Friday, August 27, 2010


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.

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.  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!

Wednesday, August 25, 2010


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. 

Monday, August 23, 2010


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.

Wednesday, August 18, 2010


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. 

Saturday, August 14, 2010


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.

Monday, August 9, 2010


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.

Friday, August 6, 2010


"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. 

Tuesday, August 3, 2010


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.