PROVEN RESULTS - The Colorado Real Estate Blog by Dale Becker

BUYERS ARE EVERYWHERE, BUT SELLERS ARE NOWHERE TO BE FOUND

2012-02-10T09:14:00.000-08:00

What happened to the Denver housing market in January?

In short, buyers are everywhere, but sellers are nowhere to be found. In the continuation of a theme that has been evolving since last summer, listing inventory grew even more scarce in January, while buyers continued pouring into the market, particularly at the entry level.

As of January 31, there were just 10,443 homes in total on the market in the Denver MLS, a 42% reduction from the 17,890 we had at the end of January in 2011. Yet over the past 30 days, a total of 3,084 homes went under contract, up from 2,667 that went under contract during the corresponding period a year ago.

Under $250,000, which has been the hottest segment of our market for some time, the numbers are even more amazing. A full 63% decline in the number of homes for sale (3,333 this year vs 8,933 one year ago), with 6% more homes going under contract (1,647 this year vs 1,538 last year).

Are you following this?

It is literally a stampede for well-priced, move-in ready inventory.

Below $250,000, we actually have more homes under contract today (3,524) than homes for sale (3,333). Eighteen years in the business, and I’ve never seen buyer demand so outstrip seller supply.

The story is even more complex, I believe, because while there is no metric to measure it, I have tons of anecdotal evidence that suggests the actual strength in the buyer market is more pronounced than these impressive numbers demonstrate. The "hidden strength" in buyer demand lies with the large number of buyers (several working with me) who are waiting for the right house, the right floor plan, the right neighborhood, and/or the right deal. For all the contracts being written, there is an army of patient, discriminating buyers who feel compelled to wait for the "perfect" deal.

Have your pen ready, that's all I can say.

As I have discussed month after month, this has been and will continue to be a segmented market. Below $250,000, things are just sizzling. From $250,000 to $400,000, the market is pretty functional. Above $400,000, it starts tailing off and it gets particularly bad over $600,000. Be careful about generalizations you hear, because the realities at $200,000 are wildly different than what you may see reported regarding $600,000 homes.

Everyone needs a place to live, but due to the economy, the $500,000 buyer of 2007 is a $300,000 buyer today. The $300,000 buyer of a few years is a ago is a $200,000 buyer today. And so on, until you run out of segments to downsize into. At that point, demand so outstrips supply that prices begin to appreciate, working their way up as the market heals. Recovery always starts at the bottom in housing market cycles, and that is 100% on display right now.

For those who keep waiting for the mysterious "shadow inventory" (bank-owned properties that are allegedly being held off the market until things improve), let me ask you this: with inventory down 42% overall and 63% below $250,000, why on earth would you be holding anything off the market right now? If the banks had piles of "secret inventory", we would be seeing it.

With rates in the 4’s and prices offering all-time levels of affordability, buyers are everywhere.

The question remains, when will the sellers return?

"AVERAGE IS OVER"

2012-01-21T09:45:00.001-08:00

On Christmas morning, columnist Tom Friedman (“The World is Flat ”) appeared on Meet the Press and made a comment that resonated with me. He said, simply, “Average is over.”

Those three words connected deeply with me, because I have been expressing this sentiment in different ways with people for the past three years, especially in explaining why the high end of the real estate market is in such trouble.

In short, average is over.

What that means is that average people simply aren’t going to have the opportunity to buy $500,000 or $700,000 or $1 million houses any more. Because of global competition, outsourcing, automation… almost every big company in the world today has opportunities to hire help that is either; a) cheaper; b) more skilled; or c) both.

Because of automation, companies are constantly being presented with ways to increase efficiency by decreasing their overhead, otherwise known as “human capital”. If you don’t become more efficient, you can’t compete. If you can compete, you die.

As more and more “little guys” fail, power consolidates into the hands of an ever-increasingly powerful minority. This is the underlying premise of Occupy Wall Street.

And as the overall population becomes poorer, the government fires up the printing presses to keep the masses fed, at the expense of future generations. This is the underlying premise of the Tea Party.

The conditions that caused higher end housing to be so overbuilt between 2000 and 2007 – namely low unemployment and easy credit – are not coming back.

And so we have hundreds of thousands of homeowners who “overbought”, based on a confidence that no longer exists. The number of truly qualified buyers who can afford (in today’s economy) to live in $500,000 homes is a fraction of the total number of these homes that were built.

The result – we’re going to continue to see this sector of the market gradually lose air like a tire with a slow leak. While there is still some demand for these types of properties, it is simply not commensurate with the supply that is available. Higher end homes will simply keep deflating until equilibrium is reached with today’s economic realities.

On my Facebook Business Page this week, I posted that I could sum up the housing market for 2012 in 13 words. “Entry-level is RED HOT. Mid-level is OKAY. High end = PAINFULLY BAD.”

Going forward, everyone is going to need someplace to live. But that place is likely to be smaller, and the simple fact is that we have way more people living in higher end homes than can actually afford them.

THE BEST TIME TO LIST A HOME FOR SALE - NOW!

2012-01-16T09:21:00.000-08:00

In Colorado, we have a seasonal housing market. Historically speaking, inventory is lowest during the month of December, then builds month by month, peaking in May, June and July. Sales activity follows a similar path, with one small adjustment - whereas the peak inventory months are during the summer, the peak sales months occur in the spring - usually March, April or May.

In other words, sellers list in the summer, but buyers buy in the spring.

So when should you put your home on the market? Obviously, to catch the March - April - May spring buyer surge, you want to be on the market before the buyers show up.

Take a look at month-by-month listing and sales activity for 2011:

LISTING AND CONTRACT ACTIVITY, MONTH BY MONTH (DENVER MLS)

2011	ACTIVE LISTINGS	UNDER CONTRACT
JANUARY	17,890	2,667
FEBRUARY	17,358	2,841
MARCH	17,707	3,092
APRIL	17,847	3,775
MAY	17,888	3,321
JUNE	18,026	2,903
JULY	17,583	2,960
AUGUST	16,631	2,637
SEPTEMBER	15,533	2,663
OCTOBER	14,156	2,850
NOVEMBER	12,634	2,342
DECEMBER	10,993	1,756

The peak sales month last year was April, while the peak listing month was June. This trend is one I have seen year after year throughout my nearly 18 years in the business.

My interpretation of why this happens is that, based on hundreds of conversations through the years with buyers and sellers, buyers (especially first-time buyers) make up their minds to purchase over the holiday season and engage quickly once the new year begins.

Sellers often work on a school-year calendar, and assume that listing their home in May or June will allow them to move over the summer, creating the least amount of distraction for their families.

From a strictly financial standpoint, the best time to be on the market is starting in February or March, when buying activity is at its peak and many sellers have not yet come on the market. (Keep in mind that many buyers look for six to ten weeks before buying a home, which means the serious looking is actually under way by late January)

Of course, no matter when you choose to list, your home must be salable. In today's fear-based economy, buyers are going to look more critically than ever at a home's location, components, and overall value in relation to the competition.

But if you're looking for that time of year when you have the greatest probability to sell your home for top dollar, it's the spring market. Simple supply and demand says if you list with maximum buyer interest against less competition, you'll get the best price.

THE WORLD OF THE ONE PERCENT

2012-01-09T08:47:00.000-08:00

In something as complicated as a real estate transaction, let’s face it: experience matters.

In 17 years as a broker, I have seen dozens of deals go sideways for a host of different reasons. Sometimes they are legitimate. Sometimes they are based on emotion overriding logic. And sometimes they are totally avoidable with a few slight adjustments or corrections in the way certain challenges are addressed.

The fact of the matter is that, above all else, you should hire a real estate broker for his or her experience. Contrary to the old adage that “experience is the best teacher”, in reality, the far better alternative is to learn from other people’s experience. It’s more efficient, less costly and it doesn’t hurt nearly as much!

My goal as your broker is to help you negotiate the best possible terms, sidestep the pitfalls and use my 17 years of hands-on experience to close your transaction smoothly.

Having said that, it still must be acknowledged that we are living in a world of new and ever-changing lending regulations, underwriting requirements and a fundamental shift in attitudes about housing. This means that closing a real estate transaction is more difficult today than at any time in recent memory, and it means there can be no room for complacency or assumptions during the contract period.

A good broker must be vigilant, diligent and always thinking one step ahead.

Here are 100 of the most common reasons real estate transactions fail to close:

The Buyer / Borrower…
1.    Fails to disclose information which disqualifies the buyer from financing
2.    Provides inaccurate information on the loan application
3.    Has late payments after applying for credit
4.    Takes on new debt after applying for credit
5.    Loses job after going under contract
6.    Underwriter refuses to accept sourcing of buyer’s income
7.    Overtime hours used for qualifying are rejected by underwriter
8.    Buyer becomes sick or incapacitated while under contract
9.    Buyers separate or divorce while under contract
10. Anticipated gift funds fail to materialize
11. Tax returns obtain from IRS differ from what buyer disclosed
12. Cannot obtain certified copies of tax returns from IRS in a timely manner
13. Buyer’s personal circumstance changes and purchasing the home no longer makes sense
14. Bank statements do not substantiate assets buyer claimed to have
15. Landlord refuses to verify rental history or provides negative information about buyer
16. Rates increase before borrower locks rate in, causing buyer to no longer qualify
17. Loan program is discontinued prior to closing
18. Child support increases, decreases or stops altogether after buyer is under contract
19. Buyer cannot provide or obtain divorce decree from courts
20. Judgments are uncovered which disqualify buyer from financing
21. IRS liens are placed against buyer’s income
22. Borrower declares bankruptcy
23. Underwriter declines file based on “payment shock” compared to previous rent
24. Borrower changes jobs while under contract
25. Borrower has less than two years of work history in a commissioned sales position
26. Employer refuses to verify likelihood of continued employment
27. Too much emphasis given to commissions or bonuses in calculating qualifying income
28. Friends or family members talk buyer out of purchasing once under contract
29. A more attractive, competing home comes on the market
30. Inspections cause buyer to ask for unreasonable or unrealistic repairs
31. Veteran using VA financing cannot obtain DD-214
32. Buyer has concerns about future planned development in the neighborhood and cancels
33. “Megan’s Law” – registered sex offender is discovered in the neighborhood and buyer cancels
34. Buyer gambles away funds required to close
35. Buyer’s lender closes shop and disappears

The Seller…

36. Lacks motivation to sell and refuses to cooperate (not uncommon during short sale transactions)

37. Cannot find adequate replacement property

38. Rents the home to uncooperative tenants or family members

39. Removes inclusions previously agreed to in the contract

40. Cannot clear liens against the property

41. Fails or refuses to complete inspection repairs to buyer’s satisfaction

42. Does not own 100% interest in the property

43. Divorcing spouse, or spouse’s attorney, kills the deal

44. Has insufficient equity to sell

45. Attempts to change closing date, possession date or inclusions after agreement is reached

46. Is in foreclosure and sale date arrives before contract closes

47. If a short sale, terms from bank are deemed unacceptable by seller

48. Problems with seller’s replacement home transaction derail the deal

49. Builder for seller’s replacement home is delayed in construction

50. Builder of seller’s replacement home declares bankruptcy

51. Seller of seller’s replacement home declares bankruptcy

52. Representatives of estate cannot agree on price or terms

53. Seller loses job and cannot complete transaction

54. Seller becomes sick or incapacitated and cannot close the transaction

55. Seller is sued and cannot complete transaction due to litigation

56. Seller’s HOA is sued and buyer cannot finance into community with pending litigation

57. Seller dies while under contract

The Property…

58. Has problems discovered during inspections which cannot be cured

59. Has condition issues the lender requires remedy for which the seller cannot provide

60. Property suffers freeze damage and floods

61. Property has electrical issues and there is a fire

62. Hailstorm damages or destroys all or part of property

63. Lightning strike damages the home or inclusions

64. Is not FHA approved or loses FHA approval during contract period

65. Has real or perceived structural concerns that concern the buyer or buyer’s inspector

66. Is subject to environmental issues which cause the buyer to cancel

67. Square footage does match what was marketed

68. Property is vandalized during contract period

69. Property is subject to zoning change which affects desirability

70. Property tax increases are passed which make the home too expensive

71. Draws water from a source which is deemed unreliable for future needs

72. Existing well on the property is not permitted

73. Septic system fails inspection

74. Survey reveals faults with boundary lines, encroachments or easements

75. Excessive claims history makes it uninsurable

76. Neighboring home is damaged or destroyed, affecting neighborhood’s desirability

77. Is not zoned for intended use

78. Has a special assessment levied against it

79. HOA declares bankruptcy

The Agent(s)…

80. Has not properly vetted client’s ability or motivation to sell or buy

81. Has not educated clients thoroughly enough and they waver at buyer or selling

82. Loses the confidence of buyer or seller through gross incompetence

83. Disappears during the transaction

84. Is fired by the buyer or seller after contract terms have been agreed to

85. Lacks experience to close a complicated transaction

86. Does not accurately portray true contents of short sale approval until day of closing

87. Sues the seller for breach of contract, derailing the transaction

88. Sues the buyer for having multiple agency agreements

89. In a short sale, has misrepresented communications with the seller’s bank

90. Recommends incompetent or negligent inspectors

The Appraiser…

91. Lowballs the value of the property

92. Comes from out of the area and does not know the neighborhood

93. Fails to adequately value certain improvements

94. Cannot find suitable comparables

95. Loses license or has lender approval revoked after the appraisal is complete

96. Is accused of favoring buyer at the expense of seller

97. Is accused of favoring seller at expense of buyer

Variables…

98. War, natural disaster or Act of God that affects the economy during the contract period

99. Title company shuts down, freezing assets held in trust

100. Government shuts down, freezing accessibility to financing through FHA, VA and GSE’s

My clients know that I write “tight” contracts and I don’t skip over anything when it comes to reviewing the 15 page Colorado Real Estate Commission purchase contract, the eight page listing contract or the six page buyer agency agreement.

I often explain my meticulous approach to going over contracts by saying that “I live in the world of the one percent,” which means I am always thinking about things that have a one percent chance of happening… but when you have been licensed for nearly 20 years, you have seen what can happen to agents who haven't given thought to every contingency.

The point of this article is simply to let you know that the decision to hire a broker is an important one, and it should not be entered into lightly. If your agent isn’t talking to you about the “world of the one percent”, chances are he or she hasn’t been there, or worse yet, doesn’t even know it exists.

OVERDOSING ON GARY V

2012-01-05T16:23:00.000-08:00

A few weeks ago, I posted a review on this site of Gary Vaynerchuk’s new book, “The Thank You Economy”.

In the book, Vaynerchuk makes the argument that the Internet is creating an age of transparency which will create more turbulence, change and opportunity than we’ve ever seen before.

If your product is good and your service is sincere, social media will be the fuel that propels your business to greatness.

If your product is stale and you don’t care about the end user, social media will be the demise of your organization.

For Vaynerchuk, there is no middle ground. You either go all in with customer service, listening to your audience and doing whatever it takes to bond with them in a real way… or you ignore them, oblivious to the consequences of neglect in the age of social media.

Watch the video link I have embedded in this post. Just go ahead and launch it, and let it run in the background while you work on other things. Listen to what Gary says about the radical changes taking place in the way consumers shop for products and services, and tell me if his arguments don’t make perfect sense.

THE SILENT VICTIMS OF AMERICA'S FORECLOSURE CRISIS

2012-01-03T18:13:00.000-08:00

There has been plenty written about America’s four-year foreclosure epidemic, and it’s undeniable that the impact has been felt from Main Street to Wall Street to the entire world.

From media portrayals, we often see “subprime borrowers” and lower middle class Americans (who saw the biggest growth in homeownership rates during the boom years) as the “big losers”. But consider the following:

- What percentage of this buyer group actually made a sizeable down payment?

- To continue, what percentage made little or no down payment but then pulled freshly created equity out of their homes as values soared?

- And what percentage of these foreclosure “victims” lived for two, three or four years without making a payment as overwhelmed and politically targeted banks dragged their feet on the foreclosure process?

I am not saying the banks are blameless (hardly). And I am not denying that’s it traumatizing to lose your home, no matter how long it takes for the banks to actually foreclosure or what kind of neighborhood it's in.

But what is the percentage of buyers who had legitimate credit and income… who put sizeable down payments into their home purchase… who didn’t pillage their equity like a piggy bank… who today have lost tens (or hundreds) of thousands of “after tax” dollars as their values have plunged?

Do they have a lobbying group? Do they picket and protest the banks? Do we see them interviewed on “60 Minutes”?

The point is… everyone should think a little more deeply about this whole crisis, how it started, and what lessons can be learned from it. Because the guy with lousy credit putting no money down wasn’t really having much of an impact on the economy anyways… but the guy whose 401k has been wiped out, who lost his management job when it was outsourced, and who put $150,000 down on his house only to see it vaporize… that's the person whose not taking vacations, not buying new cars and generally living a much more fiscally conservative life.

Chances are he's still in his home, stewing about all this. And one thing is for certain: he's not buying another one any time soon!

One reason I am so bearish on the high end of the market is because there's no way the homeowner who fits this profile is going to sell and move up. He's been toasted, his equity is gone, and the last thing he is thinking about is buying a bigger home.

Every market is different, but in Colorado, our housing market has slammed into a wall around $500k. There is just no demand for anything above this point, and I don't see it changing for a long, long time.

GOOD NATIONAL PERSPECTIVE ON DENVER AREA HOUSING MARKET

2012-01-02T13:55:00.000-08:00

Here's a video that ran on Fox News over the holidays that's been making the rounds in local real estate circles. I think it's a little bit over the top, but I do believe Denver is certainly in the top 20% of markets nationwide and a well-researched home entry or mid-level home purchase today with rates in the 4's will look good for a long time to come, especially compared to rents, which are rising rapidly.

Take a look:

READY TO LAUNCH

2011-12-26T17:31:00.000-08:00

As 2012 arrives, the entry level of the Denver market is truly ready to launch.

Why do I say this?

Consider the following…

If you think of the real estate market as a giant conveyor belt, there is one sector of the market that has been rolling at full speed for three years… and that is with buyers coming in to purchase entry level housing, generally priced below $250,000.

Currently, this sector of the market accounts for 34% of all listings, but 59% of all buyers. There are just 1.25 homes on the market below $250,000 for each one currently under contract, an absurdly tight ratio, and the absorption rate is below 3 months.

One leg up, in the $250k - $400k price range, the conveyor belt slows. Here, there are 2.54 homes on the market to each one under contract (still a functional market) and the absorption rate stands at 4.99 months. In this range, you have 29% of the inventory accounting for 25% of sales, which is basically a balanced market.

From $400k - $600k, the conveyor belt beings to stall out. There are 3.88 homes on the market to each one under contract, and the absorption rate is 6.79 months. Home in this category account for 17% of properties on the market, but just 10% of contracts.

Above $600k, the conveyor belt simply stops. Homes above $600k account for 19% of the inventory, but just 5% of the contracts. The absorption rate from $600k - $1 million is 12.24 months, and above $1 million, it’s 22.48 months. There is simply no price support at the top of the market, and I do not see this changing unless there is a radical (and unforeseeable) turnaround in the economy.

The other major theme in our market is lack of inventory. With fewer than 13,000 homes on the market, we have 36% fewer homes for sale today than one year ago – a stunning turn of events that I can’t recall seeing at any time in my 17 years as a broker.

There are two reasons for the lack of inventory:

1) Far fewer foreclosures, and

2) Loss of the traditional “move up” market

Foreclosures are down 50% from the peak year (2007) in Colorado, and the mix of homes being foreclosed upon is very different than what we were experiencing even three years ago. While the first waves of the foreclosure crisis pounded the entry level of our market, today it’s a mix of entry-level, mid-range and luxury homes that are going back to the lenders. Statistically, the fastest growth in foreclosures is occurring at the luxury ($1 million and up) level, as buyers simply do not have the courage or faith in the economy to pay retail prices for high end homes in this market.

So what does it mean?

In January of 2011, there were 9,121 homes on the market below $250,000 – and just over 1,000 of these went under contract during the month.

In January of 2012, there will be fewer than 4,000 homes on the market below $250,000. Over the past three months of the year (traditionally the slowest three months of the year), we have averaged over 1,500 homes per month going under contract below $250,000.

With inventory down 60% from one year ago and the number of monthly contracts up roughly 50% from the same time period, how can we not be on the verge of price recovery at the entry level?

These are not small shifts – this is a 60% reduction in inventory with a 50% increase in demand!

Very few of the buyers I am talking to have any idea how dramatic this change has been, or what it should mean for prices going forward.

The bottom line is this: if you can buy a home in today’s market with prices that are 10% to 20% off the peak, with a rate in the 4’s, you should be in fabulous shape for many years to come.

In a few years, when rates work their way back up to historical norms, FHA assumptions will become as common as short sales, and today’s buyers will see future buyers paying a premium to assume their partially amortized loans with rates in 4’s.

