Wednesday, December 26, 2007
Friday, December 21, 2007
Sunday, December 16, 2007
Friday, December 14, 2007
Thursday, December 6, 2007
Monday, December 3, 2007
Friday, November 30, 2007
Tuesday, November 20, 2007
Here in Colorado, our challenges traced back much further, perhaps all the way to 2001… to an oversupply of new homes, post 9/11 economic troubles in the airline industry and the high tech sector, and the dubious distinction (finally corrected in 2007) of being one of only two states in the country which required NO licensing or registration of any kind for mortgage brokers.
The result: too many homes, not enough high paying jobs, and rampant mortgage fraud. Under that formula, Colorado entered 2007 number one in the nation in foreclosures per capita. Many areas, particularly those east of I-25, such as Greeley, Brighton and Aurora, became known as “foreclosure alley”, and values dropped in many parts of the state.
Spring forward toward the end of 2007, however, and the picture appears to be changing. In August, the National Association of Realtors caught many off guard when it named the Denver region as one of its top five projected housing markets in the country for 2008. Since then, NAR has reinforced that position by placing Denver on its preliminary list of top five markets for 2009, as well.
Working in the field, I have seen a lot of positive indicators over the last half of 2007. Many of you have worked with me, either as investors or first-time buyers, in picking up properties out of foreclosure. Some of those deals were just amazing, and while 2007 was a challenging year for many home sellers, buyers picked up some incredible bargains.
Those of you well-acquainted with me know that I am a hound when it comes to research. Over the next several days, I'd like to share with you some of the reasons 2008 is poised to be great!
Tuesday, October 9, 2007
The vacancy rate for affordable rental housing in the state dropped to 4.7 percent during the second quarter, according to a report released Monday by the Colorado Division of Housing and the Colorado Housing and Finance Authority.
That’s down from 6 percent during the first quarter. Denver’s rate for affordable housing is just 4.3%.
Thursday, October 4, 2007
What does this have to do with real estate? Well, it's a bit of a stretch, I admit, but it has to with psychology. Real estate markets, like the stock market, are often driven by emotion as much as by underlying fundamentals. When times are good, everyone wants in, and the herd mentality takes over. And when times are bad, no one wants to budge for fear of paying too much or buying into a declining market.
All it took was two magical weeks of winning for Denver to turn back into a baseball town. The Rocky Mountain News reported last week that Denver is showing the early signs of a housing recovery, as homes here appreciated by 1.3% during the second quarter of 2007, the fastest rate of 20 major metropolitan areas tracked by the Standard & Poors / Case-Shiller Home Price Index. Overall, the 20 areas studied in the Case-Shiller survey showed an average drop of 3.9% over the past 12 months.
"Denver is a low risk market", said Mike Foster, director of land acquisition for Century Communities, a private suburban builder. Because the Denver market has been flat for the past five years, "it will continue to be easier and more attractive for companies to relocate to our market than to relocate to other markets," he said.
It has been mentioned previously in this space that NAR is projecting Denver to be a "Top Five" housing market for 2008, and with interest rates dropping as the national foreclosure pictures grows more severe, there clearly is value and affordability in many sectors of our market.
Whether you are a first-time homebuyer, an investor, or a longtime homeowner thinking about moving up, now is an excellent time to look at what the greater Denver metro area has to offer. Please give me a call and let's discuss where the opportunities exist in this market for you.
Tuesday, August 28, 2007
This year's Wealth-Building Convention will be held Saturday and Sunday, October 13 - 14, at the Denver Tech Center Hyatt Regency in South Denver.
The list of speakers at this year's conference is tremendous: Loral Langemeier, best-selling author and CEO of "Live Out Loud", a real estate investment coaching and consulting organization ; Jeffrey Taylor, known to millions as "Mr. Landlord" for his innovative and positive approaches to finding and retaining quality tenants; Wendy Patton, a nationally-known real estate investor who has bought and sold over 600 homes; and Bill Bronchick, the founder of CAREI and a prominent real estate attorney here in the Denver area.
If you are looking for a massive, fast-paced education on real estate investing, this two-day seminar may be for you.
Early registration for the two-day event is just $99. For more information or to register online, go to www.RealEstateConvention.com .
