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".

CASE-SHILLER SHOWS FIRST NATIONAL HOUSING PRICE INCREASE IN 34 MONTHS

Okay, so it's not exactly a roaring recovery, but it is a sign of hope.

For the first time in 34 months, the Case-Shiller national housing index showed a rebound in prices, with values up in May by 0.5% over April's figures. The Case-Shiller report tracks the 20 largest markets in the county (including Denver) and reports its numbers with a lag time of about two-months.

Prices were down by over 17% year over year on a national level, but decreased by just 4% in Denver (and those value losses were almost all at the higher end of the market, which remains extremely soft above $500,000).

While the Denver market has been in recovery mode for more than a year, the Case-Shiller report indicates that, on a national level, buyers are coming back into the market in larger numbers and confidence is being restored.

While I do not feel the Case-Shiller numbers are particularly relevant to Denver (I have always believed that "all real estate is local"), it is important because a recovery in housing confidence will put more pressure on interest rates... and rising rates will be one of the next big challenges for both the housing market and our overall economy, in my opinion.

So take the good news with a grain of salt... recognize that things may be improving a little bit at the national level, but remember that the Denver market is probably 18 months ahead of this curve, since we were one of the very first markets into the housing (and subprime meltdown) abyss.

Keep your eye on interest rates - because good news for the housing market is a sure indicator that higher interest rates are ahead.

WITH MORE HOME BUYERS IN THE MARKET, DENVER RENTAL VACANCIES RISE

My personal feeling is that the Denver Metro Area housing market "hit bottom" in March or April of 2008. That's when inventory was highest, buyers were scarcest, and sellers (including banks) were discounting like crazy to get homes sold.

That was probably also about the peak of the last rental cycle, when vacancies for single family rental homes were below 3% (apartment vacancies were about 6%) and landlords were able to raise rents at will.

Fast forward to today, and you see that the market is transitioning once again. While the market for single family rental homes and condos remains strong, with just a 3.6% vacancy rate in the second quarter, apartment vacancies in the Denver Metro Area have now increased for six consecutive quarters, rising to nearly 10%.

It appears that the first-time buyer tax credit and low interest rates have been pulling many longtime apartment renters into the housing market.

I believe this is a short-term condition, personally, because one significant factor these days is that new apartment construction has all but disappeared from the landscape. New apartment units are not coming online, and most residential builders have either declared bankruptcy or suspended operations in the face of lower demand for "retail" product, more difficulty with financing and an overall decline in profit margins as consumers stress "value" over "luxury".

As long as the population continues to grow, the rental market will stabilize and landlords will be okay. The "big picture" fundamentals for both private and institutional landlords remain in place, but the fact remains, in the short term, some landlords will feel the pinch of the economy, just like everyone else.

REALTY TRAC SAYS FORECLOSURES IN METRO AREA CONTINUE TO DECLINE

RealtyTrac, a California-based foreclosure tracking service, reports that the Denver Metro area ranked number 45 in the country in new foreclosure filings during the first half of the year, signaling a continuing decline in foreclosure activity as the local housing market solidifies.

The RealtyTrac numers show a 29.43 decrease in foreclosure filings for the Denver region, while nationally foreclosures increased by almost 15 percent.

Because foreclosure filings are counted differently by different tracking services (some count NEDs, some track delinquencies, some count trustee sales), the numbers vary a bit from report to report. Earlier this summer, a survey of public trustees' offices in the seven county Denver Metro Area showed an overall decline of about 11 percent in trustee sales, which is that final point in the process when the homeowner actually loses title to the foreclosed property.

However, no matter which report you follow, there is a consistent theme: Denver appears (for now) to be on the back-end of its foreclosure crisis, and with low interest rates, already discounted prices and an $8,000 tax credit for first-time buyers, our market will continue to perform better than most for the rest of this year.

THE GREAT SUMMER STORM OF 2009

Okay, that was interesting.

Where were you when the Great Summer Storm of 2009 rolled through town last night? Here, once the storm got started around 10 o'clock, it sounded like someone had taken a giant firehose full of hail and was firing it at the side of our house.

Not only was there extraordinary amounts of wind, rain and hail, we could see rolling clouds along the ground that would obscure streetlights, buildings and even large trees in our neighborhood. I don't know if it was groundfog or funnel clouds... I just know it was weird.

So I was at Home Depot mid-morning and it was the most crowded I've seen it in four years. Chain saws and power tools flying off the shelves... rakes... garbage cans... power generators... gloves... we had our own economic stimulus event last night, in the form of an insane summer storm.

Just part of the adventure of living in Colorado, I suppose, where you never know what weather event waits just around the bend.

FINAL DAYS FOR $8,000 FTB TAX CREDIT?

334… 123… 60… ZERO!

What does this sequence of numbers have to do with the housing market?

It’s a countdown to the end of the $8,000 First-Time Buyers federal tax credit, which covers new homeowners purchasing a primary residence between January 1, 2009 and November 30, 2009 (a window of 334 days) and who have not owned a home in the past three years.

As of this morning, there are just 123 days left until the expiration of the tax credit, but in reality, because it normally takes 45 to 60 to close a property once it’s under contract, buyers looking to take advantage of the $8,000 tax credit really only have about 60 days left to find the perfect home and get it under contract.

But it’s not just buyers who have benefitted from this tax credit. As you know, the market in the Denver Metro region below $250,000 has been sizzling hot this summer, and "traditional" sellers are having more success than any time in the past three to four years. Foreclosures are down and private sellers are finding that retail buyers are out there, especially if a home has been well maintained (or rehabbed) and is in "turnkey" condition.

That means if you have been thinking about selling an entry level home, and you want to capitalize on the strong buyer demand that exists today, you only have about 60 days left to secure an offer before the strong impact of the tax credit incentive starts to diminish.

Many of next year’s first-time buyers have jumped into the market this year, drawn by the tax credit and an incredibly attractive interest rate environment. In a few short months, we could lose the tax credit and see higher rates, a one-two punch that would take some of the starch out of our market and make things more difficult for both buyers and sellers.

Now I don’t advise you to sell your home just because of the tax credit, any more than I would tell you to buy a home because of the tax credit. Homes should be bought and sold because the decision makes sense from the standpoint of your family situation, your employment situation, your economic status and other “life events” that normally trigger moves up or down.

But both buyers and sellers are benefitting right now from this unique tax credit, which is slated to go away pretty soon.

Is there anyone you know who has been thinking about buying a first home or selling a longtime residence?

Remember, I am never too busy for your referrals!