HEARTFELT THANKS FOR A GREAT 2009

As we wind down the final hours of 2009, I want to stop and say THANK YOU to everyone who helped my business reach new heights this year. We overcame significant obstacles in our market in 2009 and I am indebted to all of you who referred business to me or trusted me with your own transactions.

I have treated each deal as if it was my own, and I remain committed to being both your trusted advisor and fiercest advocate.

As you know, my business is referral driven. That means not only do I work hard on keeping my existing relationshipships strong, but I must take incredible care to make sure each client referred to me has an awesome experience. Frankly, I wouldn't have it any other way.

As I work on my business plans for 2010, know that you are at the heart of it. To those friends, colleagues, past clients and future prospects who regularly read this blog, thank you.

Next year, I pledge to continue to engage in the disciplines of success. I will hold client appreciation parties, networking events, first-time buyer seminars and open houses. I will work on improving my eduction through CRS classes, RE/MAX International programs, state and national conferences and by surrounding myself with the best support team in the business. I will set goals and track their progress, realizing that "success is something you attract by the person you become."

And I will continue to give every client my full time and attention so that the process of buying or selling a home is fully understood.

Have a safe and enjoyable New Year's Eve... and cheers to a great 2010!

CASE-SHILLER RANKS DENVER AS BEST PERFORMING MARKET IN THE COUNTRY

As I have posted many times before, I don’t buy the Case-Shiller housing data “hook, line and sinker” because it throws the entire housing market into one big pot, like a mutual fund. Obviously, it’s better to have a good Case-Shiller reading than a bad one, but as I have said for two years, this market is incredibly segmented.

Overall, Case-Shiller reports that homes in the Denver market lost 0.1% of their value in the year ending October 30, the top reading from the 20 major metro areas the study tracks.

However, as is always the case the statistics, some interpretation is in order.

Almost all of the strength in the Denver market lies in one place, and that is the sub-$300,000 market. We have seen appreciation as high as 15% in some areas of town over the past year, mostly in areas of entry-level homes that were on the front end of the foreclosure cycle. Above about $400,000 the market is dead, regardless of what your neighborhood brokerage is putting out there or what propaganda you read in the newspapers.

Our economy has fundamentally shifted in the past 18 months, and “thinking small” is the trendy new reality of today. One client recently asked me, “How much house can we afford if my wife loses her job and we have to get by on one income?” That’s a great question, and it’s one you never heard asked three years ago.

New construction is dead, high end is dead, but the population continues to grow. Colorado is on track to be the fourth fastest growing state in the country in 2009, and our excess housing inventory is being depleted at a pace that is much quicker than the rest of the country. The number of homes for sale is off by nearly 40% from its peak in 2007, and bank-owned inventory is getting harder and harder to find.

Bottom line: the Case-Shiller news is good for Denver. But it’s especially good for people who have purchased entry level homes over the past 36 months, with fixed rates in the 5's and waves of future demand sure to come as our population continues to grow.

CONSPIRACY OF THE RICH

Looking for a jolt to start the new year?

Pick up a copy of Robert Kiyosaki's Conspiracy of the Rich, a fascinating and fast-paced read that discusses the conditions that led to the stock market collapse of 16 months ago and talks about what you can do to better prepare yourself for the choppy economic waters ahead.

Financial education in this country is woefully inept, according to Kiyosaki, and if you don’t know the difference between investing for capital gains and investing for cash flow, you need to slow down and really come to understand these important distinctions.

Most capital gains from the past decade have been the result of easy credit, which created an asset bubble which caused real estate and stocks to become overvalued. Now that the credit bubble has popped, those who invest in real estate or the markets need to rethink their strategies to focus on cash flow and sustainability in an economy that will not be going back to what we knew (and grew too comfortable with) just a few years ago.

Kiyosaki also talks about the corruption of our political systems, of how President Nixon’s decision to take America off the gold standard in 1971 essentially unleashed a new, debt based (as opposed to “production based”) economy that enriched banks and catapulted average Americans into a debt spiral that finally came unraveled over the past 24 months.

The book warns of hyperinflation in the years to come, showing how the amount of currency in circulation has essentially doubled in the past eighteen months. This around-the-clock printing strategy will ultimately drive the prices of commodities higher (think $5 per gallon gasoline and $3 per head lettuce), eroding savings and pushing much of the middle class into a lower standard of living. Demands for government services will rise, taxes will increase, and high unemployment will become the new norm.

It’s a scary assessment, but to protect and prepare for your financial future, you need to consider the possibilities. There will be opportunities and shelters in every economy, but they will be fewer and it will take a better understanding of economics to identify them.

Now is the time for raising your financial IQ. If you know that interest rates are going up, taxes are going up, unemployment is likely to stay high and the stock market is likely to stagnate, is it a good time to buy a house? Is it a good time to buy two??

With better education, your thinking will be clearer.

Since the onset of the stock market crash 16 months ago, I have subscribed to the notion that the only way out is to forget about the government and for YOU to get better. For YOU to improve your skills. For YOU to become more financially literate, better educated and adaptable to a changed economy.

Whether or not you agree with the author's assessment of our economic condition, this book will challenge you to look critically at what's going on. And that alone makes it worth the read.