Tuesday, August 7, 2007
The Broncos are back in training camp (which means the front page of the Rocky Mountain News looks just like the sports page of the Rocky Mountain News), the Rockies are actually in a pennant race (okay, just close your eyes and TRY to believe) and the 2008 Democratic National Convention here in Denver is only 12 months away.
IS THE REAL ESTATE MARKET CHANGING?
To answer the question... yes, the real estate market is changing. It's ALWAYS changing. The trick is to know how it's changing and then to apply what it means in a way that can help us make better decisions. If you weren't watching the headlines last week, more huge changes took place in the mortgage industry. American Home Mortgage, the country's 10th biggest lender, declared bankruptcy in a stunning turn of events that sent Wall Street hurtling lower at the end of last week. The company's stock, which was priced at more than $36 per share at the beginning of the year, closed at 70 cents on Friday after the company announced it could not fund its existing loans and would not solicit new ones.
More than 50 major lenders have declared bankruptcy this year, mostly those who focused on "Alt-A" or subprime loans. Years of rapidly appreciating prices in many markets caused brokers and underwriters to effectively throw caution (and underwriting guidelines) to the wind on the theory that, as long as prices kept going up, there was little risk in making more loans. That was a fatally flawed assumption.
WHAT'S HAPPENING NOW??
The mortgage loan environment right now is highly dynamic and subject to more dramatic changes at any time.
Gone are many 100% LTV and stated -income products. The guidelines for Home Equity Lines of Credit (HELOCs) are being re-written almost daily. Second trust deed products are under careful scrutiny. Underwriters are once again dotting their I's and crossing their T's with a thoroughness that hasn't been seen in a long time.
Does this mean that you cannot get financing? Not at all. Change always brings opportunity, and right now, investors are lining up for good old fashioned "A paper" loans. Rates for conventional, full-doc mortgages have actually fallen 12 of the past 16 days. "Alt-A" and subprime loan products are tougher to find, but not impossible.
If you find yourself needing this type of loan, you cannot afford to deal with inexperienced brokers or "fly by night" lenders. Now is the time for professionalism and integrity.
WHERE IS THE OPPORTUNITY??
Tighter credit means that, simply speaking, some folks who may have qualified for financing in January or February may not be so fortunate today. Just as our high foreclosure rate caused vacancy rates to fall and rents to increase, there exists that possibility that more renters may improve the outlook further for area landlords in the months ahead.
Whether you are a first-time buyer or a seasoned investor, now is a very good time to touch base with your mortgage lender to get a clear picture of where you stand in the "new world order". If you would like assistance in connecting with a reputable, honest mortgage professional, please let me know and I'll gladly pass along a quality
Change is in the air... make sure you stay up on the new lending landscape.
Wednesday, August 1, 2007
Yes, Denver. Home of the Mile High Foreclosure Rate.
(Click HERE to read the Wall Street Journal Article)
It is anecdotal, which means it comes with an asterisk, but it's really hard to find an agent in the Denver area these days who isn't actively working with at least one Californian.
An agent in my office who specializes in REOs has pointed out that many REO properties are coming off the market in days (not weeks) with multiple offers. We know that with rising rents local investors have been into this market for a while, now it seems out-of-staters are moving in as well.
Lawrence Yun, chief economist for NAR, will be in Denver on August 22 to meet with local agents to talk about why the Denver housing market will be heating up well before the Democrats come to town next August... Mr. Yun, the red carpet awaits you!
Sunday, July 15, 2007
Over 20% of all active inventory in the Denver MLS system right now consists of REOs (bank owned), short sales (seller owes more than the property is worth) or foreclosures (seller can't or won't make payments). This high number of "distressed" listings is one reason why our market has seen little or no appreciation over the past few years, but it also has created a real opportunity for investors to pick up bargains as homes are sold at discounted prices.
To illustrate the opportunity that exists, I recently assisted an investor in purchasing a five-year old bank-owned townhome measuring over 1,600 square feet for about $135,000. With a downpayment of 20% and about $2,500 invested to paint, clean carpets and update fixtures, the property is now yielding positive cash flow of over $100 per month. And with recent comps in the same complex going for the mid $150s, we picked up some equity going in to compliment that monthly cashflow return, which can be used to pay down the mortgage and strengthen my investor's equity position in the property.
