Monday Morning Coffee

Mike’s Comments:  Another article about how our local market is changing. As inventory continues to drop, there will be a day when we wake up in the morning and prices are going to be going up. In general, we are not there yet, but as we have discussed for many months, all indications are, that we are not that far away. So many signs point to a recovery in Denver before the rest of the nation. If you want to buy, or move up, or invest in real estate, now is the time. If you are selling for any other reason than you have to sell, don’t. If you can make a move up without selling, great way to serve both ends of the transaction, even if you have to rent your current home. The problems will not be solved quickly, but many of our local problems are on the road to recovery. Hopefully the road will stay relatively straight for a while.

Deb’s Comments:  I do agree that if you aren’t serious about selling right now, it isn’t a good time to see how much you might be able to get for your home.  But you can sell your home right now—in quite a few neighborhoods in the Metro area, you can even sell it quickly!  With inventory levels down, buyers that are looking for move-in ready homes in good solid neighborhoods, probably won’t find the REO owned or foreclosure properties as attractive.  And many neighborhoods through the metro area haven’t been hit as hard with foreclosures as Thornton, Green Valley Ranch or parts of Aurora, so you won’t necessarily need to worry about competing with foreclosures in your neighborhood.  Best advice, if you are thinking about selling, ask your trusted real estate advisor first (we’re here for you!). 

Lisa’s Comments:  I agree with Debbie, if you don’t have to sell, this is definitely not the time to test the market.  However, if you currently have your home on the market, it is more crucial than ever to have your home competitively priced and showing well.  With inventory down 20%, take advantage of the fact there are less homes competing with your own!   If you are on the buying end but not sure if you should do anything, give us a call and we can talk you through any pros or cons. 

Supply of unsold homes dives again

The number of unsold homes on the Denver-area market continued to plummet in October, falling to an almost three-year low. The reason: Homeowners who don’t have to sell are keeping their houses off a market loaded with a large inventory of foreclosed homes.   For more information, click the link below.

   http://www.rockymountainnews.com/news/2008/nov/07/stock-of-unsold-homes-dives-again/ 

Mike’s Comments:  As always, the comments that run through the rest of the nation are not always going to apply to the local Denver market. We have had a great year around here. There are many areas in Denver that have not yet seen the bottom, but so many that are starting to rebound already. It may not be completely over yet, but there is much to be positive about in the Denver metro area.

Deb’s Comments:  Some great news for Colorado, and another good reminder that the media doesn’t differentiate between local and national trends.  Everything we see suggests that Colorado should be solidly recovering through 2009. 

Lisa’s Comments:  We are fortunate to have all the components in Colorado that makes our state rated as “expansion”.   One of the components being the unemployment rate.  In comparison to Michigan, Colorado has only 5.2% unemployment, Michigan at a high of 8.5%!  Yikes!!  With the govt. lowering interest rates this week, we are at a prime time to jump into the market.  

  Majority of States Now in Recession  

What started out as a housing problem in a few states has now exploded into a full-fledged recession with a majority of states now in or dangerously close to recession.

For more information, click the link below.

http://abcnews.go.com/Business/Economy/story?id=6075580&page=1 

Mike’s Comments:  This article has a lot of the scenarios we have been asked about in the past 6 months. In the current market, short sales are not the place I would go to find the “best deal”. They can be VERY good deals, but when combined with the difficulty of the purchase and the extra time it sometimes takes, the DEAL sometimes gets left behind. If you find THE house you’re looking for it would not be something I would say absolutely don’t do. We get so many questions about those types of deals, it helps to get some answers out there. If you want to find a deal, there are plenty. Don’t limit yourself to short sales or any other type of sale. If you are thinking now is a good time to re-invest some stock market money…you are right. We can help.

