Monday, September 29, 2008


I knew it couldn't last.

It was just a few days ago that I expressed my shock and near cardiac reaction to the fact The Denver Post actually wrote a positive story about our housing market (Case-Shiller Ranks Rocky Mountain Region Tops in Country). Guess the editors are back from vacation.

Check out this headline from The Post:


Now check out the premise: Because Denver's commercial and residential markets are holding up well compared to the rest of the country, investors are having a harder time finding bargains.

"Denver is holding up well compared to the rest of the United States," said Seth Walkov, vice president and portfolio director at Madison Capital Management.

"Denver is looked upon pretty favorably," said Susan Smith, editor-in-chief for PriceWaterhouseCooper's Real Esate Investor Survey.

"Intuitively, you would think bargains would be out there," said Mark Sidell, president of Gart Properties. "But the immediate horizon doesn't look to be populated with great opportunities."

You have got to love this.

The market is too stable for investment.

The Denver Post interviews vultures who say there's not enough roadkill in Denver. Yep, guess that qualifies as bad news.

Monday, September 22, 2008


A look at the August market statistics from Metrolist shows that demand at the bottom of our market continues to grow.

Homes priced under $250,000 currently account for 1/3 of all homes on the market, but nearly 2/3 of all sales.

The absorption rate, or the number of months it would take to sell all homes under $250,000 at the current pace of sales, is just 3.85 months. Real estate economists will tell you that a 6 to 8 month supply of homes is a balanced market. Foreclosure inventory continues to fly off the shelves.

The number of homes on the market at the end of August - 24,648 - is a 20% decrease from the number of homes on the market one year ago. And all of this change has taken place over the past six months.

Wells Fargo announced last week that it was lifting its loan-to-value limits on the Denver market by 5%. In other words, for Wells Fargo programs previously capped at 80%, the new limit allows Wells Fargo to lend up to 85%, and so on.

It's all about the bottom of the market right now, and that's where the healing has to begin.

As banks continue to raise prices on less foreclosure inventory, more buyers will begin to look at traditional resales. As values rise, there is more opportunity for sellers to compete with banks, which creates more move-up buyers. It's a good cycle, and basically the opposite of what we have experienced for the past five years.

At higher price points, it's still a slog. The inventory of homes between $400 - $600k is 15.81 months. From $600k - $1 million, it's 26.07 months. And above $1 million, there is a mind-blowing 59 month supply of homes.

The economic problems plauging Wall Street and our country in general are definitely impacting the mid to high end of our market. But down low, where first-time buyers and investors live, it's a dramatically different story.

I would think the government's effective "nationalizaiton" of the housing market last week will lead to more "work-outs" with delinquent borrowers, fewer foreclosures and less inventory on the market. That means your best opportunity at a good selection of homes is right now, and that's why I think you're going to continue to see significant improvement in the bottom of our market.

Saturday, September 20, 2008


You may not know the name, but I bet you know the face.

George Ross is executive vice president and senior counsel for the Donald Trump Organization, but he is better known as the steely-faced boardroom judge who rides shotgun with Trump on "The Apprentice".

George Ross is the keynote speaker at this year's Colorado Association of Real Estate Investors (CAREI) Convention, which will be held October 18 and 19 at the DIA Crown Plaza Hotel.

I have no stake in CAREI other than to say I find it to be a credible investors association and I have learned to dramatically expand my thinking from the tips and systems I have been exposed to through their classes and seminars.

If you are thinking about real estate investing - or if real estate investing seems scary to you - the two days you spend at this event will help you clear your mental hurdles and take action on the road to financial independence.

The cost for two full days of world class instruction is just $69.

Other featured speakers include "The Troubleshooter", Tom Martino; internationally-known business coach Bill Bartmann; Jeffrey Taylor, who publishes the largest circulation landlording magazine in America; and several other speakers with marvelous credentials including Donna Bauer, Chris Johnson and the president of CAREI, attorney William Bronchick.

