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Interest rates are at historical lows … again. What does this mean in terms of purchasing power especially for those waiting out the market for an extra 10% price drop in housing?

A general rule of thumb holds that every one percentage point decline in mortgage rates is the equivalent of roughly a 10% reduction in the home price for the buyer.

A website I follow, (on Manhattan real estate), has the following example:

“Take a $1MM property with a $750k mortgage:
– 4.4% interest rate = $3,755 mortgage
– 5.0% interest rate = $4,026 mortgage (equivalent to a 6% difference)
– 5.5% interest rate = $4,258 mortgage (a 13% difference)

This means that it would take a 6% drop in housing prices by mid-2011 to make your monthly payments the same as they would be today at a 4.4% interest rate, or a 13% drop in prices by the end of 2011. This doesn’t take into account the compounding effect of the interest payments over 30 years, keeping in mind that there may not be another attractive refinancing opportunity down the road. … a compelling reason to pull the trigger, perhaps.” (September 22, 2010)

Link to article and more interest rate resources.

Dick Carter, a high end local lender from Affiliated Financial Group, says that “for the typical Aspen high end buyer, qualifying is not as much an issue as how low the payments are for each million dollars of mortgage. It is obvious that when I tell someone that I can get them a 5 year fixed rate loan up to $10 million at about 3.5.% interest only, their monthly payments are going to be very low ($2,916.68/million) …a 3 year fixed is about 2.75% up to $10 million. Also these rates are for loans at or above $3.5 million. They are about 0.1 % higher for lower loan amounts. Naturally, buyers must qualify. Most significant is their liquid assets in addition to income and credit scores.”

Interest rates are at such record lows that the wealthy are in fact borrowing money now to be used as an inflation hedge later! With the cost of money so low, in the high 2% to mid 3% provided one qualifies, this is basically free money to purchase Aspen property at average 30% to 50 % discount to ask from two years ago.

Market Highlights this Week

o Of (6) closings last week, (5) were condos (two in Snowmass Village) and (1) is a deeply distressed Snowmass Village single family home sale.
o Of the (5) under contracts, all are condominiums, and (2) are in Snowmass Village.

o Of particular note are the tremendous discounted prices available in Snowmass as these sales attest.

Last Week’s Aspen and Snowmass Sales and Under Contract Activity
Last week’s real estate sales activity appears below for the upper Roaring Fork Valley for all property types over $250,000 excluding fractionals in Aspen, Snowmass Village, Woody Creek and Old Snowmass (although Residences at Little Nell and Dancing Bear are included due to their higher fractional price points). Because the MLS link(s) to photos and property details expire after 30 days, photos and descriptions of the closed properties are posted to preserve an archive of sold market activity.

For a Spreadsheet Summary of last week’s sales and under contract activity, see The Estin Report: Aspen Snowmass Weekly Sales Statistics Oct 10 – 17, 2010

Closed (6): MLS #’s 110539, 116284, 117998, 116733, 118469, 115766 This link is valid for 30 days until 11/16/2010

MLS #110539 – 814 W. Bleeker Unit C-4, Aspen Villas Condo/Townhouse, Aspen, CO: Sold Price: $758,000/$539 sq ft; Ask Price: $825,000/$587 sq ft. (Original Price: $995,000 and 552 days on the market since April 17, 2009). This is a 3 bdrm/2 bath, 1,406 sq ft townhome built in 1992 located close to the “S” turn at entry into Aspen.The listing broker comments are, “One of Aspen’s best values for a townhome-style Aspen Villa three bedroom condo. Large trees surround the outdoor terrace. Open and light living spaces and views of Aspen Mountain from the upstairs bedroom.” 2007 Taxes: $1,939 Yr; HOA Dues: $1,300 Qtr.(Comments and Photos courtesy of One of Aspen’s best values for a townhome-style Aspen Villa three bedroom condo. Large trees surround the outdoor terrace. Open and light living spaces and views of Aspen Mountain from the upstairs bedroom.)