TRIBUTE TO A GREAT MENTOR - JIM ROHN

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

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

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

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

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

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

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

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

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

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

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

THE DECEMBER SLOWDOWN IS HERE

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

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

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

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

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

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

...AND ONE DAY LATER, RATES WENT NUTS

Talk about timing.

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

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

Recession over?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Will your agent do the same?

NINETEEN PERCENT OF COLORADO MORTGAGES "UNDER WATER"

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

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

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

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

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

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

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

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

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

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

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

DESPITE DOWN ECONOMY, COMPLETED FORECLOSURES FALL 8% IN COLORADO

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

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

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

COLORADO RANKS 42ND IN MORTGAGE DELINQUENCIES DURING Q3

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

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

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

ON THE PASSING OF A DEAR FRIEND

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

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

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

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

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

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

CHECKING IN ON OUR 2009 PREDICTIONS

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

TAX CREDIT EXTENSION JUST ABOUT A DONE DEAL

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

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

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

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

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

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

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

REALTY TRAC PLACES DENVER 47TH IN FORECLOSURE FILINGS

Remember when Colorado led the nation in foreclosures per capita in 2006? Or when we were 7th in 2007? Although there are still troubled spots in certain areas (mostly outlying suburbs), the "big picture" continues to get brighter and brighter for the Denver metro area.

RealtyTrac's third quarter foreclosure filing data was released this morning, and the Denver region now ranks 47th among the nation's largest metropolitan areas for new foreclosure filings with 0.89% of homes in some stage of the foreclosure process. Las Vegas, ranked at the top of the survey, has 5.13% of its housing inventory in some stage of the foreclosure process.

Third quarter filings in Denver were down 1.58% from a year earlier, despite the downturn in the economy over the past 12 months. By comparison, foreclosure filings were up 105% in Salt Lake City, 80% in Reno, and 53% in Las Vegas during the same time.

Cities in California, Arizona, Nevada and Florida accounted for 19 of the top 20 foreclosure hot spots in RealtyTrac's report. Greeley, at number 33, was the worst performing Colorado region on the list.

EMBARRASSMENT TO THE PROFESSION

Not calling out any names here, but here's my favorite picture of the week from the MLS.

This is a home for sale in Green Valley Ranch - a short sale, of course - where the agent's commitment to quality marketing went all the way to rolling down the passenger window, but not to the point of actually getting out of the car to take this marketing photo.

How can agents realistically expect sellers (or banks) to pay full commissions when they are too lazy to get out of the car and actually photograph the home? Come on, the sky is blue, I bet it's at least 60 degrees!

For the record, I consider photography to be one of the critical elements in marketing a home for sale, which is why I hire professionals to photograph and stage my listings. We are in the "first impressions" business, and what I see here is that if the seller's agent is too lazy to get out of the car, then how in the world is she going to get the bank to sign off on accepting a short sale?

NATIONAL HOUSING DATA CONTINUES TO SHOW IMPROVEMENT

Interesting chart today addressing some of the "big picture" national trends affecting real estate.

The three charts below show national housing inventory, sales of existing homes and the pending sales index through September.

It's pretty easy to see there has been marked improvement in all three areas - listings on the market have fallen from an inventory of 12 months in January to less than 8 months today; sales have rebounded strongly through the summer months to an annualized pace of 5.6 million; and the pending sales index is up nearly 30 basis points sinice bottoming out at the start of the year.

As the debate rages over extending or even expanding the first-time buyer tax credit, these charts are at the center of the discussion. Has the tax credit caused the rebound, or was the market already rebounding when the $8,000 tax credit was implemented? Truth is, the market was already improving at the start of the year, and the tax credit just amplified the bounce.

Should the tax credit be extended? Do we need it any more? Can we afford it? What do you think? One thing is for sure - buyers who took advantage of depressed prices, low interest rates and got the tax credit appear to have gotten a pretty sweet deal.

SO TRUE IT HURTS - BUT REALLY FUNNY

Courtesy of Kris Berg in San Diego.

ROUND ONE IMPACTED THE ENTRY LEVEL; ROUND TWO TO HIT UPPER MIDDLE CLASS

A new national study by Zillow.com and reported by the Wall Street Journal this week confirms what I have been saying to my clients for months... while the lower end of the housing market got walloped in "round one", it's the high end that's going to take the next big hit.

The Zillow study showed the allocation of foreclosures in markets around the country, breaking the pricing tiers into the bottom, middle, and top based on area median price.

The findings? While higher end homes accounted for just over 10% of foreclosures in 2005, upscale homes will account for 30% of all foreclosure activity nationally in 2009.

And lower end homes, which accounted for 60% of foreclosures nationally (and nearly 80% here in Colorado) in 2005, now account for just under 40% of all foreclosures.

The first wave of losses were driven by subprime loans and easy credit, which primarly attracted buyers who had never been able to obtain credit or financing before. The losses sustained from those loans has caused banks to radically restrict lending practices (call it "risk avoidance"), making it difficult or impossible for higher end buyers to obtain the financing they need to purchase or refinance move up homes.

Call it what you will, but the reality is that round two of the foreclosure crisis is going to weigh most heavily on the upper-middle class. This market remains the most segmented I have seen in many years, with three very different realities for buyers and sellers at the entry-level, mid-level and higher end.

