TRIBUTE TO A GREAT MENTOR - JIM ROHN

I was saddened to learn last Saturday of the passing of Jim Rohn, a man whose influence in my life runs deep. Even though I never met Mr. Rohn personally, I came to know him quite well through his books, interviews and recorded seminars, which have been influencing people around the globe for nearly 30 years.

And it was the application of those principles taught by Mr. Rohn that prodded me to leave a comfortable existence in California five years ago to launch and then build a successful and growing real estate practice here in Colorado.

I have read Rohn’s "Seasons of Life" aloud to both of my daughters, who are 8 and 10. The book is written in simple English, but it explains with clarity and beauty the natural flow of seasons in our lives. “Sow in the spring or beg in the fall” is one of my favorite Jim Rohn quotations.

Recognizing opportunities, and knowing when a season of opportunity (springtime) is at hand, is fundamental to planting a crop that will yield a fruitful harvest in the fall.

At the same time, Rohn taught that winters are an inevitable season of life. We all experience setbacks, we all deal with loss from time to time… but spring will come again, and another opportunity with it. Knowing that the next opportunity is just around the corner places winter in its proper context – as a season, not as a final result.

Rohn also influenced me to become an avid goal setter. Five years ago, I began making lists of one year, 5-year and 10-year goals. I review them often, and the truth is, I have learned that our minds are equipped to take us anywhere we choose to go. Focus on scarcity, and it finds you. Focus on abundance (and engage in the disciplines to create it), and it will find you as well.

Rohn taught that many of us are held back by our own self-imposed limitations. Rohn said we are all faced with a choice – we can choose to earn a living, or we can choose to design and live out an extraordinary life.

We are also faced with a choice about how we use our time and resources. We can engage in disciplines that will create abundance and opportunity... or we can choose to glide along, missing opportunities, not tending to relationships, ignoring the clock... until we find ourselves all alone and out of time.

Rohn often said "the pain of discipline weighs ounces, while the pain of regret weighs tons."

I’m pursuing that more disciplined, extraordinary life now, and the journey is exciting. Jim Rohn taught me how to start the process. Simple disciplines, consistently repeated - an apple a day, sending out handwritten notes, making one extra call - add up to huge results.

Mr. Rohn is gone, but his philosophies live on. There is a better future for all of us, if only we commit to pursuing it.

THE DECEMBER SLOWDOWN IS HERE

For most of 2009, first-time buyers have been in a frantic sprint to find inventory, write offers, and cash in on the $8,000 tax credit from the federal government. From the time the stimulus bill was signed in February, the inventory of homes below $250,000 dropped down to less than 3 months (and then stayed there). That's an exceptionally tight market by anyone's standards.

This tight market created urgency, bidding wars and a lot of angst for both buyers and their agents. But now that we have hit the holiday season (and even though the tax credit has been extended), it's seems the market has hit a wall of exhaustion.

The inventory of homes priced below $250,000 has jumped from 2.89 months to 4.79 months in the past 60 days. That's a 60% increase in market time, caused not by a surge of new inventory, but by a dramatic reduction in the number of buyers looking for homes.

The market from $250,000 to $400,000 has also cooled off, with inventory rising from 6.99 months to 9.86 months over the past 60 days. Above $400,000 the demand has remained relatively unchanged, but since homes below $400,000 have accounted for over 85% of the sales in the Denver metro area this year (peaking at 88% in October), the bottom off the market is what we should be watching as we try to project where buyer confidence is headed.

Come January, I would expect to see a lot of new inventory on the market and a lot of buyers coming back in off the sidelines, but for now, there's not a lot to choose from.

Until then, the market figures to continue to move in slow motion.

...AND ONE DAY LATER, RATES WENT NUTS

Talk about timing.

Yesterday in this space I wrote about the fact Denver had shed almost four percent of its jobs in the past year, and that interest rates were holding in the 5% range because you cannot have true economic growth without job creation.

This morning, the government reported that the nation's economy lost only 11,000 jobs in November, a 100k improvement from October and the lowest figure since June of 2007.

Recession over?

In response, interest rates have spiked significantly, wiping out three weeks of downward drift in three hours of frenzied trading and pulling us well off the record lows we were experiencing. If you are under contract and have your rate locked in, congratulations. If not, you might want to check in with your mortgage lender and have a conversation about strategy going forward.

For the past year, I have been looking over my proverbial shoulder, waiting for the impact of a trillion dollars in government stimulus to wash over the market and drive interest rates higher. I hope this is not the arrival of that tsunami.

