Real Estate Review
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By Chris Hardy:
There is an old Chinese saying that states "The best time to plant a tree is 20 years ago; the second best time is today." The same can certainly be said about buying real estate. Historically, an investment in a home has provided a secure long-term appreciation opportunity. For example, an average home in Denver purchased 20 years ago has enjoyed a 250% increase in value during that time period (as calculated by the Office of Federal Housing Enterprise Oversight at www.ofheo.gov
That astonishing figure doesn't include any potential income gains from renting, realized tax benefits from mortgage interest deductions, and/or depreciation of the investment. It simply states that if you bought a house in Denver in 1986 for $50,000 it would be worth somewhere in the vicinity of $250,000 today, based on the average repeat sales in our area (individual subject properties may have seen greater appreciation than this number depending upon key variables like location, condition, upgrades, and original purchase price).
However, the most attractive aspect of real estate investing is that your initial investment expenditure can be a fraction of the cost of the total investment. In other words, you get to use a financial institution's money to build your own personal wealth. The person who bought that house for $50,000 probably financed the bulk of that purchase with a mortgage. Being patient is not one of our society's strong suits. Being patient with an investment requires many of the same things a growing tree does. You must plan where the tree will be planted to take full advantage of the fruit or the shade it will provide. You must have a vision of what that tree will look like when it reaches maturity. A real estate investment is no different. You need a vision for what the property is going to do for you.
Do you want a rental? Do you want a second home in the mountains? Do you have cash to spend or will you seek alternative financing options? How long are you willing to hold the investment before you will need to sell it to enjoy the return? These are just a few of the questions that need to be answered early in the investment purchase process. Too often, we get caught-up in the fervor of Reality TV where folks make and lose tens and even hundreds of thousands of dollars in a matter of weeks or months. Unfortunately, all we get to see are the dramatic extremes of winners and losers (otherwise we wouldn't watch).
In real life, there's a vast middle section of the real estate investment game that wouldn't be particularly exciting to watch on television but does provide most of the opportunity for steady, reliable financial gain. Colorado is on the brink of yet another change in our real estate market. The market is always changing, always looking for balance between supply and demand. It's no secret that our market has seen a significant shift over the last 4 years - and that's the good news! Our market didn't cool off over night as it has in areas of Florida, Nevada, and California. We've had no bursting bubbles or sustained depreciation. We have arrived at that moment in the real estate sales cycle where many indicators are showing signs of renewed vigor. If you wait, you may miss out on some tremendous opportunities currently available.
So, what about our tree? If you didn't invest in real estate 20 years ago, the next best time to invest in real estate is right now. Prices have corrected, inventories are dropping Colorado is positioned for a steady increase in jobs and people. Additionally, rental occupancy rates have increased and mortgage interest rates remain at historic lows. Set an appointment today with a Coldwell Banker Agent to provide you with guidance and analysis of the current market. She or he will be able to assist with answers to the questions most critical to achieving your stated investment goals.
Denver Metro Statistic
For October 2007, closed units were 6.9%. The Average sales price went down by 5.5%, as a result of the REO properties closing. The good news is that the listing market continues to tighten with a 2.7% decrease. Lessening supply is always good news. The million dollar market softened during the month of October by 22.4% in closed units.
Looking forward to NEW BEGINNINGS in 2008! Wishing you the Absolute Best Success!
Sarah Solomon
Douglas & Arapahoe County Real Estate
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