This market calls for a more thoughtful examination than any market in decades, and buyers and sellers need to work with someone who understands what's driving the radical changes taking place.

The quality of your outcomes is going to be based on the quality of your information, and that is why you need serious, professional, and honest representation today.

THE BABY BOOMERS, GENERATION X AND THE MILLENNIALS

Yesterday in Fort Collins, I was part of an audience that listened to Dave Liniger, President and Founder of RE/MAX International, as he offered his opinions on the state of the United States real estate market in 2010 and beyond.

And while the next few years will be challenging due to high unemployment and record foreclosures, Liniger predicts that huge demographic changes starting in 2012 will unleash the next national surge in real estate values.

“You’ve got 80 million Baby Boomers, many of whom are looking to downsize in the next few years,” Liniger said. “And what you see is that, for the most part, these are folks who do not want to leave the areas where they have raised their kids, made their friends and lived their lives. Many of these people are looking for lower maintenance homes in urban environments where they can enjoy their retirement without the hassles of home upkeep and maintenance.”

Because these boomers will need to sell their existing homes in conjunction with buying their new ones, there’s a huge opportunity for real estate brokers who successfully can market to this demographic.

“Then you have the ‘Gen X’ers’”, said Liniger. “They are the ‘sandwich generation’, because while there are 80 million ‘Boomers (born between 1946 and 1964) and 74 million Millennials (born between 1980 and 1995), there are only about 48 million Gen X’ers. For the past decade we have been working through a demographic trough, with immigrants helping to supply the additional demand that helped to drive prices higher. Now you’ve got the Millennials coming, and they will start to hit the market in force as first-time buyers in 2012.”

Liniger cited NAR research showing that nearly 70% of first-time buyers are age 34 or younger, meaning that a wave of Gen Y’ers (who are now between 14 and 29 years of age) will be sweeping over the market for the next decade. With new construction down by nearly 80% due to the economy and many builders having gone out of business altogether, Liniger predicts the demand for existing housing will fuel the next boom.

With a surge in housing demand coming, today’s first-time buyers can look forward to seeing appreciation in their housing investments. But today’s buyers won’t necessarily need to sell in order to cash in – by locking in low, fixed rates now in the 5 to 6% range, today’s buyers will have the option of holding on to their homes and owning cash-flowing investment properties for years to come.

WHAT WILL 2010 HOLD FOR REAL ESTATE? REMAX FOUNDER DAVE LINIGER WEIGHS IN

I was in Fort Collins this morning for a presentation on the state of the real estate market by RE/MAX President and Founder Dave Liniger. Speaking before about 250 RE/MAX associates at the Fort Collins Hilton Hotel, Liniger shared his feelings about the tough times we’ve seen in the housing market, but also about the opportunities that lie ahead.

“The market we had this year is pretty much the market we’re going to have next year,” predicted Liniger, who says that the country will have at least three more years of higher than normal unemployment as we struggle to come out of the recession.

Liniger predicted that up to 50% of all real estate transactions in 2010 would involve distressed properties, either short sales or foreclosures.

In 2005, there were only about 400,000 foreclosures. In 2010, there are projected to be 1.9 million foreclosures across the United States, with Nevada, Arizona, California and Florida accounting for over one-half of the total.

Short sales continue to be the most frustrating segment of the market nationally, with just one in nine listed short sales closing successfully so far in 2009.

The vast majority of short sales end up as foreclosures, with banks often leaving tens of thousands of dollars on the table because of their unwillingness to accept short payoffs.

Like many agents, I caution my buyers about the perils of short sales. I have one offer written in May that is still in a holding pattern five months later, despite the fact my clients have twice “upped” their original offer and agreed to switch from FHA to conventional financing. There’s no reason (other than stupidity) that the bank is leaving this offer on the table as the foreclosure sale date looms.

“The banks have got to understand that they are damaging themselves, their balance sheets and an eventual recovery in the market with their stupid policies regarding short sales,” Liniger said. “If the banks can start to process this backlog of short sales, the sellers who are losing their homes today could be back in the market in as soon as two years. But when they foreclose, people see their credit damaged far more severely, and it takes them years longer to get back into the market.”

Tomorrow I’ll talk about the silver lining that Liniger sees starting in 2012 – and how today’s first-time buyers could be real beneficiaries of the wave that is coming.

WINTERIZATION TIPS

The bitter cold that rolled through over this weekend serves as more than a gentle reminder that winter is right around the corner. For those who have lived here a few years, the drill is familiar. For those new to our state, here are a few tips to help you get ready for the cold season ahead.

SPRINKLERS

Shut off the water to your sprinklers and have them blown out. Hopefully, this advice isn't coming to you "too late". I saw at least three homes in my travels over the weekend where copper lines had frozen and geysers were shooting up toward the heavens. Last year, we blew our sprinklers out in early October and then had three more weeks of hot weather. This year, the first "hard freeze" hit October 9. As usual, the autumn weather here is purely random.

GUTTERS AND DOWNSPOUTS

This weekend's cold snap has thrown a lot of the trees into a panic. From here on out, we're going to have a pretty fast "turning" of the leaves, which means roof gutters and downspouts will be filling up with leaves over the next few weeks. Clean them out to make sure water (which will freeze and expand) isn't trapped, and make sure they are firmly mounted so they can bear the weight of snow and ice.