MLS #115766 – Crestwood Condominium, 400 Wood Rd #2203, Snowmass Village, CO:
Sold Price: $565,000/$627 sq ft; Ask Price: $614,900/$683 sq ft. (Original price $1,295,000 and 641 plus days on the market since Feb. 2007.) This is a bank sale of a 2 bdrm/ 2 bath, 900 sq ft, The listing broker writes,”Totally remodeled, ski-in/ski-out, directly across from new Snowmass Base Village and gondola. $16M exterior renovation with new pools and spa/work out room. Awesome price – now sold newly furnished. Best value in Snowmass.” 2009 Taxes: $2,915 YR; HOA Dues: $15,523 Yr (Photos and comments courtesy of McKinley Sales)

MLS #116284 – Sagewood Condominium, 910 W. Hallam Unit 1, Aspen, CO: Sold Price: $ 750,000/$558 sq ft; Ask Price: $895,000/$665 sq ft. (Original Price $995,000 and 155 days on the market since May 12, 10.) This is a 3 bdrm/2 bath, 1,345 sq ft, built 1972 unit. The listing broker comments are, ” Luxurious cherry cabinets and floors, slab granite counter tops, 2 fireplaces (wood & gas), open living area, large closets, in-unit washer/dryer, 2 patios make this in-town condo unique. Lovely garden level with private entrance, assigned parking, dogs allowed, walking distance to the music tent and Aspen Institute and steps to valley wide buses and ski shuttles. Homeowner’s dues include all utilities except electricity and telephone.”. 2009 Taxes: $3,689 Yr; HOA Dues: $ 2,156 Qtr. (Photos and comments courtesy of Morris & Fyrwald, Sotheby’s Intl Realty)

MLS #116733 – Maroon Creek Townhome, 713 Oregon Trail, Aspen, CO:
Sold Price: $3,880,000/$837 sq ft; Ask Price: $4,295,000/$927 sq ft. (Original Price: $4,295,000 and 119 days on the market since June 2010. It had been listed the year before from 1/27/09 – 6/08/09 at $4,895,000.) This is a 4 bdrm/ 4 bath, 4,633 sq ft, 1998 built townhome with a 500 sq ft garage. The broker comments are, “Truly a turn-key townhome. This sophisticated and well appointed townhome features a gracious and open floor plan, spacious bedrooms, a study, and a gourmet kitchen. Perfect home for entertaining family and friends. A ski-in, ski-out home that is just steps away from the Maroon Creek gold course and Aspen Recreation center, a perfect match for an active lifestyle.” 2009 Taxes: $10,343; HOA Dues: Not mentioned. (Photos and comments courtesy of Morris & Fyrwald, Sotheby’s Intl Realty. )

MLS #117998 – single family home, 33 Fairway Drive Snowmass Village, CO: Sold Price: $800,000/$313 sq ft; Ask Price: $995,000/$389 sq ft. (Original Price: $1,795,000, price lowered progressively chasing the market down …on the market since June 11, 2009.) This is a 5 bdrm/4 bath, 2,556 sq ft 1976 built/1985 remodel home with 2-car garage. The brokers comments are, “Being sold by Order of U.S. Bankruptcy Court. This will be the first single family home sold in Snowmass Village under $1MM since June 2004. Older, well maintained home. Live in it as is or ripe for a remodel with lots of options including expansion to 2,700 s.f. This location offers outstanding views of Hanging Valley Wall and is directly across from Two Creeks ski lift. Great for getting first tracks. Small creek runs along the property line.”. 2009 Taxes: $4,857; HOA Dues: $90 Yr. (Photos and description courtesy of Lane Schiller Properties)

MLS # 118469 – Condo/Townhome in Racquet Club Condos, 1050 Matchless Dr Unit 3,Aspen, CO: Sold before MLS. Sold and Ask Price:$2,995,000/$1,215 sq ft.This is a 4 bdrm/ 4.5 bath, 2466 sq ft, built 1977/total remodel 2010 1/2 duplex in the Smuggler area of Aspen. No brokerf comments except the knowledge the unit was completely gutted and redone in 2010.2009 Taxes: $3,935 Yr; HOA Dues: TBD. No other details provided.

Under Contract / Pending (5): MLS #’s 116963, 113936, 115192, 116657, 112524 This link is valid for 30 days until 11/16/2010

Tim Estin is an active Aspen Snowmass real estate broker and he welcomes your comments, inquiries and business. Email him or call 970.920.7387. Subscribe to The Estin Report and blog on twitter @EstinAspen or click “Join the conversation” below:

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Disclaimer: The statements made in The Estin Report and on Tim Estin’s blog represent the opinions of the author and should not be relied upon exclusively to make real estate decisions. A potential buyer and/or seller is advised to make an independent investigation of the market and of each property before deciding to purchase or to sell. To the extent the statements made herein report facts or conclusions taken from other sources, the information is believed by the author to be reliable, however, the author makes no guarantee concerning the accuracy of the facts and conclusions reported herein. Information concerning particular real estate opportunities can be requested from Tim Estin at 970.920.7387 or by email.. The Estin Report is copyrighted 2010 and all rights reserved.. Use is permitted subject to the following attribution: “The Estin Report: State of the Aspen Market, By Tim Estin, mba, gri,”