Tuesday, December 31, 2013


If you lived through the Denver housing market of 2013, this story doesn't surprise you.

The Denver Business Journal has ranked Denver's housing boom as its number one story of 2013, beating out floods, recalls and yes, marijuana.

Growth in home values created over $21 billion in new equity for Denver metro homeowners during 2013, with a median priced home gaining about $25,000 in value. This led to more consumer spending, more job growth and more new construction.

The year was marked by an unprecedented inventory shortage, overwhelming buyer demand and record low interest rates, which sparked bidding wars and market velocity which was so extraordinary that in June, over half of the homes that went under contract in the Denver MLS were on the market six days or less.

Interest rates were in the 3's for much of the year, thanks to the Federal Reserve's ongoing Quantitative Easing policy.  The Fed pumped nearly $1 trillion into the housing market nationally by funding mortgages and then purchasing the notes at discounted rates.  The Fed has announced that it will end the QE program by the end of 2014 (although I am skeptical that the Fed will have the discipline to pull the plug, especially in an election year).  

Rates rose into the 4's during the fourth quarter, as markets braced for the Fed's expected pullback in 2014.

The median home price in the Denver metro area increased somewhere between 9.3% (according to Zillow) and 10.2% (according to Core Logic), which followed an impressive 8.5% gain in 2012.  

Foreclosures and short sales, which accounted for 45% of listing inventory at the start of 2011, now make up less than 5% of the active listing inventory.  

Population growth also continued to be a big story.  According to a report released on Monday, Colorado has gained over 800,000 residents in the past three years, the fourth strongest growth rate among the 50 states.  During that same time, fewer than 100,000 new homes have been built.  

This demographic pressure has kept upward pressure on rents and prices while vacancy rates remain at historic lows.  Rents increased nearly 5% in 2013 and the vacancy rate in Denver is 4.4%, although in some markets (like Fort Collins) vacancy rates are less than 2%.

Zillow also has ranked Denver as the fifth healthiest housing market in the country heading into 2014, with the best market ranking of any major city not located in California (which saw far greater value losses during the downturn).  Zillow has given Denver a rating of 8.1, meaning that the Denver market is in better shape than 81% of all markets surveyed.

Tuesday, December 17, 2013


Don't panic - the fundamentals of the Denver housing market remain remarkably strong.

But while a botched MLS rollout and the distractions of the holiday season have some wondering if the market is slowing down, I believe that you will see a strong January with buyers back in large numbers and agents getting the hang of our new MLS system.  

For 2014, however, we’re going to have recalibrate our thinking a little bit as year-over-year statistics begin to reflect the huge changes which have occurred over the past 24 months.

Falling inventory has been the number one driver of price increases over the past two years, caused in large part by the fact that foreclosures and short sales have essentially disappeared from the landscape after dominating our market for nearly seven years.  

The numbers are going to moderate going forward, not so much because buyer demand has abated (it definitely has not), but rather because year-over-year comparisons are now going to be made against a market that has been sizzling hot for nearly two years.

Going forward, the new story will be more moderate price increases and rising inventory levels.  Get used to it.  

But before you start to worry, consider the following (from our last full month under the Prime Access MLS system):

In October of 2012, there were 3,164 homes that went under contract.  In October of 2013, however, 3,874 homes went under contract.  That's an increase of over 20%, and compared to October of 2011, when 2,850 homes went under contract, the October 2013 numbers reflect a 35% increase.

The market is just fine, thank you.

Price increases will moderate because you simply can't pile 10% price increases on top of 10% price increases for very long.  The 10% price gains in 2013 are on top of the 8.5% gain we saw in 2012.   

I've talked with clients for years about how "tiered" our market is, with different realities at different price points... and that will continue.  Lower end inventory will continue to outperform higher end inventory, especially with builders now roaring back into the market (starting at about $325k and heading north from there) and throwing up new homes at a breakneck pace.

The name of the game remains land value and replacement cost, and as long as lower end homes are cheaper to buy than they are to build, you really can't go wrong.  

The big stories in the housing market next year will be interest rates and the national economy, which continues to struggle (even while Denver has seen impressive growth, with the unemployment rate now below 6.0%).   

We have experienced a remarkable two year run in the Denver real estate market, and inventory has now bottomed out.  Expect to see more homes for sale on a year-over-year basis with value increases in the single digits.  

But while supply will increase, the place to keep your eye is on demand.

Because as long as buyer demand remains strong, the housing market will continue to function very well.

Tuesday, December 10, 2013


These are turbulent times in the world of real estate.  There are complex issues that the industry is dealing with that have heavy ramifications for the future.

One of the biggest has to do with the issue of transparency, and changes are definitely afoot.

What is “transparency”?  For the purpose of this conversation, transparency simply means making each individual agent’s sales history information publicly available online.

Why is this an issue?  It’s layered, and complex, but here are the key arguments the “anti-transparency” people make:

Consumers will be pre-disposed to choose agents based solely on sales production instead of competence, ethics or harder-to-quantify criteria like micro-market knowledge;

Agents who form teams will lump all production under the team leader’s name, which will drive consumers toward teams (which often have several inexperienced agents working under the name of a team leader) instead of better-qualified individual agents;

Sales production alone isn’t the only qualifier for what makes an agent exceptional.  There are many high quality agents who choose to sell 10 or 12 homes a year who will be passed over in favor of mega-producers and teams full of newbies.