FURNACE AND HEATING SYSTEMS

Don't forget to have your furnace checked out at least every two years. Same with your gas fireplaces. Carbon monoxide in your home is a deadly serious matter (bad pun intended)... and over the past few years Colorado has been in the news more than a few times for CO-related deaths. Effective July 1, sellers are now required by law to install functioning carbon monoxide detectors within 15 feet of any sleeping area in homes with fuel-based heating systems.

SNOW SHOVELS, SNOW MELT AND WASHER FLUID

Make sure you know where your snow shovel is before you need it, and take time this week to fill your car's windshield washer fluid reservoir with a good, winter grade solution. Keep in mind, too, that your tires may loose a few pounds of pressure in the cold air and you should top them off next time you hit the filling station.

This is not a comprehensive list, but it's a good start. The important thing is to be prepared for whatever comes, and help your neighbors to do the same.

CASE SHILLER REPORTS SIXTH STRAIGHT MONTH OF GAINS

I wouldn't pop the bubbly just yet, but we'll take good news where we can find it.

Case-Shiller reported this week that July housing prices in the report's 20-city composite index rose 1.6% between June and July, the sixth straight month of sustained improvement in the national survey.

On a year-over-year basis, Case-Shiller reports an overall decline in values of 13.3%, but a loss of just 2.9% in Denver.

While Case-Shiller's information is interesting (and gets plenty of media attention), it doesn't really tell you much about the market that exists today.

Because Case-Shiller is lumping all sales together into one statistical pie, it does not illustrate the radical disparity between the hyperactive, multiple-offer driven entry level and the credit-frozen, equity-losing high end of the market.

A Denver area seller or buyer at $200,000 is living in a completely different reality than a Denver area seller or buyer at $600,000. Below $200,000, many homes are appreciating (or more accurately, rebounding from previous losses) at 5 to 10% on an annualized basis. Above about $400,000, it's hard to find any neighborhood that isn't losing value.

So take the Case-Shiller report as good news, but don't get carried away. Show me continued improvement AFTER the $8,000 first-time buyer tax credit goes away, and then you'll have me on board the recovery bandwagon.

90 DAYS OF MASSIVE ACTION - LET'S GO!

October is here, at last!

Turning leaves, crisp nights... and decisions that will shape our destinies in 2010 and beyond.

The fourth quarter of the year has always been my favorite quarter of the year, not only for the change of seasons, but because the last 90 days of the year is when those of us in real estate are faced with a critical, annual decision:

Ramp up, or shut down. Make plans, or "veg out". Accelerate hard, or coast into next year.

I don't know why agents lose focus in the fourth quarter of the year. Maybe it's the shorter days. Perhaps the colder weather turns them off.

All I know is that there is less competition, and those who are in the market are more motivated than those who work and shop seasonally.

It's true that demand among first-time buyers will fall off soon, either because the $8,000 tax credit is extended ("Whew! - more time") or expires ("Tilt! - game over"). But first-time buyers are only a part of the market, and I believe there are many non-first time buyers who have been sitting on the sidelines waiting for traffic to clear.

Either way, there is always opportunity if you are willing to work hard.

So bring it on... let's rock in the fourth quarter!

THAT $8,000 FREE GIFT? TRY $15 BILLION AND COUNTING...

The hottest topic in real estate these days is whether the $8,000 first-time buyer tax credit that was initiated in February will be extended beyond its November 30 deadline. In Washington, it is the subject of an intense lobbying campaign and in markets around the country, first-time buyers are scurrying about trying to lock up homes that they can close on before November 30.

Here's one strong argument against an extension for the credit - the cost.

Originally projected to be $7 to $8 billion, the total tab now stands at over $15 billion and counting. Proponents say that it's evidence the credit is working. Opponents say the government can't continue to subsidize a program that has been this expensive when so many other needs are being unmet.

Here's one strong argument for an extension of the credit - estimates are that the tax credit has inspired nearly 400,000 sales nationwide, including tens of thousands of foreclosures that were sitting vacant and neglected. Most of these buyers are pouring at least some of their tax credit money back into home improvements, which help create stronger, safer and more vibrant neighborhoods.

So will the tax credit stay or will it go? Bottom line - it's a toss up.

Two months ago, I thought an extension was a slam dunk. Now I'd call it 50/50, maybe less than 50/50, that the credit is extended.

Too expensive to continue? Or too successful to unplug? That's the question being debated in Washington right now.

DO BUYERS USING E-CONTRACTS HAVE AN ADVANTAGE?

Below $200,000, or with any attractive, well-priced property, the answer is most definitely "yes"!

I began using the e-Contracts program about two years ago, and today I couldn't fathom going back to paper. In short, the e-Contracts program allows agents to write purchase offers (and listing agreements, inspection notices, amendments, etc.) online, and then email those contracts over to clients for immediate, electronic signatures.

They can then be forwarded directly to the other agent, who can forward them to their clients for review and another electronic signature.

The point is, in a market where there is such competition for entry-level homes, every second matters. Many properties, especially the REOs, are coming off the market within a day, and sometimes within a few hours of going into the MLS system.

