"THE ROCKIES WIN THE PENNANT! THE ROCKIES WIN THE PENNANT!!"

We are living in interesting times. Here in Colorado, where baseball season normally ends about the time the Broncos report to training camp, the Colorado Rockies won 13 of their last 14 regular season games, beat the San Diego Padres in a one game playoff, and are now locked in a duel with the Philadelphia Phillies for the right to go to the National League Championship Series.

What does this have to do with real estate? Well, it's a bit of a stretch, I admit, but it has to with psychology. Real estate markets, like the stock market, are often driven by emotion as much as by underlying fundamentals. When times are good, everyone wants in, and the herd mentality takes over. And when times are bad, no one wants to budge for fear of paying too much or buying into a declining market.

All it took was two magical weeks of winning for Denver to turn back into a baseball town. The Rocky Mountain News reported last week that Denver is showing the early signs of a housing recovery, as homes here appreciated by 1.3% during the second quarter of 2007, the fastest rate of 20 major metropolitan areas tracked by the Standard & Poors / Case-Shiller Home Price Index. Overall, the 20 areas studied in the Case-Shiller survey showed an average drop of 3.9% over the past 12 months.

"Denver is a low risk market", said Mike Foster, director of land acquisition for Century Communities, a private suburban builder. Because the Denver market has been flat for the past five years, "it will continue to be easier and more attractive for companies to relocate to our market than to relocate to other markets," he said.

It has been mentioned previously in this space that NAR is projecting Denver to be a "Top Five" housing market for 2008, and with interest rates dropping as the national foreclosure pictures grows more severe, there clearly is value and affordability in many sectors of our market.

Whether you are a first-time homebuyer, an investor, or a longtime homeowner thinking about moving up, now is an excellent time to look at what the greater Denver metro area has to offer. Please give me a call and let's discuss where the opportunities exist in this market for you.

COLORADO REAL ESTATE INVESTOR'S CONVENTION COMING IN OCTOBER

Each fall, the Colorado Association of Real Estate Investors (CAREI) puts on a terrific two-day investor's conference in Denver that draws both investors and real estate professionals from all over the country. CAREI is one of the largest and most prominent investor's clubs in America, with over 500 members meeting monthly to discuss market conditions, real estate investment strategies, legal protections, landlording practices and more. It's been a great resource for me and an excellent source of information for many of my investor clients.

This year's Wealth-Building Convention will be held Saturday and Sunday, October 13 - 14, at the Denver Tech Center Hyatt Regency in South Denver.

The list of speakers at this year's conference is tremendous: Loral Langemeier, best-selling author and CEO of "Live Out Loud", a real estate investment coaching and consulting organization ; Jeffrey Taylor, known to millions as "Mr. Landlord" for his innovative and positive approaches to finding and retaining quality tenants; Wendy Patton, a nationally-known real estate investor who has bought and sold over 600 homes; and Bill Bronchick, the founder of CAREI and a prominent real estate attorney here in the Denver area.

If you are looking for a massive, fast-paced education on real estate investing, this two-day seminar may be for you.

Early registration for the two-day event is just $99. For more information or to register online, go to www.RealEstateConvention.com .

CHANGE IS IN THE AIR - CAN YOU FEEL IT??

August is always an interesting time here in Colorado. Booming afternoon thunderstorms, chillier evenings and the first hints of fall color are all increasingly on display as we start to say goodbye to the summer of 2007.

For many students (including my two daughters), school starts in less than two weeks. The pool closes on Labor Day. Those magnificent sunsets over the Rocky Mountains move a little further to the south each day, and arrive a few minutes earlier.

The Broncos are back in training camp (which means the front page of the Rocky Mountain News looks just like the sports page of the Rocky Mountain News), the Rockies are actually in a pennant race (okay, just close your eyes and TRY to believe) and the 2008 Democratic National Convention here in Denver is only 12 months away.

IS THE REAL ESTATE MARKET CHANGING?