In case this isn’t clear, let’s review one more time:

· The overall inventory of homes for sale is down 36% from one year ago
· The overall inventory of homes for sale below $250,000 is down 57% from one year ago
· Overall demand for homes under $250,000 is up 50% from one year ago
· With just 1.25 homes for sale to each one under contract below $250,000, and an absorption rate of just 2.97 months, there is hardly anything for first-time buyers to choose from and sellers have far more leverage than they have had in four or five years

I’m looking for listings under $250,000 right now, because these homes are salable, and they should be salable at prices better than we were seeing one year ago, or even six months ago.

There is no new construction coming online to compete with these homes, there are far fewer of them being foreclosed upon, and we are seeing a new generation of very well qualified buyers replacing a generation of marginally qualified buyers who were never equipped to make it for the long haul.

The beginning of 2012 will reveal a housing market below $250,000 that is very, very different from the one we have seen over the past few years, and buyers who wait are going to have to be willing to spend a little more and perhaps settle for a little less as values in many neighborhoods begin moving higher.

While the higher end of the market will continue to suffer, the entry level will start the year red hot and burn even brighter by spring. You can bank on it.

HOW MANY TIMES SHOULD YOU REFI?

2011-12-15T16:59:00.000-08:00

I have been in my current home for six years and I have refinanced on two occasions. A few years ago, when rates first went below 6%, I felt like I was being given a gift and I locked in a rate in the mid 5's. Then, last year, rates dipped below 5% and I felt like there was just too much money to be saved by refinancing once again.

Now, 30-year rates are near 4% (with 15-year rates in the mid 3's) and I'm hearing the siren song again.

I do not want to paint the picture that refinancing is automatically a great move for everyone. It can be an expensive proposition, and unless you shorten up your loan term (which I recommend if you can afford to do it), you essentially recast your loan onto another 30 year payment schedule.

You also need equity in your home, which is not something everyone has these days. And if you made a 20% down payment (to avoid mortgage insurance) and your home has lost value, you may either have to bring in a large amount of money to pay your loan balance back down to 80% of current appraised value, or take on the extra expense of mortgage insurance.

So there are reasons to avoid refinancing, or at least think critically about it, before you sign on the dotted line. But when the savings are just too great to ignore, it's hard to resist.

The one constant through my six years in this home is that I've always made additional payments on my mortgage each year, without fail. I set a housing budget six years ago and I've stuck to it... so now, even though my payment is significantly less than when I first moved in, I make the full payment as if it's still my original loan.

Generally speaking, one additional payment each year on a 30 year loan will shorten the life of your loan by about 13 to 14 years. That's a huge savings opportunity and solid financial planning.

So now, with 30-year rates around 4.00% and 15 year rates even lower, what to do?

If I refinance into a 15-year loan with a rate in the mid 3's (essentially the same payment I had on my original 30-year loan, which was in the high 6's), I'll have my house paid for in less than 20 years. That basically means I own my house free and clear 30% faster than with my original loan. That's a good deal.

The best thing to do, as always, is to gather enough information to make informed decisions. Talk to a mortgage lender you trust and see how much money there is to be saved by taking advantage of today's incredibly low rates. And if home values are a concern, give me a call and I'll be happy to pull some comparable area sales information so you can proceed with clarity and confidence.

NOVEMBER MARKET UPDATE

2011-11-22T07:44:00.000-08:00

If this isn’t a shifting market, I've never seen one!

The overall inventory of homes for sale in the Denver MLS fell 34% last month when compared to October of 2010, the ninth straight month of year-over-year declines. Below $250,000, the number of homes for sale fell by a breathtaking 50%!

Where did all the inventory go?

As I said last month, there are two driving factors which have drained the market of inventory. First, the number of foreclosures is down over 30% year-over-year in Colorado, and foreclosure filings are well over 50% off of their peak in 2007.

Second, poor economic conditions have essentially frozen the “move-up” market, which used to provide the entry level inventory that first-time buyers would purchase.

Fewer foreclosures and fewer move-up buyers equals no inventory, which creates an interesting and potentially inflationary impact on prices as qualified and motivated first-time buyers continue pouring into the market.

In fact, during the reporting period from October 11 through November 10, the number of homes that went under contract increased at every one of the five price brackets we track when compared to the previous 30 days. That normally does not happen as we move closer to the holidays.

What it means is that there is less inventory and that sellers who are listing their homes are doing so because they are motivated to actually sell them. No more sellers waiving appraisals from 2007 that have little relevance to today’s market.

It also means that people are hungry to take advantage of well-priced homes with rates in the 4’s. They feel there is value there that will hold up well as the economy starts to recover, and we all know that rates in the 4’s are more fairlytale (thank you QE1 and QE2) than fact.

In large part because of the strong demand at the entry level, the overall absorption rate for the entire market fell to 4.71 months, last month, the first time it has been below 5.00 months in the past five years.

Overall, there are just 2.18 homes for sale to each one currently under contract, and below $250,000, there are just 1.25 homes on the market to each one under contract. That, pure and simple, is a severe shortage of inventory.

So what does it mean? To cover ground we’ve addressed before, it’s a reminder that any recovery in the Colorado housing market is going to come from the bottom up, where demand is strongest.

At $1 million and up, there are currently 11 homes for sale to each one under contract, or about one-eighth of the demand that exists for homes priced below $250,000.

So pick your market. If it’s the entry-level, it’s red hot, even as the temperatures drop. If it’s high end, be prepared for a long, cold chill.

With one-third of all real estate transactions nationally involving cash buyers, there is tons of money flowing back into real estate. And with rental vacancy rates at 10-year lows, landlords are going to have a ton of leverage as the demand for affordable housing far outstrips supply.

At the entry level, there is more demand than supply, both for purchase transactions and rental homes. And when supply and demand are out of whack, the outcome is almost always higher prices.

JD POWERS RANKS REMAX #1 FOR CUSTOMER SATISFACTION

2011-11-09T04:36:00.000-08:00

The 2011 JD Powers and Associates survey of consumer satisfaction for real estate companies and the findings are not surprising: RE/MAX is number one among both home buyers and home sellers!

This post is not merely an attempt to “pump up the brand”. The fact that RE/MAX was ranked number one is because the entire RE/MAX model is based on recruiting and retaining the most productive agents in the industry by allowing them to keep more of their commissions… while charging a fixed monthly "pay to play" fee structure that simply will not work unless you are selling a large number of homes.

Recognition by JD Powers comes at a price. Although JD Powers has conducted surveys since 1968 recognizing top performers in a variety of industries, the licensing fee to use the JD Powers trademark and logo for commercial purposes starts at $275,000 per year. Because RE/MAX was honored for top performance with both home buyers and home sellers (two different categories), RE/MAX will pay $550,000 to fully promote its JD Powers ranking in the coming year.

That explains why you only see a few select companies – like Honda Automotive, for example – broadly using JD Powers recognition in television and print.

I recently attended a RE/MAX event in Denver where company founder and CEO Dave Liniger challenged every RE/MAX agent to embrace the award and what it represents.

As many of you know, I moved to RE/MAX five years ago because I wanted to be associated with the most powerful, professional and productive brand in real estate. The JD Powers recognition affirms once again that RE/MAX is the most trusted brand in real estate.

WHAT BUYERS DON'T WANT

2011-11-04T08:29:00.000-07:00

Last week, I wrote a post on things most buyers are looking for in a home today. This week, we’ll turn the coin over.

Here are things to be careful of in a fear-based market:

1) Obsolescence – on a busy street? Too close to the train tracks? Back to a gas station? All of these things are trouble for sellers in today’s market.

2) McMansions – real estate investors will tell you that the best value in housing is finding the “WOB in the MOB” (that’s the Worst on the Block at the Median Price or Below). Conversely, anything oversized, non-conforming or which is negatively affected by its neighborhood is toxic in the minds of most buyers.

3) Dated – the fastest way to guarantee vicious lowballing is to list a home that is dated. Whatever improvements need to be made, assume the buyer will double the cost, then deduct if from your list price. There are only two markets today: wholesale and retail. And if you are not retail, you're wholesale.

4) Dark homes – if you don’t have great natural light, then start painting the rooms! Many buyers are in a dark mood before they even get to your home. If the bedrooms are midnight blue, it’s only going to get worse for you.

5) Unkept landscaping – got overgrown trees? Get ready to pay. Shrubs beating on the side of the house when the wind kicks up? That’ll cost you. Limbs dangling over your powerlines? Buyers smell “wholesale.”

6) Large lots – there are still some people who want to live on an acre, but there are fewer of them than there used to be. And since many people in the Great Recession have fired their lawn guy, a 40,000 square foot lot isn’t as appealing as it used to be.

7) Pools – in Colorado, appraisers will tell you that a nice pool adds exactly $0 (zero) to the value of your home. Twelve months of maintenance, three months of use. Instead, call up your friend with access to the HOA or community pool and invite yourself over.

8) Above ground power lines – a fact of life in most older neighborhoods, but the fact remains: many buyers are paranoid about living under electrical currents 24 hours a day.

9) Three story homes – tri-levels are okay, but true “3 levels” are just too non-conforming.

10 Bi-levels - quick decision: up or down. Apparently that's confusing to a lot of buyers, and I've had many clients tell me right off the bat that bi-levels are not an option.

11) High Schools – a good elementary school can help value, but proximity to almost any high school will hurt it, due to crazy traffic, loud kids, and events that run day and night.

12) Condos – for a little while longer, it’s still going to suck owning condos. FHA has just killed (killed killed killed!) the market with its asinine financing restrictions, which will loosen up again in time. If you can hang in there for the long haul, you can get some amazing value right now… but just be careful if you need to sell in the next two or three years.

IN SEARCH OF THE PERFECT HOUSE

2011-10-29T11:23:00.000-07:00

So much has changed over the past few years in the housing market. But one of the biggest changes I have seen is that people have shifted their attitudes, and where housing was once seen as an asset, many people now view a home as a liability.

With that change in philosophy, buyers have become much more focused on buying for the long term. What does that mean? In part, it means that homes with obsolescence (located on busy streets, next to industrial areas, irregular floorplans, etc.) are shunned because buyers believe the home they buy today is the one they will live in for the next 10, 15 or 20 years.

So what characteristics do buyers desire most? Based on my experience, here’s a list of what I think buyers desire most heading into 2012:

1) Value – there it is, the bottom line. Buyers want to know that whatever they buy today will be saleable tomorrow. That means whatever they purchase needs to be priced right and be marketable to other buyers. The three most important words in real estate remain “buy it right”.

2) Location – with buyers looking long-term, the emphasis on quality neighborhoods has never been greater. Buyers want safety and predictability, which means stable neighborhoods around good schools.

3) Condition – if buyers are going to pay “retail” for a home, it needs to shine. No deferred maintenance, no inherited deficiencies. Buyers have very high expectations about the condition of a home, which often makes the inspection resolution process loads of fun for sellers these days.

4) Orientation and Floorplan – for years, I have gotten a lot of mileage from the phrase “Light, Bright and Airy” in my listing descriptions. You know why? Because buyers like like, bright and airy. Especially today, there’s a premium for south facing homes (snow melts faster in the winter) and homes with pass-through light. Our mood is affected by our surroundings, which means it’s hard to sell a dark house, and even harder in the winter.

5) Walkability – another trend on the rise. Because “staying in the new going”, people want walkable neighborhoods with good amenities. Parks, shops and schools in walking distance all count for a lot.

6) Privacy – no one likes a neighbor’s house perched up on the hill overlooking your bedroom. In fact, I can’t think of one buyer I’ve worked with who has said, “Gee, I’m glad my neighbor can watch me get dressed in the morning.” Lot location and orientation is important – privacy is an intangible that sells.

7) Ranches – as the population ages, there's strong and growing demand for one-floor living. Builders can’t build ranches affordably because the land costs too much and buyers are reluctant to pay a premium… but as the Baby Boomers continue downsizing and flatsizing, ranches will come with a greater and greater pricing premium.

8) Space and Flow – If buyers like “Like, Bright and Airy”, they love flowing, open floorplans. Connectivity between rooms is all the rage these days, while “single use” rooms (like dining rooms and living rooms) are on the way out. Show me your great room, baby!

9) Finished Basements – with 28 million adult children living at home today, need we say more?

10) Three Car Garage – those with toys can’t afford to store them and with HOA’s that don’t allow them to be on display, the value of a three car garage (or two cars and a boat, or motorcycles, or jet skis) is going up.

11) Large Closets – I have a middle schooler, so I get it. Kids need lots of clothes, especially in a four season state. Having grown up in Southern California, I would say you need a closet that’s at least 50% bigger to hold all of your seasonal clothes, shoes, jackets, etc.

12) Master Bath – since household size is increasing (thanks to those grown kids coming back home), a nice master bath is a must.

13) Cul-de-Sacs – no passthrough traffic is always a plus, especially if you live near a school.

14) Green Features – there definitely as a rising awareness of all things green, but as the economy has tanked I’ve seen people pull back from this. Can you expect to get your money out of a solar panel installation? In today’s market, I would say no. Good windows count for tons, and a competent home inspector can tell you the difference between quality insulation and toilet paper shoved between sheets of drywall.

THE LOSS OF THE MOVE-UP MARKET

2011-10-23T13:45:00.000-07:00

The overall inventory of homes for sale currently stands at 15,533, a stunning 32% drop from one year ago, when we had almost 23,000 homes for sale in the Denver Metrolist MLS.

When you focus only on inventory priced below $250,000, the decline in inventory is a full 50%! This is a sharp and dramatic disappearance of inventory which demands some explanation.

At this sub-$250k price point, there are just 1.43 homes on the market for sale to each one currently under contract. The absorption rate stands at 3.45 months, well below the 6 to 8 month supply economists refer to as a “balanced” market.

The numbers always tell a story, and because I study numbers and I've been at this for 17 years, I can see the trees clearly through the forest. In fact, what's happening right now is fairly obvious if you simply string the numbers together.

Historically speaking, first-time buyers make up about 40% of the buyer market. So-called “move up” buyers make up the next 40%, with the remaining 20% consisting of downsizers and investors.

In analyzing these numbers, the reality is clear: the move-up market has essentially disappeared.

What does this mean?

In short, it means the homeowner in a $250,000 home who historically would sell to buy one for $375,000… isn’t selling. He has neither the equity nor the confidence in the economy to take on such a move, and so he stays where he is.

The homeowner at $400,000 is even in worse shape. If he’s thinking of selling, it’s to get out from a large housepayment and either buy down or rent. He most certainly is not looking at $700,000 homes. And so it goes all the way up to the $1 million market, where you currently have 15 homes on the market to each one under contract (compared to 1.43 below $250,000).

If you think of it as a conveyor belt, the first leg of the belt, consisting of first-time buyers, is rolling at full speed. There is absolutely no shortage of first-time buyers looking to buy at discounted prices with rates in the 4’s. Any recovery that takes place in housing will most definitely be from the “bottom up” (again, that’s experience speaking), and so these folks who are buying homes at 2011 prices with 1940s interest rates really are in fantastic shape.

The challenge for these buyers today is not fear of the market, but simply a lack of inventory. Because first-time buyers (by definition) have avoided the housing troubles of the past five years, they arrive with clean credit, strong motivation and a better understanding of what mistakes others have made.

The second leg of the conveyor belt, which covers homes priced between $250,000 and $400,000 is running much slower. Buyer demand is not as strong here (although there is still demand). There are currently 3.15 homes on the market to each one under contract, with a functional 6.09 months of inventory.

From $400,000 to $600,000, the pain starts to really set in. Here, there are 4.93 homes on the market to each one under contract and 9.25 months of inventory. This is a surplus of inventory that shows clearly you have more sellers than buyers, and in that situation value loss is almost a certainty.

At $600,000 to $1 million, there are 8 homes on the market to each one under contract. That means that each new seller is competing with 8 other homes – hardly a favorable ratio. Inventory surges to 15.07 months at this price point.

Finally, at $1 million, you have a staggering 15 homes on the market to each one under contract and gruesome 29 months of inventory. Hopeless.

So where is the opportunity in today’s market? Clearly, it’s with first-time buyers and sub $400,000 buyers who have the patience to wait for a great deal.

With three-quarters of Colorado’s builders no longer around, there’s not going to be much new construction coming online any time soon. And because builders cannot build profitably at today’s prices, most will simply wait until there is significant recovery before getting back into the game.

That means first-time buyers today figure to be well-protected for the next several years. With 61% of all contracts coming from just 34% of all listings (the sub-$250k range), recovery starts here.

For first-time buyers today, the hardest part of this market is simply finding something to buy. Because with foreclosures down 50% from the peak and very few people selling entry level homes to move up, there’s hardly anything for sale.

REDFIN’S RADICAL GAME CHANGER

2011-10-06T16:03:00.000-07:00

It was called the most disruptive, game changing move in the real estate industry in at least a decade. And it lasted all of four days.

Redfin, the online-based discount real estate company which only recently expanded into the Denver market, set off waves of panic last week when it launched “Agent Scouting Report”, a new service on its website which did the unthinkable: it displayed MLS closed listing and sales information for every agent in markets all across the country.

In other words, it pulled back the veil and showed consumers which agents produce, and which agents don’t. And it was met with howling screams of protest from the moment it launched.

First, some background.

Myself, I am all for disclosure. I am for disclosure because I work my tail off, I close more transactions that 90% of my competitors and I have absolutely nothing to hide. So bring it on. The Redfin app made me look great, and for those three glorious days of full disclosure, I was walking on air as I strategized how to leverage this awesome windfall of information into even more business for myself.

Behind the scenes, however, Redfin’s move set off fire alarms within the industry.

Nationally speaking, there are about one million active members of the National Association Realtors. This year, there will be about four million residential resales. Do the math, with two transaction sides per deal (buyer and seller), and you see that it averages out to about 7.5 transactions per year, per agent.

You cannot call yourself a full-time agent, nor provide for your family, on 7.5 paychecks per year.

Real estate has always been the ultimate turnstile business, with half of all new licensees quitting in their first year and three-quarters of all new real estate licensees walking away during their first three years in the business. Only the strong – or those with other means of support – survive.

And there’s the rub… because the consumer at home has always had a difficult time figuring out just exactly who is who. Are you a producer, or a pretender? Do you close deals, or do you dabble in the business? Redfin’s new app cranked up the floodlights and put the data out there.

So what happened?

Within hours, backlash and threats of litigation filled the air, most of it tied to the use of MLS data to publish these reports.

MLS, for the uninitiated, is short for Multiple Listing Service. In most cities, the MLS is a subscriber-based service that collects membership fees from real estate brokers (up to $1,000 per year, in many areas) and provides an online platform for sharing and promoting new real estate listings. Companies sign "subscriber agreements" with the MLS systems which govern what can and can't be done with the data.

And in the case of Redfin, a whole lot of agents and companies felt that public disclosure was a violation of those rules. Many agents called their local MLS boards to complain, or to threaten withdrawl, if Redfin was allowed to publish production data.

Agents who belong to teams (or who previously have been on sales teams) immediately complained that the data lumped their sales under their team leaders, which made them look unproductive while making team leaders look like giants. Smaller companies (which often welcome lower-producing agents) felt betrayed by the MLS systems they support, and so the outrage was real and immediate.

With 96 hours, Redfin pulled the plug, finding that the potential price of facilitating this disclosure of information was just too high.

And so, today, the consumer once again lives in the dark.

It will be interesting to see what happens going forward, because once the Genie pops out of the bottle, it’s hard to put him back. I am sad to see Redfin’s play foiled, but if it advances the agenda of making more data available to the public and helping the public think more critically about who they are working with, then it has been worth the drama.

A RECURRING CONVERSATION

2011-10-05T09:35:00.000-07:00

I’ve been having a recurring conversation lately and it goes like this: “My landlord is raising my rent again it I think it would be cheaper and smarter if I just bought a place instead.”

Three times in the past month, at least six times since the start of the summer, I’ve had somebody bring this story to me. It is not an aberration. Tenants are upset that landlords are raising rents and good units are harder than ever to find.

It’s not going to change any time soon.

Rising rents are a reality, and there is a simple, obvious supply and demand dynamic at work here. When you have 100,000 foreclosures in the Denver metro area, which we have had since the beginning of the housing crisis, you are essentially taking 100,000 households that used to own and converting them back into renters – for at least the next seven years.

And because most of these owners got used to the idea of living in houses, they don’t want to go back to living in apartments.

While apartment vacancy rates are around 5% in the metro area, the vacancy rate for rental is homes is 2%... two percent!!!

In that type of environment, how can you not have rising rents?

For today’s landlords, who are buying foreclosures at discounted prices and locking in mortgage payments with rates in the 4s, there is tremendous long-term upside to this market. For renters, you can see the writing on the wall.

I mentioned at the beginning of this article that I have been meeting with a number of renters who are upset about rising rents. And while I empathize with that, I also want to point out that many landlords have been dealing with years of low rents, high vacancy rates and sinking property values. I’m not going to begrudge them the opportunity to recover some of their losses when the market finally supports higher rents. This is the market landlords have been waiting on for nearly a decade.