As you can see, there are some legitimate concerns with this information going public.  There is also the very real fact that every agent who belongs to the National Association of Realtors (NAR) pays hundreds of dollars a year in membership dues, whether they sell four houses or forty.  And since the average number of transactions per Realtor per year is about 7.5, you can see how the vast majority of dues-paying agents may have real concerns about this disclosure.

NAR is going forward with a controversial new platform called “Agent Match”, which is now showing agent production in a few beta markets around the country. (Denver is not one of these test markets, but Fort Collins is) 

But here’s the problem – thanks to Zillow, Neighbor City and other third party aggregators, the data is already getting out there. 

Zillow’s solution (introduced just this year) was to simply step outside of NAR’s data reporting controversy and allow agents to certify their own production (mine can be viewed by going to www.ZillowReviews.com).

Zillow went one step further, encouraging agent reviews on their site (I currently have over 60 verified past client reviews posted, also available at www.ZillowReviews.com) which supports this growing trend of consumer transparency. 

The consumer wants information and transparency, and since NAR is engaged in a giant fistfight with its members, Zillow simply stepped around the fray and filled the void.

Agents need to get over it.  Sales production may not be the only criteria that matters, but shouldn’t we let consumers be the ones to make that decision? 

The in-fighting at NAR and in the real estate community is damaging the Realtor brand, and agents need to suck it up and realize that transparency isn’t going away. 

As an agent, it’s up to you to determine how the world views your brand.  Having a blog is a good first step.  Verified client reviews are also extremely helpful.  A social media presence make a difference, too. 

Yes, it is work to build a brand and maintain a great reputation online.  The dinosaurs in my business don’t like it, but change is inevitable.  You adapt, or you perish.

I’d rather put my energy into going forward than trying to protect a closed-data world that no longer exists.

Monday, December 9, 2013


We all know that good technology can be an accelerator, that it can increase the speed at which things happen and improve the productivity and profitability of users. 

But can bad technology do the opposite?

Unfortunately, we’re about to find out here in Denver.

On November 21, the Denver MLS went through a “hard” conversion from our previous system, Prime Access, to a new system called Matrix.  The early returns make Healthcare.gov look like it was put together by Google.

The main criticism of Prime Access was that it was “too basic”.  That it was easy to use, but perhaps not evolving fast enough to match the other technological advances taking place in our business.

Matrix, on other hand, sits at the far end of the spectrum of advanced technologies.  It includes dozens of new fields (some relevant, some not) like HERS Ratings, WalkScores, Energy Star Qualifications, Ceiling Height, Carport Square Footage, Distance to Light Rail, Amperage, Latitude and Longitude, and Solar Panel Kilowatts (to name a few) that have made entering a new listing a weeklong ordeal.

Also, the printouts we share with buyers have gone from easy to read one-page summaries of basic, relevant information to the Cliffs Note version of War and Peace, with tiny 6-point font covering multiple pages of data (such as "NAHB/ICC-700 Year Certified") for each and every property, with most fields currently left blank by agents who couldn't calculate a HERS Rating if their life depended on it.

But do you want a simple map, to show you where the property is?  Sorry, not included.  Want sales history for the thousands of homes that sold prior to the launch of Matrix?  It's gone.  

There’s a right way and a wrong way to do this type of data conversion.  The absolute worst way is to implement a “hard” cutoff, with one system shutting down in entirety the day a new system goes live.

Congratulations, Denver MLS.  You just put half of your constituents out of business.

I’m not understating the problems here.  Agents (even the smart ones) are having terrible problems searching for homes, loading data and navigating the new fields.  I believe this is already resulting in agents simply throwing their hands up and checking out for the rest of the year, while other agents who are still listing homes are seeing those properties significantly under-marketed due to the failures of the new system.

In short, everyone is angry.  And they should be.

This is a serious problem, because all 19,000 agents in the metro area have one source for real estate data, and it’s the new Matrix system. 

Now, in fairness, I don’t doubt that a few months from now, we’ll all have it figured out and most agents will be skillfully navigating the new system.  But you simply can’t do it the way it was just done – with an overnight shut down of the primary marketing systems for 10,000 homes currently on the market.

I pay fat memberships dues to NAR and the Denver Metro Association of Realtors plus sizable monthly access fees for the MLS.  We’re talking over $1,000 per year.  For that money to result in this kind of bungled rollout is cause for serious concern, and it undermines the credibility (and ability to make a living) of the real estate community.

Significantly, it also effects our clients, and that's even more important.  

Meantime, MLS “outsiders” like Zillow and Trulia are delivering quality (if not always current) data to consumers that it is getting better by the day. 

Unlike many agents, I am not “checking out” for the rest of the year, but I am "working angry".  I hope other boards and associations in other cities that are thinking about “upgrading” their MLS technology look to Denver and learn what not to do when it comes to shifting technology platforms.