To answer the question... yes, the real estate market is changing. It's ALWAYS changing. The trick is to know how it's changing and then to apply what it means in a way that can help us make better decisions. If you weren't watching the headlines last week, more huge changes took place in the mortgage industry. American Home Mortgage, the country's 10th biggest lender, declared bankruptcy in a stunning turn of events that sent Wall Street hurtling lower at the end of last week. The company's stock, which was priced at more than $36 per share at the beginning of the year, closed at 70 cents on Friday after the company announced it could not fund its existing loans and would not solicit new ones.

More than 50 major lenders have declared bankruptcy this year, mostly those who focused on "Alt-A" or subprime loans. Years of rapidly appreciating prices in many markets caused brokers and underwriters to effectively throw caution (and underwriting guidelines) to the wind on the theory that, as long as prices kept going up, there was little risk in making more loans. That was a fatally flawed assumption.

WHAT'S HAPPENING NOW??

The mortgage loan environment right now is highly dynamic and subject to more dramatic changes at any time.

Gone are many 100% LTV and stated -income products. The guidelines for Home Equity Lines of Credit (HELOCs) are being re-written almost daily. Second trust deed products are under careful scrutiny. Underwriters are once again dotting their I's and crossing their T's with a thoroughness that hasn't been seen in a long time.

Does this mean that you cannot get financing? Not at all. Change always brings opportunity, and right now, investors are lining up for good old fashioned "A paper" loans. Rates for conventional, full-doc mortgages have actually fallen 12 of the past 16 days. "Alt-A" and subprime loan products are tougher to find, but not impossible.

If you find yourself needing this type of loan, you cannot afford to deal with inexperienced brokers or "fly by night" lenders. Now is the time for professionalism and integrity.

WHERE IS THE OPPORTUNITY??

Tighter credit means that, simply speaking, some folks who may have qualified for financing in January or February may not be so fortunate today. Just as our high foreclosure rate caused vacancy rates to fall and rents to increase, there exists that possibility that more renters may improve the outlook further for area landlords in the months ahead.

Whether you are a first-time buyer or a seasoned investor, now is a very good time to touch base with your mortgage lender to get a clear picture of where you stand in the "new world order". If you would like assistance in connecting with a reputable, honest mortgage professional, please let me know and I'll gladly pass along a quality
referral.

Change is in the air... make sure you stay up on the new lending landscape.

26 DOWN, TWO UP - DENVER???

On the heels of NAR's 2007 Mid-Year Report projecting Denver to be one of the country's TOP FIVE housing markets in 2008 comes an article in the Wall Street Journal showing that, of the top 28 housing markets in the country, only TWO have seen a decline in inventory over the past 12 months. Those cities are (drumroll please!) Boston and DENVER...

Yes, Denver. Home of the Mile High Foreclosure Rate.

(Click HERE to read the Wall Street Journal Article)

It is anecdotal, which means it comes with an asterisk, but it's really hard to find an agent in the Denver area these days who isn't actively working with at least one Californian.

An agent in my office who specializes in REOs has pointed out that many REO properties are coming off the market in days (not weeks) with multiple offers. We know that with rising rents local investors have been into this market for a while, now it seems out-of-staters are moving in as well.

Lawrence Yun, chief economist for NAR, will be in Denver on August 22 to meet with local agents to talk about why the Denver housing market will be heating up well before the Democrats come to town next August... Mr. Yun, the red carpet awaits you!

REO IS WHERE IT'S AT...

REO stands for "real estate owned", a term that actually means "real estate (bank) owned". And bank-owned real estate is where investors are finding a lot of tremendous deals these days in the greater Denver area.

Over 20% of all active inventory in the Denver MLS system right now consists of REOs (bank owned), short sales (seller owes more than the property is worth) or foreclosures (seller can't or won't make payments). This high number of "distressed" listings is one reason why our market has seen little or no appreciation over the past few years, but it also has created a real opportunity for investors to pick up bargains as homes are sold at discounted prices.