Now I understand that some landlords are jerks – tenants have a right to hot water, clean surroundings and a safe environment. And if your landlord is a jerk, then you should move.

But in my experience, the vast majority of landlords (and certainly the ones I have worked with) are good people who are simply trying to invest profitably in the real estate market. They are neither predatory nor cold… on the contrary, they are exactly the types of people you would want as landlords. They simply don’t get the same press that jackasses do.

And for those people, the investors who have hung on through years of depression in the rental market, there is finally some light at the end of the tunnel.

Economies change. Opportunities shift. For landlords, today’s market is the most promising one we’ve seen in a generation. For renters who can buy into today’s market, with discounted prices and low, long-term fixed payments, there is sweet opportunity.

The truth is, I expect to hear from a lot more renters who think that owning is a better option. And I expect to hear from even more investors looking to take advantage of a red hot rental market. If you can get your foot in the door of today's market, chances are there are some excellent opportunities for you.

SUPER DIAMOND

2011-10-03T05:53:00.000-07:00

My next Client Appreciation Event is coming up October 22, when Super Diamond plays at the Ogden Theatre in Denver. For the uninitiated, Super Diamond is a nationally-recognized Neil Diamond Tribute Band that puts a contemporary twist on classic Neil Diamond songs, including such well-known hits as "Sweet Caroline", "I'm a Believer" (originally a Neil Diamond song, stolen later by the Monkees), and the patriotic anthem "America".

Just my way of expressing thanks once again to my clients, friends and referral partners. If you would like tickets to see the show, please contact me. It's going to be a great time!

18% OF ALL REAL ESTATE CONTRACTS CANCELLED IN AUGUST

2011-09-21T22:08:00.000-07:00

Nationally, nearly one in five homes under contract was cancelled during August, with most of those cancellations resulting from low appraisals.

The National Association of Realtors reported this week that 18% of deals under contract were cancelled in August, up from 16% in July and up from just 9% in August of 2010.

We continue to live in a very fear-based economy, and it’s affecting appraisers, underwriters, buyers, sellers and agents. It is more difficult today to see a transaction through from start to finish than at any time in recent memory, which is why there continues to be a massive migration of agents heading out of the business while buyers and sellers spend more time seeking out the top agents in their markets.

In short, everyone has different fears, but they are all wrestling with something

APPRAISERS – are afraid of losing their standing with banks and lenders if they appraise properties which later go into foreclosure. Therefore, they appraise conservatively with a “better safe than sorry” philosophy on value and condition.

UNDERWRITERS – are afraid of losing their jobs if loans they approve go into default. Therefore, they ask for more documentation, underwrite more cautiously and decline files which would have sailed through in a better market.

BUYERS – are afraid of overpaying, plain and simple.

SELLERS – are afraid of moving up (and often do not have the equity or job security to do so), leading to less inventory on the market and fewer homes to choose from.

AGENTS – have a choice to make: either work harder, smarter and more efficiently… or get out of the business.

There’s not a lot of comfort for anyone in today’s market, but it’s the market we have and we must become comfortable navigating these uncomfortable waters.

We all have a choice - we can view this market as a burden, or we can view it as an opportunity. We can choose to complain, or we can choose to elevate our game. We can think about how things used to be, or we can focus on getting better each day so that we can compete and win in a market where so many others are simply quitting and leaving.

WHERE HAS THE INVENTORY GONE?

2011-09-15T15:14:00.000-07:00

There is a fairly dramatic and ongoing trend in the Denver real estate market today, and it is a lack of inventory.

I’ve been talking about this with clients for the past few months, but it’s gone from an interesting observation to a dominant reality that will affect both prices and expectations for some buyers and sellers in the coming months.

As of September 10, the inventory of single family homes for sale in the Denver MLS is down a stunning 28% from one year ago. That is almost a seismic shift, but it’s even more dramatic than that at the entry level.

Let’s compare available inventory right now to one year ago, breaking it down by price point:

Price Point         Sept 2010          Sept 2011          Decline
$0-$250k               10,409               5,533               - 46.9%
$250k-$400k           7,250               4,795               - 33.9%
$400k-$600k           3,727               2,775               - 25.6%
$600k-$1M              2,428              1,870               - 23.0%
$1M and up             1,435              1,089               - 24.2%

Below $250,000, where most of today’s buyers are looking, inventory is down a remarkable 46.9%. For all homes below $400,000, there are 41.6% fewer homes on the market than 12 months ago.

Why the disappearance of homes for sale?

Historically, there are two main drivers in the housing market: first-time buyers, who traditionally make up 40% to 45% of the market, and move-up buyers, who traditionally make up about 40% (downsizing buyers make up the balance).

So here’s the deal: foreclosure are down 50% from the peak in Colorado, and the move-up market is dead because buyers simply don’t have the confidence to sell $250,000 homes to purchase $400,000 homes in today’s economy.

So when the supply of foreclosures dries up on first-time buyers, and existing owners (many of whom have little or no equity) in the $250k to $400k range don’t want to sell for economic reasons, you suddenly don’t have any homes for sale.

What we’re seeing right now is historic, and if the trend continues, it’s going to mean higher prices at the entry level.

I have several buyers right now who are quite frustrated by this total lack of supply. And, to be fair, many buyers are still under the increasingly untrue assumption that they hold all the cards in today’s market.

When inventory falls 46.9% at the entry-level, one of two things has to happen: buyers either start paying more, or they must be willing to accept a few more defects in a property because sellers are done cutting on price.

From an aerial perspective, the drop in inventory is actually an indicator of healing in our market, although I will say yet again that any improvement is going to be mostly concentrated below $400,000, because the move-up market simply isn’t generating enough buyers to absorb the higher end inventory.

But if you own a home under $200,000, you are looking at the first significant opportunity to see appreciation in at least five years. It’s going to take time – it always does – because buyers and sellers are almost always behind the market when it comes to perceptions.

Buyers still think that finding a great home for cheap is easy – it’s not. For a long time, sellers refused to acknowledge the reality of falling home prices, and as a result, the market was littered with overpriced, unsalable inventory for years.

Now, at last, it appears the pendulum is starting to swing.

With no new inventory coming online, interest rates at historic lows, rents rising rapidly and vacancy rates near zero, there are simply more buyers than sellers below $250,000.

Buying a home is still a sweet deal for most folks today, but it is hard and sometimes frustrating work.

And over time, buyers are going to have to adjust their expectations about what’s out there, how much it is worth and how quickly they will need to take action to secure a contract. It’s a totally different market than the one we knew 12 months ago, and it will be interesting to see how much lower inventory falls before more sellers start wratcheting up their expectations after several dry years with little or no appreciation.

CRUSHING IT IN THE THANK YOU ECONOMY

2011-08-22T11:28:00.000-07:00

Meet Tony Eitzel.

Tony is a professional photographer based in Denver. He has worked with John Fielder (the "dean" of Colorado nature photographers) and actually rents space in a Fielder gallery in the Santa Fe Arts District.

We first met Tony a few weeks ago on a Friday afternoon art walk through the Arts District downtown. We have been looking for a particular piece of artwork to go over our living room sofa for some time, and we have said "no" this summer to more pieces than I care to remember.

Then we met Tony. While art will always be subjective and "in the eye of the beholder", we were drawn to the depth and character of Tony's pieces, whether cityscapes downtown or soaring mountain peaks.

We engaged Tony in a conversation about one particular piece - a grove of aspens near Independence Pass - and Tony stopped what he was doing, told us the complete backstory of how and when he found this particular grove, and asked us what we thought of it.

We liked it, we liked it a lot. But the frame was wrong and the matting behind the picture wasn't quite perfect. We were looking for blacks and greens, and the matting was sand and the frame was white.

"No problem," said Tony. "I'll make it however you want it to be."

With that, we agreed to the sale and Tony asked for a few days to reframe the photograph.

A few days later, Tony called us again.

"Do you mind if I bring the picture out to your house, so I can center and mount it myself?" he asked.

It was clear that Tony took as much pride in how the picture would hang in our living room as he did in taking the picture itself.

This morning, Tony came by with his ladder, his tape and his level. Thirty minutes later, his gorgeous photograph was ours. Perfectly framed, perfectly spaced, perfectly level.

Why do I bring this up in a real estate blog? Because Tony Eitzel gets it.

Here is someone who loves his craft and wants total satisfaction for his clients. Tony is not going to have to ask for referrals, he's going to attract them by the way he runs his business.

When you deliver value in excess of cost, you create fans. Tony Eitzel knows what it takes to succeed in "The Thank You Economy".

THE THANK YOU ECONOMY

2011-08-20T08:51:00.000-07:00

Social media isn't a platform, it's a culture.

So says Gary Vaynerchuk in "The Thank You Economy", which dives headfirst into the realm of social media and its game-changing effects on how businesses engage consumers in today's market.

In Vaynerchuk's view, everything old is becoming new again.

In the old days, word of mouth meant everything. If you had a bad experience at the corner store, you told your friends and neighbors, and the impact of lost goodwill on the store was immediate.

Then, from about 1970 to 2000, corporations took over the world. Businesses were gobbled up by larger competitors, communication became "one way" and the customer lost all power. But since 2000, social media has changed the game again.

Today, the consumer is once again empowered through sites like Facebook, Twitter, Yelp and Trip Advisor. Businesses have to care what people think, because the Internet is for consumers what the printing press was for writers - a platform for leveraging their thoughts and ideas into something far more powerful than had been the case when communication was merely a one-to-one proposition.

Social media is a brand-equity building machine, according to Vaynerchuk, while SEO is a fad. Search Engine Optimization provides exposure, but it does not build relationships, and relationship selling is the power tool of the 21st Century. Social media can be used to build an emotional bond between retailer and customer, between service provider and end-user.

I have seen the power of social media firsthand over the past three years, and it has allowed me to leverage my thoughts and build my personal brand with over 300 "friends" on Facebook while connecting with hundreds of others on Twitter and YouTube.

But the key is to remember that, as Vaynerchuk says, social media is not a platform - it's a culture. It's not me with a bullhorn; rather, it's me looking to connect, create value, be an authority and most of all, remain available to the hundreds of clients I have worked with through the years.

I'll close this post with my favorite quote from the book: "If you think everything in your business is fine, it means you have stopped caring."

My goal is to continue to grow not just my sales, but my value to others. I am continually working on ways to do a better job, be more efficient, incorporate more technology, leverage my personal brand and help my clients get what they want.

When you master those skills, you will master the market, no matter what that market looks like. Because value is a quality that transcends markets, and if you can create it, the market will come to you.

ABOVE THE LINE

2011-08-04T20:57:00.000-07:00

I taught a class this morning to a group of real estate agent entitled “Getting It to Appraise”. The subject, obviously, was strategies for getting your listings to appraise in a market where buyers, lenders and appraisers are often fear-based and/or predatory in their assessments of what a home is worth.

On this subject, there is one caveat that must be declared up-front: when making representations to an appraiser (or a buyer, or anyone else), all data must be factual. There is to be no cheating, no distorting of information and no known misrepresentations of fact.

As listing agents, it is our job to provide as much concrete, accurate and factually-supported data as possible which protects and defends the interests of our clients.

Having said that, here is a list of strategies one can use in supporting a home’s value in today’s market:

• Current comparable sales from the MLS

• Old comps from the MLS (can’t necessarily be used, but does support argument for historical value baselines)

• Comps from public records not appearing the MLS (FSBO’s and new builds)

• County assessor records

• List of upgrades and updates

• Previous appraisals (again, won’t necessarily be used, but does provide historical value baseline data)

• Neighboring appraisals (a “hidden gem” if you are willing to ask neighbors if they have refinanced or had their homes appraised in the past six months)

• Rental surveys (establishes rental value, which can influence market value)

I often refer to appraisal data as “above the line” or “below the line”. What that means is that some data supports value at or above the contract price you are looking to support. That is called “above the line” data.

Conversely, there is also data that can undermine your price – that is called “below the line” data.

The name of the game is to provide as much factual, honest, above the line data you can to support your price. That, in my opinion, is your job as a listing agent and a fiduciary to your seller.

The old “4P” approach to selling a home – Put a sign in the front yard, Put a lockbox on it, Put it in the the MLS, and Pray for a buyer – simply isn’t enough.

It’s hard work to list a home, hard work to negotiate a contract, hard work to support an appraisal and hard work to close the deal. That’s why one-quarter of all contracts fail to close, and why nearly one-third of the agents in Colorado have quit the business in the past three years.

There is, however, no point or purpose in complaining. Shut up and do your job. And do it well. That’s real estate in 2011.

CHANGES FORTHCOMING TO THE MORTGAGE INTEREST DEDUCTION

2011-07-26T09:04:00.000-07:00

A few months ago, I received an urgent "Call to Action" from the National Association of Realtors. The mortgage interest deduction, a key driver for home ownership and an indisputable benefit to homeowners, was under attack.

At the time, I felt there was no way the government would eliminate (or even reduce) the MID. It simply plays too large a role in the overall value of housing, and with the GSE's (Government Sponsored Enterprises) Fannie Mae, Freddie Mac and FHA touching 90% of all mortgages being made today, I could not see the government putting a gun to its own head.

As more and more time passes, I'm starting to think I was wrong.

Very connected industry insiders are saying there's now a "75% chance" the mortgage interest deduction is going to be scaled back by the end of 2011. It will probably start with a cap on the deduction, limiting the deduction to the first $500,000 or $750,000 of one's mortgage, but the precedent will have been established.

The government isn't broke... it's $15 trillion in debt. And the demand for new sources of revenue is simply too strong to think that housing is going to escape unscathed. If the mortgage interest deduction is scaled back, I think it will be at least a few years before the issue is revisited, but the damage this will do to the high end of the market is undeniable.

As I have stated in post after post this year, we are living in a very segmented economy with a very segmented housing market. The million dollar market in Denver, which already has 40 months of inventory, is going to get hit even harder. The "trickle down" will roll all the way down to homes at or near the $500,000 range... I simply cannot see anything priced above this level holding value in the years to come.

If we are getting poorer as a nation, the demand for so-called "cheaper stuff" is going to increase. And housing is part of this equation.

There is already zero inventory below $250,000, and since it's no longer profitable to build, nothing new is coming online. The population continues to increase by 3% to 4% per year, and people will always need places to live.

Landlords are already feeling the "boom effect" of a poorer population. Rents are rising because demand for affordable renting housing is hot. It's only going to get hotter over the next few years, until rents become so high that the scales of affordability tip back toward homeownership as the more affordable alternative.

All this is to say that change is a constant, wealth is under attack, and you need to be able to read the tea leaves to figure out how to protect and provide for your family.

High end housing is in big trouble, and the upcoming reduction of the mortgage interest deduction is going to make it worse.

JULY MARKET UPDATE

2011-07-12T08:52:00.000-07:00

In July of 2008, there were over 26,000 homes for sale in the Denver metro market area. Today, there are fewer than 18,000 homes on the market.

Lack of inventory continues to be, in my mind, the big story in the Colorado real estate market today.

Below $250,000, there are just 1.65 homes for sale to each one currently under contract. And since that number includes short sales (of which there are many), the reality is that the market is even tighter than that.

When half of the homes listed for sale in any price range are under contract, you have an inventory problem.

Above $1 million, the story is 180 degrees reversed. In the luxury market, you have nearly 13 homes for sale to each one under contract, reflecting a continuing trend in which the high end of the market will continue to lose value for some time to come.

Absorption rates help to tell this story. The absorption rate, as we have explained before, is a mathematical calculation intended to show how many months of inventory exists on the market today. Real estate economists will tell you that six months of inventory reflects a balanced market, favoring neither buyers nor sellers. Below six months of inventory reflects a tight market, generally favoring sellers, while inventory above six months indicates that a buyers' market exists.

Check out these current absorption rates:

* Below $250,000... 4.03 months

* $250,000 - $400,000... 6.48 months

* $400,000 - $600,000... 8.00 months

* $600,000 - $1 million... 13.86 months

* Above $1 million... 40.25 months

That's about all you need to see to understand today's market. The low end of the market has a shortage of inventory, but no shortage of buyers. The middle of the market is okay, but hardly robust. And the high end is a mess, and will continue to stay that way for quite some time to come.

I don't think that articles which discuss the overall market serve much purpose at all, because the $200,000 buyer has virtually nothing in common with the $1 million seller. When The Denver Post and other news outlets report on overall trends, I think the information is often misleading and skewed.

Markets are about price point, condition and location. And frankly, I am working with no shortage of buyers at the entry level who feel a disconnect from what they hear on the news when there is no inventory to look at and the nicest homes come off the market in days, not weeks or months.

Successfully navigating this market requires specialized knowledge, and that's what competent brokers are supposed to provide. The agents who are closing deals are the ones who understand the market. Now more than ever, competence matters.

DAZED AND CONFUSED AT THE DENVER POST

2011-07-09T09:33:00.000-07:00

Here is the opening paragraph from today's real estate article in the Denver Post:

"The metro Denver housing market continued its rally in June. The number of homes put under contract last month increased 22.5% from a year ago - the second consecutive month that homes under contract showed large increases over 2010."

The article then goes on to quote a number of Realtors and other happy-talk professionals, painting a picture of recovery and momentum for everyone with four walls and a roof over their heads.

Not so fast.

There's one simple, obvious, huge omission from this article, and it's the fact that the two large and lucrative tax credits being offered to first-time buyers and move-up buyers came off the table April 30, 2010. With the incentive to buy gone, sales crashed through the floor in May and June of last year. Therefore, comparing this year to last year is a totally distorted comparison, and the Post real estate writer should know this.

Although I would love it if the facts matched the headline, there's only one sector of the market that is performing strongly, and it is the entry level.

At the mid-level and higher price points, fear is keeping buyers out of the market while sellers outnumber buyers by a large margin.

Lack of inventory is the dominant theme today, especially at the lower price points. Overall, there are nearly 21% fewer listings on the market today and than a year ago. But below $250,000, there are 37% fewer listings on the market today than one year ago. There's simply nothing out there for buyers at the entry level.

While inventory is also down (although not by nearly as much) at the higher price points, there are no buyers looking at luxury homes. In fact, only 28 contracts were written on $1 million homes last month in the entire metro area.

I suppose the happy headlines in the Denver Post will help buyer confidence, but when it comes to making huge financial decisions, I'd rather base them on facts instead of poor reporting.

INFLUENCE: THE PSYCHOLOGY OF PERSUASION

2011-06-22T09:04:00.000-07:00

"Consistency is easier than thought."

So says Robert Cialdini in his excellent book Influence: The Psychology of Persuasion.

According to Cialdini, people often adjust their thoughts to match decisions they have already made. Understanding that most decisions are made before a sales presentation even takes place can radically alter (and improve) the effectiveness of how sales presentations are made.

Understanding how "social proof", "social jujitsu" and the "principle of association" affect persuasive psychology can also dramatically improve the impact and effectiveness of your sales presentations.

Under the theory of social proof, consumers can be heavily influenced by the actions of others. That's why claims about being "the number one brand" or being recommended by "4 out of 5 dentists surveyed" are so effective.

Social jujitsu is a theory that states if a few people inside of a group can be herded in the right direction, the rest of the group will follow. This is why, in many opera houses and even Broadway theaters, proprietors hire "professional clappers" to applaud and cheer loudly at pre-determined moments to bring the rest of the audience along.

Finally, under the "principle of association", persuaders attempt to connect themselves with positive or popular events. That's why radio stations will repeat their call letters before every hit song, and it explains why every concert, sporting event and college bowl game has a presenting sponsor.

How can the Psychology of Influence make you a more effective salesperson?

For me, the goal has always been to provide value. By understanding what motivates people, I am better able to give more effective presentations. In essence, I can give people more of what they want, and less of what they don't.

Similarly, understanding influence is a valuable skill when it comes to marketing more effectively, especially with listings. Popular neighborhoods, school performance or community awards can all be leveraged in positive ways to help the salability of a home.

A career in real estate is about so much more than homes and land. It is first and foremost a marketing job, starting with yourself.

Influence: The Psychology of Persuasion is a terrific and timely read that will sharpen the sword of any committed sales professional.

FIVE STARS, AGAIN

2011-06-19T15:40:00.001-07:00

Found out this week I have been named a "Five Star Professional" by 5280 Magazine once again in 2011. For the second consecutive year, I have been ranked in the top 7% of agents in the metro Denver area, based on surveys sent to over 10,000 recent homebuyers and over 250 Colorado mortgage and title companies.

Just like last year, survey respondents were asked to evaulate their real estate professionals based on customer service, integrity, market knowledge, communication and negotiation skills, closing preparation, marketing skills, and overall satisfaction.

In less than six years, I have established myself as a top tier agent in Denver and I am so grateful to everyone for their support. I have worked exceptionally hard for more than 100 local home buyers and sellers since relocating to Colorado in 2005 after 11 years as a licensed broker in California.

