Help Turn Pumpkins into Habitat for Humanity Houses!

Golden Real Estate is happy once again to support the Habitat for Humanity pumpkin patches in Lakewood and Arvada. The Lakewood patch is at Garrison Street & Alameda Avenue, on the grounds of Mile Hi Church. The Arvada patch is on the grounds of Trinity Presbyterian Church at 78th Avenue & Wadsworth Blvd. Our thanks go to these two churches for providing great locations for this fundraiser.

Both pumpkin patches are operated each year by Jeffco Interfaith Partners, a coalition of a dozen local faith groups. The profits from these two volunteer-manned patches have funded over 20 Habitat for Humanity homes in the metro area over the past 2+ decades.

The pumpkins are grown on a Navajo reservation in the Four Corners area, so the sales also benefit that community, which gets 60% of the proceeds. Habitat gets the other 40%.

Yes, the pumpkins sold at our two patches may be more expensive than at your local supermarket, but you have the satisfaction of making a difference with every purchase, and the 40% of your purchase which goes to Habitat is tax deductible.  Ask for the tax receipt.

What Can You Do to Make Your Home More Energy Efficient?

In a previous column, I pointed out that making your home more energy efficient can save you money immediately if you finance the improvements, because the monthly payments could be less than your monthly savings. The recently enacted Inflation Reduction Act has some very generous tax credits and rebates that make such improvements even more practical and affordable. My intention this week is to give you a “roadmap” for doing so.

The logical starting point is to hire a professional to do an energy audit of your home — to identify the “low-hanging fruit,” meaning the quickest and easiest changes you can make or improvements you can install that will give you the most “bang for your buck.”

That low-hanging fruit is typically better insulation, and the energy auditor normally begins by performing a blower door test of your home. That involves installing a computer-calibrated fan in a doorway which sucks air out of your house. By depressurizing your home in this manner while all your other windows and doors are closed, the auditor can identify all the leaks which allow cold air into your home in the winter. That way you know where to caulk to make your home less “leaky.”

When it’s cold outside, the auditor can use an infrared camera pointed at your walls and ceilings to assess where you could improve your in-wall and in-ceiling insulation.

You’ll get a written report from you energy auditor with suggestions of things to do and how much benefit you will get from making those changes, whether it’s blowing insulation into your attic and walls, replacing your old gas furnaces and gas water heaters with heat pump versions, or installing better windows. Most recommended improvements will earn you a 30% tax credit under the Inflation Reduction Act.

There are more “roadmap” items, but you will learn about most of them by attending the Oct. 1 tour of green homes. See the blog post.

If you or someone your know is an energy auditor, let me know. We expect big demand for your services!

Cash Sales Are Up Less Here Than Nationally

By JIM SMITH

Like you, I’ve read reports from Zillow, Redfin, the National Association of Realtors, and others about the surge in investor purchases and the percentage of transactions that are all cash, but I can rarely confirm those reports when I do statistical searches on REcolorado, Denver’s MLS.

For example, Inman, the leading real estate news service, reported the following last Saturday: “All-cash home purchases in the U.S. hit 31.4 percent of all transactions in July 2022, up from 27.5 percent the year before, and just shy of an eight-year high reached in February, according to data released Friday by Redfin. Since the beginning of 2021, all-cash purchases have surged thanks to a pandemic-housing rush, reaching an apex in February when 32.1 percent of all transactions were made without financing, according to Redfin.”

Compare those numbers with the chart below, created from REcolorado, based on closings within 25 miles of the State Capitol.

The pandemic took root in April 2020, but there is only a modest increase in the percentage of cash transactions well into year two of the pandemic. A more significant increase can be noted in 2022, but the peak was well before the increase in mortgage interest rates which only showed up in April, and the percentage of cash sales actually dropped a little as those rates increased.

Regardless of those fluctuations, the percentages are well below the national percentages reported by Inman.