To illustrate the opportunity that exists, I recently assisted an investor in purchasing a five-year old bank-owned townhome measuring over 1,600 square feet for about $135,000. With a downpayment of 20% and about $2,500 invested to paint, clean carpets and update fixtures, the property is now yielding positive cash flow of over $100 per month. And with recent comps in the same complex going for the mid $150s, we picked up some equity going in to compliment that monthly cashflow return, which can be used to pay down the mortgage and strengthen my investor's equity position in the property.

I have assembled a FLYER with some bank-owned listings currently on the market. For those of you who are out of the area, this will give you a feel for what our market looks like. Yes, there are homes on the market for under $100,000. But there is more to price when choosing a profitable rental property. Condition and location are huge factors in the long-term viability of your investment property, and so we'll look closely at these factors as we look at what's available.

SPERLING'S SHINES SPOTLIGHT ON FORT COLLINS

Another "Best Cities" survey, another mention for Fort Collins.

Fort Collins has been ranked the eighth-best place to live in the United States, according to the recently released edition of Sperling's Cities Ranked & Rated (www.BestPlaces.net).

Cities Ranked & Rated offers insights into more than 400 metropolitan areas in the United States and Canada (Paperback: 864 pages; Publisher: Wiley; 2nd expanded revised edition; May 7, 2007).

The guide rates cities in 10 categories: Arts & Culture; Climate; Cost of Living; Crime; Economy & Jobs; Education; Health & Healthcare; Leisure; Quality of Life; Transportation.

Interesting data about Fort Collins:

- The median age is 30.8 (U.S. median is 37.6)

- 22.68 percent of people are married with children (meaning 71.32 percent still have time and money!)

- Cost of living score is 105.90 (U.S. average of 100)

- Renters make up 39.69 percent of the Fort Collins population

(LET ME REPEAT THAT ONE FOR YOU, MY INVESTOR FRIENDS... RENTERS MAKE UP 39.69% OF THE FORT COLLINS POPULATION!!!)

- On average, there are 237 sunny days per year

- Climate comfort index is 62 (U.S. average is 44 - higher is more comfortable)

- Median household income is $52,192

- Water quality is 100 on a scale to 100 (higher is better)

On a highly related note, I was in FC this week with a CA investor looking at three bedroom, one and two bath rental properties in 80521, which is the ZIP closest to the university. This is the "bread and butter" formula house for investing in Fort Collins... with rooms renting at between $325 and $400 apiece, an investor can assume a cash neutral position with even a mildly motivated seller.

Of the 78 single family detached listings in the MLS meeting those criteria, 33 are currently under contract, including some DOGS I visited all the way back in January and February that looked like they would NEVER sell.

It's also taking longer for my property manager to answer the phone when I call these days, which either means he's busy working with prospective tenants, or he's finally gotten caller ID for his phone.

I'm hoping it's the former.

SCARY CHART OF THE MONTH

People of Orange County... be afraid, be very afraid!

This is a chart showing historic debt-to-income ratios for median priced homes in Orange County, California, since 1981. The chart shows the percentage of the median household income it has taken to service mortgage debt on a median priced home with a 20% down payment.

In 1982, with rising prices and interest rates nearing 18%, debt-to-income ratios crossed the 60% (!!!) threshhold and the market abruptly went in the tank.

In the next cycle of appreciation, which took place in the late 1980s, debt-to-income ratios topped th 50% mark in 1989, followed by a sharp roll back in values that extended into 1996. That market bottomed out with DTI ratios back down to 30%, in line with traditional 28/36 underwriting guidelines.

Today, our chart shows that the cost of servicing a 30-year mortgage on a median priced home with an average Orange County household income will consume over 62% of that family's monthly income... before taxes, groceries, insurance, utilities, car payments, IRAs, gasoline or the monthly trip to Benihana's.

Now most folks who already own a home have some (or lots) of equity to burn, provided they bought before 2005 and they haven't already burned it all on boats, Hummers and trips to Maui. But for those who were late to get in the game, who is left to bail THEM out?

Is this model sustainable????

THAT is the $64,000 question.

DEAL OF THE DAY

Arvada, Colorado
FOR SALE

Four bedrooms, four baths, finished garden level basement, over 3,200 square feet of living space, mountain views, backs to a golf course, built in 1991, IN FORECLOSURE --- Asking Price $289,900. On the market since Monday.

