Sunday, May 27, 2012


The tightest real estate market in at least a decade got tighter last month, as inventory continued to fall to unprecedented levels and buyers continued storming the market as Denver's powerful real estate recovery rolled forward.

At the end of April, there were just 10,254 homes for sale in the Denver MLS, a drop of 43% from one year earlier.  A total of 4,721 homes went under contract during April, up from 3,775 during the same period a year ago.

But it together and you have a 43% drop in listings with a 20% increase in the number of contracts, pressure which is driving prices higher below $400,000 and sparking bidding wars through much of the metro area.

Below $250,000, the change is even more remarkable.  The number of listings for sale - 2,818 - is down 65% from the 8,007 homes that were on the market in this price range one year ago.  A total of 4,675 homes are currently under contract in this price range, which basically means three out of every five homes listed for sale below $250,000 is currently under contract.

The overall absorption rate, which was 5.37 months one year ago, is at just 2.22 months today.  Below $250,000, the absorption rate is just 1.37 months, which means at the current pace of sales it would take less than six weeks to sell every single home on the market today, regardless of price or condition.  

Foreclosures are now back to 2002 levels in Colorado and the state currently ranks 44th in the country in terms of mortgage delinquencies... a far cry from when Colorado led the nation in foreclosures per capita during 2005 and 2006.

First-time buyers continue pouring into the market, driven by soaring rents and incredibly low interest rates that make owning significantly cheaper than renting in most parts of town.

A shaky economy has capped the so-called "move up" market, which means there are fewer privately owned homes coming on the market at the same time bank-owned inventory has dwindled.

And, in an interesting twist, many of the more than 40,000 households that were foreclosed on back during those dark days of 2005 and 2006 are cycling back into the market, eager to own once again but approaching things much more conservatively this time around.

Add it all up and you have the formula for an amazing inventory crunch, the likes of which we haven't seen in many years.  As long as rates stay low, rents keep rising and builders stay mostly on the sidelines, you can expect it to continue for some time to come.

Monday, May 21, 2012


Three years after the condo market brutally tanked, hope may be on the horizon.

FHA has announced that it plans to revisit the drastic steps it took in 2009 to effectively get out of the condo market, steps that killed the primary funding source for condo loan in the US and sent values plummeting as a result.

Due in large part to the high number of investors and speculators who used FHA financing to fuel a condo bubble in cities like Miami, Las Vegas and San Diego during the boom, FHA announced in 2009 a new set of rules that essentially disqualified 60% to 70% of the nation's condo developments from FHA financing.

These rules included:

· Not lending in developments where FHA insures more than 30% of the units

· Not lending in units where owner occupants occupy less than 50% of the units

· Not lending in developments where 15% or more of the owners are delinquent in their HOA payments

· Not lending in units where a single investor owns 10% or more of the units

· Not lending in units where the HOA isn’t withholding sufficient reserves

Because FHA makes 40% of the nation's mortgage loans, and over 60% of the loans below $200,000, the loss of FHA financing was a crippling blow to condo communities and condo owners alike.

In an ironic (but predictable) twist, FHA's attempt to shut down future condo lending also sent hundreds of thousands, if not millions, of existing FHA loans into foreclosure, further sinking the agency in red ink.

Regulators have now announced, however, that FHA plans to look at easing up on these rules as the housing market improves and the economy recovers.  That would be a huge lift for the millions of condo owners who have been holding on, waiting for some good news in the most distressed sector of the US housing market.

Friday, May 11, 2012


Home inspections can be highly stressful for all parties involved.  There is no such thing as a "perfect" home, and there never will be.  

Generally speaking, a thorough home inspection should last two to three hours, and it will address the key components of a home, including the roof, foundation, HVAC, plumbing and electrical components.

There may also be comments about the paint, siding or drainage, as well as comments about commonly ignored areas of deferred maintenance.

Most inspectors will tell you, however, that home inspections really boil down to five key things:  foundation, roof, HVAC, plumbing and sewer line.

The "Big Five", so to speak, are the items that can make or break a deal, because they affect the overall health of a home and repairs can cost thousands and thousands of dollars.

How buyers and sellers respond to inspections is subjective.  Some people take things with a grain of salt, while others have severe reactions when they are informed of flaws or potential flaws that exist with a home.

Inspections are a trying time, and this is really where a skilled agent is needed to hold a deal together.

Ignore or miss something big, and brace for an angry outburst (or potential litigation) from the buyer somewhere down the road.  Nitpick the seller to death on small things, and the entire deal may come unraveled when the seller decides to take a hard line.

The market plays a role in how this process plays out, as well.  In the market of 2008, 2009, 2010 and even the first half of 2011... sellers were often desperate to sell and they would accommodate some large quests.  Today, however, with buyers swarming the market and inventory at record-low levels, buyers must be much more realistic about what they ask for.  Many sellers do not fear going back on the market when homes are selling in days instead of months.  

How buyers, sellers and agents handle the inspection process is often the most critical component in holding a deal together once a home has gone under contract.  And it is one of the key reasons why experience is such an important factor when choosing representation.  Hire an agent who has seen it before, and chances are he or she will come up with solutions.  Hire someone who hasn't, and brace for a bumpy road.

The key is to assemble a competent team, giving unbiased assessments, with no agenda other than protecting the client's interest.  If you get that right, chances are excellent that you will survive the inspection process.

Tuesday, May 8, 2012


Does the current red-hot nature of the Denver housing market affect negotiations?  Of course.

In a market where sellers are routinely seeing multiple offers, buyers need to bring their highest and best offer upfront.  No more lowballing, hoping to go back and forth for a few days before arriving at a middle ground.  That’s so 2011.

The new model works like this:  a home comes on the market, six buyers see it, three write offers.  One lowballs, one comes in near list price, and one comes in over list price.  Instead of negotiating with all three, the sellers quickly discuss qualifications with their agent.  Who’s got the largest downpayment?  Who has a reputable lender?  Does the agent on the other side actually close deals?  If it’s the buyer with the highest offer, the game is over right there.

Why not spark bidding wars?  Sometimes they happen.  But good agents know one of the primary challenges in this market is actually getting listings to appraise for what buyers are offering.  That’s because appraisals look backwards, and things are changing so rapidly in this market it’s hard for appraisers to keep up.  If the comparable sales are from November, January and March, chances are the older sales are going to be for less, because they were sold in a different type of market.

That’s not to say you can’t get a great deal.  It’s just going to take longer, and you’re going to need to be more patient.  Lots more patient. 

If you want to actually buy a house in a reasonable period of time, you’re going to have to change your thinking. 

That means you come in hard with your best offer quickly, and make it easy for the seller to say yes.  Does that sound different than what you’ve heard for the past five years?  Absolutely.  Because this
market is absolutely different from any we’ve seen in the past six or seven years. 

Today’s successful buyers are now playing to win, instead of playing not to lose.