THE $8K FTB TAX CREDIT - WILL IT STAY OR WILL IT GO?

The question I am hearing more than any other right now is, "Will the $8,000 first time buyer tax credit be extended or expanded after it expires on November 30?"

Up until a few days ago, I was pretty confident it would be extended. Now I am not so sure.

The Denver Post ran an editorial this morning in opposition to extending the tax credit. One huge reason: the original projected cost of $8 billion has nearly doubled, to $15 billion and counting.

Interest groups like the National Association of Realtors and the National Association of Home Builders (as well as ancillary beneficiaries like Lowes, Home Depot, etc.) are lobbying not only for an extension of the credit, but an expansion to $15,000, made available to all home buyers in 2010. That proposal comes with an estimated price tax of $100 billion, or an additional one-year tax burden of about $1,200 for every household in America.

I have felt all along that the lobbying for an expansion of the credit was simply a negotiating ploy to preserve the existing credit for a few months longer. That still could happen.

But it's no sure thing. And continuing down this road runs the risk of taking us right back to the place where this economic meltdown started - people buying homes with short term perspective driven first by easy credit, and now by an $8,000 check from the government.

Here's a thought: if keeping the housing market afloat in the midst of the worst economy in 70 years is a priority, why don't we cut the credit in half for 2010, and offer $4,000 to first-time buyers? Don't unplug the stimulus all the way, but let's recognize we can't subsidize all areas of the economy forever.

Here in Colorado, we are far better poised to deal with an elimination of the tax credit than the "free-falling" states like California, Arizona and Nevada. Truth is, our market was getting better before the national economy came unravelled, and it's likely to bounce back before many other areas of the country.

Although I have helped a lot of buyers take advantage of the $8,000 first-time buyer tax credit, we shouldn't be dependent on it, nor should we count on it being around indefinitely. Reducing or eliminating the credit is probably better for the long term health of our housing market than expanding or extending it.

REAL ESTATE COMMISSION DEACTIVATES 4,560 MORTGAGE BROKER LICENSES

When discussing the ups and downs of the past decade in the Colorado housing market, one subject that always comes up is Colorado's relatively lax history with real estate regulation.

Specifically, until 2007, Colorado was one of only two states (Alaska being the other) where there was absolutely no licensing, training or education requirements for mortgage brokers.

One day out of Supermax? Become a mortgage broker!

Thankfully, those days are behind us.

In August of 2006, Erin Toll was appointed director of the Colorado's Division of Real Estate. Since then, the hammer has been coming down hard on brokers, appraisers, builders and anyone else who plays a role in Colorado's real estate industry.

In 2007, Colorado instituted a registration program for mortgage brokers, and in 2008 the state put a full licensing program in place. As part of that program, mortgage brokers were subjected to background checks and required to take 40 hours of licensing education. They also had to pass what many mortgage brokers have told me was a pretty wicked licensing exam (anybody want to amortize a 30-year loan without a calculator?).

The result?

On August 31, Toll deactivated 4,560 mortgage broker licenses - or roughly 50% of those issued by the state - for failure to complete the division's licensing requirements.

What does this mean? It means that if your mortgage broker is still around, he or she is probably pretty competent.

And if you can't find your old mortgage broker, chances are he or she is working in Alaska.

NEW COLORADO LAWS OFFERS FORECLOSURE DEFERMENT

A new law that took effect August 1 may offer some Colorado homeowners facing foreclosure a 90 day deferment.

HB 1276 offers homeowners a 90 day deferment on their foreclosure sale date, meaning that the public auction process will be delayed. This can provide up to an additional 90 days for the homeowner and their HUD approved housing counselor to work with the bank.

When a homeowner has officially entered the foreclosure process, meaning that their foreclosure has been filed with their county Public Trustee, the holder of the loan will be required to post the document physically on the home.

The posting notifies the homeowner that they may be eligible for a foreclosure deferment through HB 1276, and provides contact information to reach a HUD-approved housing counselor.

Eligibility does not mean that the homeowner will qualify for the deferment, but a housing counselor can help them determine if they qualify. Counselors can also help homeowners determine if they may be eligible for a loan modification or other assistance.

Some of the groundrules for deferment include:

1. The home must be owner-occupied.

2. The home must be a primary residence.

3. The mortgage cannot be greater that $500K.

4. The homeowner must have some source of income that allows them to make two-thirds of their regular mortgage payment.

5. The homeowner must continue actively working with a HUD-approved housing counselor to negotiate with their mortgage company.