My clients know firsthand that nobody works harder to educate and inform them than I do, and that my relationship-based philosophy is all about creating customers (and a steady referral stream) for life.

If you work hard, study hard, negotiate hard, live with integrity and have passion for what you do, you'll never have to worry about finding your next client. I believe with all of my heart that success is found by attracting new business, not chasing it. And you become an attractor of business when you deliver value, expertise and integrity over and over again, and when you take time to build relationships which last beyond your transactions.

Thank you for naming me a Five Star Professional. It is my honor to serve you.

JUNE MARKET UPDATE

2011-06-10T04:37:00.000-07:00

With the inventory of homes for sale in the Denver metro area now down 16.5% from one year ago and down nearly 35% from three years ago, we are living in strange and confusing times.

Because the Denver Post continues to fail to adaquately explain the realities of today's market (including a pathetic article this week discussing the state of the market in May), I continue to find home buyers and sellers who have no understanding of how different this market is from just one year ago.

Below $250,000, there is hardly anything for sale (just 2.08 homes for sale to each home currently under contract) and lots of buyers are on the hunt. But here's the catch - what buyers want above all else is value, and they simply won't pay retail prices for junk. So you have swarms of buyers pursuing one type of house... the well-priced piece of real estate in good condition which is priced for the market of 2011, not the market of 2008.

If you can list this type of home, you'll sell it in a week. But the moment you get unrealistic about price, or if the condition isn't up to par with the competition, buyers move right on down the road to the next house in pursuit of that price/condition combination,

There are two reasons I can see why inventory is down so dramatically. First, banks aren't foreclosing on as many homes, and the ones they are foreclosing on are generally at higher price points. And second, sellers have finally figured out that if your home is in good condition and in a good area, it's no fun to sell it at 2011 prices.

At higher prices, there is going to continue to be distress ("deleveraging" as I call it) for some time. While the absorption rate below $250,000 is just 3.45 months, at $1 million there is an 18 month supply of homes. There is no price support for the high end of the market, and as people continue to hunker down and think smaller about housing, help is not on the way.

In between $250,000 and $1 million, there are pockets of opportunity, but they still call for caution. I regularly remind clients not to count on the market bailing them out if they make a questionable purchase, and to do all pieces of diligence up front. If you're smart about what you're buying and where you're buying it, there are excellent opportunities.

Buyers need to be realistic about the market and the moment we are living in. Prices have come down in many areas (and continue to fall at the higher price points) and interest rates are in the 4's. There's no new construction coming online (it simply isn't profitable to build at these prices) and the population continues to grow. If you're buying a home today and looking at the big picture (and you plan to stay in it for a few years), the combination of discounted prices and absurdly low rates simply shouldn't be passed up.

But it's a professionals' market, which calls for expertise and understanding. Now more than ever, assembling the best possible team to help you with your purchase or sale should be your highest priority.

THE WOB IN THE MOB

2011-06-04T14:02:00.000-07:00

Having spent a lot of time around real estate investors (and being one myself), there's always chatter about the next "hot" area, or how Light Rail is going to affect values over the next decade as spurs shoot out from Union Station into Golden, Lakewood, Arvada and DIA.

Investors are always trying to think two steps ahead of the market, and that's a good practice. But for safety and value, nothing beats the "WOB in the MOB".

Simply put, the WOB in the MOB is the worst house on the block at the median price or below. The reason this type of home has so much upside is because while improvements your neighbors make can help your value, there's very little that can happen that will undercut it. And because you're buying the worst house on the block (in theory), you have the most ability to improve it and bring it up to the standard of the area around you.

Good investors want control of their investments, and WOB/MOB fits this model. Buy it right, fix it up, and ride the coattails of your more well-to-do neighbors.

Of course, the opposite of this corollary also holds true. To buy the biggest home on the block (especially at the higher end of the market) becomes the riskiest, most speculative type of purchase out there because, to a large extent, you are at the mercy of your neighbors. If a house gets foreclosed on and the bank sells it for cheap... the biggest loser is YOU. If someone lets their yard go and the character of the neighborhood is affected, the biggest loser is YOU.

Without a doubt, the "McMansion" buyers of ten years ago today live in a world of regret and blown equity. To buy an overpriced, non-conforming home in an area of less expensive homes has almost universally been disastrous, and today there are simply few buyers for these types of homes (and especially not at retail prices).

The real estate market of 2011 is all about caution, with buyers ranking perceived value above all else.

Real estate investors know the WOB in the MOB model fits this paradigm, and they are profiting handsomely from this new reality.

FEEDING FRENZY

2011-06-03T22:01:00.000-07:00

Don't believe the entry level of the market is tight? Then try this...

I just ran a search of everything in Arvada priced between $100k and $170k that went under contract during the month of May. There were 13 total homes that fit this profile, and they went under contract in an average of 9.6 days!

The reason you see Metrolist statistics quoting overall "days on market" at 109 is because that useless number includes short sales (many of which sit for months because most buyers don't enjoy torture) and because higher end homes are taking months, not weeks to sell.

But for the entry level, demand is intense.

There is no "single" housing market in Denver - there are at least three distinct markets. The entry level, the mid-level and the high end all hold very different realities for buyers and sellers. If your agent can't tell you the difference, then you're not working with someone who understands what's happening on the ground.

I recently picked up a client who had been working with another agent for nearly six months, looking for an entry level home below $150,000. After dozens of showings and at least three failed offers, I told her there was another way. "It's time," I said, "to stop looking at this as a marathon and start thinking of it as a sprint."

And by that, I meant it was time to quit lollygagging around looking at homes on Sunday afternoons and start treating it like a job, which means scanning the MLS for new listings several times a day, looking at houses after work and, if need be, writing contracts late at night.

The result - she went under contract on a beautiful home within two weeks, less than 24 hours after it hit the market. She saw it first, wrote the contract quickly, and closed on it today.

That's how you make things happen in 2011.

PROPOSED 20% DOWN PAYMENT RULE EQUALS HOUSING MARKET SUICIDE

2011-05-25T23:20:00.000-07:00

As federal regulators debate whether to save, reinvent or shut down mortgage giants Fannie Mae and Freddie Mac, there has been increasing discussion of what mortgages should look like going forward.

One provision of the newly-enacted Dodd-Frank Wall Street reform law requires lenders to hold on to at least 5% of the credit risk for anything other than a "safe" mortgage, which is defined in part as a mortgage with higher credit scoring requirements for the borrowers and a minimum 20% down payment. Because smaller lenders simply do not have the reserves to carry 5% of the credit risk for very many loans, smaller down payment programs are very much at risk.

So should 20% down payments become the "new normal" for home ownership?

Space doesn't allow me to adaquately explain all the reasons this will destroy the housing market, so let's just start with a few common sense items:

* A 20% down payment requirement will eliminate 75% of first-time buyers, destroying values at the entry level.

* A 20% down payment requirement will simply be unaffordable for higher end homes, destroying the high end of the market.

* With home prices down by 10% - 40% in different parts of the country, and interest rates currently below 5%, the market should be a less risky place for lenders, not one that's more risky.

In other words, now is not the time to be nailing the barn door shut on home ownership. With Fannie, Freddie and FHA touching nearly 90% of the loans being made today, any talk of a mandated 20% down payment requirement for home ownership is absurd, and it makes me think the regulators and politicians talking about it are either ignorant, stupid or simply looking to shake down the real estate and lending industries for additional campaign contributions.

Any way you slice it, this is a bad conversation to be having.

This does not mean we should go back to the old way of doing business. But it does mean that the market of today is fundamentally safer than the market of five years ago (except at the high end of the market), because the people who never should have been allowed in have mostly been flushed out of the ownership market.

But enough already with trying to correct the mistakes of 2005. It's 2011, and we need to be finding new ways to make home ownership safe, enticing and affordable. Instead, we've got regulators who think the only way to save the market is to utterly destroy it.

AFTER 50 YEARS OF SMALLER HOUSEHOLDS, THE TREND REVERSES

2011-05-17T15:24:00.000-07:00

Not a surprise... just a fact.

After 50 years of progressively smaller household sizes, a U.S. Census Bureau report says households grew larger between 2000 and 2010. The primary reason, according to the Census Bureau, was the faltering economy.

One recent study done by an Ohio State University professor reported that the number of adults between 19 and 29 living at home with parents increased from 25% in 1980 to nearly 35% in 2010. A larger number of immigrant households also helped to reverse the trend toward smaller households.

What does it mean? Finished basements, egress windows and extra baths can make a real difference when it comes to resale, especially in smaller homes. And once the economy does begin to improve, it's very likely that millions of younger Americans currently tucked away in spare bedrooms or finished basements will be looking for a place of their own.

MAY MARKET UPDATE

2011-05-10T10:29:00.000-07:00

Looking for three current themes in the Denver area housing market? Try these:

1) LACK OF INVENTORY

The latest snapshot of inventory showed that there are currently fewer than 18,000 homes listed for sale in the Denver MLS. That's a reduction of 14.8% from one year ago, and it's a drop of more than 30% from just three years ago. So where did the inventory go?

First, you don't have as many foreclosures as you have had in years past. A small part of that is the processing delays many servicers have incurred as a result of last year's "robo-signing" scandal, but the larger part is simply that we don't have as many homes being foreclosed upon. At some point, the orange runs out of juice, and that's what you're seeing at the entry level of our market, where most of the foreclosures have occurred.

Now I will say that foreclosures are increasing at the higher price points, and I expect this trend to continue. But the fact is from a shear numbers standpoint, there are more entry level homes than luxury homes, and at the entry level we've seen most of the foreclosures already pass through the system.

2) FALLING ABSORPTION RATES

Looking for evidence of more stability in the market? Start with absorption rates.

The absorption rate, as discussed here many times, is a hypothetical calucation that seeks to show "how many months it would take to sell all inventory on the market, based on the current pace of sales, if nothing new were to come on the market." Economists will tell you that six months of inventory represents a balanced market... higher than that reflects a surplus of inventory, less than that reflects a shortage of homes.

Below $250,000 the absorption rate has fallen from 9.05 months in January to just 3.75 months today. That's a drop of nearly 60% in just five months! From $250,000 to $400,000, the absorption rate has fallen from 11.83 months in January to 5.71 months today. Above this, the drops are not as dramatic, but that's because the market simply lacks enough buyers for higher end homes, so you are going to continue to see a different picture once you work your way beyond about $350,000 to $400,000.

The point is (and I have current buyers experiencing this), there is not much out there right now up to about $300,000. There's less bank-owned inventory, and sellers have finally realized that this is not a great market to sell into unless your motivation is very, very strong.

A lack of inventory, however, does not automatically equate to a seller's market - what is in demand is well-priced inventory in good condition.

Price it right and make it show well, and your chances for a sale are very, very good. Price it wrong, and the parade just passes right on by and continues looking for the next well-priced, well-maintained home.

3) INTEREST RATES REMAIN STUBBORNLY, BEAUTIFULLY LOW

As of this writing, 30-year fixed rates have dipped back down below 5.00%, which continues to be the gift that keeps on giving. A Japanese earthquake and tsunami, stubborn U.S. unemployment, and continued pessimism over recovery are keeping bond yields low, despite $2 trillion of government spending, $100 per barrel oil and rampant inflation in commodity prices.

Are we on borrowed time with interest rates? Yes, just like we've been for the past two years. There will come a day of reckoning with interest rates, and it will likely be this year, but I will admit I have been bracing for higher rates for the past 18 months and they've yet to arrive in the way I expect we will eventually see them.

I do believe when rates bump up it will happen quickly, without warning, and it will be for good. 30-year fixed rates in the 4's are totally contrarian to current economic policy and global commodity price inflation. Whether your interest rate is 4.50%, 5.00% or even 5.50%, one day soon you will look back in amazement at this golden era for cheap money.

What does it all mean? In reality, we have a very functional market. There is less sales activity, which is bad for brokerages and salespeople who rely on "the market" to bring them business. But there are fewer "dead listings" and plenty of motivated (but value-oriented) buyers who are keeping the good agents exceptionally busy.

Sellers can sell and buyers will buy, but only if there is value in the deal. That's the bottom line.

DEVELOP THE COURAGE TO STAND ALONE

2011-05-02T09:02:00.000-07:00

I the privilege of seeing Tim Tebow speak Friday night at a local private school fundraiser in Arvada. While the past few years have made it easy to become skeptical about celebrity athletes, I think Tebow is the real deal.

In a 40 minute presentation, unscripted and without notes, Tebow laid out a plan for living life to the fullest in front of an audience of about 2,000 students and parents. His three key points were as follows:

1) Live with Passion

Life is too short not to care. Life is too short to do things you don’t enjoy. School isn’t just about learning book knowledge, it’s about developing your passions and figuring out what you want to do with your limited time on this earth.

2) Develop the Courage to Stand Alone

If we are going to live principled lives, we won’t fit in every situation and sometimes we’re going to be in conflict or disagreement with others. Speaking to a room full of 10 to 18 year olds, this was a great message. Standing alone doesn’t mean wagging your finger in the face of others when they make different choices, but it does mean knowing what you believe and understanding that’s it okay to stand alone, with your principles.

3) Finish Strong

Finally, in every situation, finish strong. If you make a commitment, keep it. If you start a project, finish it. If you become frustrated, endure and understand that finishing strong is the greatest satisfaction there is in any situation.

Tebow said that his philosophy on the football field is to be the toughest, strongest and most resilient player on the field. The last man standing. The player no one wants to face.

In an era of celebrity and self-absorption, it was great to hear Tim Tebow speak of passion, principle and courage. I have heard it said that money doesn't make a person - it simply makes a person more of what they already are. My hope is that my kids will see Tim Tebow use the platform he has been given to continue to stand up for passion, principle and courage, traits that every young person is going to need in order to succeed in the years ahead.

WHAT TO MAKE OF ZILLOW.COM

2011-03-16T09:30:00.000-07:00

Many real estate professionals have mixed feelings about Zillow.com. On the one hand, it is an amazing source of data and it can help to educate both buyers and sellers about what is happening in local real estate markets. But on the other hand, Zillow's algorithms are far from perfect and quite often, these "Zestimates" of value can be off by 10% or more.

I think anything that provides information for the consumer is valuable, so I'm generally a pro-Zillow kind of guy. But that doesn't mean I trust their information.

For example, Zillow's information is based on what is available in public records. But what if someone finished a basement without pulling permits? Should Zillow not award any additional value for the work that was completed?

And because Zillow places an emphasis on geographic sales activity, some higher end communities get undercut by sales in neighboring subdivisions with smaller, less expensive homes. Conversely, many smaller subdivisions "piggyback" their way to higher valuations by being close to more expensive subdivisions, or worse yet, McMansions, which universally are the worst performing category of home on the market today.

I do love the aerial photos on Zillow, and I also like that they will report recent sales data (although that sales data does not reflect seller concessions, whether the property was bank-owned, and other important pieces of information). The bottom line is that the world is a better place with Zillow in it, but just realize that much of the data is raw and it's algorithms cannot universally be trusted.

HOW DOES THE MEDIAN PRICE RISE WHEN VALUES ARE FALLING?

2011-03-08T06:12:00.000-08:00

While the overall median home price in the Denver metro market was relatively flat in February compared to a year earlier, there's some buzz being generated by a Coldwell Banker report that shows the luxury home market (defined as $1 million and up) saw a 7.2% increase from February of 2010.

Does that mean the high end of the market is recovering? In my opinion, the answer is "no".

The median price is a figure that gets a lot of play in the media, but like all statistics, it is subject to manipulation and interpretation. In short, the median price is that price at which half of the homes sold for more money, and half sold for less.

Here's what a rising median price in the million dollar market means to me: it means home that were listed a year ago for $1.9 million are selling today for $1.4 million. The difference is that a year ago, they weren't selling at all (because they were overpriced), but today values have adjusted down to meet the market and buyers are stepping in, albeit cautiously, for the most attractively priced luxury homes.

The increase in sales activity and median price at the higher end of the market does not mean that the luxury market is improving, but simply that the downward trajectory is bottoming out. If you owned what used to be a $2 million dollar home (which may only generate an offer of $1.6 million on the open market today) and you saw a report that said median prices had gone up, you might be fooled into thinking your home was in better shape than it is. The only high-end sellers truly in touch with the realities of today's market are those who are trying to sell into this very stiff headwind.

The reality is that buyers are still totally value-driven, and the median price only reflects those homes which have sold. And with few exceptions, the homes that are selling are those that are priced most attractively.

SHOULD YOU HIRE A MORTGAGE BROKER OR A MORTGAGE BANKER?

2011-03-02T13:41:00.000-08:00

A few years ago, very few home buyers could tell you if they were working with a mortgage banker or a mortgage broker. Financing was so readily available you could get a loan almost anywhere... brokers, bankers, credit unions, pawn shops... everyone had money to lend.

Today, that distinction makes all the difference.

In short, mortgage bankers lend their own money, while brokers "shop" loans to different lenders and deliver that loan file to the selected lender, who then must underwrite, approve and fund the loan.

So which option puts you in the stronger position? And which one is more likely to lead to heartbreak at closing?

Let's look at the basics for an answer. With a mortgage banker, there is usually only one entity which is underwriting, approving and funding the loan. And that is the mortgage bank itself.

With mortgage brokers, there is a layer of risk because the mortgage broker does not have a direct association with the lending underwriter, and it's rare that a broker can ask for a management review or take other steps to win an approval on a difficult file. (And just because you are a well-qualified buyer does not make your file "easy". Appraisal conditions, liens, title issues and other conditions totally beyond a buyer's control can turn a seemingly simple transaction into a very high risk, stressful and uncertain ordeal.)

There are good mortgage bankers and mortgage brokers. But the brokers have been scapegoated to a large extent for many of the bad loans that were made over the past few years. Because brokers are not lending their own money, there is a perception that they have "less skin in the game", and because of that, a broker's loan file is going to be looked at more closely than an in-house mortgage banker's file. Anything from a broker channel that feels the least bit risky is likely to be hit with a wall of resistance.

Whether you choose to go with a broker or a banker is up to you. But if you choose to go the mortgage broker route, you better trust that your loan officer is totally competent and that your file is totally clean... because your margin for error is next to nothing.

Many banks have completely eliminated their broker channels, while others have imposed strict buyback requirements that will put a mortgage broker out of business with one bad loan. So do you homework, make sure you understand the difference, and realize that circumstances totally beyond your control could cause you to show up at closing without the funds to close the deal if your transaction hits the smallest pocket of turbulence.

CRASH PROOF 2.0

2011-02-27T06:15:00.000-08:00

Peter Schiff's "Crash Proof 2.0" is an alarming book - not because its conclusions are shocking, but because they are highly logical. And they paint a troubling picture about the US economy.

Schiff, who ran unsuccessfully for a US Senate seat in Connecticut last year, argues that current government economic policy punishes savers and encourages debt. By holding intererst rates down to artificially low levels, Schiff argues that the US is doing whatever it takes to keep Americans spending at a time when they should be pulling back and retrenching.

With over $2 trillion of stimulus spending since the economy soured in 2008, Schiff believes that rapid and uncontrollable inflation is a very real possibility, and that investments in precious metals like gold and silver will be a better store of value that the US dollar, which is being deflated through mass circulation.

Schiff also looks at the historical path of the US dollar, from the famous "Bretton Woods" agreement that established the dollar as the world's currency after World War II to Kennedy's incorporation of Keynesian economic theory (expanding the money supply) in the 1960s to Nixon's decision to take the US off the gold standard in 1971 to deal with the country's rising debt problems.

Today, in Schiff's view, the US needs to turn its attention away from spending and back toward increasing our capacity for the production of goods. An overleveraged credit bubble has created artificial demand by allowing people to purchase and acquire goods without first creating or saving wealth. We are entering an era of "forced austerity" where we will need to rebalance our capacity to produce with our propensity to consume.

One interesting concept in Schiff's book... the author's recommendation that current homeowners pull as much money out of their homes as possible by taking out a 30-year fixed rate loan at today's historic low interest rates. Future dollars will be cheaper to repay than today's dollars, as inflation devalues the currency and prices rise. Schiff argues for investing some of those funds in overseas economies that will benefit from a US recession as global markets develop to replace the demand artificially created through the US credit bubble era.

While extreme in places, Schiff's worldview overall is worthy of consideration. If dollars are going to be devalued going forward, fixed return investments will not be a good vehicle for funding retirement. And if your dollars today will be worth more than dollars ten years from now, there are reasons to consider leveraging yourself into today's low fixed interest payments.

If an investor can purchase a rental property which cash flows today, with a low fixed rate payment, how much more powerfully will that investment cash flow ten years from now when rents have doubled but payments remain the same?

Peter Schiff's Crash Proof 2.0 serves as a valuable reminder that we are all responsible for our own economic well being. To have a better portfolio in the future, we need to make better decisions today. And understanding the trends and policies that will impact our wealth portfolio ten years from now is an essential part of planning for the future.

HOW THOROUGHLY SHOULD A BUYER HAVE A HOME UNDER CONTRACT INSPECTED?

