FIRST 2009 HOME BUYER'S WORKSHOP COMING UP NEXT WEEK

Just a quick note to let you know my next Home Buyer's Workshop will be one week from Thursday at the Arvada Public Library.

On Thursday evening, January 29 at 7 p.m., I'll be hosting a talk called "What Will Happen With Housing in 2009?".

Here are some of the topics we'll discuss:

· What else can (or will) the government do to prime the housing market in 2009?

· How long will interest rates remain low?

· Why has active inventory fallen by over 20% in the past year?

· What will be the next "shoe to drop" in the foreclosure crisis?
· Are the number of foreclosures going up or coming down?

· Why are over 70% of all sales right now below $250,000?

The program will run about 90 minutes and I'll be joined by Christine Jensen from Cherry Creek Mortgage. We'll have light snacks and plenty of good information.

Please call or email to RSVP - and if you have a friend or family member who would like to attend, please let me know so that I may invite them personally.

I look forward to seeing you next Thursday night in Olde Town Arvada!

COLORADO GETS $53 MILLION IN HUD FUNDS TO BUY FORECLOSURES

Governor Bill Ritter yesterday received $34 million from the U.S. Department of Housing and Urban Development earmarked for the purchase and rehabilitation of foreclosures in Colorado. The money was allocated as part of the "2008 Housing and Economic Recovery Act" bill which was signed by the President last summer.

An additional $19 million in funds has already been allocated to Denver, Aurora, Adams County and Colorado Springs, bringing HUD's total investment in Colorado to $53 million.

Now the fun part - what will be done with the money? Who will do it? And when will it be done? And oh yeah, who's watching it?

If the money is used to purchase blighted foreclosures - and there are plenty in need of so much work that neither investors nor first-time buyers will touch them - it will be interesting to see how this new program impacts inventory. Will the government agencies flip them? Keep them as rentals? Do lease-to-own programs?

By my calculation, the state and its local governments could purchase about 350 homes this year in the $150,000 price range, or 700 homes if they aim to clean up the most distressed inventory at the bottom of the market. This is not inconsequential, and it will be worth following to see how a large, deep-pocketed government agency uses its resources in 2009.

With only 2.36 current active listings for every home already under contract in the sub $250k price range, it's possible that we could see low end inventory tighten up even more as the year moves on.

PMI GROUP SAYS "LESS THAN ONE PERCENT" RISK OF FURTHER PRICE DECLINES IN DENVER

It might be too late to save The Rocky Mountain News, but at least they published a positive article on the way out the door.

METRO HOUSING HOLDING ITS VALUE

Don't know how long this link will stay up, but enjoy it while it's there.

And to see the complete PMI forecast which puts the likelihood of further price declines in Denver at less than one percent, click HERE.

STATE OF THE MARKET - PART 3

A study by Relocation.com reports this week that Denver is the second best projected relo market in the country for 2009, behind only Las Vegas. It's the second straight year Denver has been ranked as a top five relocation market, and it's due in large part to relatively affordable housing, an economy that's decidedly stronger than the nation's as a whole, and a great quality of life.

The study ranked metropolitan areas with a population in excess of one million. Other top five citites for 2009 were Charlotte, Phoenix and Portland.

Relocation.com analyzed nearly 500,000 moving quote requests from 2008 in arriving at its list for 2009. About 14% of those requests involved out-of-state moves, according to the company.

As an interesting sidebar, the Denver Post ran a story this week on people leaving California and moving to Colorado. You can check it out here. Note that there are over 250 comments on this story, and counting.

That there's this much energy around the subject shows that people have strong feelings on both sides of the population growth issue. The fact is, however, that we are growing, people are attracted to Colorado, and that continued migration into the state over time will strengthen both the housing and rental markets.

STATE OF THE MARKET - PART 2

Let's take a look at absorption rates as they exist in our market today.

Absorption rates, for those who don't live and breathe real estate, is a calculation which measures "how long it would take to sell all homes on the market today at the current pace of sales". The technical calculation is the number of active listings today divided by the number of homes which went "under contract" in the past 30 days.

Here are current absorption rates, by price points:

$0 - $250,000: 4.22 months

$250,000 - $400,000: 12.66 months

$400,000 - $600,000: 18.23 months

$600,000 - $1 million: 41.40 months

$1 million and above: 67.08 months

Obviously, this is not a pretty picture for most segments of the market. The only area with any resilience right now is the sub-$250k market, which is mostly driven by discounted foreclosure inventory.

The stock market collapse last fall sent a chill over the traditional resale market. People instantly pulled back, became more cautious, and are waiting to see which direction things go under the new administration. The only area which wasn't really affected was the low end of the market, where investors and first-time buyers continue to compete for discounted properties.

