Insight into Pagosa Springs through the eyes of Chris Liverett (aka PagosaRE Guy)
A friend sent me this graph yesterday. It tracks the real estate sales activity in Pagosa Springs compared against the S&P index. It is not rocket science but it gives the indication that market activity is directly tied to stock market confidence here in Pagosa Springs. This makes even more since considering we are primarily a second home driven market. I thought it looked interesting when you look at it using the graph.
Pagosa Springs Real Estate market compared with the S&P 500
As a REALTOR® operating in Pagosa Springs my business is tied very closely to the mortgage industry. The shifting tides of rates and corrections have left me dependant on my “daily fix” via the Internet to try and maintain some understanding of current mortgage conditions. Thankfully, I don’t have to go this alone. Recent news of fairly significant rate changes whet my appetite enough to seek out someone who really knows what’s going on- Kathy Lattin of First Southwest Bank was gracious enough to give me a few minutes of her time this week. Kathy is the vice President of First Southwest Bank and has been with them for 17 years. The following is from an interview with her:
Chris: “Kathie could you give us an overview of what has happened in the last few years in the mortgage industry?”
Kathie: “We hit the big turbulence when the sub-prime market dropped because too many people over borrowed for their ability- which has really hurt the housing market. There are a lot of houses out there for sale. The inventory is available but the qualified buyers are becoming more picky. The programs have all changed. Obtaining the 100% financing is getting a lot tougher. Mortgage insurance and extra costs are still appropriate to what you are doing. You can do 80/20 purchases or 90/10, whatever you want to do, but a lot of them aren’t offering second mortgages anymore so you can’t do a first/second combination. Most of them only go up to 90% on the first. So to get the 100% you usually have to go to an in-house portfolio or have mortgage insurance.”
Chris: “I understand that last week the long term mortgage rate dropped. Can you give me a basic scenario of what that means for the borrower on a $350,000 home.”
Kathie: “This rate drop was put into place to help stabilize the core market. Last week with an interest rate of 6.25% a borrower would have made a principal and interest payment of $2,155, where today with a 1% origination fee your looking at about 5.5% which drops that payment down to $1,987. So we are seeing significant monthly payment changes from the interest rate drop.”
Chris: ”The big news this morning is that the Federal Reserve cut the short term interest rates by 75 basis points. Will that have any effect on long term mortgage rates?”
Kathie: “Not on long term mortgages, but on short term borrowing. The cut was made in hopes that consumers will get out there and borrow more short term money- your credit card, in house accounts, home equity line of credit and that sort of thing. If they pull it down then people can therefore buy more and get the economy back going.
Chris: “It seems that I am starting to see more attention on some of the homes between about $200,00 and $250,000 in the recent weeks. Can you offer any reason for this concerning mortgages?”
Kathie: “We are seeing a shift in the people that are able to qualify for these loans. Rates are coming down. We are at a low even for what it was two years ago…so this is making those loans available. What we have to do as REALTORS® and Lenders is consciously put the right person in the right home. Not over extend them, we can almost qualify them for anything. The 100% is still out there but we need to know they can truly afford this so that were not flipping or doing foreclosures a year or two from now. We have to justify to our customers, we are here for the long haul.”
Chris: “For the borrower with an average credit score what rate can you give them right now?”
Kathie: ” Probably 5.875% with no origination fee and 5.5% with an origination on a 30 year fixed rate mortgage.”
Thanks to Kathie Lattin for her expert insight into the mortgage industry. I highly recommend her for her professional efficiency and strait answers when it comes to home loans. She can be contacted at kathie.lattin@fswb.com or 970-9-731-1300.
Jimmy, wherever you are, here is the answer to your question. That question being “Where can I find some of your articles about Pagosa Springs Real Estate?”
This will get you started…the rest is up to your curious mouse.
Articles by Chris Liverett Pagosa Springs Real Estate
As the end of another wonderful year in Pagosa Springs comes to an end, my thoughts begin turning toward a little reflection. I tend to do this in all parts of my life. Reflection of my faith and what I have been taught this year, a review of relationships good and bad and business practices with an eye toward improvement.
For my on-line readership I thought I would give a snapshot of our Real Estate market, a year end comparison of sorts. I have compiled the SOLD data from our local MLS system in order to see a general trend for the past 5 years.
I have broken down the numbers into two major categories, Residential and Vacant Land. Residential is comprised of all stick-framed homes and sub-categorized by acerage or partial acreage size. The Vacant Land can simply be understood as differing sizes. All data is county wide.
Last week I wrote about the general stability of real estate values that we are seeing in Archuleta county. I also mentioned that although home and land prices are remaining very strong, the rate at which they are selling has significantly decreased. After the publication of that article I had a few conversations in which I was asked about the rate of sales, and what that really means for us in real estate. I decided to address that topic here on my blog.
One of the measurements frequently used to understand liquidity of inventory is known as the absorption rate. This is basically the rate in which a specific sector (usually price range) of the market sells in a given time frame. An easy way to understand this is to look at it in one month increments. For example- If we were looking at home sales between 100,000 and 200,000 and we found that 60 homes have sold in 2006, this would be an absorption rate of 5 per month. (60/12 = 5) This number does us little good unless we put it in more tangible terms. When we take the number of current active listings and divide it by the absorption rate we can determine how many months of inventory we have. For our example above if we have 39 active listings then we have a 7 month inventory.
As a general rule 6 months supply of inventory is a balanced market. More than that and we are considered to be in a buyer’s market, less and we are in a seller’s market.
As I mentioned last week we are in a buyer’s market right now which up until this point has not affected our sale prices, but has affected our months of inventory. Simply put, It will take a lot longer for you to sell your home if all factors remain equal.
I have compiled the charts below from the numbers found in the CREN MLS system from Nov 1st 2006-2007.
Listed below are the current months of inventory for residential listings in Archuleta County.
Here are the current months of inventory for vacant land in Archuleta County.
The first two questions I get asked when preparing to list property is 1- “How much is it worth?” and 2- “How long will it take me to sell?” Once I determine how much a home or property “should” sell for I always go to the numbers found through absorption rates and months of inventory. Then I encourage my seller’s to determine their list price by deciding how long they are willing to wait to statistically be able to sell their property.
If you currently have your home or property on the market and are unsure about the price in which it is listed, ask your REALTOR® about the months of inventory for your price range. If you are not currently working with a REALTOR® give me a call and I will be happy to discuss the pricing of your property with you.
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