I have attended this program each of the last two years and it is guaranteed to light your real estate investing fire.

One last word, in the name of disclosure: the cost of $69 is ridiculously low for speakers of this quality. They will be trying to sell coaching programs, books and audio sets. So what. The program is awesome, and if you're serious about retiring early, you should go.

Wednesday, September 17, 2008


New construction may be down in Colorado, but it’s not out.

In previous posts, I have been critical of the building industry in Colorado. A high percentage of “underwater homeowners” have beautiful new homes… that they purchased three or four years ago with interest only – or worse yet, subprime – loans that were happily dished up by in-house lenders working for builders all over Colorado.

Build the homes, pump the values with incentives, finance anyone… and then get out of town, fast.

Having said that, new construction will come around again. It always does.

That’s why I invested a day last week on a program offered by the Builder Realty Council (BRC) which basically dissects the construction process of a new home, from land acquisition to zoning to permitting to construction to sale to warranties and follow-up.

Because a new home receives a certificate of occupancy and passes city inspections does not meet it is well built. In fact, I always recommend a thorough home inspection, even on new construction.

In this economy, builders are feeling the pinch and are slicing profit margins and absorbing higher costs for materials and labor just to stay in business. New homes are probably a better value today, especially with tighter financing guidelines, than they were a year ago. But I would still be very careful with new construction.

It’s a “retail” acquisition in a “wholesale” market. That alone should cause you to think twice.

Monday, September 15, 2008


Another major financial domino fell today with the Lehman Brothers bankruptcy. Also took the markets down big time, as I'm sure you know.

Investors (and investment banks, and foreign governments, etc) have money to park, and right now they are parking it in bonds, which pull down interest rates. In fact, 30-year mortgage rates have fallen by almost 30 basis points again today - which is a huge move, on top of last week's 50 basis point drop.

Money is getting very cheap, which is great if you are buying a home.

I'm sure the phones will be ringing off the hook tomorrow at my lender's office... refi-mania is back in style, and this turn of events should only help the housing market.

But let me caution you right now - most lenders have laid off staff and many have gone out of business altogether. There are a lot fewer players in the game, and suddenly there is tons of business on the table.

That means (potentially) poor service and frustrating delays.

If you are under contract, currently listed or thinking of buying, make sure your contract dates are stretched to reflect a major traffic jam with your financing. And don't even think about using a lender you don't know and trust.

Just a word to the wise...

Thursday, September 11, 2008


We've heard for a while that FHA downpayment requirements were going to be increasing as a result of the Housing and Economic Recovery Act bill that was signed by the President in July.

Now we know the date.

For all FHA case numbers assigned after January 1, 2009, the new downpayment requirement will increase from 3.0% to 3.5%.

On a median-priced home here in Colorado, that means downpayment requirements for an FHA buyer will be about $1,200 higher next year.

If you are a first-time buyer, here are five reasons you need to take action before the end of this year:

1) There are now 20% FEWER active listings in the Denver MLS today than one year ago - and inventory continues to fall

2) Banks are raising their prices on foreclosures in the face of stronger demand after more than six months of multiple offers and bidding wars on distressed homes

3) New foreclosure filings FELL by more than 17% in the second quarter in the Denver Metro area

4) The federal takeover of Fannie Mae and Freddie Mac this week have caused 30-year fixed interest rates to DIVE by more than 50 basis points

5) And now, we know downpayment requirements on FHA loans are going UP in three months

I didn't even mention the $7,500 FEDERAL TAX CREDIT available to first-time buyers who purchase between now and June 30, 2009.

The time to act really is right now. That's why I am hosting a series of First Time Buyer Workshops beginning Wednesday, October 1 at the Arvada Public Library in Olde Town Arvada.

Please call or email for more information or to reserve your spot. And remember, I am never too busy for any of your referrals - especially investors or first-time buyers!

Tuesday, September 9, 2008


I want to call a brief time-out this morning for a quick (but relevant) detour from our normal menu of real estate-based conversations.