2011-02-20T20:57:00.000-08:00

A physical property inspection is something that I will recommend to every buyer, every time. It's simple common sense.

But there are limitations to what a regular home inspector will examine. For example, the inspector's standard disclaimer will remind you that it is a visual inspection only, and limited to things the inspector can see with the naked eye. No cutting into drywall, no tearing apart electrical systems.

Most property inspectors perform a basic, visual inspection. And that service is well worth the $300 to $400 most inspectors charge. If an inspector cites something unusual, or out of his area of expertise, then it is common for the inspector to suggest additional follow-up inspections.

So how far do you go with this? The answer is, it's completely up to you.

There are nearly 20 different "secondary" inspections that a buyer can perform on a home.

These include:

* Electrical systems

* Heating and air conditioning

* Lead-based paint

* Mold testing

* Foundation assessment

* Soil stability

* Roof inspection

* Survey

* Sewer scope

* Septic system

* Radon gas

* Asbestos

* Chimney

* Wood-destroying pests

Most buyers will not do all of these tests, or anywhere close to all of these tests. Based on what the general home inspector finds, it's not unusual to ask an HVAC person to take a look at the furnace, or have the sewer line scoped for breaks. But every home is different, and every situation is unique. I'll never advise a client to skip over an inspeciton if he or she thinks it's important.

The point of this is simply to educate and inform, and let you know that as a buyer you should satisfy yourself as to the condition of the home you are purchasing before you get to the closing table. And if you have concerns about any of these areas, you should discuss them with your agent or your home inspector as early on in the process as possible.

THE FEBRUARY BOUNCE

2011-02-15T19:06:00.000-08:00

The Denver housing market saw some sharp and abrupt changes during January, and these shifts bode well for most buyers and sellers going into the spring market.

At every price point, we saw substantial and dramatic drops in the absorption rate, which is the hypothetical calculation which projects how long it would take to sell all homes on the market at the current pace of sales.

December's overall absorption rate, which I pegged at 11.20 months, was the worst reading I have seen since I began tracking these numbers in the Denver market in 2005. The previous high mark was 10.45 months in September of last year, when the market was still recalibrating and going through a severe post tax-credit hangover.

Real estate economists will tell you that a six month inventory represents a balanced market.

Now the good news: in January, the overall absorption rate for the seven-county metro Denver area dropped all the way to 7.19 months, a four month reduction of inventory in a single 30 day cycle. Despite the fact the December market is always slow, that bounceback in January is neither small nor insignificant, because it shows we had buyers entering the market in fairly large numbers compared to the number of homes for sale.

Additionally, while the number of homes for sale in January of 2010 increased by about 1,000 from December of 2009, last month we saw almost 400 fewer homes for sale than we had in December.

One factor driving buyers off the fence is the rapidly rising interest rate environment we have seen since the first of the year. The average interest rate on a 30-year fixed payment mortgage has increased by nearly a full percent in the last month, now pushing 5.25%. After months and months of predicting a signficant jump in rates, improvement in the overall economy is turning those forecasts into reality, and buyers are scrambling so as to not be left behind.

The most improved segment of the market? It's the $250-400k range, traditionally the primary move-up market. The inventory of homes here fell from 11.83 months to 7.11 months, and there are just 4.43 homes for sale in this price range to each one under contract. In January of 2010, by comparison, the absorption rate for homes in this price range was 9.98 months and there were 5.16 homes on the market to each one under contract. (And that was with two highly attractive tax credits in play)

So what does it mean? We're still living in a very segmented housing market, with very different realities for folks buying a first home compared to those trying to sell a luxury estate. The entry level of the market (below $250k) remains balanced and competitive; the move up market ($250-400k) is improving; the upscale market ($400-600k) is stagnating; the high end ($600k-$1M) is losing value; and no one can say where the bottom is for the luxury market ($1M and up), where there is currently 35 months of inventory and there are 16 homes on the market for each one under contract.

With 85% of the sales in our market taking place at $400k and below, for most buyers and sellers the market is looking more stable than it has in three or four years. I'm not afraid of this sector of the market, and with rates still attractive and competitively priced homes, there is good value to be found here.

From $400-600k it's dicey, and I think most homes in this price range are probably just treading water or gradually drifting downward in value. Until our economy starts producing jobs and growing again, there just aren't enough confident buyers to offset the number of people looking to get out from under pricier homes.

Above that, it's flat out risky, and I don't see improvement in the luxury market any time soon, despite the cheerleading you hear from certain members of the real estate community and brokerages around town.

Colorado has always been a seasonal market, and spring is historically the busiest time of the year. Last year the inventory of homes for sale increased from 17,000 in January to 23,000 in July, and we'll see another surge of inventory here shortly.

The way the numbers are looking to start the year, however, it might be a better idea for sellers to list early than to wait for the traditional spring surge, because there are buyers in the market right now.

BEWARE OF BUILDER CONTRACTS

2011-02-13T23:04:00.000-08:00

Have you ever signed a contract without reading it?

For 99% of people (including anyone who has ever acquired a cell phone or visited a doctor’s office), the answer is probably yes.

I’ve done a couple of deals lately involving builders, and if there was ever a contract you should read before signing, it’s a builder contract.

In Colorado, the standard real estate commission purchase contract is 14 pages. The last builder contract I looked at was 58 pages, plus addendums.

What on earth do they write into 58 pages of legalese?

Here’s some of it:

• The seller makes no warranties about soil condition, and your acceptance of the soils report is your acceptance of the risks associated with shifting soils

• The seller makes no warranties regarding the presence of mold or radon

• The seller makes no warranties about future development (or lack thereof) of additional phases of the subdivision

• Seller makes no warranties regarding completion of amenities, including parks, clubhouses, pools or other common areas

• During construction, the seller reserves the right to change the home’s elevation or modify the position of the home as it rests on the lot

• The buyer may not have the home professionally inspected until it is “substantially complete” (no “work-in-progress” oversight by licensed inspectors hired by the buyer)

• If the buyer (or the buyer’s lender) causes closing to be delayed beyond the agreed upon closing date (unilaterally enforced upon buyer only), the buyer agrees to pay a penalty of interest on the full purchase price at 18% per annum for each day of delay

• The seller has a “targeted” (but unenforceable) closing date – per the contract the seller has 24 months to finish the home, no matter what they tell you

Additionally, in a clause that is utterly absurd in today’s lending environment, the seller reserves the right to cancel the deal (and keep the buyer’s earnest money) if the buyer cannot furnish a written loan commitment (with a completed appraisal as the only outstanding condition) within 30 days of acceptance.

So as you can see, there are some compelling reasons to read the contract, understand it, and negotiate on some of these points.

To blindly sign a builder’s contract is to waive 95% of your rights as a buyer, yet people do it every day.

One last tip for anyone looking at new construction… if you do pursue new construction, make sure a title company (and not the builder) holds your earnest money. With so many builders declaring bankruptcy, you don't want your earnest money deposit to be tied up in bankruptcy court. (But make sure your title company is solvent as well!)

New construction is most definitely a retail purchase in a value driven market, so buyers need to be careful. Read the contract. Write down your questions. And don't sign on the dotted line until you've reached a comfort level with builder and the builder's product.

Talk to other owners. Ask for bank references. Do your homework. Now, more than ever, it's up to buyers to get educated and choose wisely.

WHO'S TELLING THE TRUTH?

2011-02-10T18:24:00.000-08:00

Home sales numbers being reported by the National Association of Realtors are being disputed by First American CoreLogic, a data aggregator for the title insurance industry.

At issue: NAR reported that real estate sales in 2010 fell about 5%, to 4.9 million, while CoreLogic contends that there were only about 3.6 million completed sales last year.

The dispute is relevant because having accurate information about the current pace of sales is critical when determining how much excess inventory exists in the US housing market. It also indicates how long it will take for demand to catch up with supply, so a 30% overstatement (as CoreLogic contends) means that prices may be slower to recover and that the current national downtown may last even longer than has been forecast.

Based on CoreLogic's numbers, the nation's overall inventory of unsold houses stands at 16 months, while NAR reports an overall inventory of about 9.5 months. Here in Denver, our inventory of unsold homes is just over seven months.

CoreLogic argues that NAR's methodology for reporting home sales has not been updated since 2004, and with many MLS systems consolidating and a much smaller percentage of For Sale By Owner transactions, NAR's calculation formulas are out of date. In Colorado, for example, many of our MLS systems began sharing data in 2009, meaning that the same home sold in Denver could be reported as a sale in the Denver MLS, the Northern Colorado MLS, and the Pikes Peak (Colorado Springs) MLS, which could be interpreted as three sales when only one actually occured.

NAR is defending its numbers and its methodology, but it will be interesting to see where this goes. The truth is that what matters most is what happens locally, and our market continues to show more strength than is seen in national averages. But a slower real estate market does impact the overall economy, and if there are distortions in the numbers being reported by NAR, they need to be corrected.

THE LITTLE BOOK OF BULL MOVES

2011-01-29T16:43:00.000-08:00

What's happening today in the US economy is not an adjustment - it's an earthquake.

That's Peter Schiff's premise in "The Little Book of Bull Moves (in Bear Markets)", an interesting and somewhat scary read which argues that we have entered an era of economic deconstruction and deleveraging that's bound to continue for another 10 years.

Instead of producing goods of services to run the economy, the United States government has chosen to print money. In the next decade, Schiff argues, the economy will have to return to its traditional roots of producing and saving rather than borrowing and consuming if America is going to retain it's place as a global economic leader.

If the housing bubble has already popped, what's next?

Schiff believes that the next big government bailout coming will be for student loans, as millions of loans default and students walk away from billions of dollars in debt they cannot repay because the jobs they thought were waiting for them are no longer there. College education, Schiff says, is overleveraged in the same way housing was overleveraged. And because of it, tuitions have become artificially high because of the government's push to make college accessible to everyone.

That easy access to college-education financing is about to end, according to Schiff, and when it does, the price of a college education will fall and universities will see double-digit enrollment declines.

As America becomes poorer, Schiff argues, our service-based economy will suffer. Financing and banking services, retail sales, travel and tourism are all going to be hit hard. Somewhat surprisingly, Schiff is also bearish on health care, despite the fact our population is aging and more life-extending medical procedures are available than ever before. Schiff believes the government simply will not be able to afford to provide such high-level care and as individual wealth diminishes, citizens won't be able to take advantage of the advances in health care.

We'll see more foreigners, who are benefiting from rapid growth in their own production-based economies, coming to the US to take advantage of our health care innovations while Americans are priced out of the market.

What industries will be the next to cycle up? Schiff believes the winners in the next wave will be engineering, construction, agriculture, commercial fishing, computers and technology, textiles and anything related to the "New Energy Economy", which is big here in Colorado.

America has got to rebuild it's economic base, according to Schiff, and those industries that actually produce will be better situated than those which simply provide services.

Whether you agree or not with Schiff's viewpoint, "The Little Book of Bull Moves (in Bear Markets)" is a compelling read. It stimulates thought, and it's foundational points are worth considering.

We are all going to have raise our IQ when it comes to economics, and Schiff's book offers plenty of heavy and compelling theories to ponder.

REALTORS PROPERTY RESOURCE

2011-01-23T21:27:00.000-08:00

Realtors Property Resource is here! So what is Realtors Property Resource (RPR), and why does it matter?

In an age where more and more housing information is available at the fingertips of the consumer, the National Association of Realtors launched the RPR project three years ago in an attempt to ensure that Realtors stay relevant in a rapidly changing industry.

In short, NAR has poured more than $10 million into building a national database of houses. Type in any address in the country, and RPR spits out up to 40 pages of reports and data, including ownership history, mortgage history, property tax history, recent sales history, comparable sales history, school and community information… the list goes on and on. It's sort of like "Carfax" for houses.

So I can be sitting in my office in Denver and if someone calls me wanting to relocate, but has a home to sell in California first, in a few keystrokes I can see exactly what that house looks like, know its history, see the mortgage information, and assess its salability. It’s an incredible resource that provides information that’s infinitely more detailed than what consumers can find on Zillow or Trulia or any of the other real estate data aggregation sites on the Internet.

Most consumers don’t understand that Realtors pay thousands of dollars per year in memberships, associations, subscriptions, professional insurance fees and continuing education programs. And many agents are dropping out of the business because unless you are selling homes, the start up costs, day to day expenses and legal liabilities are just too high.

RPR, if used properly by agents, is a game-changer. It’s a valuable tool that will help agents make better assessments about neighborhoods, communities and specific parcels of real estate in particular. It increases the agent's knowledge base and give Realtors access to information that simply isn't available anywhere else. Kudos to NAR for delivering real value at a time when all agents need to be upping their game.

STAGING SELLS

2011-01-20T20:28:00.000-08:00

My current opinion about the local housing market is that there are two types of homes that are selling:

1) Beat up dogs, heavily discounted, and…

2) The nicest homes in a price range, with spotless interiors, quality finishes and great curb appeal, which still must be reasonably priced.

Beat up dogs, usually bank-owned rehab projects, account for about 10 to 15% of the market, and the turnkey beauties also account for 10 to 15% of the market. For the 75% of homes in the middle, it’s a tough road right now.

So how do you get your home to sell in this environment? The answer is obvious – you have to win the beauty contest while being willing to compete in the price war.

As part of my listing services package, I bring a stager in to look at every new listing I take. And based on her feedback, I will often have my sellers spend several days (and sometimes weeks) cleaning, decluttering, updating and polishing the finishes of their homes. New paint and carpet do wonders, as do clean windows, new fixtures and fresh towels. Removing as much as one-third of a seller’s personal belongings can create space and give flow to a previously cluttered home, and buyers will still pay for space and cleanliness.

In a good market, staging will put money in your pocket by raising the value of your home above the cost of improvements and cleaning. In today’s market, where half of the homes listed for sale in the Denver MLS never sell, it may not be as profitable (although it sometimes is), but it will get your home sold when others linger on the market for weeks and months.

Not everyone wants to stage and not everyone wants to clean. But then, not everyone is going to successfully sell their home, either. In this market, sellers have to outwork their competition, and that means doing what is necessary up front so that when a buyer walks through the front door, there are no objections and the feelings are all positive. Clutter, dirt, and deferred maintenance create confusion in the mind of buyers, and the confused mind will always say no when there are other alternatives available.

In my opinion, you have to focus on the first 21 to 30 days of market time as your one and only window to sell for a “retail” price. If you don’t move it in the first month, staleness sets in, and in this market, many buyers will carve you up on price once you have gone stale.

If you’ve got 21 to 30 days to capture that retail buyer, your home simply cannot be a “work in progress”. It needs to be a finished product, polished and ready. Buyers today want quality or value… anything in the middle just won’t do.

IF YOU’VE BEEN HERE, YOU KNOW

2011-01-16T15:24:00.000-08:00

One of my goals for 2010 was to spend at night at The Broadmoor Hotel in Colorado Springs. Annually ranked among the top five hotels in the United States, The Broadmoor is pure quality. From a 3,000 acre campus to a world class golf course to some of the best food in America, The Broadmoor stands tall as one of the crown jewels of American hospitality.

There was a trigger to my goal – and it was production related. The Broadmoor does not fit neatly into many budgets, so I set a production goal for 2010 which I reached on December 21. It was close.

Having spent my 24 hours at The Broadmoor (much of which was devoted to gathering my thoughts in the ornate lobbies and sitting areas and working on my goals and objectives for 2011), I wrote down some observations about what makes The Broadmoor so special.

1) Location – The Broadmoor has an incredible location and campus, at the foot of Cheyenne Mountain with jagged peaks, soaring evergreens and high blue skies fanning out behind the hotel’s famous façade. Cheyenne Lake separates the two main towers, and in the winter months the water freezes and geese land and take off from the frozen surface in dramatic formations.

2) Quality Finishes – Just stroll the hallways and look at the rooms. Hundreds of high quality paintings and photographs, marble everywhere, beautiful window coverings, roaring fires. There are six inch baseboards and 12 inch moldings. The chairs are comfortable, the bookcases ornate, the brass handles shiny and clean.

3) Attention to Detail – Once we identified ourselves to the valet, from that moment forward it seemed every employee at The Broadmoor knew us by name. Once we made our dinner reservation, every employee at the restaurant knew us by name. And this attention to detail doesn’t just stop with names… look at the windows. Every pane is crystal clear, probably cleaned twice a week. The shower was spotless. Not a speck of dust in the room. No cobwebs in the chandeliers. They don’t miss details here.

4) The People - Most places you go, hospitality workers come and go with the wind. Not at The Broadmoor. Our bellhop had been with the hotel 23 years. We talked to a concierge who had been there for over 15 years. And the valet who parked our car had been there for nearly a decade. It's rare to find a service industry that builds its brand around people, but that's what The Broadmoor has done.

The Broadmoor is the essence of quality, and that’s why I wanted to come here. I’m always interested in studying how to do things right, and in that regard, The Broadmoor sets a worthy example.

FIVE PREDICTIONS FOR 2011

2011-01-08T15:23:00.000-08:00

Okay, here we go with the start of a new year. What will 2011 hold?

For real estate, buyers and sellers are going to have to align their expectations with the new realities of our economy. Buyers want value and/or quality, and that means steep discounts and/or turnkey homes. Sellers have to understand the market of 2006 has no bearing on the market of 2011, and it would be wise to give some thought to the fact that over 50% of all listings placed in the Denver MLS last year never sold.

It's a price war and a beauty contest, which means another year of hard work and new challenges.

Here are five predictions for 2011:

1) On December 31, 2011, mortgage rates will be closer to 6% than 5%. This isn't a bold or daring prediction - in fact, it might be classified as "hopeful". The inflation grenade is in the room, in the form of $2 trillion in stimulus spending and a government which seems incapable of tackling the deficit. Higher gas prices, higher commodity prices and higher interest rates are all in the cards.

2) Rents continue to rise and vacancies fall. If there is any bounceback at all in the economy, the benefit will flow to landlords before homeowners. Rents have been on a steady upward march in Denver for three years, and statewide vacancy rates (led by Fort Collins, at 2.8%) are lower than they have been in years. With tighter lending standards and fears about the housing market, the pool of renters will continue to grow, and the cashflow numbers should get better and better for landlords and investors.

3) The rich get richer. I'm predicting a good year for Wall Street... but another lousy year on Main Street. Corporate takeovers are big right now, as healthy giants swallow up wobbly competitors, boosting market share and beefing up the bottom line while disposing of more and more workers. I'm not saying I agree with it - but it's what I see. A Wall Street rally will help some and hurt others. People with money are going to be able to buy what they want at incredible prices.

4) The high end of the market won't get any better in 2011. I've been sounding the alarm on the high end of the market for the past three years. In a contracting economy where people are hunkering down and living more conservatively, big is out. And what that means is that today, at price points above $1 million, there are 15 homes on the market for each one under contract. That's murder on prices, and it's going to continue for a while longer.

5) It's a great time to buy real estate, if it's priced right. Buyers really do have incredible leverage right now, with high inventories, motivated sellers, low rates and cash-flow opportunities for investors. Rising rates will be a concern, but the rise in rates will be offset by an improvement in consumer confidence. The bottom line is that if you think we're going to climb out of this malaise, the alignment of the stars is about as good now as it's going to get for purchasing homes at the median price or below in Colorado.

None of these are excessively outrageous predictions, but I'm not trying to shock anyone. It's just important to know which way the tide is flowing if you plan to swim in the ocean, because the quality of your decisions is based on the quality of your information.

What are the wildcards for 2011? Well, you never know what the government is going to do, or if there's going to be some new program or initiative that helps or hurts the market. Government regulation of condo lending (via Fannie and Freddie) has killed the condo market. A loosening of underwriting guidelines here could reinvigorate that sector of the market.

A strong Wall Street rally may help stabilize the higher end of the market, but a bad year on Wall Street could be devastating. What Congress does or doesn't do with taxes, health care, the national debt and ongoing deficit spending could affect rates and prices.

Then, of course, you've got the uncertainties of war, terrorism, employment and inflation.

The bottom line is that in 2011, just like in 2010, buyers need to be cautious and sellers need to be realistic. And that means making decisions with your head and not your heart.

FLIGHT TO QUALITY

2010-12-28T13:04:00.000-08:00

If I could give you one piece of advice heading into the new year, it would be this: align yourself with quality.

If you are a real estate broker, this means that you should align yourself with the strongest company you can find, the most skilled and ethical lender you know and a title company with the resources to be here ten years from now.

If you are a buyer or a seller, you start by hiring someone who can show you proven results, backed by a strong company, with a competent and well-developed network of problem solvers to help you get through your transaction in one piece.

Since 2007, nearly one-quarter of Colorado's real estate agent population has been re-careered. Over 200 title and closing companies have disappeared since 2005. And although it's not possible to pinpoint the exact number of mortgage lenders who have left (mostly because Colorado was one of only two states which required NO licensing or registration program of any kind for mortgage originators prior to 2007), estimates are 50% of the loan originators in business five years ago have quit the business since things got rough.

