Wednesday, July 29, 2009


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.

Saturday, July 25, 2009


RealtyTrac, a California-based foreclosure tracking service, reports that the Denver Metro area ranked number 45 in the country in new foreclosure filings during the first half of the year, signaling a continuing decline in foreclosure activity as the local housing market solidifies.

The RealtyTrac numers show a 29.43 decrease in foreclosure filings for the Denver region, while nationally foreclosures increased by almost 15 percent.

Because foreclosure filings are counted differently by different tracking services (some count NEDs, some track delinquencies, some count trustee sales), the numbers vary a bit from report to report. Earlier this summer, a survey of public trustees' offices in the seven county Denver Metro Area showed an overall decline of about 11 percent in trustee sales, which is that final point in the process when the homeowner actually loses title to the foreclosed property.

However, no matter which report you follow, there is a consistent theme: Denver appears (for now) to be on the back-end of its foreclosure crisis, and with low interest rates, already discounted prices and an $8,000 tax credit for first-time buyers, our market will continue to perform better than most for the rest of this year.

Tuesday, July 21, 2009


Okay, that was interesting.

Where were you when the Great Summer Storm of 2009 rolled through town last night? Here, once the storm got started around 10 o'clock, it sounded like someone had taken a giant firehose full of hail and was firing it at the side of our house.

Not only was there extraordinary amounts of wind, rain and hail, we could see rolling clouds along the ground that would obscure streetlights, buildings and even large trees in our neighborhood. I don't know if it was groundfog or funnel clouds... I just know it was weird.

So I was at Home Depot mid-morning and it was the most crowded I've seen it in four years. Chain saws and power tools flying off the shelves... rakes... garbage cans... power generators... gloves... we had our own economic stimulus event last night, in the form of an insane summer storm.

Just part of the adventure of living in Colorado, I suppose, where you never know what weather event waits just around the bend.

Sunday, July 19, 2009


334… 123… 60… ZERO!

What does this sequence of numbers have to do with the housing market?

It’s a countdown to the end of the $8,000 First-Time Buyers federal tax credit, which covers new homeowners purchasing a primary residence between January 1, 2009 and November 30, 2009 (a window of 334 days) and who have not owned a home in the past three years.

As of this morning, there are just 123 days left until the expiration of the tax credit, but in reality, because it normally takes 45 to 60 to close a property once it’s under contract, buyers looking to take advantage of the $8,000 tax credit really only have about 60 days left to find the perfect home and get it under contract.

But it’s not just buyers who have benefitted from this tax credit. As you know, the market in the Denver Metro region below $250,000 has been sizzling hot this summer, and "traditional" sellers are having more success than any time in the past three to four years. Foreclosures are down and private sellers are finding that retail buyers are out there, especially if a home has been well maintained (or rehabbed) and is in "turnkey" condition.

That means if you have been thinking about selling an entry level home, and you want to capitalize on the strong buyer demand that exists today, you only have about 60 days left to secure an offer before the strong impact of the tax credit incentive starts to diminish.

Many of next year’s first-time buyers have jumped into the market this year, drawn by the tax credit and an incredibly attractive interest rate environment. In a few short months, we could lose the tax credit and see higher rates, a one-two punch that would take some of the starch out of our market and make things more difficult for both buyers and sellers.

Now I don’t advise you to sell your home just because of the tax credit, any more than I would tell you to buy a home because of the tax credit. Homes should be bought and sold because the decision makes sense from the standpoint of your family situation, your employment situation, your economic status and other “life events” that normally trigger moves up or down.

But both buyers and sellers are benefitting right now from this unique tax credit, which is slated to go away pretty soon.

Is there anyone you know who has been thinking about buying a first home or selling a longtime residence?

Remember, I am never too busy for your referrals!

Wednesday, July 15, 2009


As we do at the beginning of each month, we pull raw data from the MLS and run it through our own statistical filters to get a handle on the condition of the Denver area housing market.

Here are highlights from this month's snapshot:

* Homes priced below $250,000 currently account for 28% of all listings and 60% of all sales

* Below $250,000, there are just 1.41 active listings for sale to each one currently under contract

* Homes priced between $600,000 and $1 million currently account for 15% of all listings and just 3% of all sales

* Above $1 million, there are 24 active listings to each one currently under contract

Each of these snippets tells a story, but in short, the song remains the same.

Although overall listing inventory is down 20% from a year ago (as foreclosures become more scarce), it's still all about the lower end of the market.

There is currently just a 2.60 month supply of homes below $250,000, compared to a 45 month supply of homes priced above $1 million.