I have assembled a FLYER with some bank-owned listings currently on the market. For those of you who are out of the area, this will give you a feel for what our market looks like. Yes, there are homes on the market for under $100,000. But there is more to price when choosing a profitable rental property. Condition and location are huge factors in the long-term viability of your investment property, and so we'll look closely at these factors as we look at what's available.
Saturday, May 19, 2007
Fort Collins has been ranked the eighth-best place to live in the United States, according to the recently released edition of Sperling's Cities Ranked & Rated (www.BestPlaces.net).
The guide rates cities in 10 categories: Arts & Culture; Climate; Cost of Living; Crime; Economy & Jobs; Education; Health & Healthcare; Leisure; Quality of Life; Transportation.
- The median age is 30.8 (U.S. median is 37.6)
- 22.68 percent of people are married with children (meaning 71.32 percent still have time and money!)
- Water quality is 100 on a scale to 100 (higher is better)
Saturday, May 5, 2007
People of Orange County... be afraid, be very afraid!
This is a chart showing historic debt-to-income ratios for median priced homes in Orange County, California, since 1981. The chart shows the percentage of the median household income it has taken to service mortgage debt on a median priced home with a 20% down payment.
In 1982, with rising prices and interest rates nearing 18%, debt-to-income ratios crossed the 60% (!!!) threshhold and the market abruptly went in the tank.
In the next cycle of appreciation, which took place in the late 1980s, debt-to-income ratios topped th 50% mark in 1989, followed by a sharp roll back in values that extended into 1996. That market bottomed out with DTI ratios back down to 30%, in line with traditional 28/36 underwriting guidelines.
Today, our chart shows that the cost of servicing a 30-year mortgage on a median priced home with an average Orange County household income will consume over 62% of that family's monthly income... before taxes, groceries, insurance, utilities, car payments, IRAs, gasoline or the monthly trip to Benihana's.
Now most folks who already own a home have some (or lots) of equity to burn, provided they bought before 2005 and they haven't already burned it all on boats, Hummers and trips to Maui. But for those who were late to get in the game, who is left to bail THEM out?
Is this model sustainable????
Tuesday, March 27, 2007
Four bedrooms, four baths, finished garden level basement, over 3,200 square feet of living space, mountain views, backs to a golf course, built in 1991, IN FORECLOSURE --- Asking Price $289,900. On the market since Monday.
I found this beautifully upgraded home while door knocking yesterday. It had been listed for $339,900 as recently as six months ago, when Mr. and Mrs. Seller felt there was still time on the clock. It has been lowered to $324,900 in time for the holidays, which didn't work either.
The property was pulled off the market at the start of this month, then magically reappeared on Monday with a $35,000 haircut. It's a sad situation, but somebody is going to make out very well here in the next couple of days.
Meanwhile, a thousand miles away in another galaxy, there's this home:
Santa Ana, California
498 square feet, two bedrooms, one bath, "low maintenance" front yard, priced affordably at just $440,000, or $893 per square foot.
Santa Ana isn't exactly the garden spot of "The OC", but the housing insanity isn't simply confined to gated communities and ocean front properties.
This picturesque alley-side home was sold most recently in 2004 for $323,000, so obviously our seller here is trying to eke out a tidy $117,000 profit to show for two years of hard work mailing in mortgage payments and collecting rent checks.
Eleven of the top 25 lenders in America have shut their doors or severely curtailed operations in the past 30 days... anybody out there want to offer 100% Alt-A financing on this beauty??
Friday, March 9, 2007
Everyone else has.
Casey Serin (www.IAmFacingForeclosure.com) has become a cult figure in much of the real estate investing world. A 24-year-old immigrant from the Ukraine who came to Sacramento in 1994, Casey has parlayed his atrocioius (and admittedly fraudulent) real estate investing career into national celebrity, including a feature story this week in USA Today.
Using a string of stated income, 100% financing and hard money loans, Casey has left a trail of implosion throughout the western United States, buying homes with the intention of flipping them for profit in New Mexico, Utah, Nevada, Arizona and his home state of California.
Except right about the time he began closing his deals, the market fell apart.
Only in the era of YouTube and the Internet could someone become a cult hero because of his own massive personal failures. Google the name "Casey Serin" and you'll find dozens of references to America's poster boy for the impending collapse of the subprime lending market.
It's very hard to say where Casey is going to end up... will it be in jail, or will it be in the next new Fox prime time sitcom? You'll have to stay tuned.