So how many agents are using e-Contracts? Based on my interaction, I would say it's less than one-quarter. That means three out of four agents in the Denver Metro area are still writing contracts by hand, or on the office computuer, and then bringing clients into the office (often after work) to review and then sign them.

The contract is then faxed, where it often sits in a pile behind a receptionist's desk for another hour or two, then carried to the listing agent's office, where it may sit for another hour or two... do you see where this is leading?

Electronically, a contract can be written in 20 minutes, reviewed and signed in 20 minutes, and emailed within a nanosecond. Hits the listing agent's BlackBerry or PDA, gets looked at immediately, and SNAP! - we're under contract!

Do you see who's more likely to get the better outcome?

Buyers, demand e-Contracts!

THE $8K FTB TAX CREDIT - WILL IT STAY OR WILL IT GO?

The question I am hearing more than any other right now is, "Will the $8,000 first time buyer tax credit be extended or expanded after it expires on November 30?"

Up until a few days ago, I was pretty confident it would be extended. Now I am not so sure.

The Denver Post ran an editorial this morning in opposition to extending the tax credit. One huge reason: the original projected cost of $8 billion has nearly doubled, to $15 billion and counting.

Interest groups like the National Association of Realtors and the National Association of Home Builders (as well as ancillary beneficiaries like Lowes, Home Depot, etc.) are lobbying not only for an extension of the credit, but an expansion to $15,000, made available to all home buyers in 2010. That proposal comes with an estimated price tax of $100 billion, or an additional one-year tax burden of about $1,200 for every household in America.

I have felt all along that the lobbying for an expansion of the credit was simply a negotiating ploy to preserve the existing credit for a few months longer. That still could happen.

But it's no sure thing. And continuing down this road runs the risk of taking us right back to the place where this economic meltdown started - people buying homes with short term perspective driven first by easy credit, and now by an $8,000 check from the government.

Here's a thought: if keeping the housing market afloat in the midst of the worst economy in 70 years is a priority, why don't we cut the credit in half for 2010, and offer $4,000 to first-time buyers? Don't unplug the stimulus all the way, but let's recognize we can't subsidize all areas of the economy forever.

Here in Colorado, we are far better poised to deal with an elimination of the tax credit than the "free-falling" states like California, Arizona and Nevada. Truth is, our market was getting better before the national economy came unravelled, and it's likely to bounce back before many other areas of the country.

Although I have helped a lot of buyers take advantage of the $8,000 first-time buyer tax credit, we shouldn't be dependent on it, nor should we count on it being around indefinitely. Reducing or eliminating the credit is probably better for the long term health of our housing market than expanding or extending it.

REAL ESTATE COMMISSION DEACTIVATES 4,560 MORTGAGE BROKER LICENSES

When discussing the ups and downs of the past decade in the Colorado housing market, one subject that always comes up is Colorado's relatively lax history with real estate regulation.

Specifically, until 2007, Colorado was one of only two states (Alaska being the other) where there was absolutely no licensing, training or education requirements for mortgage brokers.

One day out of Supermax? Become a mortgage broker!

Thankfully, those days are behind us.

In August of 2006, Erin Toll was appointed director of the Colorado's Division of Real Estate. Since then, the hammer has been coming down hard on brokers, appraisers, builders and anyone else who plays a role in Colorado's real estate industry.

In 2007, Colorado instituted a registration program for mortgage brokers, and in 2008 the state put a full licensing program in place. As part of that program, mortgage brokers were subjected to background checks and required to take 40 hours of licensing education. They also had to pass what many mortgage brokers have told me was a pretty wicked licensing exam (anybody want to amortize a 30-year loan without a calculator?).

The result?

On August 31, Toll deactivated 4,560 mortgage broker licenses - or roughly 50% of those issued by the state - for failure to complete the division's licensing requirements.

What does this mean? It means that if your mortgage broker is still around, he or she is probably pretty competent.

And if you can't find your old mortgage broker, chances are he or she is working in Alaska.

NEW COLORADO LAWS OFFERS FORECLOSURE DEFERMENT

A new law that took effect August 1 may offer some Colorado homeowners facing foreclosure a 90 day deferment.

HB 1276 offers homeowners a 90 day deferment on their foreclosure sale date, meaning that the public auction process will be delayed. This can provide up to an additional 90 days for the homeowner and their HUD approved housing counselor to work with the bank.

When a homeowner has officially entered the foreclosure process, meaning that their foreclosure has been filed with their county Public Trustee, the holder of the loan will be required to post the document physically on the home.

The posting notifies the homeowner that they may be eligible for a foreclosure deferment through HB 1276, and provides contact information to reach a HUD-approved housing counselor.

Eligibility does not mean that the homeowner will qualify for the deferment, but a housing counselor can help them determine if they qualify. Counselors can also help homeowners determine if they may be eligible for a loan modification or other assistance.

Some of the groundrules for deferment include:

1. The home must be owner-occupied.

2. The home must be a primary residence.

3. The mortgage cannot be greater that $500K.

4. The homeowner must have some source of income that allows them to make two-thirds of their regular mortgage payment.

5. The homeowner must continue actively working with a HUD-approved housing counselor to negotiate with their mortgage company.