Deb’s Comments:  No question that short sales will try the patience of the most seasoned buyers, sellers and agents out there!  The main point of frustration comes with having no control over the bank’s process.  I do have a buyer that just recently closed on a short sale after a mere four months of waiting, and did have bring an extra $200 to the table at the last minute, plus they were unable to have the seller pay for closing costs, so had another $5000 out of pocket that they had not planned for when they originally started the home search process.  But the home is what they want, and they are going into it about $40,000 under market value—it is a great deal and to them the pain of the wait was well worth it.  That being said, short sales are not for everyone and you absolutely need to have the right mind set going into it.  I agree with Mike that there are other deals to be had out there that involve considerably less pain!

Lisa’s Comments:  Because I am currently in the market of finding a home to buy, I was getting caught up in the “potential” of a short sale.  Yes, there is an advantage of getting a home below market, but at what cost?  As Mike said, if you come across THE house for you, and you are in the position to wait it out, and you are in the position to bring extra money to the closing if needed; then it could be a good deal for you.  But keep in mind, short sales aren’t the only way of finding a good deal out there!  

Selling for less

Catherine Bacchus has had a frustrating nine months trying to unload her Strasburg home in a short sale. Three times she’s had buyers accepted by the lender. And three times the sale has fallen through.  A short sale occurs when the proceeds of a real estate sale fall short of the balance owed on the property.  For more information, click the link below.

  http://www.denverpost.com/search/ci_10634554

Mike’s Comments:    The credit crunch has surely changed many of the programs that we have used for buyers in the past 5 years, but it is still possible to get a loan. One of the very positive changes that will come of this, is that conforming loan amounts are scheduled to change from the current $417k to $625k. That will be a huge help to our marketplace. Right now a conforming 30 fixed rate is about 5.75%. we haven’t seen loans at that rate for years. especially loans in the 425-625 range. If you have a current mortgage in that range that you’ve acquired in the past 2 years, I’ll bet it’s time to re-finance.

Deb’s Comments:  I have talked to many people lately who assume that it is across the board more difficult to get a loan for buying a home.  The truth of the matter is that the majority of people will not notice any difference in their ability to qualify. The programs that have changed dramatically or gone away completely are 100% down,  investment property loans and stated income.  There are some local banks that are still doing stated income loans, but most of the institutional investors are not.  For the higher end, while jumbo loans may be getting more expensive, the change to $625K for a conforming loan limit is terrific news!  The best advice in this market, is that if you are not sure what you can qualify for, talk to a trusted lender before you assume the worst.

Lisa’s Comments:  As Mike has pointed out, the possibility of having conformed loan amounts raised over $200k is one of the silver-linings we have to look forward to!!!  The gravy train of easy credit, no doc loans, etc. has all come to a screeching halt.  If you are battling with low credit scores, it is imperative to do what you need to do to get your credit scores raised!  The buzz on the market will even out and when it does, you want to be able to take advantage of the market.  

Credit crunch means smaller chances for jumbo mortgages

an article from the Denver Business Journal, reports that according to Denver-area residential real estate experts, jumbo mortgages used to buy high-end homes aren’t going away in Colorado because of the worsened credit crunch, but they may be harder and more expensive to get.  Jumbo mortgages are home loans that are higher than conventional mortgages guaranteed by federally chartered guarantors, such as Fannie Mae and Freddie Mac.  For more information, click the link below.

  http://denver.bizjournals.com/denver/stories/2008/09/29/story6.html?b=1222660800^1706004&brthrs=1 

Mike’s Comments:    Considering that Wells Fargo is the largest lender in the State of Colorado, this is GREAT news. This will add 5% more borrowing power to every buyer in our market place. This will hopefully make a difference in the lower end price ranges to keep money flowing upward. Even amongst the tremendously negative national news, our market continues to make strides towards good health.  

Deb’s Comments:  Some good news amidst the noise and confusion of what is going on in the financial markets!

Lisa’s Comments:  Great news that Wells Fargo followed suit with Fannie Mae and Freddie Mac by removing Denver from the declining market list.  I think this says a lot considering Wells Fargo was just named in Global Finance as the only US Bank to be one of the world’s safest banks.  Obviously, Wells Fargo has been prudent in judgment and conservative in nature. 