As many of you know, my wife is a second grade teacher, and as such, education is one of our great passions.

Have you seen SHIFT HAPPENS?

It's an 8 minute, 19 second YouTube video that was put together by a group at Arapahoe High School in 2006. It has now been viewed over FIVE MILLION times on the Internet and has spawned the formation of hundreds of discussion groups and strategic planning committees at school districts all over the country.

Think the world is changing? It already has.

CLICK HERE to view the video, and let me know what you think about it.

Monday, September 8, 2008


Yesterday, we discussed some of the problems with new construction over the past few years. The conversation is important, because we must learn from the mistakes of the past to ensure a better future.

There is plenty of blame to go around - and the real estate commission has responded with heavy reforms including mortgage broker licensing and aggressive enforcement of ethics violations.

Buyers, too, have changed in the face of this experience. For too many years, buyers throughout the country put the size of their dreams ahead of the size of their wallets.

Having said that, "almost-new" construction is a great deal today in many areas. With prices that have fallen 20% or more from their peaks, and a great quality of life driven by newer schools, community parks and updated infrastructure, there's a lot of value for the dollar.

Want to know where some of the best values are located? Drop me a line and I'll let you know my thoughts.

Sunday, September 7, 2008


I had a discussion on Friday with an old friend who I have not seen in about two years. During our conversation, we talked about foreclosures, and I made a comment to him that I have made to many of my buyers that should be emphasized once again.

In many of the newer communities that have been hardest hit by foreclosures, the damage was caused in large part by the builders themselves. For example:

* Builders routinely threw in "extras" like finished basements, prepaid HOAs, appliances and upgrades, vacations in Mexico... anything to get buyers to pay the highest possible price for their new construction, especially in the early stages of the build-out

* Once higher values are established and on the books, the "pullback" begins - fewer incentives at the same, inflated prices

* An unregulated mortgage industry up until 2006 - since addressed by the state legislature with strict registration and licensing requirements that has placed greater oversight on "builder-owned" mortgage companies and driven many corrupt lenders out of the state

While there are many reputable builders out there, the fact remains that many builders looked only at pumping up values for a short period of time - two or three years, or enough time to finish the build-out, sell the inventory and move on to the next project.

What happened in many areas is that people overpaid for homes they could not afford with loans set to explode shortly after the builder left town.

And the net result was a trail of foreclosures.

Wednesday, September 3, 2008


I've fielded several questions lately on the $7,500 first-time buyer tax credit that was part of the housing bill the President signed in July.

A quick primer:

* First-time buyers (defined as those who have not owned a home in the past three years) who purchase a home between April 10, 2008 and June 30, 2009 are eligible for a $7,500 federal tax credit on their federal tax return

* If your outstanding tax liability at the time you file your taxes is less than $7,500 (and for almost all first-time buyers, it is well below this amount), you will receive a check back from the government for the difference between what you owe and the $7,500 offered in the credit

* Beginning with the following tax year, the tax-credit recipient "repays" the $7,500 tax credit in $500 increments over a 15-year period

* If the home is sold prior to the time your credit is repaid, the balance of the credit is accelerated and due for the tax year in which you sell your home, unless you take a loss on the property, in which case it is forgiven

So as you see, the $7,500 tax credit is much more like a 15-year interest free loan. It's nice to have money coming back (for possible upgrades and home improvements?), but it's a loan, not a gift.

As always, I recommend you speak with your tax advisor or accountant for specific details.

A couple of thoughts about the tax credit:

* While an interest-free loan is not as nice as a pure tax credit, you do get to take the money in today's dollars in repay it without any adjustment for inflation

* For young families and those just starting out, the $7,500 can be very helpful in solidifying your finances during the early years of homeownership

* If you are looking at foreclosures (and a lot of people are), this money can go toward your rehabilitation and improvements of the property

The tax credit is a tool, not a gift. But it does give you the ability to make some strategic decisions about managing your finances, and options are never a bad thing to have.