Cheers to you, Casey. You have figured out that shame and disgrace is the "new new", and you're going to ride that horse as far as it will take you.
Wednesday, March 7, 2007
If you have watched the news this week, you know there’s a meltdown going on right now in the lending industry, specifically with the Alt-A (slightly less than perfect) and subprime (way less than perfect) credit markets.
Last year, a friend of mine told me half of what was being funded in Orange County was 100% financing product, a claim I found so ridiculous and beyond belief that (at first) I laughed it off. But upon further review, it didn't turn out to be such a far-fetched statement after all. And nearly 1/3 of the properties being purchased in Southern California were 2nd homes or investment properties, which clearly showed that wild-eyed investing was still cool, even as the housing market was finally hurtling back toward earth.
So here we are today, many months later, and suddenly all those 100% loans aren’t looking so hot, and all those ARM’s from 2003 and 2004 are now adjusting upward to the tune of 2% (or more) a year, and hey, who turned out the lights???
Goodbye New Century. Adios Ameriquest. Strike up the band, another one bites the dust.
Saturday, February 24, 2007
Wednesday, February 7, 2007
As I have highlighted in this space previously, one of the many enticements for investing in Colorado real estate is the healthy and prospering condition of the state's economy (unemployment currently stands at just 4.0%) with virutally NO help from the residential housing market over the past four years.
While the economies of California, Arizona, Florida and other "boom" states have been propelled in part by the massive equity extractions of homeowners flush with paper profits, no such phenomenon has existed here.
Now the Census Bureau report is interesting for several reasons... let's take a look at the top ten states last year for population growth:
8) Colorado 1.9%
From both a percentage basis and the numeric gain standpoint, Colorado ranks number eight. But what stands out is that every single other state on both lists is either experiencing or has experienced a significant housing "boom" in the past five years.
As we have discussed previously, both the events of 9/11 and the fallout from the "dot.com" crash severely undermined the Colorado economy at a time when it was gaining significant traction. Five years later, it is more robust and diversified than at any time in memory, with the last latent component being the housing market, which is still sifting through a record number of foreclosures caused in part by unregulated lending practices which have since been addressed (to some extent) by the state legislature.
Colorado is a lifestyle driven-state, a magnet for educated workers and entrepreneurs looking for a better place to raise a family (sound familiar?). People are coming here - with dreams and visions of a better life, with the skills and tools to make them a reality.
I can't say that Howard Dean and I have much in common, but I have to believe he made a pretty smart choice when he tabbed Denver to host next year's Democratic National Convention. This is a region of the country that is on the rise, gathering momentum, and seeing its influence grow with each passing day.
Friday, January 26, 2007
If there's one theme that unifies the most popular real estate blogs today, it would be (in the words of the late Hunter S. Thompson) "Fear and Loathing".
For starters, check out the award-winning "Housing Panic" (http://www.housingpanic.blogspot.com/), which goes after David Lerah, George Bush and pretty much anyone who has ever owned a home in California.
"The Housing Bubble Blog" (http://www.thehousingbubbleblog.com/) screams of imminent collapses in Arizona, Florida and California while interestingly selling ad space on its site to Option One Mortgage.
And "OC Flip Track" (http://www.oc-fliptrack.com/) spotlights the activities of property flippers in Orange County, California, showing current MLS listings with purchase histories, price reductions and the estimated losses of those "investors" who got burned by buying it wrong (and then trying to flip) in 2006.
But perhaps my favorite award-winner is http://www.bubbleinfo.com/, a northern San Diego-county based site hosted by local real estate agent Jim Klinge. Klinge offers all sorts of doomsday scenarios for the Southern California market, ringing with apocalyptic tones and as recently as today identifying his home market as the "second most likely" to collapse in 2007... then he asks to list your home. Hmmm. (Interestingly, he also includes a link on his site called "Best Places to Live"... which redirects visitors to the Money Magazine article from 2006 singing the praises of Fort Collins - I guess I'll be calling Jim to see about setting up a referral network!)
Well, as you know, I'm not a doomsdayer when it comes to the Southern California market. I do think there is some serious dysfunction in the market - caused in large part by the ongoing unrealistic expectations of sellers and the fact that there are now 505,000 (!) licensed real estate agent in California, 80% of whom have never been through a transitioning market.