Looked at Correctly, It Costs No More to Build (or Buy) a Sustainable Home

“Conventional wisdom” says that it costs more to build a solar powered, highly sustainable or net zero energy home, but that’s not really true if you look at the issue a little differently.

As you surely know, such improvements reduce the operating cost of a home. Solar panels, for example, can virtually eliminate your electrical bill, if your system is sized correctly. They can even provide free fuel for your cars — if they are powered by electricity.

Super insulating your home can reduce the cost of heating it, whether by natural gas or electricity (using a heat pump system). Ditto for installing triple-pane Alpen windows and doors.

If you go all-electric, you not only save on the natural gas or propane you consume, you can have your gas meter removed, saving on the base cost of being connected to the gas distribution network. As a commercial customer, Golden Real Estate, saves over $600 per year from having removed our gas meter, since that’s what Xcel Energy charges before a business uses a single cubic foot of natural gas.  The savings is lower for residential customers.

So, yes, it may cost more to go all-electric, but the return on investment is substantial over a pretty short period of time.

But consider the following. Whether you build or buy a home with these cost saving features, and whether or not you pay a premium for them, you will likely be financing your home with a mortgage.

Let’s say, conservatively, that you pay an extra $50,000 or even $100,000 for those features, and it adds that amount to the principal of your mortgage. Your monthly savings from those solar panels or that heat pump system or those Alpen windows and extra insulation will be far in excess of the increased monthly payment for your mortgage.

And if you make those improvements in a home you already own, you can take out a Home Equity Line of Credit (or HELOC) to pay for them, and the monthly payments will again be less than your monthly savings.

Looked at it this way, does it make any sense at all to build a home powered by fossil fuels, that is not solar powered or that has “normal” insulation and have higher monthly cost of ownership, starting from day one?  Of course not.

You can apply the same reasoning to the purchase of an electric car. You could go with the conventional wisdom that electric cars are more expensive and you should wait until the price comes down, but that thinking substantially misrepresents the cost of ownership.

I haven’t purchased gasoline for my electric cars since 2014, during which time I have saved tens of thousands of dollars on gasoline as well as on repairs on components that don’t exist on an EV, such as transmission, engine, fuel pumps, water pumps, timing belts and so much more.

And I have never had a catalytic converter stolen — or lost any sleep after reading about the epidemic of such thefts in my city.

Forgetting for the moment that there are indeed EVs which cost no more than their gasoline-powered equivalents, even if you paid $10,000 more for an EV than you might for a gas powered car, the cost of financing that difference is far less than what you’ll save on fuel and repairs.

If I have changed your thinking about making your home (or transportation) more sustainable, here’s what you can do.  First, attend this year’s Metro Denver Green Homes Tour on October 1st. You’ll be able to visit a dozen or so homes whose owners have taken steps to make their homes more energy efficient or even net zero energy. You’ll also visit a home builder who is building net zero energy homes. If you can’t visit some of these homes in person, you can view the narrated video tours which I have created for most of them.

(You can also — right now — take video tours of 16 homes that were on this tour in previous years!)

You can register for the tour — and see those videos — at www. NewEnergyColorado.com.

And if I have changed your thinking about the cost of buying or owning an electric vehicle, plan on coming to the Electric Vehicle Roundup (mentioned below) which occurs the same day, October 1st, as the Metro Denver Green Homes Tour.  If that date doesn’t work for you, there are many other EV roundups in October around Colorado. Find those other events online at www.DriveElectricWeek.org.

Here’s More Info on Incentives in the Inflation Reduction Act

John Horst of the National Renewable Energy Lab read last week’s blog post about the Inflation Reduction Act’s impact on the building sector and provided some valuable additional information.

For starters, he made me aware of the White House website, which has a listing of tax credits and grants under the IRA which pertain specifically to each state. Click here to view the IRA tax credits and grants that apply to Colorado. It’s a two-page PDF with paragraphs about those financial incentives plus job creation, manufacturing, cleaner air, rural opportunities and “resilient communities.”