I found this beautifully upgraded home while door knocking yesterday. It had been listed for $339,900 as recently as six months ago, when Mr. and Mrs. Seller felt there was still time on the clock. It has been lowered to $324,900 in time for the holidays, which didn't work either.

The property was pulled off the market at the start of this month, then magically reappeared on Monday with a $35,000 haircut. It's a sad situation, but somebody is going to make out very well here in the next couple of days.

Meanwhile, a thousand miles away in another galaxy, there's this home:

Santa Ana, California
FOR SALE

498 square feet, two bedrooms, one bath, "low maintenance" front yard, priced affordably at just $440,000, or $893 per square foot.

Santa Ana isn't exactly the garden spot of "The OC", but the housing insanity isn't simply confined to gated communities and ocean front properties.

This picturesque alley-side home was sold most recently in 2004 for $323,000, so obviously our seller here is trying to eke out a tidy $117,000 profit to show for two years of hard work mailing in mortgage payments and collecting rent checks.

Eleven of the top 25 lenders in America have shut their doors or severely curtailed operations in the past 30 days... anybody out there want to offer 100% Alt-A financing on this beauty??

THE CURIOUS CASE OF CASEY SERIN

Have you heard of Casey Serin?

Everyone else has.

Casey Serin (www.IAmFacingForeclosure.com) has become a cult figure in much of the real estate investing world. A 24-year-old immigrant from the Ukraine who came to Sacramento in 1994, Casey has parlayed his atrocioius (and admittedly fraudulent) real estate investing career into national celebrity, including a feature story this week in USA Today.

Using a string of stated income, 100% financing and hard money loans, Casey has left a trail of implosion throughout the western United States, buying homes with the intention of flipping them for profit in New Mexico, Utah, Nevada, Arizona and his home state of California.

Except right about the time he began closing his deals, the market fell apart.

Casey has taken his calamity road show national, appearing on numerous television programs and admitting freely he lied on his loan applications, fudged paystubs and tax returns and pretty much signed anything they put in front of him in order to close on another house.

The interesting thing is, like certain American Idol contestants, although pathetically inept in the area of personal decision making, he's a rather intriguing and likeable guy.

Only in the era of YouTube and the Internet could someone become a cult hero because of his own massive personal failures. Google the name "Casey Serin" and you'll find dozens of references to America's poster boy for the impending collapse of the subprime lending market.

It's very hard to say where Casey is going to end up... will it be in jail, or will it be in the next new Fox prime time sitcom? You'll have to stay tuned.

Cheers to you, Casey. You have figured out that shame and disgrace is the "new new", and you're going to ride that horse as far as it will take you.

WELCOME TO THE (SUBPRIME) JUNGLE...

I hate to admit it, but I’ve developed a bit of an addiction. It started a few weeks ago in this space when I listed some of my favorite “Housing Bubble” blogs, all of which I bookmarked and refer to at least once a week when I’m in need of inspiration. (The MOST creative of these remains OC-FlipTrack.com, which is just hilarious in the way it roasts property flippers who in the process of being burned at the stake in Southern California)

If you have watched the news this week, you know there’s a meltdown going on right now in the lending industry, specifically with the Alt-A (slightly less than perfect) and subprime (way less than perfect) credit markets.

Last year, a friend of mine told me half of what was being funded in Orange County was 100% financing product, a claim I found so ridiculous and beyond belief that (at first) I laughed it off. But upon further review, it didn't turn out to be such a far-fetched statement after all. And nearly 1/3 of the properties being purchased in Southern California were 2nd homes or investment properties, which clearly showed that wild-eyed investing was still cool, even as the housing market was finally hurtling back toward earth.

So here we are today, many months later, and suddenly all those 100% loans aren’t looking so hot, and all those ARM’s from 2003 and 2004 are now adjusting upward to the tune of 2% (or more) a year, and hey, who turned out the lights???

Goodbye New Century. Adios Ameriquest. Strike up the band, another one bites the dust.

