using a $200,000 30-year fixed rate loan:

• $200,000 @ 3.5% = $898.09
• $200,000 @ 4.0% = $954.83 (+6.3%)
• $200,000 @ 4.5% = $1,013.37 (+6.13%)
• $200,000 @ 5.0% = $1,073.64 (+5.95%)
• $200,000 @ 5.5% = $1,135.58 (+5.77%)
• $200,000 @ 6.0% = $1,199.10 (+5.59%)

As you can see, your interest rate is probably more important than the price you pay for your home.

If you wait to buy a home until rates rise from 3.5% to 6.0%, your monthly payment jumps from $898.09 to  $1,199.10 ~ a 33.5% increase!

Worse yet, that payment difference totals $108,363.60 over the life of the loan!

If you wait to buy until prices AND interest rates have risen, you could easily get priced out of the market.

In our current market, it’s a good idea to focus on your financing more than the price of the home.

You’d think our market would be awash in lots following the downturn of the past several years, but that’s not true.

Most subdivisions have no available lots and waiting lists for their next phase.

Lots in foreclosed subdivisions have mostly been absorbed.

There are numerous new developments going in, especially around Eagle, but those lots will be created on recently-purchased land acquired at today’s higher price.

And, development costs for infrastructure are increasing on top of higher land costs.

My best guess is that lot prices are about to take a big jump in the near future as those new lots come online.

Those higher lots costs will inevitably lead to higher home prices.

If you’re thinking about building, better get going on it this year!

Even better, I had a buyer lined up for the home he planned to build.

We found a nice lot for $36,000, got it into escrow, and my builder/buyer signed final papers as we prepared to close on the lot.

Title companies are pretty smart; they always run a last-minute lien search on the buyer, seller, and property before closing an escrow.

This time was no exception.

On closing day, I got a call from my escrow officer, informing me that the IRS had filed a lien on everything the builder owned the day before closing.

That killed the deal because the title company couldn’t issue title insurance with the IRS lien in existence.

Charlie Lyman (aka “The Carpet Geek”), cleaned my carpets again yesterday.

In addition to stellar carpet and upholstery cleaning services, Charlie also offers carpet stretching, carpet repair, hardwood polishing, tile grout cleaning, and hard-surface counter polishing services.

Charlie even steam-cleans my German Shepherd, Sarro!

For the ultimate in carpet cleaning services, call The Carpet Geek at 855-5715.

It’s interesting to see how things have changed.

Here’s a breakdown of current short sale activity.

• Total Available Listings: 1,857
• Short Sale Listings: 257 (13.8% of all available listings)
• Short Sale Listings With Offers: 200 (77.8% of all short sale listings)

Takeaways

• We are seeing very few new short sale listings.
• Most (nearly 80%) of existing short sale listings have accepted offers awaiting lender approval.
• Despite some improvements in lenders’ short sale processing, short sales remain difficult, frustrating, and can take months or more to close.

I have often said that the only person who should buy a short sale is someone who doesn’t care if they get the property.

Data pertains to Ada County single-family homes on lot or acreage.  Data does not include condo or townhome properties.

(click on the top photo to view virtual tour)