Denver’s stronger real-estate market good news for buyers

Colorado’s largest mortgage lender is making it easier for homebuyers to borrow money.  Wells Fargo Home Mortgage on Saturday upgraded the status of the Denver metropolitan area’s real-estate market from “distressed” to “stable.” “The fundamentals in the Denver market are changing,” said Greg Osborne, regional vice president of the mortgage company. “Inventory is being worked down, and as a result, prices are stabilizing.”  For more information, click the link below.

  http://www.denverpost.com/business/ci_10464806

Mike’s Comments:    Great article for planning your future. Even if it is a long way away. Many opportunities to become more or less urban. The only caution I would have in this market place, besides pricing your home correctly as mentioned in the article, would be to be cautious about moving down in this market. The market we have currently is a great place to make a move up, but because of the softness we are currently having with the listing market, moving down may not be the best thing for you, DEPENDING ON YOUR CIRCUMSTANCES!

Deb’s Comments:  This article is great for pointing out that downsizing for low maintenance or for a lower mortgage payment are not the only factors to consider when planning for the future.  Your lifestyle values may make your “empty nest” home something completely different than what you might typically think of.  If you love to entertain, want to have plenty of room for family and the privacy of a larger yard, but don’t want the maintenance, maybe hire out for a maid service or lawn service. The cost of those may be offset by what you would pay with an HOA fee for a townhome or patio home.  I agree with Lisa, that deciding to downsize based on lifestyle values is not limited to empty nesters.   

Lisa’s Comments:  It can be easy to get caught up with “keeping up with the Jones’ family”  Sometimes it makes sense to downsize.  Fortunately, our local market seems to be stable and if you bought your house right, realistic about the price, and keep an open mind when you look at downsizing, this could work for you.  Personally, I am downsizing by 40%.  I sold my home and will be moving next month.  I agree with the article, be careful if you decide to buy before you sell your home, a contingency clause is a good idea.  Most importantly, realize your next home may not be perfect, but think about the extra money you will have in your wallet!  The article mentions if you pay extra principal, you can save thousands in the long run.  Another solution would be to split each of your normal monthly payments in half and pay biweekly.  This can add up to one additional payment per year.  You will also pay less interest because your payments are applied to your principal balance more frequently.   

Your home: When it’s wise to downsize

Many empty-nesters assumed the grass will be greener in a smaller home. Not necessarily.   Last year Rick and Suzanne Pepin moved from the four-bedroom 3,400-square-foot house in Minneapolis where they lived with their three (now grown) kids to a luxury condo that’s a third smaller and offers only a Murphy bed for guests. Still, the couple couldn’t be happier. Click on the link below for the rest of the article:

 http://money.cnn.com/2008/09/05/retirement/wise_downsize.moneymag/

Mike’s Comments:    Already today, there has been significant positive movement in the bond market. The confidence that will be renewed by this announcement, in the financial world, will have the greatest impact on our market. To have lenders know they can make loans that will be insured should have a great trickle down effect. Guidelines will surely be tough, but at least they will get to be stable. That has been our biggest struggle for the past few months, everyday lending guidelines are changing. It’s tough to hit a moving target. Hopefully we will see the stabilization quickly.

Deb’s Comments:  The news of the government taking over Freddie Mac & Fannie Mae is largely what I think everyone was expecting.  The hope is that the move will help stabilize the market and bring interest rates down a touch.  The tightened mortgage restrictions and extra costs for borrowers with lower credit scores are still going to remain in place, and is a necessary factor in restoring investor confidence in the financial institutions.   The second article is helpful for understanding Freddie and Fannie’s role in the mortgage industry and why it has been such a major discussion in the news for the past months.

Lisa’s Comments:  It is obvious our country is undergoing a huge transformation in the mortgage industry, as it should.  The Bush administration wants to minimize the bleeding that has taken place and rescuing Freddie Mae and Freddie Mac. In addition, Congress is seeking to help some 400,000 households from losing their homes to foreclosures is a good thing as well.   The problem is,  there is no way knowing how much it is going to cost the taxpayer.  Yikes!!  Only time will tell….