One irony to this whole program is that when Colorado was leading the country in foreclosures per capita in 2005 and 2006, none of this help was available. In fact, virtually none of the loan modification or foreclosure deferment programs that are increasingly available today were around when we were diving head-first into the foreclosure crisis.

The fact is that the $8,000 first-time buyer tax credit program would have been sweet tonic for our market three years ago, but because the housing markets in California, Arizona and Nevada were still relatively stable, the federal government had no interest in helping Colorado.

Now that Colorado is among the healthiest markets in the country (or, perhaps more accurately, among the least ailing), the $8,000 tax credit has simply thrown more incentives onto an already recovering entry-level market.

SO YOU WANT TO BE A REAL ESTATE AGENT?

Late last month I spoke before several members of the Arvada Chamber of Commerce at a lunchtime function. When I speak before other business owners and sales professionals, I rarely focus on real estate, unless someone has a specific question. When I talk to other salespeople, I prefer to focus on subjects like contact management, referral systems and lead generation, which is the lifeblood of sales.

For many years, I worked in a mentoring capacity with newer agents. One of the philosophies I have always subscribed to is that excellence comes from specialization. While there are probably 15 to 18 proven ways to generate leads in real estate, the trick for most successful agents is to simply get REALLY GOOD at three of four of them, and do them every day.

Proven Systems to Generate Real Estate Leads (in no particular order)

• For Sale By Owner: Offer services, advice, stay in touch with unrepresented sellers who may list with you down the road

• Past Clients / Sphere of Influence: Connect with your friends, family and past clients for business referrals

• Door Knocking: Walk neighborhoods and talk to people

• Open Houses: Hold three to five every weekend, post 12-15 directional signs, follow-up with everyone who comes through

• Floor Time / Ad Calls: Sit around the office and wait for someone to call - the WORST strategy ever, but some people do it

• Sign Calls: Pay referral fees to other agents to “ride” their signs and take buyer calls off of their listings

• Investor Groups: Associate with investor clubs

• "Traditional" Advertising: Bus benches, magazines, PTA newsletters, etc

• Absentee Owners: Build relationships with out of area landlords (good strategy in rental towns, like Fort Collins)

• Just Listed / Just Sold Postcards: Mail to areas around company listings, sales

• Websites: SEO, unbranded stealth sites (ColoradoForeclosures.com, etc)

• Relocation: Affiliate with relocation companies and pay referral fees for leads

• Bank-Owned Listings (REO): Represent banks in the dissolution of their inventory

• Blogging (Active Rain, Zillow, Personal): Engage the consumer online

• Networking Groups: Leads groups, BNI, chambers of commerce

• Geographic Farming: Focus on select neighborhoods (sponsor Little League teams, community garage sales, monthly newsletters, etc)

• (800) Call Capture: Advertise listings, services, free reports and capture phone numbers

• Expired Listings: Call on listings others failed to sell

• Short Sales: Ouch!

Again, the trick is not to do them all, or even try. The trick is to figure out three or four that you can do well, build great systems around them, and then strive to be in the top 5% of your field.

Success comes from having a clearly defined plan, working it well, and adjusting as market conditions change. Massive action directed with clarity and focus is a hard combination to beat. I know my "big four" when it comes to lead generation... do you?

COUNTING DOWN

It's September 1.

That means if you are a first-time buyer looking to take advantage of the government's $8,000 tax credit, you're almost out of time.

Reality is, if you don't have something under contract by October 15, you probably won't close by the November 30 deadline.

Title companies and lenders are already working overtime trying to handle the deals stacked up in the pipeline today. And as buyers become more desperate to find something, anything, they can get into, the delays only figure to get worse.

My timeline for buyers is six weeks.

If you're not under contract in the next 45 days, it probably won't happen for you.

The countdown is on.

95% OF NATION'S MARKETS SHOW IMPROVEMENT IN CASE-SHILLER INDEX

Maybe now we can say that housing has bottomed?

After three years of disastrous data, 19 of the 20 markets tracked by Case-Shiller improved last month - the fifth straight month of strong data and the index's strongest showing in 3-plus years.

Leading the charge? Dallas and Denver, which each have reported four consecutive months of positive returns. Prices in Denver showed a 1.3% increase in May, followed by an even stronger 2.5% increase in June.