DENVER REGION SHED 3.89% OF ITS JOBS OVER THE PAST 12 MONTHS

The headlines are what the headlines are, and the fact is that jobs continue to disappear. The Denver Business Journal reported today that the Denver metro region has lost 48,000 jobs in the past year, as unemployment has risen from 5.3% to 6.8%.

This remains a serious problem, and I believe that it's the primary reason interest rates are still in the 5% range, despite trillions of dollars of spending and spending commitments by the federal government.

The story is far more bleak in other markets - several metropolitan areas reported job losses of 7 to 8% over the past 12 months, while Detroit checked in with a staggering unemployment rate of 16.7%. The entire state of Michigan is broken.

A total of 124 cities across the country reported unemployment rates of 10% or higher, led by El Centro, California, with 30% of its workforce sitting at home.

No jobs, no economic growth, no matter how much the government spends. That's the deal. And with 361 of the 369 cities surveyed reporting job losses over the past year, a legitimate recovery remains a long way off.

LANDLORD UPDATE: RENTS UP 7%, VACANCIES DOWN IN THIRD QUARTER

Vacancies for Denver area rental homes fell to 4.6% during the third quarter of 2009, down from 5.2% during the second quarter, according to a new report from the Colorado Division of Housing. Average rents increased from $998 per month to $1,059, a jump of almost seven percent.

Rental housing, as defined in the survey, includes single family homes, townhomes, condos, duplexes, triplexes and fourplexes.

The strongest rental market in the region remains Jefferson County, where the vacancy rate is just 3.4%. Adams County (6.2%) and Douglas County (5.7%) have the highest vacancy rates in the seven county metro area.

While the $8,000 first-time buyer tax credit continues to pull qualified renters into the ranks of new home owners, population growth and tougher loan qualifying guidelines are helping to fill entry level rental properties, which remain in high demand.

A lack of new construction figures to increase the pressure for entry level housing in the years ahead, both for renters and first-time buyers.

It is my opinion that, prior to the introduction of the first-time buyer tax credit, investors basically had the entry-level purchase market to themselves. With so many first-time buyers jumping into the mix over the past 18 months, I have seen investors pull back, as values have risen in many areas by 10% or more in the past year.

That means less new rental inventory coming onto the market, which is one reason things continue to get tighter. There are still opportunities for investors, but it is more difficult and time consumptive to find the kinds of deals that were readily available at the start of 2008.

HOW TO GET WELL-PRICED FORECLOSURES UNDER CONTRACT IN A RED HOT MARKET

A few months back I shared some tips in this space about how to get well-priced, structurally sound foreclosures under contract quickly when the marketplace is teeming with buyers and bidding wars are increasingly common.

The photo to the left is dark and a little hard to make out because it was taken at 6:05 a.m. last Tuesday morning.

As in, I showed this property (which went into the MLS late Monday afternoon) at 6:05 a.m. last Tuesday morning, wrote the contract at 8 and had it under contract before noon.

By Tuesday night, the listing agent tells me she received six additional offers, many of which were no doubt higher than the offer we submitted.

We have completed inspections, the appraisal is done (the home appraised about 7% above our offer price) and we are on track to close in three weeks. Plus my buyers are getting a 30-year fixed rate at 5% and an $8,000 tax credit. Sound like a good deal??

The point is... you can complain about the market (or your job, or the government, or anything else, for that matter) or you can choose to get up a little earlier, work a little harder and go the extra mile to get the results you want.

I do not want to leave my house at 5:30 in the morning to show property... but I will.

Will your agent do the same?

NINETEEN PERCENT OF COLORADO MORTGAGES "UNDER WATER"

About 214,000 of the 1.1 million homes with mortgages in Colorado are "under water", according to a new report by First American Core Logic. Mortgages are said to be "under water" or "upside-down" when a homeowner owes more on a mortgage loan than the home is worth.

Nationwide, 23% of all mortgages have negative equity positions, led by Nevada (65%), Arizona (48%), Florida (45%), Michigan (37%) and California (35%).

According to First American, most of the loans in trouble share common characteristics:

* the vast majority of upside-down loans were originated between 2005 and 2008, with 2006 being the peak year for negative equity loans

* adjustable-rate loans have defaulted at rates far higher than fixed-rate loans

* in much of the country (including Colorado), new construction has taken a more serious hit that traditional resale homes

* homes originally purchased for $250,000 or below have accounted for nearly 80% of Colorado's completed foreclosures, although it appears more higher end properties are now falling into foreclosure

Although all areas have been affected to some extent, it is very clear that certain areas have taken a heavier hit than others. Communities like Brighton and Commerce City, which were flush with entry-level new construction during the early years of the decade, and areas with older housing stock, like Aurora and Lakewood, have seen foreclosure rates far higher than cities with a more diverse mixture of housing stock.