One new incentive that hasn’t gotten a lot of coverage is the $4,000 upfront discount on the purchase of used electric cars and trucks. In the past, there was no incentive for purchasing a used EV, and the $7,500 incentive for a new EV came only as a tax credit on the following year’s tax return.

Making both incentives an “upfront discount” will make both incentives much more attractive and useful to car buyers and will accelerate the adoption of electric vehicles.

John also provided a link to a list of 59 state and federal tax credits (both personal and corporate), loan programs, grant programs, rebate programs, sales tax incentives, regulatory policies, energy standards and more — each with its own link for further information. (The above link gives the information for Zip Code 80401, but you can select a different ZIP Code anywhere in the country on that website.)

Interestingly, ‘Seller Concessions’ Can Benefit Both Buyers & Sellers

If you’ve been following my “Real Estate Today” column, you know that homes are taking longer to sell, and in some areas sales prices have decreased slightly.

Jaxzann Riggs, owner of The Mortgage Network, has been serving Colorado borrowers for 37+ years and she has witnessed more market fluctuations than I have in my 20 years. I asked her what “old and new” marketing and financing strategies she suggests for both buyers and sellers in this dynamic market.

   Her response: “First, buyers need to understand their highest priorities. Is investing the smallest amount of cash their priority, or are they more interested in minimizing the monthly housing expense in the early years of the loan? If they expect to own the property for many years, having the lowest possible 30-year fixed rate may be the highest priority. Buyers who are fortunate enough to be paying cash for a home are normally looking for the lowest possible purchase price, in which case seller concessions won’t matter to them.”

Let’s analyze each goal and how a seller concession built into a purchase contract can help you.

Goal #1:  Lowest Cash to Close

If your income is good and you are not concerned about your monthly housing expense, but you don’t have much cash to work with, a popular seller concession is one that covers your closing costs. That way, you only need cash for the down payment.

Goal #2:  Lowest Payment in the Early Years of Your Mortgage

If your income is likely to increase in the near future, and you want to minimize your monthly housing expenses until your pay increases or you receive an expected bonus, a temporary interest rate buydown funded by a seller concession might make sense. The simplest explanation of this strategy is that the buydown subsidizes a reduced monthly mortgage for the first one or two years of the mortgage.

Goal #3:  Lowest Interest Rate for the Term of the Mortgage

If this is a property that you expect to own for many years, it makes sense to ask for a seller concession that is utilized to buy the interest rate down on your mortgage for its full term.

So, the next question is, what is a reasonable dollar amount for a borrower to request from the seller as a concession? Each borrower and seller circumstance will vary, so there is no set rule, although Fannie Mae and Freddie Mac underwriting guidelines limit the seller to a contribution of 6% of the sales price (or 3% if the borrower is making a minimum down payment).

Seller concessions may only be utilized to offset closing costs, reduce the interest rate on a temporary or permanent basis, or to prepay mortgage insurance on behalf of the borrower. Seller concessions may NOT be used to reduce the down payment made by the borrower.

It might surprise a prospective buyer to understand the different impacts that a seller concession versus a price reduction can have on the monthly cost of their mortgage. And it might surprise sellers to learn that offering a concession in the form of an interest rate buydown can increase the pool of prospective buyers.

I am happy to explore buyer and seller wants, needs, and goals. Structuring a seller concession so that both buyer and seller benefit is possible once all parties agree upon the anticipated appraised value of a property. Of course, this is best done with the assistance of an experienced Realtor like me who knows how to evaluate the market trends in a particular community.

    If you are buying or selling and have questions about the different possible concessions, call Jaxzann at 303-990-2992.

Report Details How the Inflation Reduction Act Will Transform the Building Sector

One of the best analyses of the impact of the IRA on sustainability and the mitigation of climate change was released on Aug. 31st by the Rocky Mountain Institute. Below is a graphic from that report summarizing the IRA’s biggest direct impacts. Click here to view the full report.