Since Case-Shiller only tracks resales of existing homes, "sold" data is the only thing that counts.

And since higher end homes simply are not selling, it's important to keep in mind that what Case-Shiller is really telling us is that the homes that are actually selling (lower end homes) are increasing in value.

Remember that homes priced below $250,000 currently account for just 28% of all listings in the Denver Metro market, but 61% of sales activity. Conversely, homes above $600,000 account for 25% of all listings, but just 4% of all sales.

So the vast majority of the sales activity being tracked by Case-Shiller is at the low end of the market... therefore, when Case-Shiller says values are increasing, please understand that it's the bottom of the market that is driving the good news.

When you consider what a drag the high end of the market is on the overall numbers, the reality is that homes below $200,000 are appreciating at rates that are significantly higher than what Case-Shiller is reporting.

THE BEST DAYS TO BUY A FORECLOSURE

Foreclosures are hot and buyers want more of them... that's one obvious conclusion for the bidding wars that have broken out on bank owned homes priced under $250,000.

Having sold over 40 foreclosures since 2007, I have become pretty adept at figuring out the formulas that give buyers the best chance of beating out the competition for these aggressively priced homes.

While I won't give all of my secrets away, here is one... the best days to look for foreclosures and write offers and Monday, Tuesday and Wednesday.

Why is this?

Mostly it's because if you are trying to outsprint a dozen other buyers to the prize, you don't want competition. And when you submit an offer to the bank, best case is getting a response in about 24 hours. Sometimes it can take a week.

What you don't want is to have a listing sit open over a weekend, because the majority of buyers are weekend shoppers, and if you're competing against 10 or 15 other buyers, it's pretty much granted that even if you do win you're probably not getting much of a deal.

That's why "fresh" foreclosures which come on the market Monday, Tuesday or Wednesday give you the best chance for success. See the property before others see it... write the offer before others write... and (here's the key) get an answer before your competition doubles or triples in size.

The truth is, the asset manager sitting in Dallas or LA or Orlando doesn't care if the home sells for $162,000 to $169,000... they just want it gone. Most banks will take the first acceptable offer that comes along, as long as there aren't multiple offers. Once you've got multiples, you've got delays, more eyes on the property, and a lesser chance of ultimately getting the home.

So how do you find foreclosures that hit the market on Monday, Tuesday or Wednesday?

The answer is pretty obvious - you work with someone who is totally focused on finding new inventory as soon as it hits the market. That's the formula for success.

BUSINESS WEEK CALLS BOULDER NATION'S STRONGEST HOUSING MARKET

August has been a very good month for the housing market in Colorado, at least in the media.

First, Money Magazine named Louisville the best town in America in which to live.

Next, Forbes declared Denver to be the seventh best housing market out of 161 metropolitan areas it surveyed around the country.

And now, Business Week says Boulder has the strongest housing market of all.

According to the article:

Boulder has several factors working in its favor. The town has controlled growth by putting limits on development and by acquiring more than 50,000 acres of open space for a greenbelt that surrounds the town. With the boundary of the Rocky Mountains to the west, the supply of new homes has been restricted.

Business Week also cites the positive influence of CU on the job market, both with university and research positions as well as high tech employers who take advantage of the strong pool of graduates who come to Boulder as students and decide not to leave.

Business Week says nearly 60% of homes in the Boulder market are appreciating in value, making it one of the safest bets anywhere in the United States

BEST CITIES FOR A HOUSING RECOVERY

Forbes Magazine has released a study of 161 metropolitan statistical areas (MSAs) around the country, looking for markets with the most upside as the national economy begins to regain its footing.

Denver is ranked number seven on the list.

Forbes says foreclosures currently account for just 24% of sales in the region (compared to 70% or higher in parts of California and Nevada), and prices have stabilized in many parts of the metro area. According to the magazine, while the higher end of the market remains soft, entry level homes are showing strong value increases as first-time buyers chase after limited inventory, low rates and the $8,000 federal tax credit.

Exactly what we're seeing on the street.

FED WINDING DOWN MORTGAGE PURCHASES

The Federal Reserve announced today that it will wind down a program to purchase up to $1.25 trillion in mortgage-backed securities by the end of the year, removing a significant backstop to higher mortgage rates.