So let's take a look at how absorption rates changed between October and January.

$0 - $250,000: 3.77 months to 4.22 months, an 11% increase
$250,000 - $400,000: 8.82 months to 12.86 months, a 46% increase
$400,000 - $600,000: 14.72 months to 18.23 months, a 24% increase
$600,000 - $1 million: 34.58 months to 41.40 months, a 20% increase
$1 million and above: 56.43 months to 67.08 months, a 19% increase

Turns out the softest spot in the market over the past three months is the $250,000 to $400,000 range, and it's not even close. This is where the fear is greatest in our market.

Whether you are a buyer or a seller, you need to know this piece of information.

STATE OF THE MARKET - PART 1

Over the next few days, I thought we'd take a look at some statistical components of our market.

Although overall active inventory is down over 20% from one year ago (a good thing), understanding what that actually means is something different.

Here's a look at the ratio of active homes on the market to properties under contract in a selection of price ranges:

0-$250k: 2.36 homes on the market for each one currently under contract

$250k - $400k: 7.13 homes on the market for each one currently under contract

$400k - $600k: 10.30 homes on the market for each one currently under contract

$600k - $1 million: 18.61 homes on the market for each one currently under contract

$1 million and above: 31.64 homes on the market for each one currently under contract

When you consider that two-thirds of the traffic your home is likely to receive will occur in the first 30 days on the market, can you see how important price and condition are to getting the result you want?

Terrifying statistic, courtesy of Lon Welsh: last year, over 50% of all homes listed for sale in the Denver MLS did not sell. They were withdrawn, expired or (worse case) foreclosed upon.

Deciding to List vs. Committing to Sell

DECIDING to LIST your home for sale is NOT enough. You must COMMIT to SELLING it, and that means focusing on price and condition. It's a beauty contest and a price war. And it takes marketing to attract buyers.

If you're thinking about selling in 2009, let's talk. I offer my sellers a 71-point marketing plan that ensures their homes will be seen where buyers are looking for them. Over the past two years, my listings have sold in an average of 44 days, when the market average was over 100. You must understand the market you are in, you must price them right, and you must promote your properties where buyers will see them.

BY THE NUMBERS: FAST FACTS ABOUT THE TOP 100 REAL ESTATE COMPANIES

Courtesy of Mariwyn Evans at REALTOR Magazine, here are some interesting facts and figures about the Top 100 Real Estate Companies in America for 2008...

20: Companies with gains in sales volume
17: Companies with gains in transaction sides
7.3: Average number of sides per associate
13.8%: Decline in average number of transaction sides
6.1%: Drop in average number of sales associates
2.4%: Drop in average number of offices
10.1%: Decline in average sales volume

Here's an interesting piece of data: while 80% of companies in REALTOR Magazine's Top 100 saw a decline in overall sales volume, these companies only lost 6.1% of their agents. Estimates nationally are that between 35 and 50% of licensed agents will leave the business when their licenses expire, based on current trends.

The takeaway is this: the best agents are with the best companies.

RE/MAX agents are involved in more than 30% of all real estate transactions in the state of Colorado, and agents in my office average more than 13 years of experience.

In tough times, the brand matters. Experience matters. And the REALTOR Magazine Top 100 survey bears this out.

BUILDER INCENTIVES A THING OF THE PAST?

For years, builders have used "incentives" to persuade customers to use affiliated mortgage and title insurance companies. These incentives, which can total thousands of dollars, can include closing cost credits, design center upgrades, or discounted interest rates on mortgage loans.

The practice has been controversial for some time, and with the housing market in deep distress, regulators are coming down hard on anything that could inflate the purchase price of homes.

Federal housing regulators have agreed to delay for 90 days implementation of a rule change that would bar home builders from offering consumers incentives when they agree to use builders' affiliated mortgage and title insurance companies.

The new rule -- one of many changes to the Real Estate Settlement Procedures Act (RESPA) being phased in by the end of the year -- was set to take effect January 16.

The National Association of Home Builders sued the Department of Housing and Urban Development on December 22, saying the rule change arbitrarily applies to affiliated businesses operated by home builders. Affiliated businesses formed by settlement services providers like title insurers would still be allowed to offer discounts and settlement services packages.

In justifying the change, HUD said home builders were offsetting the cost of incentives such as home upgrades by charging a higher interest rate, increasing a home's price, or inflating closing costs. Rather than being true incentives or discounts, HUD said, such offers actually amount to penalties imposed on consumers if they choose not to use the builder's affiliated lender or title insurer.

WHAT'S IT GONNA TAKE IN 2009?

WELCOME TO 2009!