In short, this is a professionals' market. It is a consolidating market, and it is going to continue to consolidate for the next few years.

I am working a transaction right now with one of the most convoluded and crazy title issues I have seen in 16 years as a broker, one that involves a glaring error made by a title company eight years ago, and it is only because I have incredible support from a strong, supportive and influential brokerage and excellent resources in the title and lending arenas that we have a chance to save this deal.

You need a strong network right now because if you're going to be a part of this market, you will have to solve problems.

"Team" is the most important word in real estate right now, and whether you are a buyer, a seller, or an agent, you need a good one on your side.

In 2011, there is going to be a run on quality. And if you're doing things the right way, that should be reassuring.

COLORADO SCHOOL DISTRICT CENSUS DATA

2010-12-26T15:22:00.000-08:00

An old adage you often hear in real estate is "location, location, location." But perhaps a more contemporary way to look at it is to say "demographics, demographics, demographics."

As 2010 Census data begins to circulate, we always find some interesting trends and developments. Take, for example, the snapshot of education among the adult population in different Colorado school districts.

Statewide, 35.5% of the state's adult population had a college degree in 2010, which is fantastic on a national level and ranks Colorado among the top ten states for college graduates.

In Douglas County, however, the number is even more impressive - an amazing 53.4%. And that sets the stage for one of the most stable and desirable housing markets in the state.

In Aurora, by contrast, only 18.8% of the adult population has a college degree, and here you have seen more value losses and a higher number of foreclosures.

Denver presents an interesting study, as within the city you have a super-educated affulent class (15.3% with graduate degrees and 39.2% with bachelor's degrees), and a struggling underclass (7.5% of adults with less than a 9th grade education and 16.7% of the population without a high school diploma).

In the new economy (higher unemployment, increased competition), the emphasis on skills and education figures to widen the socio-economic gap between well-educated and under-educated communities.

The good news is that, in Colorado, nearly 89% of the adult population has a high school diploma. That puts us on good footing going forward, but it will be critically important to maintain those high numbers and for policymakers to keep higher education accessible and affordable.

ANOTHER CRAIG'S LIST SCAM

2010-12-12T16:25:00.000-08:00

I was contacted this week by someone in my sphere of influence who called to ask my opinion about a rental posting she saw on Craig's List. "This looks like a really nice place," she said. "And the price is more than right."

"But the guy wants me to wire him money before I've even seen the place. Do you think it's a scam?"

My default reaction on these things is one of healthy skepticism, because when something sounds too good to be true, it usually is. The number of real estate related scams is at an all-time high, and there are more scammers pouring into the arena every day.

I promised to do a little digging, and here's what I found: the name of the person offering to rent this property appeared nowhere on title. In fact, I could not find a record of his name anywhere - on Facebook, through a Google Search, via LinkedIn. It was like the guy didn't exist.

But then I Google Searched the property address and found... the exact same property listed about ten days earlier on Craig's List, offered by the owner on title, for $995 per month.

The scammer essentially "hijacked" the Craig's List posting and made it his own, telling prospective renters he was active duty military and serving overseas and was therefore unable to facilitate a face-to-face transaction. What he basically said was, "Wire me the first month's rent and a security deposit, and the place is yours."

I advised my friend to discontinue her communications immediately and move on as quickly as possible.

I have seen the same game played with foreclosures, where scammers get access to the bank's lockbox code, pull the sign from in front of the house and get to work on renting it out. They rent it below market with a bogus lease, collect the first month's rent in certified funds, hand over the keys and then disappear.

As the homeownership rate continues to decline and the number of renters continues to increase, scams like this are not going to go away. And when there's a lot of money involved, the scams are going to be more sophisticated and more numerous. Do your homework. And then double check everything.

THE IMPACT OF RISING RATES

2010-12-10T13:00:00.000-08:00

Mortgage rates have risen by almost 75 basis points in the past month, and there is a lot of anxiety in the market over what this means. I have been expecting rates to bounce for over a year, and while you can hardly call 30-year fixed rates in the high 4's problematic (come on, people!), it is important to understand the effect this has on a buyer's ability to qualify.

The rule of thumb with rates has always been that a one percent increase in rates will decrease your purchase power by about 10%.

In other words, if you look at the attached graphic, you'll see that a $400,000 loan at 4.50% carries a monthly principle and interest payment of $2,026.

If rates go up one percent, to 5.50% percent, and you still want a payment that's basically the same in the same neighborhood, you can only do that by reducing your loan amount to $360,000.

In effect, you're borrowing 10% less money for the same monthly payment.

I have felt for a while that rising rates are not necessarily a bad thing, at least in the short term, because there is an army of qualified buyers out there that have simply been biding their time waiting for things to "hit bottom".

The jump in rates this week was in reaction to the proposed extension of the Bush-era tax cuts, along with another 13-month extension of unemployment benefits. Bond traders basically took this as evidence that neither political party is serious about tackling the national debt, and if the country is going to continue to be flooded with fresh currency, rates must rise.

Rates in the 4's continue to be a gift, but the clock is ticking. Affordability may never be higher than it is right now, at least in the lower priced tiers of our market.

LIVING WITH PARENTS VERSUS THE HOME OWNERSHIP RATE

2010-12-06T11:41:00.000-08:00

Check out this amazing graph from economist Tom Lawler, which takes government housing survey data to track the national home ownership rate among 25 to 34 years and compares it to the percentage of 25 to 34 year olds living at home.

According to Lawler, between 1994 and 2005 the home ownership rate among 25 to 34 year olds increased by nearly 30 percent, to an all-time high of 13.5% at the peak of the housing boom.

Conversely, since the housing bubble burst, the number of 25 to 34 year olds who have moved back in with mom and dad has spiked from less than 37% in 2004 to almost 43% today.

Lawler's study confirms what many of us perceive to be the case, based on conversations and anecdotal stories we hear all the time. Gen Y is rapidly becoming the "Boomerang Generation", but the real question to be answered is how long this trend will continue.

If you're banking on any kind of economic recovery, you must presume that large numbers of these "Boomerangers" are going to leave home again. Whether they choose to rent or choose to own, there's going to be added demand in the market, which certainly won't hurt landlords or homeowners.

Historically, on the other side of every boom there's a bust, and on the other side of every bust there's a boom. This chart shows where some of the demand will come from just as soon as this economy starts to create jobs again, whenever that may be.

DID YOU CREATE VALUE TODAY?

2010-11-29T05:39:00.000-08:00

It's a fact: By the end of this year, nearly one-quarter of the Colorado real estate agents in business three years ago will have quit the business.

What are the reasons for this?

Well, the easy thing to point to is transaction volume, since NAR estimates that this year we'll see a total 4.82 million closed transactions in the United States, down almost one-third from the all-time record of 7.08 million sales in 2005.

So there's less fruit on the tree, and none of it is low-hanging.

Selling in this market is difficult. It's true - for many agents, selling real estate is hardly enjoyable. It's not fun when a seller has to bring a large check to closing to get out from under a house he or she has faithfully made payments on for five years. It's not fun to negotiate a short sale for four months only to see the deal fall when the buyer walks away. It's no fun when buyers want to lowball, sellers won't (or can't) make repairs and fear and loss are the overwhelming emotions in the market. No, that's not fun.

Prices have also fallen across the board, which means smaller commissions. In fact, estimates are that total real estate commissions will be down nearly 50% this year compared to the high-water mark in 2005.

So the work is harder, the checks are smaller, and the clients are fewer.

But what about the agents themselves? Just as the tide as has gone out on the US economy, so has it gone out on average real estate agents. And there's the word that makes all the difference - average.

If you have settled for being average, the market for average real estate agents no longer exists. Buyers and sellers today don't just demand your presence - they demand your expertise and integrity.

And so the consolidation taking place in the real estate market comes down to this... if you can create value for your clients, you will survive. If you can't, you won't.

* Did you educate your buyers about the purchase contract, or did you just ask them to sign it?

* Did you show your seller how you will market his home, or do you just hang a lockbox on the door and hope?

* Did you return that call promptly, or did you ignore it?

* Have you attended classes to learn about the important changes in the 2011 contract, or are you just going to wing it?

* Did you hire a professional photographer? Did you shoot video? Will you stage the listing?

* Did you engage and creatively respond to the buyer who submitted a lowball offer on your listing, or did you simply let a potentially motivated buyer walk away?

There are so many examples of how we can create value for our clients. If we can do that, we'll get to the other side of this market.

But it's up to you. If transactions are down one-third from 2005, you need to be at least 50% better than you were in 2005 to survive this market. Go get your CRS. Or GRI. Or CDPE. Get educated, get motivated, get inspired.

This market requires tenacity, creativity, authenticity and action. Do you spend your energy creating a better you, or do you spend your energy hoping for the return of a market that's not coming back?

It's time for all of us - those of us in real estate and those of us in every other line of work - to rise to the challenge.

WHAT'S NEXT FOR INTEREST RATES?

2010-11-27T10:24:00.000-08:00

Interest rates, interest rates, interest rates... what's going to happen with interest rates?

We have seen a lot of volatility in November with rates, as they have bounced in a wide range of about 75 basis points. It's been bumpy, for sure, which leads to the question... how much longer can we have rates in the 4's?

I have been ringing the inflation bell for the past year, and in the name of disclosure, I felt we were headed higher when rates were in the low 5's. And while commodity prices like those for corn and oil have soared, interest rates haven't followed suit. So I've been wrong before.

But the chart above shows why the low rate party of the past two years has to come to an end, sooner or later.

The bottom line is that today's economy is growing, albeit slowly. The rates my clients are able to get today are rates from the 1950s... but the decade ahead is likely going to be a decade of higher than normal inflation, increased volatility, higher unemployment and more uncertainty. In other words, when you can lock in a good deal, you should take it.

GDP in the second quarter increased by just over 3%, after falling 4% in the second quarter of 2009. If you look at the chart above, it's a bounceback. Now most of that growth came from government spending, but isn't government spending by its very nature inflationary?

I have said for a while that rates in the low 5's would actually do more to help our market than rates in the low 4's, because when we see rates really start to lift it will cause an army of fence sitters to finally take action. And there are many, many buyers on the fence these days.

I also think the start of 2011 is going to be better than most pundits think. Granted, we're not going back to the boom-boom days of the early 2000's any time soon, but we'll certainly see a market better than the one we've been dealing with during the second half of 2010.

People are not necessarily feeling better about the economy, but feelings change only after perceptions change. I have been saying to my clients for months that "they don't offer rates in the 4's because everything is perfect." There has to be some step of faith to take advantage of these rates, but I believe that most buyers who take action today are going to be well positioned for years to come.

AN IMPROVING RENTAL MARKET DRAWS MORE LANDLORDS

2010-11-22T05:34:00.000-08:00

I recently advised one of my sellers who had been on the market since July to consider pulling his home off the market and renting it out. This particular seller, whose home had been adversely affected by a number of foreclosures in and around his neighborhood, had taken a job transfer out of state and was essentially making "double payments" while waiting for his home to sell.

The home, a cute three bed ranch with a full basement built in the 1970s, was clean and neat. It was well cared for and priced about 6% below what my client paid for it (when he worked with a different agent) three years ago. And while we got a fair number of showings and generally positive feedback about condition, the bottom line is that there were similar models in the area that sold for less because they were bank-owned.

It was frustrating, because circumstances beyond my client's control were affecting his ability to sell.

When he made the decision to pull his home off the market and rent it, perceptions almost instantly swung 180 degrees. Prospective renters swarmed for the property, with multiple rental applications coming in within hours, not weeks.

My client was able to get almost $200 more per month than he originally thought possible, with a full security deposit and a two year lease. And by refinancing in the low 4's, he lowered his mortgage payment to where he now has positive cash flow on his former residence.

Every situation is different, and I'm not universally advocating that sellers should pull their homes off the market and rent them. Not at all. Landlording is not for everybody, and there are potential costs and headaches that should cause you to think long and hard before you offer your home for lease.

But the incredible rental market we have today is going to be around for a while, and we will see the number of landlords (both willing and reluctant) continue to increase as the home ownership rate drops.

If you are an investor, you already know about this market. But if you are a homeowner with an urgent need to move, landlording may be a viable consideration.

I've got excellent property management referrals in all areas of town. If you are considering renting your home, let me put you in touch with someone who can help you get educated about the pros and cons.

THANK YOU FOR A TERRIFIC CLIENT APPRECIATION EVENT

2010-11-20T15:47:00.000-08:00

Thanks to everyone - nearly 90 of you, in total - who came out this morning for my Megamind Client Appreciation Event at Colony Square.

We had a terrific mix of past clients, business partners and friends on hand for the show, which has been the top-grossing movie in America for the past two weeks.

The story of Megamind was interesting, as well, as the movie explored the themes of good and evil, rights versus responsibilities and love's enduring power to change people - even grimy little blue men with large heads, like Megamind.

Please know the hugs and handshakes today were heartfelt. I have great gratitude for everyone who has contributed to my business and my life. Today's movie was just a small token of appreciation for the wonderful tapestry of friendships with which I have been blessed.

Thanks again for coming out. As with our previous events, like the Switchfoot concert at the Ogden last spring and the Omni Dessert Buffet last fall, we aim to make these experiences fun and memorable.

It was great to see you all.

RUBBER BALLS AND CRYSTAL BALLS

2010-11-14T22:01:00.000-08:00

I attended an outstanding seminar last week featuring Steve Scanlon with Building Champions. Steve is a professional business coach who specializes in working with professionals in the fields of mortgage and real estate. I have attended live events with Steve each of the past two years and the ideas I have taken away (and implemented) have made a tangible difference in my work and my family life.

I have participated in many personal and professional coaching programs through the years because I believe that investing in yourself is about the most important thing you can do. Our lives and our workplaces are complex and demanding, and it's easy to lose focus and become distracted. We need to become world-class problem solvers, at work and at home. We need to create value for our employers (in my case, the readership of this blog) and lead our children with clarity. We need to be more productive, more focused, more intentional and more connected.

Years ago, Jim Rohn said "We all have two choices. We can face the pain of discipline, which weighs ounces, or we can face the pain of regret, which weighs tons."

Discipline or regret. That's often the difference between success and failure, happiness and sorrow, victory and defeat. We must be disciplined in our actions, our thoughts, our relationships, our ethics... or one day we will bear that heavy weight of regret.

The theme of Steve's message this year was emotional health. Specifically, how we can keep emotional health in challenging and uncertain times.

He said, “We all have lots of balls in the air, because it’s the nature of our business. We all get overwhelmed and sometimes become reactive when we want to stay in control. But here’s the important thing: some of those balls you are juggling are made of rubber, and some of those balls... like your health and your family... are made of crystal.”

Steve’s point is this… we all have lots to do, but not all that we do is of equal value in the grand scheme of our lives. Mess up your health, and that’s a crystal ball that will shatter into a thousand pieces. Screw things up with your family, and that’s an explosion of slivers and shrapnel that you might not be able to fix.

Recognize that your life is busy… but recognize that your time is limited and valuable. A mysterious someone you've never met who calls off a yard sign at 4 p.m. on a Sunday afternoon and demands to see a home in 30 minutes may not be more important than attending the school play your daughter has been working on for three months. (Yes, I have goofed this one up before)

In the end, we have to stand for something more than a commitment to be insanely busy, out of control and hyper-accommodating. Draw some lines and protect some aspects of your life, or the demands of this crazy market will burn you out and leave you empty.

I have shown many homes on Sunday afternoons to people I do not know. And I have missed events in my family life that I wish I had attended. Sometimes doing your job well is going to require a price (discipline), but don't mistake working like a dog for being a good husband or father. You need to have clarity, and you need to recognize which balls are made of rubber and which ones are made of crystal.

CLIENT APPRECIATION EVENT COMING UP NEXT SATURDAY!

2010-11-12T14:57:00.000-08:00

On Saturday, November 20, I'm hosting another Client Appreciation Event. This time it's a private screening of the new DreamWorks film MegaMind, starring (the voices of) Will Ferrell, Brad Pitt and Tina Fey.

MegaMind is the story of two alien children sent to earth because their home planet is about to be swallowed by a black hole. Through crazy circumstances, the two alients land in opposite realms of good and evil. Eventually, the virtuous, stately Metro Man (Brad Pitt) squares off against the sinister, devious MegaMind (Will Ferrell) and they become archenemies.

From there, the story takes many unexpected (and comical) twists and turns, but you'll have to join us to see how it all turns out.

We still have tickets available... but I need to provide a final headcount to the theater by Wednesday, so please email me for showtime and location information. We would love to add your name to our guest list!

Thank you again for your business, and your referrals.

Hope to see you next Saturday!

FALL STAGING TIPS

2010-11-08T19:55:00.000-08:00

Thanksgiving is almost here, which is often a tipping point for sellers looking to move their homes. Because of the seasonality of our market, the period from Thanksgiving until early January can be a real dead spot, and listings that don’t offer superior value or breathtaking condition can be highly challenged.

Take heart – I am not afraid to market listings during the holidays! Although your showing count will almost certainly go down, sellers need to realize that buyers out in November and December (especially on cold days) are often far more motivated that many of the recreational summer shoppers who tour homes during busier times.

But because the stakes are higher with fewer showings, sellers need to be certain their homes are in absolute tip-top condition. Here are a few seasonal hints that can make your house feel like a home:

1) Brighten things up – with shorter days and less natural light, higher wattage bulbs can be a valuable selling tool. Light and warmth are hot buttons for buyers, so focusing on extra light is a smart staging strategy.

2) Flowers – nothing says you care like flowers. That may be the case in relationships, but it also applies to homes. Flowers convey a sense of care and commitment that can make a difference with buyers, and they’ll add some extra life to any space on those colder, darker winter days. Add some color to your kitchen, bathrooms or master bedroom with some fresh cut flowers.

3) Decorative lighting – be careful with this one, because you can overdo it. But good illumination, both inside and out, can add character and drama to your home. Consider using low voltage lights to highlight branches of an outdoor specimen tree, a front door, or a walkway. Consider backlighting a ornamental tree inside your home, or using a few decorative lights around a banister or railing.

4) Frame a local scene – artwork can have a great impression, especially with buyers from out of town. Look for local scenes, or mountain vistas with a Colorado flavor. Add a picture or two to your bathrooms or place one of John Fielder’s terrific Colorado photo books on your coffee table.

5) Entice them at the entrance – buyers always place extra emphasis on the front door. This is often where they draw their first impressions while waiting for their agent to open the lockbox and pull the house key. Keep this area extra clean (no cobwebs!), paint doors and trim and if your storm door is older, consider upgrading. If the front door doesn’t open and close cleanly, buyers will immediately start looking for other signs of deferred maintenance, and that will cost you in dollars and cents when you finally see an offer.

Selling in the fall and winter months is not impossible, but it does require more preparation. By listing your home when there is far less competition, you’ll have an advantage that could yield a better price and a less stressful experience.

THE FED GOES "ALL IN" ON HOUSING

2010-11-03T05:56:00.000-07:00

Later on this morning, the Federal Reserve will announce that it is going resume purchasing treasuries, a strategy it used in 2009 to drive interest rates lower by essentially creating money to purchase IOUs (notes), which will need to be repaid in the future.

What does this mean in English? In simplest terms, the Fed will once again be pushing large quantities of currency into the system with a promise to pull it back later on.

There is legitimate debate among economists about whether flooding the economy with money will create runaway inflation and, ultimately, much higher interest rates. Right now, with unemployment at 10% (much higher when you consider the number of people who have simply quit looking for work), the Fed simply has to take a stand.

Inflation, at least in the short term, is the goal. Prop up home prices, encourage banks to lend more, kick start the economy... that's the intention here.

If it works... we will likely see a short term drop in interest rates, we'll see home prices stabilize, we'll see banks start to lend and companies will hire and expand because of the availability of "cheap money". The stalled economy will get moving again. Once there's traction, the Fed will then aggressively start pulling money out of the economy, which it will do by raising short-term interest rates.

If it fails... well, this is not a good scenario. The Fed would likely have no choice but to keep pouring money down a hole until it finally has some effect, at which point runaway inflation will be almost inevitable.

This is a high stakes move and it will impact almost every American household, one way or another. We had better hope it works.

SMART TALK

2010-10-25T08:25:00.000-07:00

Having clearly defined goals is like having the picture for a 1,000 piece jigsaw puzzle, according to Lou Tice in “Smart Talk”. Goals help you to figure out where the pieces fit, they heighten your awareness to people and opportunities that can move you forward, and they create the “constructive dissonance” that drives you to make adjustments to move from where you are to where you want to be. Goal setting sets energy in motion toward a desired outcome.

The problem most people have is that they don’t clearly define their goals.

Well thought-out goals create dissonance between what we want and where we are. And it’s that discord between the “better reality” and the “present moment” that inspires action, creativity and new ideas.

For many years, I was not an avid goal setter. During that season of my life, I let things come to me. That was a mistake. You either make things happen, or you let them happen. Guess which approach yields better results?

