Recession and Real Estate: Where do we go from here?

These stressful economic times make already-challenging decisions even harder. Is this a good time to buy? What if I also have a home to sell? Is there such a thing as a “recession-proof” neighborhood? Otherwise confident and decisive people may find themselves quaking with indecision—and understandably so.

We decided to ask some local real estate experts to sort facts from fiction and help allay some of our fears.

What do I do if I’m looking to buy?

First and foremost, the consensus is that it’s essential to have your financials tidy. Focus on saving for a down payment if you haven’t already, and make certain that your credit is in good order.

Once your financial house is in order, spend some time thinking about your priorities and focus on what will be the best plan of action for you. There are lots of important questions to consider: What kind of property are you interested in? Where and what kind of neighborhood? How long do you think you’ll own the property—a long-term investment or a fix-and-flip?

When you have a clear set of priorities, assemble a good support system. A lot of times, that starts with an agent. “Buyers are much better off working with a buyer’s agent, known as an accredited buyer’s representative (ABR),” says Janet Thompson. “Buyer’s agents are out there helping you find the best deals, working solely on your behalf.” Many buyers make the mistake of calling the listing agent on a home they like. While the listing agent will be more than happy to show you the home, keep in mind that their loyalty is necessarily divided: they are getting paid by the owner to sell that home. Fortunately, the buyer typically doesn’t pay a buyer’s agent; the listing company pays them when the house sells.

The other important member of your team is a reputable lender. “The laws have changed substantially,” Weinberg notes, “and a bad lender can create a horrible experience.” Ask friends, family members and your agent for lender recommendations.

[Tip]
Repairing damaged credit isn’t as hard as you might think. Get a free copy of your credit report—everyone is entitled to a free report once per calendar year. Next, make sure the report is accurate. If you find a mistake, you can contest it and often have it removed. Finally, recent history carries more weight on your report, so pay all your bills on time starting now. Pay down your debts, but don’t close old accounts; lowering your available credit can hurt your score. If you have more questions, don’t be afraid of credit counseling. An expert can often have a huge impact on improving your score.

What if I have a house to sell?

According to the Rocky Mountain News, there could be a ghost haunting Northern Colorado’s real estate market. Would-be home sellers are waiting to sell or taking their homes off the market hoping for an upturn. Those homes that will be put up for sale—eventually—create a sort of “phantom” resale market not reflected in current numbers.

If you’re ready to move, go ahead and put your house on the market. “People generally seem to think the market is terrible and that nobody’s paying full price for homes,” Weinberg says, “but that’s just not true. Houses that aren’t priced correctly are sitting. Ones that are priced correctly are going quickly.”

What’s the worst thing I can do right now?

“Watch the national news!” Weinberg laughs. “Negative media coverage has put a lot of junk in people’s minds. Weather and real estate are similar; they vary from minute to minute and mile to mile. There is no national real estate forecast. There really isn’t even a statewide one.” Don’t be spooked by the evening news; get the facts on your neighborhood, not the country at large.

If you’re looking for the best places to do your own research, start with these websites:

Roost.com is a clean, comprehensive listings search engine that prides itself on rigorous accuracy.
Scope out the details on your new neighborhood with city-data.com. Know everything from demographics to house values in a few clicks.
Trulia.com is a listings engine, but the more unique aspect is its ability to take all kinds of statistics and project them onto a Google map. See house values, market trends and more.
Coloproperties.com is a good Colorado-specific search engine for finding homes.
Do your price comparisons at zillow.com, which provides a “zestimate” of a home’s value, so you can spot a deal.

[Tip]
“Plan to get your house ready,” Thompson suggests. “Declutter it, do some inexpensive cleaning and painting and it will pay off when you’re ready to sell.” She told us about a client who said she was going to clean the carpets once the house sold. Thompson’s advice? Clean the carpets now! Any inexpensive things you can do to improve the look of your home will increase its desirability. Do a little more with our improvement ideas below.

How do I find a deal?

If you’re looking to buy, that’s what you’re really wondering, right? Where are all the deals? Unlike other metro areas around the country, which have lost as much as 30 percent of their value, North Metro, and Colorado in general, haven’t seen the bubble burst because there wasn’t a bubble to begin with. According to Weinberg, sustainable healthy growth is the most important reason we’re doing so much better than the rest of the country.

Does that mean there aren’t any deals to be had? Absolutely not! “All buyers are going to get great deals because the interest rates are low,” Thompson says. “There are $150,000 homes that should be $200,000 and houses for more than a million that are much less than the houses right next door. Because this economy affects everyone.”

“Finding deals is all about being ready to pull the trigger quickly,” Weinberg adds. Buyers today are very savvy because of all the information available on the Internet, and a good deal is likely to be snapped up fast. “But there are deals to be had everywhere, depending on what you’re looking for.”

[Tip]
The Denver Post put together an interactive real estate map, which covers some of the North Metro area. It includes information like average home prices, price change over the last year, number of homes sold and more. Access it at denverpost.com.

Should I wait for the stimulus package?