One irony to this whole program is that when Colorado was leading the country in foreclosures per capita in 2005 and 2006, none of this help was available. In fact, virtually none of the loan modification or foreclosure deferment programs that are increasingly available today were around when we were diving head-first into the foreclosure crisis.

The fact is that the $8,000 first-time buyer tax credit program would have been sweet tonic for our market three years ago, but because the housing markets in California, Arizona and Nevada were still relatively stable, the federal government had no interest in helping Colorado.

Now that Colorado is among the healthiest markets in the country (or, perhaps more accurately, among the least ailing), the $8,000 tax credit has simply thrown more incentives onto an already recovering entry-level market.

SO YOU WANT TO BE A REAL ESTATE AGENT?

Late last month I spoke before several members of the Arvada Chamber of Commerce at a lunchtime function. When I speak before other business owners and sales professionals, I rarely focus on real estate, unless someone has a specific question. When I talk to other salespeople, I prefer to focus on subjects like contact management, referral systems and lead generation, which is the lifeblood of sales.

For many years, I worked in a mentoring capacity with newer agents. One of the philosophies I have always subscribed to is that excellence comes from specialization. While there are probably 15 to 18 proven ways to generate leads in real estate, the trick for most successful agents is to simply get REALLY GOOD at three of four of them, and do them every day.

Proven Systems to Generate Real Estate Leads (in no particular order)

• For Sale By Owner: Offer services, advice, stay in touch with unrepresented sellers who may list with you down the road

• Past Clients / Sphere of Influence: Connect with your friends, family and past clients for business referrals

• Door Knocking: Walk neighborhoods and talk to people

• Open Houses: Hold three to five every weekend, post 12-15 directional signs, follow-up with everyone who comes through

• Floor Time / Ad Calls: Sit around the office and wait for someone to call - the WORST strategy ever, but some people do it

• Sign Calls: Pay referral fees to other agents to “ride” their signs and take buyer calls off of their listings

• Investor Groups: Associate with investor clubs

• "Traditional" Advertising: Bus benches, magazines, PTA newsletters, etc

• Absentee Owners: Build relationships with out of area landlords (good strategy in rental towns, like Fort Collins)

• Just Listed / Just Sold Postcards: Mail to areas around company listings, sales

• Websites: SEO, unbranded stealth sites (ColoradoForeclosures.com, etc)

• Relocation: Affiliate with relocation companies and pay referral fees for leads

• Bank-Owned Listings (REO): Represent banks in the dissolution of their inventory

• Blogging (Active Rain, Zillow, Personal): Engage the consumer online

• Networking Groups: Leads groups, BNI, chambers of commerce

• Geographic Farming: Focus on select neighborhoods (sponsor Little League teams, community garage sales, monthly newsletters, etc)

• (800) Call Capture: Advertise listings, services, free reports and capture phone numbers

• Expired Listings: Call on listings others failed to sell

• Short Sales: Ouch!

Again, the trick is not to do them all, or even try. The trick is to figure out three or four that you can do well, build great systems around them, and then strive to be in the top 5% of your field.

Success comes from having a clearly defined plan, working it well, and adjusting as market conditions change. Massive action directed with clarity and focus is a hard combination to beat. I know my "big four" when it comes to lead generation... do you?

COUNTING DOWN

It's September 1.

That means if you are a first-time buyer looking to take advantage of the government's $8,000 tax credit, you're almost out of time.

Reality is, if you don't have something under contract by October 15, you probably won't close by the November 30 deadline.

Title companies and lenders are already working overtime trying to handle the deals stacked up in the pipeline today. And as buyers become more desperate to find something, anything, they can get into, the delays only figure to get worse.

My timeline for buyers is six weeks.

If you're not under contract in the next 45 days, it probably won't happen for you.

The countdown is on.

95% OF NATION'S MARKETS SHOW IMPROVEMENT IN CASE-SHILLER INDEX

Maybe now we can say that housing has bottomed?

After three years of disastrous data, 19 of the 20 markets tracked by Case-Shiller improved last month - the fifth straight month of strong data and the index's strongest showing in 3-plus years.

Leading the charge? Dallas and Denver, which each have reported four consecutive months of positive returns. Prices in Denver showed a 1.3% increase in May, followed by an even stronger 2.5% increase in June.

Since Case-Shiller only tracks resales of existing homes, "sold" data is the only thing that counts.

And since higher end homes simply are not selling, it's important to keep in mind that what Case-Shiller is really telling us is that the homes that are actually selling (lower end homes) are increasing in value.

Remember that homes priced below $250,000 currently account for just 28% of all listings in the Denver Metro market, but 61% of sales activity. Conversely, homes above $600,000 account for 25% of all listings, but just 4% of all sales.

So the vast majority of the sales activity being tracked by Case-Shiller is at the low end of the market... therefore, when Case-Shiller says values are increasing, please understand that it's the bottom of the market that is driving the good news.

When you consider what a drag the high end of the market is on the overall numbers, the reality is that homes below $200,000 are appreciating at rates that are significantly higher than what Case-Shiller is reporting.

THE BEST DAYS TO BUY A FORECLOSURE

Foreclosures are hot and buyers want more of them... that's one obvious conclusion for the bidding wars that have broken out on bank owned homes priced under $250,000.