Great performers FOCUS on the result the want. To use a quarterbacking analogy, they selectively filter out the things they don’t need so they can find the man standing alone in the back of the end zone. That kind of focus pays off, and it’s a learned skill.

In Tice’s words, deliberately taking yourself out of your comfort zone is called "adventure". And to live life to the fullest, to make it an adventure, we must get comfortable being uncomfortable, because that is where discovery is found.

GROWING OR DYING

2010-10-24T14:08:00.000-07:00

I recently posted to this site the fact that nearly one-quarter of the agents selling real estate in our market three years ago have quit the business. NAR membership in Colorado, which peaked near a high of 27,000 in 2007, now stands at just over 21,000, with many more agents on the way out.

Certainly this is a difficult market, and there simply are not enough transactions to support the weight of that many agents. But there's also a lesson in this... survival is a biproduct of taking active steps. If something doesn't work, you need to change it. If something does work, do more of it. But to simply keep doing what you've been doing while the tides goes further and further out is the recipe for slow and certain professional death.

I recently began holding open houses again, after going over a full year without doing a single one. Now there's nothing wrong with open houses... in fact, if you want to know the truth, open houses are one of the most dollar-cost productive activities in real estate. You may read the studies and listen to the talking heads and think that home buyers do all of the shopping on the computer... but you would be wrong. Lots of people still get out on Saturday or Sunday afternoon and drive neighborhoods, looking for open houses.

Now showing up an open house is a good start, but it isn't enough. I will normally print flyers one or two days in advance and then knock on doors, inviting neighbors to the open house. Early on the morning of the open house (not five minutes before the open house), I will post 12 to 15 directional signs in the area, directing people to the property.

And then when people show up, I have snacks, fruit trays, bottled water, hot coffee and most importantly, LOTS OF MARKET INFORMATION. I won't chase buyers around a house or hound people who don't want to talk. But if someone has a question, I'm going to have a full, thorough, complete and documented answer. Because at that moment, I have the opportunity to start a relationship.

There are lots of examples of things people don't like to do, but which yield proven results in real estate. Most of them involve talking to strangers, which many agents don't like to do. Get over it.

If you intend to make it across the river, to 2012 or 2013 or whatever year it is when this market heats up again, you're going to need to be proactive. You're going to have to get outside of your comfort zone.

So recognize that no one feels sorry for you. No one cares about your problems. You have a choice, and it's a simple one. Will you commit to growing, or will you choose to die? Because the skills that got you to where you are today will not be enough to see you though tomorrow.

WHAT IT MEANS TO "ENHANCE" A LISTING ON REALTOR.COM

2010-10-21T20:09:00.000-07:00

In a market where over 50% of the listings entered into the MLS today will ultimately either be withdrawn or expire without selling, it's never a bad idea to go back to the basics.

When I first meet with sellers, I review with them my comprehensive marketing plan... a marketing strategy that actually involves 71 different steps and commitments I pursue to actively market and sell your home.

One of these steps involves "Enhancing" my listings on Realtor.com. What does that mean? And why is it relevant?

Let's start with Realtor.com. Although there are hundreds of sites where your home will receive exposure when you list with me, Realtor.com is the elephant in the room. Owned and operated under an agreement with the National Association of Realtors, Realtor.com attracts a global audience of over six million unique visitors each month, and more clients start their home search with Realtor.com than any other real estate site.

Realtor.com is also a "for profit" enterprise, which means the site makes money in two ways: 1) by selling advertising space, and 2) by selling "enhancement packages" to Realtors who want to better promote their listings.

The cost to enhance listings on Realtor.com can be steep. Using a formula based on the median home price for a region coupled with the number of listings the agent has taken in the past 12 months, the cost for a one year enhancement contract can easily reach $1,000 or more.

So what does enhancing do? In short, there are three main benefits.

First, the listing is displayed at the top of the search results whenever its parameters are met in a home buyers search. If a dozen listings fit the search profile based on criteria a visitor has entered, those two or three listings that are enhanced will be displayed first, followed by the generic listings.

Second, the listing information is enhanced, with up to 25 photos (instead of four), the ability to upload virtual tours (which I always utilize) and much more detailed and descriptive property information.

The third relevant aspect of enhancing is simply that the listing agent gets proper exposure with the listing. In other words, while the listing broker's office information will always be shown with a basic Realtor.com listing, unless that agent has paid for the upgrade package, he or she will not have their phone number, website and personal contact information attached to the listing.

From the seller's perspective, missing out on Realtor.com upgrades is a big deal. And most seller's don't even know what they're missing.

According to Realtor.com, about 20% of agents subscribe to the upgrade package. Which means 80% do not. If you were sellilng a home, wouldn't asking about Realtor.com enhancements be a good question to ask?

THE FALLOUT FROM B OF A'S FORECLOSURE MORATORIUM

2010-10-12T06:58:00.000-07:00

Bank of America announced last Friday that it was halting foreclosure proceedings in all 50 states so it could perform an internal review of its foreclosure processes. This follows the announcement that several major lenders in 23 "judicial foreclosure" states (i.e. states that require a court hearing before a foreclosure in finalized) have suspended foreclosures after concerns arose about the legitimacy of those proceedings.

Much has been written about this in the past five days, and it is a complicated and tangled web. The one thing I am convinced of is that this latest injection of uncertainty is not going to help the housing market, the economy or the public's perceptions of banks. It will also make some attorneys rich.

There are basically two material concerns at issue here that are being investigated:

1) Right to foreclose – does B of A (or whomever) actually OWN the loan they are foreclosing upon, and do they have the legal right to foreclose? Attorneys for foreclosed homeowners are asking that, prior to foreclosure, the original note and deed be produced by the lender. Because many of these loans have changed hands so many times (loans originally funded by WaMu, Indy Mac, Countrywide, etc.), in deals that were often brokered under severe duress by the federal government, the banks literally have no idea where thousands of these notes and deeds physically are located.

2) Costs and fees – at every stage of the foreclosure process, there are fees and penalties that are piled on to the borrower’s debt list. Attorney fees, publication fees, filing fees etc… in the 23 so called “judicial foreclosure” states, the bank is supposed to submit an affidavit verifying that these fees have been reviewed and are legitimate prior to foreclosing. The truth is that employees at Bank of America have admitted signing up to 300 of these affidavits in a single day, which means that the costs, fees and legal mandates are not being verified prior to foreclosure.

When clients sign a note and the deed of trust, closers often joke that the 15 page deed can be summarized in ten words. “If you pay, you stay. If you don’t, you won’t.” At the moment, that summation is in doubt.

These cases right now are not going to “save” any homeowners. They are simply going to cause delays and inject more fear and confusion into the housing market, which cannot help the recovery process or the nation's fragile economy. The sensational headlines may also motivate thousands of underwater or unemployed homeowners to default on their loans, since the once-obvious connection between not paying your mortgage and losing your home seems to be increasingly fuzzy.

The real agenda here, in my opinion, is a shakedown against the banks by trial attorneys, who have spotted a weakness in the system and who know that no one has deeper pockets right now than the banking industry (thank you, taxpayers).

This is a very negative development because really, there are only two things driving the housing market today, and that’s buyers in search of quality and/or value. And foreclosures represent value. Take that out of the equation, and what do you have left?

Let's think one step down the line on this so you can see the kind of chaos we are talking about here... let's say that five years ago, you took out a Visa card with Washington Mutual. WaMu goes under, the accounts get transferred to Chase, and today you owe $21,000 on that card. You don't deny that you spent the money, or that you have a legal obligation to pay it back.

But using the same logic that's bottling up the foreclosure process, you demand that Chase supply the actual written agreement you signed when you took out the card so you know they are in fact the correct creditor. Could they do that? What if they can't??

That's why this is a mess. We are all for ensuring that there is "process" and that fairness be a part of this discussion. But really, in my opinion, this is just a massive shakedown that won't ultimately save any homeowners from wrongful evictions.

It's about the fact banks have deep pockets (courtesy of taxpayer bailouts and government-arranged mergers) and that certain trial attorneys see an opportunity to make a killing. A killing which could further delay any recovery in the housing market and in the larger economy.

WHAT TYPE OF RECOVERY ARE WE GOING TO HAVE?

2010-10-10T22:51:00.000-07:00

The goal here is to educate, not to scare.

Before you have a reaction to this post, keep in mind that there are two sides to every coin. You want a 30 year fixed rate at 4.25%? I'm sorry, they don't offer those rates when times are flush.

We are arguably living through the most challenging economic times since World War II.

Check out the job losses associated with the Great Recession as they relate to other periods (chart from Calculated Risk):

Tracing back 33 months, we see that we have lost more than 5% of the nation's jobs. The only recession that comes close, by comparison, was when we went through a national recalibration immediately after World War II.

Now the issue we all have to decide upon - anyone who plans to participate in this economy - is whether the graph of this recession is ultimately going to look like a V, some form of a U, or an L.

If it's a V (and it won't be), we're going to come launching out of this recession any moment and it will all go down as a bad dream. Too late for that - didn't happen.

If it's a U, and there's evidence to support that's the direction we're headed, we're in for a long, slow period of recovery that may never actually get us back to where we sat 33 months ago. If you work, improve and focus, you'll come up with the curve. If you don't, the bottom of the U may be where you stay.

And if it's an L, 10% unemployment is the norm (17% - 20% if you count those who have quit looking altogether), the stock market will continue to deflate and the housing market will stagnate for years.

Would it be worthwhile to spend some time getting educated on what's happening with the economy? Would it be helpful to know if we're headed for a V, a U or an L?

Having an informed opinion about where we're headed is the difference between finding amazing opportunities or throwing good money after bad.

I have said for some time that one consequence of the Great Recession is that we're all going to have to improve our skills, our work ethic and our level of commitment if we want to maintain our current standard of living.

We're also going to have do a better job of educating ourselves about economics, because the recovery that's coming is going to reward those who understand it.

HAPPY NEW YEAR'S EVE!

2010-09-30T09:51:00.001-07:00

A simple reminder to my friends in the business... are you ready for 2011?

An old real estate coaching axiom goes like this: "Whatever actions you take today will determine what your income looks like 90 days from now."

That means your economic realities for January 2011 are based upon your actions in October of 2010.

So are you thinking about pumpkin patches, turkey dinners and holiday parties? Or are you taking listings, showing properties and working on your business plan?

2011 is not going to be an easy year. In Colorado, we have lost nearly one-quarter of the agents who were in business just three years ago. And a bunch more are on the way out.

So who survives? Those who work. Those who invent. Those who create. And those who do not lose focus.

Enjoy that glass of champagne tonight. Because tomorrow the New Year begins!

WHAT WOULD WARREN BUFFETT DO?

2010-09-26T09:02:00.000-07:00

BRACING FOR THE ROUGH ROAD TO COME... AT LEAST AS IT WILL BE REPORTED

2010-09-23T09:24:00.000-07:00

Over the next few months, I predict we are going to see some absolutely brutal headlines about the real estate market, both nationally and locally. But will it really be as bad as it sounds? Or is there a larger picture to consider?

Let's start with the numbers we already know about. We've all seen reports about the dropoff in year-over-year activity since the tax credits expired in April. The overall number of Denver area homes under contract in August, for example, was down 22% from a year ago.

Part of this is because so much demand among first-time buyers and move-up buyers was pulled forward into the first four months of this year. That's a fact. So some buyers who may have waited until the fall were part of the spring frenzy.

But the other factor that's going to make the headlines look bad is that a year ago at this time, our market was piping hot because buyers were scrambling to beat the original November 30 tax credit deadline. Last fall was an artifically super-charged market, and this autumn we are seeing an artificially depressed market.

Compare the numbers side by side, and it's going to look bad.

But let's go a little deeper, because the reality is there are most definitely some "green shoots" in the data.

Let's start with a more in depth look at the August numbers. Last month, just about 2,800 homes went under contract in the Denver MLS. One year ago, by comparison, nearly 3,800 homes went under contract during the same 31-day period. That's a 27% drop, which is consistent with the kind of negative headlines we saw.

Drop back to 2008, however, and we see that in August about 2,800 homes went under contract - exactly the same level of activity we are seeing today. And that occurred with buyers pursuing the original 2008 $7,500 first-time buyer tax credit.

Now it doesn't sound so bad.

I'm firmly convinced that the next four months are going to create some extraordinary opportunites for buyers, because negative (but mostly superficial) headlines will hurt market pyschology. Fence sitters will stay put, and sellers will have to make additional concessions to compete. Interest rates will stay low, at least through the end of the year.

Psychology will start to change quickly at year end as the direct comparisons to the super-charged numbers from last year die out. The headlines will start to look a lot better, and at that point I expect to see a true shift in attitudes about the housing market.

Wait until then, and you're likely to see higher rates, more competition, and sellers far less eager to negotiate. This is exactly why so many investors are in the market right now, and why a lot of people are going to do well purchasing real estate in the final quarter of 2010.

THE 15 MOST "UNDERWATER" STATES IN AMERICA

2010-09-22T08:45:00.000-07:00

The San Francisco Chronicle recently compiled a list of the 15 states with the highest percentage of "underwater" mortgages:

1. Nevada: 69.9% of all mortgages

2. Arizona: 51.3% of all mortgages

3. Floria: 47.8% of all mortgages

4. Michigan: 38.5% of all mortgages

5. California: 35.1% of all mortgages

6. Georgia: 27.8% of all mortgages

7. Virginia: 24.3% of all mortgages

8. South Dakota: 23.8% of all mortgages

9. Maine: 23.8% of all mortgages

10. West Virginia: 23.8% of all mortgages

11. Louisiana: 23.8% of all mortgages

12. Mississippi: 23.8% of all mortgages

13. Wyoming: 23.8% of all mortgages

14. Maryland: 22.9% of all mortgages

15. Idaho: 22.7% of all mortgages

The national average for underwater mortgages is 23%, according to First American Core Logic. Approximately 20% of Colorado mortgages are underwater, based on First American's automated valuation model.

AUGUST WRAP - BUYERS HAVE UPPER HAND

2010-09-20T11:34:00.000-07:00

Market statistics for August are now out, and as I do every month, I've culled through the numbers to provide this latest snapshot of what things look like in the Denver housing market.

From a raw data standpoint, it's not pretty. Overall inventory is now up 14.4% from a year ago, the fifth straight month where we've had more homes for sale on a year-over-year basis after nearly three years of steadily declining inventory.

The absorption rate held steady at 9.03 months, up 80% from when the tax credits expired in April but well below the 12 months of inventory we see on a national level.

And there are just over five active listings for each home under contract, which means in the most basic sense sellers are competing with five other sellers for each buyer writing a contract.

Of course, there is some good news, too, although you have to go a little deeper to find it. The overall number of homes that went under contract in August - about 2,800 - is right in line with sales activity from August of 2008. The numbers only look soft because this year's data is being compared to last year's data, and at this time last year the tax credit was driving a red-hot market, especially at the entry level.

We also saw a new report showing the overall number of completed short sales is up 48% from one year earlier, a clear sign that banks are finally looking for ways to liquidate inventory without the full tab brought on by a foreclosure.

30-year fixed rates remain in the 4's and unemployment is mostly holding steady in Colorado.

Overall, it's not a great market, but it's not as horrible as the headlines are making it out to be. If you are a seller, the negativity in the headlines is going to affect you. Nothing good is going to be reported for the next few months, and so buyers are likely to remain in ultra-cautious mode.

For buyers, however, there is some opportunity. The combination of low rates, ample inventory and negative headlines should be empowering and put you in a better negotiating position. And if you believe that things are going to get better at some point economically, you've got about a 90 day window to play the very negative headlines to your advantage.

By year end, when we stop comparing our sales numbers to the artificially charged data from a year ago, the data will look better (even if the market is the same) and the headlines will start to get more optimistic. Of course, in reality, the market is not much different than it was in 2008, except that interest rates are lower. It's the perception that's different, and perceptions make all the difference.

ONE IN FIVE COLORADO REALTORS HAVE LEFT THE BUSINESS SINCE 2007

2010-09-19T15:42:00.000-07:00

The National Association of Realtors reported this week that its membership in Colorado has fallen more than 21% in the past three years, from 27,000 dues-paying Realtors in 2007 to fewer than 22,000 today. In a related item, the Colorado Association of Realtors has announced that after 90 consecutive years of holding its annual convention at The Broadmoor Hotel in Colorado Springs, CAR is terminating its contract with The Broadmoor after this year.

These are hard times for Realtors, as they are for all of us. This market is not an easy one, and I've heard more than one agent this year say "It's just not worth it anymore." Reluctant buyers, underwater sellers, underwriters who are terrified of making a mistake, appraisers who appraise too conservatively... it all adds up and takes a toll.

Putting deals together is hard. Holding them together is even harder.

When I was a broker in California (1994-2005), everyone felt like a winner. Sellers were pocketing huge equity gains. Buyers felt like they were acquiring an asset that would appreciate 8 to 10% per year. Agents were making excellent money. It was a party.

Today, the reality is 180 degrees different. Buyers are afraid of making mistakes and often grind hard on sellers every step of the way. Many sellers have lost money, or worse yet, owe more on their home than it is worth. They don't want to negotiate and they don't want to fix things. Agents are stuck in the middle, with the chasm between buyer expectations and seller perceptions farther apart than ever before.

Then there's bank-owned inventory, which is usually priced attractively but often full of deferred maintenance. Appraisers call out condition items that need to fixed. Banks don't fix anything. Buyers don't have money for repairs. Agents are stuck in the middle, again, having to find solutions.

There is not a drop of glamour in real estate these days.

Having said that, there is a clear silver lining for the committed among us. The consolidation going on right now is clearing part-timers out of the business, and it's driving marginally qualified agents to the sidelines. Never in my 16 years as a broker have I seen a market which called for more persistence, creativity, innovation and skill.

The GOOD agents, the ones who work 50-plus hours a week and look out for their clients, are going to ultimately benefit from this thinning of the herd. Consumers are going to do better, as well.

Like you, we in the business are having to do more with less. Those agents intent on making it to the other side are working harder, longer and with profit margins that are paper thin (if there's any profit at all).

As for me, I'm busy planning my next client appreciation party and working hard to close the deals in my pipeline today. I'm making phone calls and holding open houses. I'm communicating with my sellers and coaching and counseling my buyers.

Because experience has taught me that there is always business if you are excellent at what you do and that satisfied clients are like gold (because of the referrals they send), especially in tough times.

Again, I'm not complaining. I'm just telling you how the market is affecting the brokerage community. And I'm explaining why that agent who sold you your house three years ago may not be returning your call.

REWORK

2010-09-15T05:51:00.000-07:00

Great business have a point of view, not just a product or service.

That's one of the key themes in "Rework", by Jason Fried and David Heinemeier Hansson, founders of the nationally-known consulting firm 37 Signals.

By standing for something and living your values, the authors assert, you can create "superfans" who will be intensely loyal to your brand, whether you are a web designer, a shoe company or a real estate broker.

In a fun, fast-paced read, Fried and Hansson illustrate how rapidly the professional world is changing due to the influences of technology, social media, home-based businesses and global supply chains.

In a chapter entitled "Meetings are Toxic", the authors discuss how ideas are the new currency of the 21st Century, and how wasteful and counterproductive staff meetings can be. Direct accountability, corporate efficiency and personal and professional inspiriation drive progress and new ideas. Attainable short-term goals are good... nebulous big picture business plans that aren't specific, concise and action-oriented are often misdirected or a complete waste of time in a marketplace that is dynamic and everchanging.

By focusing on the basics, Fried and Hansson have built a progressive software, consulting and contact management company with over 5 million clients and users worldwide. Their book encourages us to rethink work, to focus on reshaping our business with intention and design instead of merely working ourselves to death.

IS HOUSING A LUXURY OR A STAPLE?

2010-09-12T13:33:00.001-07:00

On Wednesday, a story in the New York Times asked an interesting question: Is housing a luxury or a staple?

The answer, whichever it is, will have a pronounced effect on if, when and how the housing market will see a recovery.

In the article, author David Leonhardt studied price fluctuations among luxury items (like boats, Mercedes and gold watches) and compared them to "staples" (like food and clothing) over the past 100 years. His findings: the prices of luxury items tend to rise and fall with great volatility, closely tied to increases in personal income. Staples, on the other hand, tend to track the inflation rate, with less fluctation and less drama.

From 1995 to 2005, according to the author, low unemployment and the availability of free and easy credit turned houses from staples to luxuries, and people began collecting homes like pieces of jewelry. As the very nature of homes and home ownership turned from staple to luxury, prices rose accordingly, and millions of Americans who bought homes between 2000 and 2005 ended up paying luxury prices.

Five years later, most would agree that the prevailing psychology among home buyers has turned 180 degrees. Underbuying is in, overbuying is out. Conservation is in, excess is out. Cash on hand is good, debt is bad. This most definitely impacts prices.