For my clients, the name of the game is always to "buy it right". Hoping future appreciation will bail you out of a marginal home purchase is not a good strategy. Researching, analyzing and finding motivated sellers (including banks) is a much better approach to protecting yourself long-term, although it often takes more time and patience.

And remember that with new construction, you are always paying a premium for the "shininess" of your new home. Understanding what is "retail" and what is "wholesale" when it comes to buying a home is critically important in a volatile economy. Make sure your agent isn't just a cheerleader for the housing market.

Today, you need a realistic perspective about both the potential upside - and downside - of buying into different areas and different price points as the national economy struggles to regain its footing.

DESPITE DOWN ECONOMY, COMPLETED FORECLOSURES FALL 8% IN COLORADO

Through the first three quarters of 2009, completed foreclosures in Colorado stood at 14,971, an 8% decline from last year's total of 16,265 during the same period. Colorado foreclosures are down almost 20% from their peak levels in 2006, despite large job losses and record unemployment.

While the news of a decline in completed foreclosures is positive, we obviously are still in a very tough economic situation. The first wave of foreclosures which pounded the state from 2004 - 2007 were driven by unregulated lending, overdevelopment of new construction and easy access to subprime financing.

Today, the primary culprit is job loss. Prime fixed-rate loans to borrowers with good credit now account for about one-third of all new foreclosures nationally, up from just 21% a year ago. Colorado's unemployment rate in October stood at 6.9%, while nationally the unemployment rate is 10.2%. Five states (Michigan, Nevada, Rhode Island, California and South Carolina) reported unemployment rates in excess of 12%.

COLORADO RANKS 42ND IN MORTGAGE DELINQUENCIES DURING Q3

A total of 6.7% of all Colorado residential property mortgages were past due at the end of the third quarter, ranking Colorado 42nd among the 50 states for mortgage delinquencies. By comparison, Florida mortgage delinquencies stood at a staggering 25% at the end of the third quarter.

Nationwide, mortgage delinquencies stand at 9.64%. Florida, California, Arizona and Nevada account for 43% of all delinqunent mortgages in the United States today.

In terms of foreclosure filings, Colorado ranked 19th in the country during the third quarter. 1.05% of outstanding mortgage loans were served an NED (notice of election and demand), which starts the foreclosure process, during the third quarter.

ON THE PASSING OF A DEAR FRIEND

A close and dear friend of mine, Allan Gantt, passed away on Friday from pancreatic cancer. Allan was the former managing broker for my firm in California and someone who exemplified “walking the talk” when it came to ethics, character and competence.

Allan managed over 1,000 agents in our company, and with that many agents and transactions, disputes were inevitable. Yet Allan won people over with his pragmatic approach to solving problems and his ability to bring out the best in people. Allan’s job was to deal with problems, yet he navigated litigious minefields with a smile on his face and cheer in his heart. And rarely was there a problem or conflict that he could not mediate to a peaceful solution.

Allan loved baseball, and he often made his Dodgers season tickets available to Sherry and I. Each spring he would pack up and head for Arizona with a group of baseball buddies he had known for decades, watching spring training games for a week in the warm Arizona sun and enjoying the finest restaurants in Scottsdale, Tempe, Mesa and Phoenix. We bumped into Allan on a few occasions, as we also loved to make the rounds of the Cactus League, and without fail Allan would invite us to join his group for dinner or take in a show.

Allan Gantt was one of those rare people who improved morale just by walking into the room. He was a friend to hundreds in the Southern California real estate community, and he will be sorely missed.

I have traded emails with many former colleagues this weekend concerning Allan’s untimely death, and without fail the sentiment is the same: we have lost someone who routinely brought out the best in others and helped all of us to “raise our game” in real estate.

He will be missed in many ways, and we send our deepest sympathies to those who were closest to him.

CHECKING IN ON OUR 2009 PREDICTIONS

On January 10th of this year, I sent my 2009 market forecast to about 100 past and current clients. I also blogged about my predictions for 2009 in a series of posts that you can find in this space by clicking on the JANUARY tab in the lower right corner of this page.

Ten months later, it’s time to see how I did. Here are the primary predictions I made in January, along with what happened as 2009 unfolded:

Prediction #1 – Prices below $250,000 to stabilize and recover in most areas

Result: Spot on. In fact, especially below $200,000, many areas saw appreciation between 5 and 10% over 2008 as first-time buyers poured into the market, attracted by lower prices, low rates and the $8,000 first-time buyer tax credit. 2009 was a great year to buy an entry level home.