In conversation after conversation with buyers this summer, I have emphasized that there are three key drivers pushing buyers into the market below $250,000:

1) the $8,000 first-time buyers tax credit, scheduled to end November 30

2) more affordable prices for entry-level homes, since 80% of Colorado's foreclosures (and subsequent value losses) have hit homes priced at $250,000 and below

3) 30-year fixed interest rates in the 5's, which are historic, and in my view, temporary

One analogy I use is that our national economy has suffered a heart attack, and the government has been doing fast and furious CPR for the past year in an attempt to revive it.

This "CPR" has taken the form of the banking bailouts, the stimulus bill, the first-time buyer tax credit, and in a lesser known development, the decision to purchase massive amounts of newly financed mortgages at discounted rates.

Because most institutional investors who formerly purchased mortgage-backed securities have been pulverized by foreclosure-driven losses, there has been very little demand from the private sector for mortgage-backed investments. So into that void stepped the federal government, with its decision to purchase $1.25 trillion in mortgage loans at a time when no one else wanted to take on the risk.

If the Fed stops buying mortgages at the end of the year, who will step into the gap?

What the market has shown is that private investors will demand a greater return for the risk involved in purchasing bundled mortgages.

So what does that mean? It means the pressure for higher mortgage rates is building, which is why taking advantage of today's low rates is so important.

LOUISVILLE ROCKS!

Money Magazine has released its popular best-places-to-live list with the August 2009 issue.

This year’s roundup has a few new twists. On its website, the magazine allows users to find the best place to live near their current locations. It also introduces some subcategories, including 25 best places for affordable homes, towns where there are the most jobs, towns with quick commutes, 25 best places for singles, best places for pricey homes, 25 towns where the residents are young, and places with the cleanest air.

Here are its top 10 selections for the best overall places to live—all of them small towns with strong local economies, good schools, affordable homes, and low crime rates:

1. Louisville, Colo.
2. Chanhassen, Minn.
3. Papillion, Neb.
4. Middleton, Wisc.
5. Milton, Mass.
6. Warren, N.J.
7. Keller, Texas
8. Peachtree City, Ga.
9. Lake St. Louis, Mo.
10. Mukilteo, Wash.

Of Louisville, the magazine said...

"Some towns nestled along the Rockies are full of pretentious eco-hipsters. Not Louisville. Ice cream shops dot the historic downtown. Families grab burgers at the cozy Waterloo Café. A Friday-night street fair, with a beer garden, live music, and games for the kids, runs all summer. No wonder this down-to-earth town has appeared high on Money's Best Places list before--and on many others. It's also weathering the economic downturn well. Robust industries in the area, such as high tech, energy, and health care, make county unemployment among the lowest in the state.

"But the top reason residents give for moving here? The great outdoors. Louisville is laced with nearly 30 miles of trails, Rocky Mountain National Park is less than an hour away, and eight world-class ski resorts are within two hours. The town's schools are highly rated as well. Add in dry, clear weather, little crime, good health care, and low taxes, and Louisville is pretty tough to beat."

Showing its affinity for the Highway 36 corridor, just missing the list was the town of Superior, which ranked 13th on Money Magazine's list.

DENVER AMONG TOP TEN APPRECIATING MARKETS IN MAY

Radar Logic, a national real estate data and analytics company, has released its list of the top ten metropolitan areas where prices increased the most from April to May of this year:

1. Milwaukee, Wis., 4.9 percent
2. Charlotte, 4.7 percent
3. Boston, 4.6 percent
4. Cleveland, 4 percent
5. Washington, DC, 3.7 percent
6. St. Louis, 3.3 percent
7. Columbus, Ohio, 3.2 percent
8. Seattle, 2.8 percent
9. Denver, 2.3 percent
10. Philadelphia, 1.8 percent

It's good to seen Denver on the list, but again I would caution both buyers and sellers to recognize that it is activity at the bottom of the market (below $250,000) that is driving these positive numbers.

Below $250,000, I have seen many homes that sold as foreclosures in the $90k - $120k range a year ago being rehabbed and flipped for twice that price today. That is appreciation far in excess of 2.3%!

But above $400,000, with very few exceptions, it's hard to find any areas in town that are appreciating. In fact, many higher end communities (especially newer ones) have seen value losses of 5% to 10% in the past year.

It remains a very segmented market.

We'll take good news wherever we can find it, but remember that generalized statistics can be misleading. As always, it's important to remember that "your market" may not be synonymous with "the market".