Higher end home sales depend on a strong economy (we don't have it), consumer confidence (not good) and availability of credit (tightest lending standards in 20 years). Until these conditions are corrected, the higher end of the market will remain distressed, and values will continue to erode.

As I mentioned in a previous post, there are really three totally distinct categories within the larger Denver metro housing market.

The low end is hot, the middle is warm, and at the top we're a long way from recovery.

How we approach your situation depends on what segment of the market find yourself in. But it takes specialized knowledge to navigate this market, and if your agent can't articulate what you've read in this space, chances are you are working with someone who doesn't understand what's going on.

Saturday, July 11, 2009


I received a flyer from a mortgage lender this week entitled "Quick Guide to New Mortgage Regulations". Sort of like describing the stimulus bill as a "Quick Guide to Economic Recovery".

The regulations are coming in layers now, with new regulations piled upon only slightly less new regulations, topping slightly older regulations which followed a long season of no regulation at all.

What it adds up to... obtaining a mortgage loan today (and trying to close a real estate transaction) is only a bit less challenging than trying to build a naval warship from the contents of the recycling bin in your garage.

Okay, I exaggerate, but only slightly.

Here's what the first paragraph of the "Quick Guide" said:

The Housing and Economic Recovery Act of 2008 (HERA) was signed into law and now includes new regulations for the mortgage industry under the Mortgage Disclosure Improvement Act (MDIA), which includes an amendment to the Truth In Lending (TIL) Act which changes disclosure requirements previously applied under RESPA. The Home Valuation Code of Conduct (HVCC) has also been adopted by FNMA (Fannie Mae) and FMHLC (Freddie Mac) to enhance the integrity and accuracy of home valuations as of May 1, 2009... blah, blah, blah.

Remember, this is the "Quick Guide"!

What you need to know is that your lender is now required to disclose more information to you, earlier in the process, and if anything changes that affects the APR of your loan, or you decide to buy down your rate, or finance a portion of your closing costs, or amend the terms of the contract to reflect a repair credit, the earliest your transaction can close is seven business days after the new, updated TIL is issued. And if you don't sign the new TIL (and wait the required number of days), you don't get the loan.

What this means is that we are likely to see more rocky landings with our closings... more stress-inducing 11th hour delays and more finger pointing than ever before. All to protect the consumer.

I'm not saying these new regulations are good or bad, but there's a lot of gray area to this entire process. People who have played by the rules are going to have to navigate through a lot of red tape to get to closing, and it will cause some perfectly legitimate deals to get crazy at the end.

That's about as quick as I can explain it.

Monday, July 6, 2009


I've been getting in touch with my "right brain" lately. That's the creative side, and for a die-hard analytical, it's a bit of a journey into the unknown.

I'm reading "Staging to Sell" by Barb Schwarz, who is widely considered to be the inventor of what we refer to today as "staging" a home for sale. Even though I am not a right brain person, my left brain clearly understands and recognizes that staging works, which is why I always arrange for a professional staging consultation whenever I take a listing.

Johanna Wells is my stager, and she often plays "bad cop" to my "good cop". By that I mean, if I see clutter, colors, or crazy arrangements that are likely to send buyers sprinting back toward their cars, Johanna can point it out. I can preserve the relationship with my sellers, while Johanna can lay down the law.

Staging works. Based on 15 years of experience, this is indisputable. Buyers see, but they rarely envision. Buyers work from a WYSIWYG ("What You See Is What You Get") mindset. That's why making a home turnkey ready is critical, especially in markets where there is ample competition.


From the book, Schwarz identifies the Seven C's of Staging:

CLEAN - you must deep clean, and this includes the spots we tend to forget like the top of the refrigerator, inside the cupboards, and along the window sills and tracks.

COLOR - dark rooms feel small, light rooms feel large. Green is tranquil and associated with prosperity, purple is harsh and overwhelming.

CLUTTER - buyers cannot mentally move into a space when it is occupied with stuff. Clutter eats equity.

CREATIVITY - our goal is to stage affordably. That means sometimes we simply rearrange the ingredients of items in a room. Something in the basement could look great in a bedroom... while stuff in the bedroom may belong in the basement (or Public Storage).

COMPROMISE - sometimes we can't fix everything. Painting the trim isn't as good as painting the whole house, but it helps. Instead of retiling a bathroom, we can change the color of the towels and shower curtain. When we can't change the substance, we can still change the feel.

COMMUNICATION - every room conveys a feeling. Light, bright and open... or dark, cluttered and mysterious. Buyers want certainty. We must work together to ensure each space communicates a warm and inviting feel.