The deals are out there. But there's a lot of "fool's gold" in the market as well, and you must be able to discern between the good, the bad and the ugly.

So how do you find the real thing? Patience, persistence, and a little luck.

Are you thinking it's time to get serious about buying a home in the Denver area? Here’s what you can expect to find as we kick off 2009...

* 30-year fixed rates in the 5's - historic and (I believe) temporary

* Bidding wars over the best deals priced below $250,000 - private party or REO.

* A slower market up to $400,000, increasingly sluggish up to $600,000, and just about totally dead at price points north of that.

* Private-party sellers who continue to be in denial about the impact foreclosures and the stock market crash have had on their values.

* Short sales that look pretty behind the glass, but rarely close.

* REO's that run the spectrum from well priced in good condition to poorly priced in terrible condition.

Obviously, there are a lot of "wrong" choices for buyers on the market today. So how do you find a good property at an attractive price?

Here are a couple of strategies that might help.

Be Willing To Wait - One lender’s current policy on their REOs is to accept no offer below list price for the first ten days of the listing. Regular sellers tend to react the same way. You regularly hear about sellers who get a good offer during the first week of their listing, only to blow it off, and then regret it later.

If you want a discount off the list price, you’ll probably have to wait them out. (This also means you are going to lose some properties, though.) A good rule of thumb is about 1% per week. If you want it for 10% less, wait 8-10 weeks. It takes that long for the sellers to come to their senses. But remember that, even then, it only works if the seller has enough equity to sell and bank-owned listings that sit on the market that long normally have serious issues.

Look at the Higher-Longers - If you are interested in a private-party resale (which will normally be in better shape than REO inventory), understand that a lot of sellers are tired, frustrated and losing faith. When I take listings, I talk with my sellers about the fact they have "one shot at the parade" - in other words, listings get the most attention in the first 21 days they are on the market. After that, it can be a long, slow slog before an offer comes along.

Negotiate Later - I call this "double negotiation", and it's a common tactic in a buyer's market. Round one is presenting a clean offer and negotiating on price. Round two comes after the inspections, when we negotiate repairs, credits and concessions to keep the deal together. The fact is that, under the Colorado real estate contract, the Inspection Notice allows us to renegotiate based on the condition of the home. Of course, a buyer's emotional attachment to a property goes a long way toward determining whether this is a viable tactic, but it's one I put on the table because I am here to aggressively protect the interests of my buyers.

Last week, I closed on one of the most complicated deals I have negotiated in a long time - and the seller was a bank. We literally obtained thousands of dollars in "11th hour" repairs in unbelievably short time frames.

The common perception is that banks are selling ‘as-is’, and no repairs or credits are possible, but I am finding more and more flexibility as banks see their inventories (and losses) rise.

In no way am I guaranteeing that banks will open the vault to save a deal, but I'm seeing a lot more openness to discussing it. But you have to ask, you have to be serious, and you have to be willing to walk if the bank takes a hard line.

Just before Thanksgiving, Fannie Mae and Freddie Mac put a moratorium on new foreclosures until January 9. It's possible we'll see one more surge of inventory this month, and then President-elect Obama will take office with the biggest stimulus / bailout / foreclosure-prevention program in American history.

Whatever you think of conditions as they exist today - overvalued or undervalued - you're going to find out if you are right in 2009.

Is this your moment to catch an incredible deal? If you're an investor, do you like buying into the tightest rental market in a decade? If you're a first time buyer, do you like the idea of a $7,500 tax credit and foreclosures that are priced 20% or more off their 2004 peaks? And no matter where you're coming from, aren't 30-year fixed rates in the 5's ridiculously appealing?

In the end, we each have to make our own decisions about how, where and why we invest our money. But no matter what camp you fall in, the time to get educated is right now.

GETTING SERIOUS ABOUT SUCCESS IN 2009

Here's an investment formula to consider as you close the door on 2008 and ponder what became of your 401k in the last four months of the year.

Take a look at a four bedroom, two bath home in Arvada priced at $165,000 as a bank-owned "REO". Purchase it with 20% down - your cash out of pocket is $33,000 (we can often cover closing costs by negotiating for them with the bank).

With interest rates in the low 5's (let's say 5.5%), your 30-year fixed rate payment on a $132,000 loan is about $750.00 per month. Throw in $200 per month for taxes, another $100 for insurance, and another $150 for property management (assuming you choose to hire someone to do it for you), and your total payment is $1,200 per month. The taxes, insurance and property management costs are estimated on the high side, but we want to be conservative in our estimates.

Rent the home for $1,400 per month, and your annual cashflow is $2,400. On your original investment of $33,000, that's an annual "cash on cash" return of just over 7%, not counting your possible mortgage interest deduction, depreciation or principal paydown.