Prediction #2 – From $250,000 to $325,000, values will stagnate. Above $325,000, they will fall.

Result: Again, pretty accurate. While the market below $300,000 generally held up, above $300,000 we simply did not have enough consumer confidence to support the inventory of homes available in the market. Above $325,000, values fell almost everywhere.

Prediction #3 – Above $600,000, losses in value will be severe.

Result: Lack of affordable financing, economic concerns and corporate downsizing destroyed the move-up market in 2009, with many homes high end properties absorbing six-figure losses in value. Anyone looking at purchasing a higher-end home needs to be extra-cautious right now, because the conditions that drove values up from 2000-2005 (easy financing, low rates, consumer confidence) are gone for the foreseeable future, replaced by tight credit, higher rates (for jumbo money) and systemic fear of job loss and downsizing.

Prediction #4 – Interest rates will spend more time in the 6’s than in the 5’s.

Result: Wrong-O! I saw the “trillion dollar money bomb”, otherwise known as the stimulus package, unleashing a series of unintended consequences that would drive rates higher throughout the year. The Federal Reserve responded to the threat of higher rates by agreeing to purchase over $1 trillion in mortgages at discounted rates, which held rates in the low 5s for most of the year. But trust me, sooner or later rates will boomerang into the 6’s, at which point the refi party will be over and home buyers who don’t take action today will see their purchase power erode.

Prediction #5 – Foreclosures in the Denver Metro area, which fell by 7% in 2008, will fall by an additional 12 to 15% in 2009.

Result: Through the first seven months of the year, foreclosure filings in the seven-county Denver metro area had fallen 6.4% year-to-date versus 2008. Keep in mind that the 7% decline last year and the 6.4% decline so far this year puts us nearly 15% below our 2007 numbers, so clearly the flow has slowed. This has been especially evident to first-time buyers, who have been frustrated during the second half of this year with extremely limited inventory and intense competition (see my post from August 20 on “The Best Days to Buy a Foreclosure” for more information about this subject). But ultimately I thought we would see a greater effort from banks to process loan modifications and short sales to stem the tide of foreclosures. Guess I underestimated the callousness and stupidity of banks.

So what’s coming in 2010? I have some specific ideas which I will share in the space next month, but to preview… expect more of the same. 2010 is going to be a lot like 2009, but perhaps with some improvement in the $250,000 - $400,000 market during the first half of the year, spurred by the new “move-up” tax credit signed into law by the President on Friday.

But here are some basic tenants to keep in mind: 1) houses are no longer ATM machines; 2) don’t buy a home if you don’t plan to live in it for a while; and 3) “buying it right” is the key to making a good long-term investment.

Private home ownership has always been at the core of the “American Dream”. But it’s never been more important to do your homework up front, and it’s never been more important to hire a professional who understands the market to protect your interests in these tumultuous times.

TAX CREDIT EXTENSION JUST ABOUT A DONE DEAL

I've tried to stay away from "over-analyzing" all the rumors, lobbying and grandstanding about the proposed extension of the $8,000 first-time buyer tax credit. Either they will or they won't, has been my feeling, and beyond that I have just been focusing on business as usual.

Today, however, it looks like we have concrete news...

U.S. House of Representatives just voted 403 to 12 to extend the home buyer tax credit, expanding the parameters to include existing homeowners and not just first-time buyers. As it now stands, the federal tax credit will be extended through April 30, 2010, with a 60-day extension if a binding contract is in place prior to the deadline.

First-time home buyers will continue to be eligible for a tax credit of up to $8,000, while existing homeowners will be eligible for a reduced credit of up to $6,500. To qualify for the $6,500 credit, existing homeowners must have lived in their current residences for at least five years.

The bill also increases the qualifying income limits from $75,000 for single tax filers and $150,000 for joint filers to $125,000 and $225,000, respectively. The purchase price of the home is capped at $800,000 in both instances. Under additional provisions included in the bill, taxpayers can claim the credit on purchases completed in 2010 on their 2009 income tax returns.

The legislation maintains the provision that home buyers do not have to repay the credit provided the home remains their primary residence for 36 months after purchase, and waives this requirement for active duty military personnel who move due to a military order.

So round two of the tax credit looks like its going to benefit a new class of homebuyer - the five-year homeowner who has been looking to move up (or move down). This figures to give some more push to the $250,000 - $400,000 market, which has been flat, and so sellers in this price range should start thinking seriously about taking advantage of this coming wave of new buyers.