As reported by Fast Company, the report “finds that the IRA’s main rebates and tax credits could bring electrification and energy-efficiency upgrades to millions of homes. In total, the bill’s new rebates and expansions of existing tax credits will create more than $23 billion in funding to electrify homes, upgrade heating, cooling, and ventilation equipment, and develop entirely new buildings that meet the highest federal standards for efficient energy use.” The IRA provides funds or rebates for:

Electric heat pumps that can both heat and cool your home, which the Department of Energy estimates will save families $500 to $1,000 every year. There’s a rebate of up to $14,000 for installing them.

Induction cooktops, which replace dangerous and health-harming gas stoves that contribute to asthma and other respiratory diseases.

Insulation, windows, doors, and sealing ductwork, which will ensure a home’s heating and cooling systems don’t have to work as hard to keep families comfortable.

Upgraded electrical panels and wiring for homes that have older electrical service.

The tax credits provided for in the IRA are available immediately, but the rebate program will take some time to be implemented, since it requires the creation of rules and forms.

Big Brokerages’ Stocks Plummet Due to Slowing Market

The publicly traded brokerages are taking a beating, trading near their 2022 lows, as the following stock prices quoted last Wednesday by Inman News Service show:

Compass (COMP)     $3.28 +.07   (year range: $3.20-17.70) 

eXp World Holdings (EXPI)     $14.23  -.06   (year range: $11.06-55.43) 

Redfin (RDFN)    $9.40  -.08   (year range: $7.13-55.87) 

Zillow (Z)    $34.39   +.96  (year range: $28.61-104.05)

Offerpad (OPAD)  $1.61 -.02 (year range $1.60-20.97)

Opendoor (OPEN)   $4.62 -.03 (year range $4.30-25.32)

Anywhere Real Estate (HOUS)     $11.18 +.14 (year range: $9.06-21.03) 

(Anywhere Real Estate is the new name for Realogy, which owns and franchises Century 21, Coldwell Banker. Corcoran, Better Homes & Gardens Real Estate, and ERA Real Estate.)

Golden Real Estate was founded in July 2007, just before the market crash of 2008, but we prospered through that downturn, and we will prosper through this one.

MLS Statistics Confirm a Rapidly Slowing Real Estate Market in Metro Area

As I write this on Sunday evening, I can’t know what the statistics will be at the end of August, so I ran some numbers for the first 28 days of the month to see how they compare to the previous 12 months. The result of that number crunching is in the chart below, and it confirms what we have all been feeling — that the real estate market in the metro area is indeed slowly abruptly.

The chart, limited to REcolorado listings within an  18-mile radius of the state Capitol, shows four metrics which I consult regularly to read the temperature of the market: the average and median days that a listing is active before going under contract, the ratio of sold price to listing price, and the average sold price. As you can see on the bottom four lines of the chart, the market started coming off its peak in May, slipping seriously by July.

During the seller’s market triggered by low mortgage interest rates and the pandemic, we saw the median days on the MLS in the mid single digits, as shown in column two. The average days on the MLS was higher, but not as high as in pre-pandemic times when it was in the 30s and 40s. Amazingly, that metric slipped into the single digits this April and May.

The last time the ratio of sold price to listing price was below 100% was in January 2020. In April of this year, before the impact of rising mortgage interest rates, it peaked at 106.1%, but it fell to 100% in July for the first time in 18 months, and during the first 28 days of August, it slipped to 99.57%.

The average sold price, which fell almost $30,000 in July, fell an unprecedented $58,136 during Aug. 1-28, a 9.2% drop in just one month.  When the full month is tabulated, it could well be worse.

For buyers who have cash or are not scared away by 5% interest rates, this represents an opportunity, and I have had my busiest open houses in a long time over the past three weekends, so I think buyers are ready to capitalize on that opportunity.

This is not to say there will be a market rebound anytime soon. There is a lot of uncertainty in the air in terms of politics, economics, and other matters, which will continue to keep many buyers on the sidelines.