After five years, your "cash on cash" return is now 36% ($12,000 of cash flow on a $33,000 investment). Your principal has been paid down to $122,048 and we still haven't factored in the possible mortgage interest deduction or tax benefits of depreciation.

After 10 years, your cash flow (assuming you are a really nice landlord and never raise the rent) is $24,000. Your principal has been paid down to $108,954, giving you another $24,000 equity stake in the property.

Again, these numbers are for illustrative purposes only, but they demonstrate the point - when you can find real estate in good areas with cash flow potential from day one, your success is almost guaranteed.

Of course, with my investors, we aren't just looking for cash flow, we're looking for properties near light rail or mass transit lines or close to universities or near other locations that will always put the land at a premium. We're going to look at areas with high rental demand and stable neighborhoods. We're going to research our comps and strive to buy with equity going in, not hoping that future appreciation bails us out of a mediocre investment.

Seriously, there has not been a better rental market in Denver in at least 20 years. What are you waiting for? At the very least, you owe it to yourself to become educated. Because with a trillion dollar (or more) "Money Bomb" coming in the form of government spending initiatives, you had better have a strategy to keep up with inflation in the years ahead.

We are all entitled to our opinions, but I believe these interest rates in the 5's are an anomoly and temporary. Inflation (and the devaluing of US currency) is the fastest way out of this recession, and that's what I see happening.

If you would like to start receiving new foreclosure listings by email, just give me a call and I'll set you up with immediate access through my Home Scouting Report program.

The time to take control of your financial future is now.

COLORADO FIFTH FASTEST GROWING STATE, ACCORDING TO FORBES

Colorado was the fifth-fastest growing state in the country last year, according to an article in the current issue of Forbes Magazine. Colorado added over 97,000 residents in the survey, moving up from eighth in last year's rankings.

Nevada, which has been battered by foreclosures and job losses, fell to eighth last year after being ranked in the top four for 23 consecutive years.

With new residential home construction essentially non-existent in the state, the addition of yet another 100,000 new residents should provide more spark to a recovering housing market - and more competition for an already scarce inventory of rental homes.

Utah, Wyoming and Idaho also ranked in the top ten states for growth, showing again that the mountain west region is alive and well, even in a down economy.

FIVE THINGS I HAVE LEARNED (OR RELEARNED) IN 2008

I gave a presentation this past Tuesday before members of the Arvada Chamber of Commerce. My speech was entitled "FIVE THINGS I HAVE LEARNED (OR RELEARNED) IN 2008". And while the reality is we all learned many things in 2008, here are a few of the lessons that stand out to me:

1) YOU ARE THE PRODUCT

Quite simply, the philosophy I carry in my business is that every day, I am preparing myself for tomorrow. The truth is that people are going to buy and sell homes with or without me. It is my job to become a compelling product in the marketplace, offering skill, insights and experience that my outpaces my competition.

2) WHEN TIMES GET TOUGHER, YOU NEED TO GET BETTER

Jim Rohn says, "Don't wish that things were easier. Wish that you were better."

That's the challenge for all of us right now. Get better. Get stronger. Become more skilled at every aspect of your job. And while you're at it, recommit to strengthening personal relationships like never before.

3) SURROUND YOURSELF WITH POSITIVE PEOPLE

To me, personal philosophy is as important as a good education. In other words, what you believe is at least as important as what you know. Often your beliefs are more important than your understandings. What you think about things - whether there is scarcity or abundance, whether there is loss or opportunity - is based on your philosophy.

And who you associate with plays a huge role in shaping your philosophy. The people in your life are like the weather... either sunny and pleasant, or cold and stormy. It's amazing to me how many people choose to live in a reality that is cold and stormy.

4) THERE IS OPPORTUNITY IN EVERY MARKET

I have been beating on this theme for two years... quite simply, it's the best first-time buyer / investor market in 15 years.

Want a deal that cash flows? Call me! Want to pay less for a mortage than you do in rent? Call me! Need $7,500 to fix up a foreclosure and make it your dream home? Call me! Want a 30-year fixed rate below 6%? Call me!

5) APPRECIATE WHAT YOU'VE GOT

There's a saying you'll hear around our household often, and it goes like this: "These are the good old days".

We've got our health. We've got our business. We've got friends and colleagues who are eager to refer us to their friends and colleagues. Our kids are doing well in school. Really, how much more do you need?

Yes, 2008 has been a challenging year. But I'd like to think that the end result is not of loss, but of gain... that we became better by leaning into the challenges that arose while others quit or left the business.

Don't with that things were easier. Wish that you were better.

And then make it so!