Just like here in Colorado, there are some bad loans in the pipeline and some people made flawed assumptions when they bought their homes, so it may take a while to sort itself out. But I don't recommend making the "blogosphere" your primary source for real estate news*... any more than I would recommend taking stock tips from a cab driver in New York City.
* unless, of course, it's from THIS site! ; )
Thursday, January 11, 2007
As politics is no longer my thing, I will refrain any biting commentary or sardonic wit. (Okay, email me if you REALLY want to know what I think!) I'll just say that, for the city of Denver and the entire Front Range, this is a huge opportunity with tremendous long-term implications.
The 2008 convention will be held August 25-28 at the Pepsi Center, which in an interesting sidebar, is a non-union facility.
Howard Dean said today that Denver is being recognized by his party as the capitol of not only Colorado, but of the entire Rocky Mountain region. Our fast growing, educated, and increasingly urban population no longer fits the traditional cowboy state stereotype, and the political landscape here is very fluid.
Denver mayor John Hickenlooper said today that the city "will find a way" to come up with the $80 million it takes to host a convention (get ready for an unprecedented wave of parking tickets!)... and while the city has made huge strides in becoming a more cosmopolitan place, let's just hope those party dignitaries don't get lost trying to navigate the 25 miles of farmland between DIA and downtown.
Tuesday, January 9, 2007
In "Rich Dad, Poor Dad", author Robert Kiyosaki rightly points out that the entire tax code is built to encourage certain activities (like landlording and real estate investment), while punishing others (like traditional W-2 employment).
For most rental property owners, the tax result is that all your income and expenses, including depreciation, are reported on Schedule E of your tax returns. Virtually every applicable expense is deductible on Schedule E, such as mortgage interest, property taxes, insurance, homeowner association fees, utilities you paid, repairs, and depreciation.
In addition, you can deduct reasonable “ordinary and necessary” travel expenses to inspect (but not occupy) your rental property, even if they are located out-of-state (or in really fun places, like Hawaii).
As an investor deducting your rental property's interest, expenses and maintenance costs, you are very likely to have a tax loss on paper.
That means if your 2006 adjusted gross income is $100,000 or less, you can deduct up to $25,000 tax loss from your passive rental activity. But any rental tax loss exceeding $25,000 must be carried over for use in a future year, or when you sell the property to offset capital gains.
There are scores of good books out there on the subject of real estate tax law. I strongly suggest you take the time to acquaint yourself with the basics. Dolf de Roos is the author of "Real Estate Riches", a concise, easy read that touches on many of the most important elements.
For the new year, I believe everyone should resolve to be proactive about securing their financial future. Read a book, talk to an accountant, converse with an investor... learn what you need to know so that nothing stops you from making an important investment in your future!
Wednesday, January 3, 2007
It seems the topic on everyone's mind "back home" is still the housing market. It's kind of funny, because ten years ago no one talked about housing. You found a house you liked and could afford, you purchased, and then you lived in it.
But during the great housing boom of 1998-2005, as the "wealth effect" of double digit appreciation and serial refinancing (i.e. "equity extraction") began to subsidize the acquisition of Hummers and speed boats, personal chefs and extravagant vacations, real estate became everyone's favorite subject.
And marginally-educated investors became wealthy simply by outbidding the pack for second, third and fourth investment homes... raking in those 18% annualized rates of appeciation. It's a very different story today - SoCal MLS reports that nearly one-third of the 16,000 homes for sale in Orange County are sitting vacant and overpriced. The California Department of Real Estate reports that there are now over 500,000 real estate licensees in the state, up from 220,000 five years ago. One in eighty Californians has a real estate license, and in Orange County one in 25 households has a licensed real estate agent living in it.
Colleagues of mine predict that up to 30% of all outstanding real estate licenses in California will not be renewed. Agents desperate for business continue to create unrealistic expecations for sellers who want to sell, but who don't have to sell. And when it comes to acquiring investment property, working with MOTIVATED sellers is everything.
In a state where less than 14% of its residents can afford a median priced home, winds of change are blowing in California. The Public Policy Institute of California (http://www.ppic.org/) continues to report that California is losing upwards of 250,000 residents a year to out-of-state migration, one of the highest rates in the country.
When it comes to real estate investing, I say "stick with the basics". Find stable markets with motivated sellers and let the combined benefit of appreciation and tax advantages fuel your investment portfolio.