Having sold over 40 foreclosures since 2007, I have become pretty adept at figuring out the formulas that give buyers the best chance of beating out the competition for these aggressively priced homes.

While I won't give all of my secrets away, here is one... the best days to look for foreclosures and write offers and Monday, Tuesday and Wednesday.

Why is this?

Mostly it's because if you are trying to outsprint a dozen other buyers to the prize, you don't want competition. And when you submit an offer to the bank, best case is getting a response in about 24 hours. Sometimes it can take a week.

What you don't want is to have a listing sit open over a weekend, because the majority of buyers are weekend shoppers, and if you're competing against 10 or 15 other buyers, it's pretty much granted that even if you do win you're probably not getting much of a deal.

That's why "fresh" foreclosures which come on the market Monday, Tuesday or Wednesday give you the best chance for success. See the property before others see it... write the offer before others write... and (here's the key) get an answer before your competition doubles or triples in size.

The truth is, the asset manager sitting in Dallas or LA or Orlando doesn't care if the home sells for $162,000 to $169,000... they just want it gone. Most banks will take the first acceptable offer that comes along, as long as there aren't multiple offers. Once you've got multiples, you've got delays, more eyes on the property, and a lesser chance of ultimately getting the home.

So how do you find foreclosures that hit the market on Monday, Tuesday or Wednesday?

The answer is pretty obvious - you work with someone who is totally focused on finding new inventory as soon as it hits the market. That's the formula for success.

BUSINESS WEEK CALLS BOULDER NATION'S STRONGEST HOUSING MARKET

August has been a very good month for the housing market in Colorado, at least in the media.

First, Money Magazine named Louisville the best town in America in which to live.

Next, Forbes declared Denver to be the seventh best housing market out of 161 metropolitan areas it surveyed around the country.

And now, Business Week says Boulder has the strongest housing market of all.

According to the article:

Boulder has several factors working in its favor. The town has controlled growth by putting limits on development and by acquiring more than 50,000 acres of open space for a greenbelt that surrounds the town. With the boundary of the Rocky Mountains to the west, the supply of new homes has been restricted.

Business Week also cites the positive influence of CU on the job market, both with university and research positions as well as high tech employers who take advantage of the strong pool of graduates who come to Boulder as students and decide not to leave.

Business Week says nearly 60% of homes in the Boulder market are appreciating in value, making it one of the safest bets anywhere in the United States

BEST CITIES FOR A HOUSING RECOVERY

Forbes Magazine has released a study of 161 metropolitan statistical areas (MSAs) around the country, looking for markets with the most upside as the national economy begins to regain its footing.

Denver is ranked number seven on the list.

Forbes says foreclosures currently account for just 24% of sales in the region (compared to 70% or higher in parts of California and Nevada), and prices have stabilized in many parts of the metro area. According to the magazine, while the higher end of the market remains soft, entry level homes are showing strong value increases as first-time buyers chase after limited inventory, low rates and the $8,000 federal tax credit.

Exactly what we're seeing on the street.

FED WINDING DOWN MORTGAGE PURCHASES

The Federal Reserve announced today that it will wind down a program to purchase up to $1.25 trillion in mortgage-backed securities by the end of the year, removing a significant backstop to higher mortgage rates.

In conversation after conversation with buyers this summer, I have emphasized that there are three key drivers pushing buyers into the market below $250,000:

1) the $8,000 first-time buyers tax credit, scheduled to end November 30

2) more affordable prices for entry-level homes, since 80% of Colorado's foreclosures (and subsequent value losses) have hit homes priced at $250,000 and below

3) 30-year fixed interest rates in the 5's, which are historic, and in my view, temporary

One analogy I use is that our national economy has suffered a heart attack, and the government has been doing fast and furious CPR for the past year in an attempt to revive it.

This "CPR" has taken the form of the banking bailouts, the stimulus bill, the first-time buyer tax credit, and in a lesser known development, the decision to purchase massive amounts of newly financed mortgages at discounted rates.

Because most institutional investors who formerly purchased mortgage-backed securities have been pulverized by foreclosure-driven losses, there has been very little demand from the private sector for mortgage-backed investments. So into that void stepped the federal government, with its decision to purchase $1.25 trillion in mortgage loans at a time when no one else wanted to take on the risk.

If the Fed stops buying mortgages at the end of the year, who will step into the gap?

What the market has shown is that private investors will demand a greater return for the risk involved in purchasing bundled mortgages.

So what does that mean? It means the pressure for higher mortgage rates is building, which is why taking advantage of today's low rates is so important.

LOUISVILLE ROCKS!

Money Magazine has released its popular best-places-to-live list with the August 2009 issue.

This year’s roundup has a few new twists. On its website, the magazine allows users to find the best place to live near their current locations. It also introduces some subcategories, including 25 best places for affordable homes, towns where there are the most jobs, towns with quick commutes, 25 best places for singles, best places for pricey homes, 25 towns where the residents are young, and places with the cleanest air.