“Don’t wait for the stimulus package,” Weinberg says. “Waiting is the worst thing you can do.” Thompson agrees: “We don’t know the unforeseen, so if you’re in a position to qualify for a loan, with a good down payment and good credit, you’re going to find good homes for good prices, good loans and good interest rates today. If you wait, property prices will only go up.”

That said, take advantage of the stimulus incentives if they make sense for you. Talk to your agent, your lender or a financial consultant to determine the best option for your situation, and make sure you understand any government incentives thoroughly.

Most importantly, Weinberg says “Don’t try to time the bottom. You won’t know the bottom until you’re on the upswing.”

[Tip]
Interested in reading exactly what the American Recovery and Reinvestment Act of 2009 will do? You can visit opencongress.org to read the full text of the bill and read news articles and blog posts from across the web discussing what it means.

Recession-proof real estate: does it exist?

Short answer? No. Long answer? Maybe.

There’s no one thing to look for that’s going to make a property or neighborhood better able to weather a recession, but the attributes that make a property desirable in good times will retain their value in down times as well. Both of our experts agreed that the old adage is true, no matter what the economy is doing: location, location, location. “Neighborhoods with access to the sports centers are very desirable right now,” Thompson says, mentioning the growth in Erie around the development of Erie Commons.
Quality of life is a huge intangible variable that affects an area’s ability to ride out a recession, Weinberg says. “Availability of good paying jobs, good quality schools—it all adds up to perceived value. Perception is reality in real estate.”

Three “Recession-Proof” Areas: OK, we know we said there’s no such thing, but if you’re looking for a good area to buy, these three might fit the bill.

Louisville:
“There’s a lot of strength in Louisville in general,” Weinberg says. Because it’s small, a low supply of houses drives up demand. Quality of life is quite high, augmented by a family-friendly atmosphere, commuter-friendly location and a great old town. And Conoco-Phillips’ purchase of 432 acres for the new Louisville Technology and Learning Center promises an influx of new jobs.

“The city has done a great job of planning and land use,” Weinberg says, “building bike paths, rec centers and so on. They’re very driven by families. Because of that, the market is slower in the cold months of the year, while the kids are in school.” So, while there might be fewer houses on the market, you might also be able to drive a harder bargain.

Boulder:
“Boulder itself is pretty recession proof,” Thompson says, citing few foreclosures or short sales and lots of demand for housing. “Boulder is known nationally for its city planning techniques, which helps to create a low supply of homes versus a very high demand,” Weinberg adds.

The big draw in Boulder is the quality of life that people love. The “local” lifestyle is key, with access to local retailers, locally owned restaurants and the like. But Weinberg says it’s important to have a realtor familiar with the area. “Condos and town homes in boulder have been slow, but other things have been hot,” so you need to be savvy to separate the great investments from the ho-hum.

Lafayette:
Lafayette made Weinberg’s picks as one of the last affordable places in the North Metro area for entry-level single-family homes. While not as trendy now as some other areas, Weinberg believes the area will continue to gain in popularity and prestige. Especially if you’re looking to buy and hold, buying in Lafayette now, before a big boom in interest, could be a great investment.

What can I do if I’m not ready to sell? Improvements to make for pleasure or profit.

Whether you’re hoping to sell this year or 10 years from now, home-improvement projects can add value to your home. According to Rachel Weinberg’s experience, fewer than 10 percent of her clients are looking for a “fixer-upper;” most want a remodeled home.

But improvements don’t necessarily have to require a building contractor to increase value. “Look at your home and think about the things you would like that you haven’t got,” Thompson suggests. “Something as easy as getting rid of wallpaper or putting up new paint in a designer color can make a huge difference. If you hate the current wallpaper or the color, why would you think someone else would like it?” Easy fixes—like designer paint—can often net a huge return on investment, with lots of value added for relatively little cost.

You should also consider the kinds of improvements to make based on the price point of your home and what’s going on in the neighborhood around you. For example, “energy efficient improvements are really hot in our area,” Weinberg says, “things like window replacements and solar panels.” Entry-level homes will get a better return on their investment with window replacements than solar panels.

“Call a realtor for advice on what you might be able to do to improve the salability of the home,” Thompson suggests. “A good realtor will be happy to meet with you, even if you’re not quite ready to sell, and give you some advice about how to improve it in the meantime.”

Our Experts:
Rachel Weinberg As a Realtor with Wright Kingdom Real Estate, Rachel specializes in residential sales in Boulder County, Broomfield County and the surrounding areas. She enjoys working with sellers and buyers to make what could be a stressful time in people’s lives a rewarding and successful experience. Rachel has been in the real estate industry since 2001. You can reach her at 303.541.1913 or [email protected].

Janet Thompson Janet relocated from London to Boulder County in the spring of 1991 and has lived here ever since. She services Boulder County and the surrounding areas of Broomfield, Adams, Jefferson and Weld Counties. Janet is a Certified Residential Specialist and an Accredited Buyer Representative. You can reach Janet at 303.772.7478 or [email protected].