Tuesday, December 28, 2010


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

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

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

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

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

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

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

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

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

Sunday, December 26, 2010


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

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

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

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

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

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

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

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

Sunday, December 12, 2010


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

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

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

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

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

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

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

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

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

Friday, December 10, 2010


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

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

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

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

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

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

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

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

Monday, December 6, 2010


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

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

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

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

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

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