Here are its top 10 selections for the best overall places to live—all of them small towns with strong local economies, good schools, affordable homes, and low crime rates:

1. Louisville, Colo.
2. Chanhassen, Minn.
3. Papillion, Neb.
4. Middleton, Wisc.
5. Milton, Mass.
6. Warren, N.J.
7. Keller, Texas
8. Peachtree City, Ga.
9. Lake St. Louis, Mo.
10. Mukilteo, Wash.

Of Louisville, the magazine said...

"Some towns nestled along the Rockies are full of pretentious eco-hipsters. Not Louisville. Ice cream shops dot the historic downtown. Families grab burgers at the cozy Waterloo Café. A Friday-night street fair, with a beer garden, live music, and games for the kids, runs all summer. No wonder this down-to-earth town has appeared high on Money's Best Places list before--and on many others. It's also weathering the economic downturn well. Robust industries in the area, such as high tech, energy, and health care, make county unemployment among the lowest in the state.

"But the top reason residents give for moving here? The great outdoors. Louisville is laced with nearly 30 miles of trails, Rocky Mountain National Park is less than an hour away, and eight world-class ski resorts are within two hours. The town's schools are highly rated as well. Add in dry, clear weather, little crime, good health care, and low taxes, and Louisville is pretty tough to beat."

Showing its affinity for the Highway 36 corridor, just missing the list was the town of Superior, which ranked 13th on Money Magazine's list.

DENVER AMONG TOP TEN APPRECIATING MARKETS IN MAY

Radar Logic, a national real estate data and analytics company, has released its list of the top ten metropolitan areas where prices increased the most from April to May of this year:

1. Milwaukee, Wis., 4.9 percent
2. Charlotte, 4.7 percent
3. Boston, 4.6 percent
4. Cleveland, 4 percent
5. Washington, DC, 3.7 percent
6. St. Louis, 3.3 percent
7. Columbus, Ohio, 3.2 percent
8. Seattle, 2.8 percent
9. Denver, 2.3 percent
10. Philadelphia, 1.8 percent

It's good to seen Denver on the list, but again I would caution both buyers and sellers to recognize that it is activity at the bottom of the market (below $250,000) that is driving these positive numbers.

Below $250,000, I have seen many homes that sold as foreclosures in the $90k - $120k range a year ago being rehabbed and flipped for twice that price today. That is appreciation far in excess of 2.3%!

But above $400,000, with very few exceptions, it's hard to find any areas in town that are appreciating. In fact, many higher end communities (especially newer ones) have seen value losses of 5% to 10% in the past year.

It remains a very segmented market.

We'll take good news wherever we can find it, but remember that generalized statistics can be misleading. As always, it's important to remember that "your market" may not be synonymous with "the market".

CASE-SHILLER SHOWS FIRST NATIONAL HOUSING PRICE INCREASE IN 34 MONTHS

Okay, so it's not exactly a roaring recovery, but it is a sign of hope.

For the first time in 34 months, the Case-Shiller national housing index showed a rebound in prices, with values up in May by 0.5% over April's figures. The Case-Shiller report tracks the 20 largest markets in the county (including Denver) and reports its numbers with a lag time of about two-months.

Prices were down by over 17% year over year on a national level, but decreased by just 4% in Denver (and those value losses were almost all at the higher end of the market, which remains extremely soft above $500,000).

While the Denver market has been in recovery mode for more than a year, the Case-Shiller report indicates that, on a national level, buyers are coming back into the market in larger numbers and confidence is being restored.

While I do not feel the Case-Shiller numbers are particularly relevant to Denver (I have always believed that "all real estate is local"), it is important because a recovery in housing confidence will put more pressure on interest rates... and rising rates will be one of the next big challenges for both the housing market and our overall economy, in my opinion.

So take the good news with a grain of salt... recognize that things may be improving a little bit at the national level, but remember that the Denver market is probably 18 months ahead of this curve, since we were one of the very first markets into the housing (and subprime meltdown) abyss.

Keep your eye on interest rates - because good news for the housing market is a sure indicator that higher interest rates are ahead.

WITH MORE HOME BUYERS IN THE MARKET, DENVER RENTAL VACANCIES RISE

My personal feeling is that the Denver Metro Area housing market "hit bottom" in March or April of 2008. That's when inventory was highest, buyers were scarcest, and sellers (including banks) were discounting like crazy to get homes sold.

That was probably also about the peak of the last rental cycle, when vacancies for single family rental homes were below 3% (apartment vacancies were about 6%) and landlords were able to raise rents at will.

Fast forward to today, and you see that the market is transitioning once again. While the market for single family rental homes and condos remains strong, with just a 3.6% vacancy rate in the second quarter, apartment vacancies in the Denver Metro Area have now increased for six consecutive quarters, rising to nearly 10%.

It appears that the first-time buyer tax credit and low interest rates have been pulling many longtime apartment renters into the housing market.

I believe this is a short-term condition, personally, because one significant factor these days is that new apartment construction has all but disappeared from the landscape. New apartment units are not coming online, and most residential builders have either declared bankruptcy or suspended operations in the face of lower demand for "retail" product, more difficulty with financing and an overall decline in profit margins as consumers stress "value" over "luxury".

As long as the population continues to grow, the rental market will stabilize and landlords will be okay. The "big picture" fundamentals for both private and institutional landlords remain in place, but the fact remains, in the short term, some landlords will feel the pinch of the economy, just like everyone else.