COMMITMENT - once we've painted the canvas, it's important that you not put your fist through it! How you live in a home is different from how you sell a home. It will take work to preserve the staged feel that we have created. It's part of the process of selling a home, and it does involve commitment and some inconvenience. However, the payoff is worth it!

As I have said before in this space, the first 21 - 30 days are absolutely critical when listing homes for sale. Your best chance for a solid, full-price offer are in the first days, not 45 or 90 or 180 days down the road.

After 30 days, you're going to begin to bleed equity. We don't want that to happen.

In my opinion, pre-inspecting and staging a home for sale are critical components of an effective marketing plan. These two steps will also put your home above the competition, and justify a higher price.

Staging is one of those key activities you cannot afford to dismiss.

Wednesday, July 1, 2009


At a Chamber of Commerce luncheon yesterday, I had the opportunity to discuss the state of the Denver Metro housing market with local business owners and community leaders.

Here is a summary of what I shared:


There are at least three distinct markets inside the larger Denver Metro housing market, and the realities buyers and sellers find are very different in each group.

RED HOT - $250,000 and below

This remains the red-hot sector of what Forbes Magazine now identifies as the top housing market in the country. Denver homes below $250,000 currently account for 28% of all listings and over 60% of all sales.

The market gets tighter as the prices get lower. The competition for foreclosures below $150,000 is beyond ridiculous. These homes are often attracting 10 or more offers and come off the market as soon as the bank gets around to choosing a winner as reams of paper pile up on the asset manager's desk.

There are three reasons homes continue to fly off the shelves at the lower price points:

1) $8,000 first-time buyer tax credit (currently set to expire November 30)

2) 30-year fixed rates in the low 5's (your payment will NEVER go up - where do you think rents will be in 10 years with all the money the Fed is currently printing?)

3) Value - 80% of Colorado's foreclosures have hit homes priced below $240,000... it's the entry level of the market that's taken the biggest hit in values, so that is where buyers (and investors) perceive the greatest value lies today

Pet peeve: the number of REO homes that continue to be left in ACTIVE status in the MLS when the agents know the banks already have a dozen or more offers and have made a decision. It drives me crazy, and it drives buyers crazy, too.

IMPROVING - $250,000 to $400,000

This segment of the market has shown improvement over the past 90 days.

Homes in this price range currently account for 28% of the listings, and 24% of all sales. That's a fairly balanced market.

The $8,000 FTB tax credit is having some positive impact here, but mostly below $300,000. In some neighborhoods, values are appreciating, but mostly the market is balanced and flat, with just a little appreciation in most areas (although there are always "hot pockets" inside larger markets). Very few foreclosures in this price range, at least at this time.

We'll see if rising unemployment leads to rising NED's.

TROUBLED - Above $400,000

The higher in price you go, the softer this market becomes. It's a new reality - small is the new big. A few years ago, everyone wanted 3,000 square foot new construction homes... today, it's the 1,700 square foot ranch built in the 70's (for half the price) that buyers want.

The market has shifted, and I don't see significant recovery here until 401k's return to their pre-2008 levels. It takes confidence to lay down a half-million dollars for a home, and the market really doesn't have it.

What we have today are a lot of high-end home owners who don't want to be high-end homeowners any more. Consider:

* Homes priced from $400,000 to $1 million account for 33% of all listings and just 15% of all sales

* Homes above $1 million account for 10% of all listings and just 2% of all sales

* Below $250,000, there are just 1.46 active listings (including all the short sales that clutter up the market) for each home under contract

* Above $1 million, there are nearly 21 active listings for each home under contract

The high end of the market is not only being hit with the effects of a down economy, but financing options remain extremely limited. There's just no one who wants to lend to the high end of the market, even if the borrower is qualified.

There is currently a 67 month inventory of homes above $1 million. Below $250,000, it's a 2.65 month supply. Below $150,000 it's less than a one month supply of homes. If it's bank-owned, it's under contract.

People who are locking in payments on affordably priced homes with interest rates in the 5's and receiving an $8,000 tax credit in what is widely identified now as one of the nation's best housing markets aren't taking on a ton of risk. Being able to own an entry-level home for less than it costs to rent is an aberration, and the true risk takers are those who think they are "playing it safe" by staying on the sidelines while interest rates rise and the economy recovers.

At the higher price points, the conversation is different. Maybe the $1 million market will come back some day... but maybe that day is five years off.

The quality of your decisions is based on the quality of your information, and if your agent isn't educating you about your segment of the market, you are at grave risk.

As you can see, there is not a single "housing market" in the Denver Metro region. There are at least three markets, and the realities people are experiencing in each sub-market are very different.