We have always known that people make decisions based on how they feel, and if today's buyers feel that homes are merely staples, places to go to store your things and keep the cold out, then prices will be very slow to recover.

A larger recovery in values will only happen when personal income rises, accompanied by the corresponding feeling of goodwill which comes with prosperity, which cannot happen when the unemployment rate is tracking above 10%.

In short, the rules of homeownership have changed because the way we feel about housing has changed. If you paid a luxury price during the boom years for something that has been redefined as a commodity (which I certainly can see firsthand in my own neighborhood), the premium you paid is gone.

In short, people gladly overpaid when they felt times were good. Now, in a different economy, buyers stubbornly seek value above all else.

Buyers and sellers have big choices to make in today's economy about whether buying or selling a home is the right move for them. Everyone's situation is different, but it is important to understand how the rules of the game have changed and how people's perceptions from a few years ago have little connection to today's market.

In the big picture, there are reasons why buying a home today makes sense. Interest rates are absurdly low, builders are bringing next to nothing online, the populations continues to grow and we almost certainly will see better economic times ahead. But as long as people feel uncertain, uncertainty will prevail in our market.

The key takeaway from this article is that psychology affects prices, and the psychology that caused people to willingly pay retail for anything a few years ago has changed. But just as things have changed in the past, surely they will change again. And both home buyers and sellers should keep in mind that five years from now, we'll be talking about a whole new set of changes.

EXTEND AND PRETEND

2010-09-07T20:30:00.000-07:00

One national real estate figure calls it "extend and pretend." Others refer to it as "kicking the can down the road." I sometimes simply think the banks are holding onto their worthless chips because at some point, the government will redeem them once again.

What we are all referring to is the increasingly common tendency for banks to stop short of foreclosing on homeowners who have fallen delinquent on their loans. Let's face it - the banks (at least the big ones, who survived) did very well with their 2008 and 2009 government bailouts, moving worthless loans off of their balance sheets and on to the ledger of the federal government. Many smaller banks were swept away, but for the likes of Chase, Citi, B of A and Wells Fargo, being a survivor is profitable.

With the government agreeing to take so much bad debt (at taxpayer expense), it was important to keep things looking as manageable as possible. Pulling this off required one simple ruse - getting everyone to believe that those losses ultimately wouldn't be very big.

To do this, the government changed the rules. The FDIC, which previously forced banks to get bad assets off their books, became a leading proponent of saving homeowners with loan modifications that likely just delay the inevitable.

With a little government pressure, the supposedly independent Federal Accounting Standards Board allowed banks to account for loans at theoretical values that were based on computer models rather than current market value.

An acronym soup of programs followed, which were promoted as providing help for America's homeowners: HAMP, HAFA, HARP, 2MP and more. But the reality is that, to date, these programs have resulted in little more than delays.

But delays can be profitable, if they allow banks to extract at least some payments (or partial payments) from homeowners who are ultimately not going to keep their homes. By keeping the bad loans alive, the banks have a leveraging chip for future government aid while looking more compassionate in the interim.

The problem facing both lenders and the government is that they can neither kick homeowners out or bail them out, because either scenario forces the losses onto the books, which affects earnings, reserve requirements and investor relations. The easier model is to delay confronting the problem, which works so well for the federal government that the banks are eager to give it a try.

Because I track foreclosure activity very closely (including pulling NED lists on a weekly basis in several of the neighborhoods where I work), I've seen this increasing reluctance to pull the trigger on homeowners who are clearly in default.

I'm also seeing homeowners in foreclosure become increasingly adept at gaming the system, even renting out their homes on their way out of the neighborhood to create positive cashflow while they fail to make payments month after month. This is one byproduct of a "soft enforcement" policy on defaulters.

To combat the spread of this mentality, lenders have to foreclose on a certain percentage of homeowners each month, or else the system will simply break down. Call it foreclosure roulette. Maybe it's your time to go... but maybe they'll give you six more months.

Trillions of dollars in negative equity is a serious problem, and I'm not advocating the "crash landing" approach to letting the markets reset. But more creativity is called for here, whether it's creating a federal property management agency (renting back to foreclosed homeowners) or writing tougher legislation to limit the growing number of "strategic" defaults from owners who just decide to walk away.

Letting the big banks set the rules, knowing the federal government views them as "too big to fail", is grossly unfair. Taxpayers (and voters) deserve better.

ON ROCKETSHIPS AND MILLSTONES

2010-09-02T21:40:00.000-07:00

When times were good, people felt that houses made you rich. They only went up in value, and so the way to wealth was found by attaching yourself to the largest home you could possibly qualify for... except that during the last few years of the bubble, there was no "qualifying" for a home. You simply had to want one.

Today, especially at the higher end of the market, we have far more people wanting to get out of big houses than wanting to get into them. And that has obvious and ongoing repercussions for prices.

In previous posts, I have said that the first wave of foreclosures was caused by poor lending practices. Round two, which we are experiencing now, is because of job loss and deleveraging. People are fixated on getting out from under debt, on living small, and becoming financially nimble.

Houses, especially big ones, are illiquid assets that are difficult to move. The only answer, if you intend to buy a big house and want to be shielded from falling prices - buy it right.

Buying it right sounds easy, but it's not. Buying it right involves work, conflict, and sometimes hurt feelings. When people feel like the pie is shrinking, they cling to what they have. For sellers, that means they are reluctant to let go of equity. For buyers, they simply refuse to overpay.

The concept of buying it right involves harder negotiations, more interaction with banks and short sellers, and lots more work all the way around.

You will continue to see real estate agents leave the business in large numbers not because there is no business, but because for many the business has become too hard. There are buyers and sellers - plenty of them - if you deliver great service and are knowledgable about your business. But that doesn't mean it will be fun.

Houses are neither rocketships nor millstones. They are uniquely positioned as an investment you live in, where you build dreams and bond with those you love. My advice to buyers today is not just to buy it right, but love what you buy. Because housing if for the long term, and if you aren't ready for the commitment, you should rent.

THANK YOU FOR NAMING ME A "FIVE STAR PROFESSIONAL"

2010-08-27T06:34:00.000-07:00

Walked out to my mailbox this week and what did I see? A Five-Star Professional looking back at me!

I was flattered this week to be among a select group of agents featured in 5280 Magazine's list of Five Star Professionals serving the greater Denver area real estate market.

The Five Star Professional program is based upon surveys sent to over 10,000 recent local homebuyers and 250 mortgage and title companies in the Denver metro area.

Survey respondents were asked to evaulate their real estate professionals based on customer service, integrity, market knowledge, communication and negotiation skills, closing preparation, marketing skills, and overall satisfaction.

The top 7% of Denver's 15,000 real estate professionals earned the Five Star designation.

Having been in the Colorado market for just the past five years, I can honestly say that earning this designation is a prime achievement. I have worked exceptionally hard for more than 100 local home buyers and sellers since relocating to Colorado in 2005, after 11 years as a licensed broker in California.

If you work hard, study hard, negotiate hard, live with integrity and have passion for what you do, you'll never have to worry about finding your next client. Because in 16 years, I have found that building relationships and building a business are one and the same.

My clients ARE my business - thank you for naming me a Five Star Professional!

30% OF JULY HOME PURCHASES MADE BY "ALL CASH" BUYERS

2010-08-25T07:12:00.000-07:00

Are investors afraid of our current housing market? Not if you believe the latest NAR report on housing, which shows that 30% of all home purchasers in July were "all cash" buyers!

That's a staggering number, the highest I have seen in 16 years, and it points out that investors continue to hunger after foreclosures, fixers and other cash-flowing rental opportunities.

In a related story, the Denver Business Journal reported earlier this month that Denver area apartment vacancies had fallen to a two-year low and that rents have increased by nearly 4% in the past year. In Fort Collins, rents increased by more than 5% while the overall vacancy rate is 25% lower than one year ago.

Many analysts continue to believe that Colorado will be one of the strongest performing rental markets over the next few years, as home ownership rates continue to fall and the economy regains its footing. With virtually no new construction coming along for the foreseeable future, competition figures to increase for all types of rental housing.

BREAKING DOWN JULY'S MARKET NUMBERS

2010-08-23T06:38:00.000-07:00

On Wednesday, I posted the most recent snapshot of housing market numbers for Denver during the month of July. Overall, it was not a pretty picture.

But "inside the numbers", there are some interesting stories to tell. For example, comparing July of 2009 to July of 2010, some intriguing trends emerge.

Check out this chart:

                                         JULY 2009          JULY 2010          CHANGE
* Listings on the Market         20,890                23,450               +12.2%
* Active / Under Contract        3.38                    5.00                  +47.9%
* Absorption Rate - Overall      5.71                    9.08                 +59.0%
     $0 - $250k                        2.63                    6.73                 +155.9%
     $250k - $400k                   6.23                    9.61                 +54.2%
     $400k - $600k                  11.53                  10.89                 - 5.6%
     $600k - $1 million             24.68                  20.80                - 15.8%
     $1 million and up              62.87                  28.75                - 54.3%

LISTINGS ON THE MARKET: At the end of July, there were 23,450 unsold single family homes and condos on the market in the Denver MLS. That's a 12.2% increase from the 20,890 homes for sale at end of July 2009.

ACTIVE / UNDER CONTRACT: One year ago, there were just 3.38 homes for sale to each one under contract. In other words, on average, each seller was competing with 3.38 other unsold listings. Today, there are 5.00 homes for sale to each one under contract. That means sellers have 47.9% more competition today than they did one year ago.

ABSORPTION RATES: Absorption rates project how many unsold months of inventory exist on the market, based on the current pace of sales. For example, if 100 homes were on the market and 10 went under contract in the past 30 days, it would take 10.0 months to extinguish all inventory. Real estate economists will tell you that six months of inventory represents a "balanced" market.

Overall, the absorption rate has spiked from 5.71 months of inventory one year ago to 9.08 months today, a 59% increase. But when you break down the numbers into different price points, you see even more profound changes.

Below $250,000, the entry-level of our market, absorption rates have skyrocketed from 2.63 months (exceptionally tight) to 6.73 months, a 155.9% increase. This sector of the market was the target of the first-time buyer tax credit, and clearly it is suffering since so many first-time buyers pushed their purchases forward in pursuit of the $8,000 incentive.

One step up, from $250,000 to $400,000, absorption rates have increased from 6.23 months to 9.61 months, an increase of 54.2%. This is where the $6,500 "move-up" buyer tax credit was aimed, and again, the market is suffering without the tax credit.

But now watch the shift that happens as you get out of "tax credit country"...

At the $400,000 - $600,000 level, the absorption rate has actually FALLEN 5.6%, from 11.53 months to 10.89 months. From $600,000 to $1 million, there has been a 15.8% decrese in the absorption rate, from 24.68 to 20.80 months. And above $1 million, there has been a staggering 54.3% decrease in the absorption rate from 62.87 months (yes, a five-year supply) to 28.75 months.

In the post-tax credit world, the lower end of the market is most definitely suffering from a hangover, while at the higher end of the market, we have seen significant improvement in the fundamentals. So what does it all mean?

At the entry level, for the next few months, the market is going to be searching out a "new normal". At the higher end, sellers have gotten the message: overpriced listings simply will not sell, and sellers have been adjusting their prices down to "meet the market". The result - significantly more sales and tighter inventory at the high end, while many lower-end sellers are attempting to take advantage of a market that no longer exists.

THE HOUSING MARKET HANGOVER HAS ARRIVED

2010-08-18T05:14:00.000-07:00

The market is awash this week with news of housing's demise. Sales fell nationally by over 27% in July (post tax-credit), with just 320,000 homes changing hands. That represented the worst one-month performance since May 1995.

Inventory has also spiked, something that we are seeing in Denver right along with the national trend. After 36 consecutive months of declining inventory on a year-over-year basis (truly a sign of a strengthening market), unsold inventory has now rised by 12% from its April lowpoint. There are also 12.2% more unsold homes today than one year ago in the seven-county Denver metro area.

The absorption rate, which is a hypothetical calculation that shows how long it would take to extinguish all unsold inventory based on the current pace of sales, has jumped from 5.00 months at the end of April to 9.08 months today. That's an 81% increase in the length of time it will take to sell an average home in today's market.

For 18 months, demand was shifted forward by offering two highly attractive tax credits to first-time buyers and repeat buyers. The bill has now arrived for that extended giveaway.

The market is not broken... but it most definitely is recalibrating. Of course the post-tax credit world looks different. But over the next few days, we'll break some of the data down to show which part of the markets are faring better, and which sectors are most vulnerable.

FHA RAISES THE BAR WITH NEW FEES AND CREDIT RESTRICTIONS

2010-08-14T05:52:00.000-07:00

Colorado home buyers looking for FHA-backed loans will face tougher hurdles and higher costs under new legislation and new rules that could take effect within the next 60 days.

Higher monthly fees, larger down payments and better credit scores are among the new initiatives intended to insure that the FHA stays solvent. Its reserves, which are used to cover bad loans, have plummeted to $3.5 billion today from $19.3 billion in September 2008, according to a recent report from the Department of Housing and Urban Development.

Proponents of the measures applaud FHA's efforts to preclude the need for a taxpayer bailout, while also stepping up the quality of its insurance portfolio. But critics fear that the moves will stifle an already fragile housing market and will be most burdensome on first-time home buyers, who historically account for about 40% of all purchases. The FHA backs 30% of all loans outstanding and has accounted for nearly 45% of home purchases in Colorado during the past year.

Here's a rundown on some of the new initiatives:

Higher Monthly Mortgage Insurance Fees: Earlier this month, Congress gave the green light for FHA to raise the monthly premium it charges on loans. FHA-backed loans have looser restrictions than other mortgages on down payments - now at 3.5% of the home's selling price - but require borrowers to pay an upfront mortgage insurance premium (usually added on to the base loan amount) and a separate monthly mortgage insurance fee.

That monthly mortgage insurance fee is scheduled to go up from 0.55% to 0.90%, a 61% jump. On a $150,000 loan, this would represent an increase from $68 per month to $112 per month.

Lower Upfront Mortgage Insurance Premium: The good news is the upfront mortgage insurance premium, currently 2.25%, will be lowered to 1.00%.

Because the upfront mortgage insurance premium is usually added on to the base loan amount, FHA wants to get this number lower so as it decrease its exposure in the market. Raising the monthly premium has the effect of making it more difficult for buyers to qualify, which is also a safeguard against more defaults

Even with the decrease in the upfront fee, increasing the continuing fee is expected to generate $300 million per month, according to FHA.

Better Credit Scores: In its 76-year history, FHA has never required a credit score from borrowers, though the lenders typically have. That would change under a proposed rule that the FHA is expected to adopt.

FHA would require borrowers to have at least a 500 score for FHA backing. At 580 and above, borrowers would be eligible for the 3.5% down payment. But those who fall between 500 and 580 would see their down payments jump to 10%.

Many lenders are currently underwriting with "overlays" (higher internal standards) which require a 620 or 640 minimum score for FHA financing. Again, the name of the game across the board is "risk aversion."

Most conventional loans now require a minimum credit score of at least 660.

Reduced Seller Contributions. This is the change that will have the biggest impact on borrowers, because it will increase the cash required to close for many FHA buyers.

Historically, sellers have been able to contribute up to 6% of the price of the home toward an FHA buyer's purchase. While 3% is often sufficient for closing costs on median-priced homes, on lower priced homes (below $150,000) the closing costs often add up to much more than 3%. This is because many closing costs are "fixed" costs, such as underwriting, processing, title company closing fees, etc. This change means that on lower priced homes, FHA buyers will likely need to come up with more cash to close than ever before.

It is important to keep in mind that these changes will only affect new loans going forward. Current FHA borrowers will not see any change in their mortgage insurance or loan terms.

But by raising the bar on buyers, FHA is also making things harder on sellers, who need as many qualified buyers as possible to increase their odds of a successful sale in the post tax credit market.

FREDDIE NEEDS A HANDOUT (AGAIN)

2010-08-09T15:20:00.000-07:00

For the sixth time, mortgage giant Freddie Mac is going back to the government, hat in hand, asking for help. This time it’s to the tune of $1.8 billion, which puts Freddie’s bailout tab at just over $64 billion since 2008.

Sister company Fannie Mae has received over $90 billion in bailouts since the mortgage meltdown in 2008.

For my many clients who have experienced the joy of financing in the post-meltdown era, this information probably helps clarify why lenders have been so reluctant to make loans. It’s why we’re asked for second appraisals and independent inspections and (sometimes) non-sense repairs that are frustrating and costly to everyone involved.

In 16 years, I have never seen a time where it has been more difficult to put and hold deals together, in large part because of the layers of difficulty with financing. The good news is that I have a terrific team in place and we are very adept at solving problems. The bad news is that getting a loan simply isn’t a lot of fun.

The losses at Freddie and Fannie, which are the ultimate upstream home for most mortgage loans, are simply staggering. And that’s why your mortgage experience from three or four years ago bears almost no resemblance to the process you are experiencing today.

The good news in this (and there is always good news, if you look for it) is that we are restocking our housing inventory with the most qualified buyers in twenty years. And that means more stability, more commitment and less likelihood of another collapse brought on by an underqualified buyer pool.

SECRETS OF THE MILLIONAIRE MIND

2010-08-06T22:24:00.000-07:00

"To change the fruits, you must change the roots."

- T Harv Eker, Secrets of the Millionaire Mind

Secrets of the Millionaire Mind is a terrific summer read that chronicles the 17 "Wealth Files" that differentiate wealth-based thinking from scarcity thinking.

According to Eker, money is a result. Health is a result. Your weight is a result. And results are at the end of a long chain of events that start with your thoughts, which lead to feelings, which inspire action, which create outcomes.

If your thoughts aren't productive and your actions are not inspired, it is likely that your your results won't be, either.

Secrets of the Millionaire Mind reminds us that thoughts are powerful, and they are not random. Thoughts are chosen, like a wardrobe, and if you allow your fears and insecurities to get the best of you, your outcomes will reflect your fears and insecurities.

Much of life is outside of our control, but our thoughts are uniquely ours. If you can make your mind work for you (instead of against you), there is no ceiling on what is possible.

HISTORICAL PERSPECTIVE ON MORTGAGE INTEREST RATES

2010-08-03T18:57:00.000-07:00

Today's post is simple and to the point. Interest rates are absurdly low.

When I first became licensed in the early 1990s, I started my real estate career in the mortgage business. And my first job involved cold calling homeowners and offering to refi them at 8.75%, since rates below 9% were "historic" (at the time).

If rates in the mid 4s don't do it for you, there's not much else I can say.

For comparative purposes, when VA loans were first authorized by Congress in 1944, servicemen were offered fixed rates of 4.0%. Today's rates are barely a tick above what soldiers returning home from World War 2 were offered nearly 70 years ago.

The risk of an upside spike is far greater than a continued decline, because we are already bordering on "free money". Although I do believe that 10% unemployment is the new reality and the economy will remain sluggish for some time, the effects of a $2 trillion cash infusion into the economy will eventually manifest. I do not believe you will see rates like this again in your lifetime.

ON TURKEYS AND TURNKEYS

2010-07-31T07:10:00.001-07:00

The overall absorption rate, which stood at 5.00 months when the tax credits expired April 30, now stands at 9.17 months. In simplest terms, the market is suffering from a post tax credit hangover.

Not entirely unexpected, but not enjoyable, either. For well over a year, tax credit incentives pullled first-time buyers off the sidelines and into the game. The challenge that sellers face now is that without first-time buyers, who historically make up about 40% of the market, there simply aren't enough traditional buyers left to soak up the existing inventory.

We’ve seen the biggest drop in activity at the lower price points, which is not surprising, given that that’s where the tax credit “juice” was aimed. Market time for homes priced below $250,000 has risen from 3.36 months to 6.42 months, and for homes in the $250,000 - $400,000 range, it has increased from 5.20 months to 10.12 months.

While most of us believed there had to be an adjustment period in the post tax credit era, sellers need to know what's happening today, because the market that whisked homes away at a brisk pace in March and April is gone, even with rates now sinking into the mid 4’s.

So what is selling right now? Based on what I'm seeing, it's TURKEYS and TURNKEYS.

Turkeys are those “investor specials”, with moldy basements and broken windows, shag carpet and missing sinks, foot-high weeds and leaky roofs.

Turnkeys are those homes fixed up, or homes that have been updated and upgraded… with new electric panels, new roofs, new carpet, new granite, new paint, new appliances… there is still a market for quality, and in difficult economic times, buyers are drawn to value or quality, or both.

Turkeys make up about 10% of the market, and right now, they’re still selling.

Turnkeys make up about 10% of the market, and they’re still selling.

For the 80% in the middle, it’s not so easy. In my opinion, sellers now need to determine if their home plays to value or plays to quality. Whatever your home's strength is, play to it. If it plays to neither, start cutting the price, or pull it off the market altogether and wait for the hangover to pass.

For the first time in three years, overall inventory is rising again. Like it or not, you are in competition. Serious, serious competition. Which means only serious sellers will have success during this transitional period.