THE BABY BOOMERS, GENERATION X AND THE MILLENNIALS

Yesterday in Fort Collins, I was part of an audience that listened to Dave Liniger, President and Founder of RE/MAX International, as he offered his opinions on the state of the United States real estate market in 2010 and beyond.

And while the next few years will be challenging due to high unemployment and record foreclosures, Liniger predicts that huge demographic changes starting in 2012 will unleash the next national surge in real estate values.

“You’ve got 80 million Baby Boomers, many of whom are looking to downsize in the next few years,” Liniger said. “And what you see is that, for the most part, these are folks who do not want to leave the areas where they have raised their kids, made their friends and lived their lives. Many of these people are looking for lower maintenance homes in urban environments where they can enjoy their retirement without the hassles of home upkeep and maintenance.”

Because these boomers will need to sell their existing homes in conjunction with buying their new ones, there’s a huge opportunity for real estate brokers who successfully can market to this demographic.

“Then you have the ‘Gen X’ers’”, said Liniger. “They are the ‘sandwich generation’, because while there are 80 million ‘Boomers (born between 1946 and 1964) and 74 million Millennials (born between 1980 and 1995), there are only about 48 million Gen X’ers. For the past decade we have been working through a demographic trough, with immigrants helping to supply the additional demand that helped to drive prices higher. Now you’ve got the Millennials coming, and they will start to hit the market in force as first-time buyers in 2012.”

Liniger cited NAR research showing that nearly 70% of first-time buyers are age 34 or younger, meaning that a wave of Gen Y’ers (who are now between 14 and 29 years of age) will be sweeping over the market for the next decade. With new construction down by nearly 80% due to the economy and many builders having gone out of business altogether, Liniger predicts the demand for existing housing will fuel the next boom.

With a surge in housing demand coming, today’s first-time buyers can look forward to seeing appreciation in their housing investments. But today’s buyers won’t necessarily need to sell in order to cash in – by locking in low, fixed rates now in the 5 to 6% range, today’s buyers will have the option of holding on to their homes and owning cash-flowing investment properties for years to come.

WHAT WILL 2010 HOLD FOR REAL ESTATE? REMAX FOUNDER DAVE LINIGER WEIGHS IN

I was in Fort Collins this morning for a presentation on the state of the real estate market by RE/MAX President and Founder Dave Liniger. Speaking before about 250 RE/MAX associates at the Fort Collins Hilton Hotel, Liniger shared his feelings about the tough times we’ve seen in the housing market, but also about the opportunities that lie ahead.

“The market we had this year is pretty much the market we’re going to have next year,” predicted Liniger, who says that the country will have at least three more years of higher than normal unemployment as we struggle to come out of the recession.

Liniger predicted that up to 50% of all real estate transactions in 2010 would involve distressed properties, either short sales or foreclosures.

In 2005, there were only about 400,000 foreclosures. In 2010, there are projected to be 1.9 million foreclosures across the United States, with Nevada, Arizona, California and Florida accounting for over one-half of the total.

Short sales continue to be the most frustrating segment of the market nationally, with just one in nine listed short sales closing successfully so far in 2009.

The vast majority of short sales end up as foreclosures, with banks often leaving tens of thousands of dollars on the table because of their unwillingness to accept short payoffs.

Like many agents, I caution my buyers about the perils of short sales. I have one offer written in May that is still in a holding pattern five months later, despite the fact my clients have twice “upped” their original offer and agreed to switch from FHA to conventional financing. There’s no reason (other than stupidity) that the bank is leaving this offer on the table as the foreclosure sale date looms.

“The banks have got to understand that they are damaging themselves, their balance sheets and an eventual recovery in the market with their stupid policies regarding short sales,” Liniger said. “If the banks can start to process this backlog of short sales, the sellers who are losing their homes today could be back in the market in as soon as two years. But when they foreclose, people see their credit damaged far more severely, and it takes them years longer to get back into the market.”

Tomorrow I’ll talk about the silver lining that Liniger sees starting in 2012 – and how today’s first-time buyers could be real beneficiaries of the wave that is coming.

WINTERIZATION TIPS

The bitter cold that rolled through over this weekend serves as more than a gentle reminder that winter is right around the corner. For those who have lived here a few years, the drill is familiar. For those new to our state, here are a few tips to help you get ready for the cold season ahead.

SPRINKLERS

Shut off the water to your sprinklers and have them blown out. Hopefully, this advice isn't coming to you "too late". I saw at least three homes in my travels over the weekend where copper lines had frozen and geysers were shooting up toward the heavens. Last year, we blew our sprinklers out in early October and then had three more weeks of hot weather. This year, the first "hard freeze" hit October 9. As usual, the autumn weather here is purely random.

GUTTERS AND DOWNSPOUTS

This weekend's cold snap has thrown a lot of the trees into a panic. From here on out, we're going to have a pretty fast "turning" of the leaves, which means roof gutters and downspouts will be filling up with leaves over the next few weeks. Clean them out to make sure water (which will freeze and expand) isn't trapped, and make sure they are firmly mounted so they can bear the weight of snow and ice.

FURNACE AND HEATING SYSTEMS

Don't forget to have your furnace checked out at least every two years. Same with your gas fireplaces. Carbon monoxide in your home is a deadly serious matter (bad pun intended)... and over the past few years Colorado has been in the news more than a few times for CO-related deaths. Effective July 1, sellers are now required by law to install functioning carbon monoxide detectors within 15 feet of any sleeping area in homes with fuel-based heating systems.