BUSINESS 2.0 PUTS FOCUS ON "FORT FUN"

More good news out of "Fort Fun", aka Fort Collins, home of Colorado State University and subject of my www.FortCollinsInvestments.com website. Business 2.0, Money Magazine's online business portal, has named Fort Collins one of the top ten cities in America for real estate investing over the next five years.

Predicting a five year appreciation of 28%, the Business 2.0 article states:

.

Fort Collins appears time and again on the media's "best" lists - best place to live, best place to retire, best place to raise a family, best "dream" town, even the best place to "reinvent your life."

"Great schools, low crime, good jobs in a high-tech economy," Money Magazine crowed earlier last year when it named Fort Collins its No. 1 small city. And talk about a lifestyle play: The city is an outdoorsman's fantasy come to life, boasting 40 parks within the city limits, more than 60 miles of hiking and biking trails, three city-owned golf courses, and easy access to whitewater rafting, kayaking, fishing, and skiing.

The presence of Colorado State University makes it a college town, to boot. Add to all this that Colorado has been a housing price laggard in recent years, with "relatively anemic" price appreciation, according to economist Andrew Leventis at the Office of Federal Housing Enterprise Oversight. With tech companies fleeing high-priced Silicon Valley, bringing California émigrés with them, now looks like a good time to buy.

I was up in Fort Collins with an investor earlier today, and the white snow draped on the foothills behind Horsetooth Reservoir under a bright, blue sky made for an extraordinary site. We stopped for a quick bite at CooperSmith's and toured about a dozen homes on a typically crisp, sunny winter's day. There's a lot to love about Fort Collins, and it looks like the secret is getting out.

WHAT THE CENSUS BUREAU IS SAYING

An interesting report came across my desk this week from the US Census Bureau, detailing migration patterns in America during 2006.

As I have highlighted in this space previously, one of the many enticements for investing in Colorado real estate is the healthy and prospering condition of the state's economy (unemployment currently stands at just 4.0%) with virutally NO help from the residential housing market over the past four years.

While the economies of California, Arizona, Florida and other "boom" states have been propelled in part by the massive equity extractions of homeowners flush with paper profits, no such phenomenon has existed here.

Now the Census Bureau report is interesting for several reasons... let's take a look at the top ten states last year for population growth:

Table A. Leading 10 States/Equivalents by Population Changes: July 1, 2005 to July 1, 2006

Top 10 Fastest Growing

1) Arizona 3.6%

2) Nevada 3.5%

3) Idaho 2.6%

4) Georgia 2.5%

5) Texas 2.5%

6) Utah 2.4%

7) North Carolina 2.1%
8) Colorado 1.9%

9) Florida 1.8%

10) South Carolina 1.7%

Top 10 Numeric Gainers

1) Texas 579,275

2) Florida 321,697

3) California 303,402

4) Georgia 231,388

5) Arizona 213,311

6) North Carolina 184,046

7) Washington 103,899

8) Colorado 90,082

9) Nevada 83,228

10) Tennessee 83,058

From both a percentage basis and the numeric gain standpoint, Colorado ranks number eight. But what stands out is that every single other state on both lists is either experiencing or has experienced a significant housing "boom" in the past five years.

As we have discussed previously, both the events of 9/11 and the fallout from the "dot.com" crash severely undermined the Colorado economy at a time when it was gaining significant traction. Five years later, it is more robust and diversified than at any time in memory, with the last latent component being the housing market, which is still sifting through a record number of foreclosures caused in part by unregulated lending practices which have since been addressed (to some extent) by the state legislature.

Colorado is a lifestyle driven-state, a magnet for educated workers and entrepreneurs looking for a better place to raise a family (sound familiar?). People are coming here - with dreams and visions of a better life, with the skills and tools to make them a reality.

I can't say that Howard Dean and I have much in common, but I have to believe he made a pretty smart choice when he tabbed Denver to host next year's Democratic National Convention. This is a region of the country that is on the rise, gathering momentum, and seeing its influence grow with each passing day.