SNOW SHOVELS, SNOW MELT AND WASHER FLUID

Make sure you know where your snow shovel is before you need it, and take time this week to fill your car's windshield washer fluid reservoir with a good, winter grade solution. Keep in mind, too, that your tires may loose a few pounds of pressure in the cold air and you should top them off next time you hit the filling station.

This is not a comprehensive list, but it's a good start. The important thing is to be prepared for whatever comes, and help your neighbors to do the same.

CASE SHILLER REPORTS SIXTH STRAIGHT MONTH OF GAINS

I wouldn't pop the bubbly just yet, but we'll take good news where we can find it.

Case-Shiller reported this week that July housing prices in the report's 20-city composite index rose 1.6% between June and July, the sixth straight month of sustained improvement in the national survey.

On a year-over-year basis, Case-Shiller reports an overall decline in values of 13.3%, but a loss of just 2.9% in Denver.

While Case-Shiller's information is interesting (and gets plenty of media attention), it doesn't really tell you much about the market that exists today.

Because Case-Shiller is lumping all sales together into one statistical pie, it does not illustrate the radical disparity between the hyperactive, multiple-offer driven entry level and the credit-frozen, equity-losing high end of the market.

A Denver area seller or buyer at $200,000 is living in a completely different reality than a Denver area seller or buyer at $600,000. Below $200,000, many homes are appreciating (or more accurately, rebounding from previous losses) at 5 to 10% on an annualized basis. Above about $400,000, it's hard to find any neighborhood that isn't losing value.

So take the Case-Shiller report as good news, but don't get carried away. Show me continued improvement AFTER the $8,000 first-time buyer tax credit goes away, and then you'll have me on board the recovery bandwagon.

90 DAYS OF MASSIVE ACTION - LET'S GO!

October is here, at last!

Turning leaves, crisp nights... and decisions that will shape our destinies in 2010 and beyond.

The fourth quarter of the year has always been my favorite quarter of the year, not only for the change of seasons, but because the last 90 days of the year is when those of us in real estate are faced with a critical, annual decision:

Ramp up, or shut down. Make plans, or "veg out". Accelerate hard, or coast into next year.

I don't know why agents lose focus in the fourth quarter of the year. Maybe it's the shorter days. Perhaps the colder weather turns them off.

All I know is that there is less competition, and those who are in the market are more motivated than those who work and shop seasonally.

It's true that demand among first-time buyers will fall off soon, either because the $8,000 tax credit is extended ("Whew! - more time") or expires ("Tilt! - game over"). But first-time buyers are only a part of the market, and I believe there are many non-first time buyers who have been sitting on the sidelines waiting for traffic to clear.

Either way, there is always opportunity if you are willing to work hard.

So bring it on... let's rock in the fourth quarter!

THAT $8,000 FREE GIFT? TRY $15 BILLION AND COUNTING...

The hottest topic in real estate these days is whether the $8,000 first-time buyer tax credit that was initiated in February will be extended beyond its November 30 deadline. In Washington, it is the subject of an intense lobbying campaign and in markets around the country, first-time buyers are scurrying about trying to lock up homes that they can close on before November 30.

Here's one strong argument against an extension for the credit - the cost.

Originally projected to be $7 to $8 billion, the total tab now stands at over $15 billion and counting. Proponents say that it's evidence the credit is working. Opponents say the government can't continue to subsidize a program that has been this expensive when so many other needs are being unmet.

Here's one strong argument for an extension of the credit - estimates are that the tax credit has inspired nearly 400,000 sales nationwide, including tens of thousands of foreclosures that were sitting vacant and neglected. Most of these buyers are pouring at least some of their tax credit money back into home improvements, which help create stronger, safer and more vibrant neighborhoods.

So will the tax credit stay or will it go? Bottom line - it's a toss up.

Two months ago, I thought an extension was a slam dunk. Now I'd call it 50/50, maybe less than 50/50, that the credit is extended.

Too expensive to continue? Or too successful to unplug? That's the question being debated in Washington right now.

DO BUYERS USING E-CONTRACTS HAVE AN ADVANTAGE?

Below $200,000, or with any attractive, well-priced property, the answer is most definitely "yes"!

I began using the e-Contracts program about two years ago, and today I couldn't fathom going back to paper. In short, the e-Contracts program allows agents to write purchase offers (and listing agreements, inspection notices, amendments, etc.) online, and then email those contracts over to clients for immediate, electronic signatures.

They can then be forwarded directly to the other agent, who can forward them to their clients for review and another electronic signature.

The point is, in a market where there is such competition for entry-level homes, every second matters. Many properties, especially the REOs, are coming off the market within a day, and sometimes within a few hours of going into the MLS system.

So how many agents are using e-Contracts? Based on my interaction, I would say it's less than one-quarter. That means three out of four agents in the Denver Metro area are still writing contracts by hand, or on the office computuer, and then bringing clients into the office (often after work) to review and then sign them.

The contract is then faxed, where it often sits in a pile behind a receptionist's desk for another hour or two, then carried to the listing agent's office, where it may sit for another hour or two... do you see where this is leading?

Electronically, a contract can be written in 20 minutes, reviewed and signed in 20 minutes, and emailed within a nanosecond. Hits the listing agent's BlackBerry or PDA, gets looked at immediately, and SNAP! - we're under contract!

Do you see who's more likely to get the better outcome?

Buyers, demand e-Contracts!

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.