U.S. seizes Fannie and Freddie

Federal officials on Sunday unveiled an extraordinary takeover of Fannie Mae and Freddie Mac, putting the government in charge of the twin mortgage giants and the $5 trillion in home loans they back.  For more information, click the link below.

http://money.cnn.com/2008/09/07/news/companies/fannie_freddie/index.htm?postversion=2008090711

Fannie and Freddie 101

Call it a bailout, or a rescue, Fannie Mae and Freddie Mac are now firmly under the grip of the U.S. government. The widely anticipated move was the logical next step as the housing crisis continued to erode the two mortgage giants.  For more information, click the link below.

http://money.cnn.com/2008/09/07/news/economy/velshi_comments/index.htm?postversion=2008090715

Mike’s Comments:    It’s tough to see a great builder like Centex leave our state. They have been here about 15 years and have done very well. The past 3 years they have tried to build in some areas that are not growing like they anticipated and they are taking their lumps. 837 unsold homes is a bunch to carry. Almost all of the big builders have slowed or stopped production. The resale market is starting to turn, but for builders I think it will be late next year before they start to see any difference.

Deb’s Comments:  The struggle for the bigger builders has been that they have not been able to use the “build it and they will come” approach that worked up well the first half of the decade.  The outlying areas around the Metro area need a chance to stabilize before new construction demand will be high again.  Over the next few years as the market improves and demand starts building again (as it should according to all of the projected population increase estimates for the Metro and Front Range area), it does seem as though the smaller builders will be in a terrific position to compete. Then I’m sure we’ll see the larger builders come back in—it is all part of the cycle! 

Lisa’s Comments:  Fortunately the resale market has been steady.  As with anything, Location, Location, Location!  As Mike mentioned, with Centex building in areas that haven’t done so well, it is so important to research the area you desire.  It will be interesting to see what happens with new developments and the smaller local builder…

Centex to pull out of Colo.

Dallas-based homebuilder Centex will pull out of Colorado next spring, becoming the third big-name homebuilder to cease operations here.  Centex follows Beazer Homes, which in June said it would leave the state in October, and Neumann Homes, which in November filed for Chapter 11 bankruptcy.  For more information, click the link below.

 http://www.denverpost.com/business/ci_10171268

Mike’s Comments:    As is always the case with statistics, take this in its context. I think the fact that sales rose 5.3% indicates that the NATIONAL market has not come to a standstill. As I keep saying to all of you, we are busy. Contracts are tough to come by, but if the property is priced well and shows well, it will sell and sell quickly. There is lots of activity out there. The tax credit for buyers is up to $7500, have to be a first time buyer or not have owned a home in the past 3 years. It’s like free money. There are some restrictions and requirements, but nothing that would dissuade me from calling this the best deal I’ve seen since $500 down HUD homes in the 80’s.

Deb’s Comments:  The first time homebuyer tax credit is a great thing to take advantage of right now if you are in the position to do so.  There is a recapture clause to it, but it is still a great benefit!  If you would like to get any additional details on it, just let us know.  This article is a great example of how confusing statistics and measurements are to try to follow—they are mixing and matching the pending home sales index with completed home sales with average home sales prices without attempting to make any correlation on the underlying data.  No wonder it is difficult to figure out whether the housing market is coming or going!

Lisa’s Comments:  In the article, it stated that pending home sales rose 5.3% in the fourth quarter.  I see that as great news!  Keep in mind, that % is averaged throughout all four regions.  Our region, (West) was second to the highest in gain.  More importantly we had the slightest decline in pending home sales from a year ago at 1.7% in comparison to all regions.  That being said, our local market could be looked at as more stable.  We are seeing it with increased buyer activity and multiple offers on foreclosed homes.  Now, first time home buyers have a great opportunity to take advantage of the $7,500 tax credit!  That sounds like even greater news to me!!!!

Pending home sales rise unexpectedly

A measurement of pending home sales rose in June in a rare piece of positive news for the beleaguered market.  The National Association of Realtors’ seasonally adjusted index of pending sales for existing homes rose 5.3 percent to 89 from May’s reading, which was revised downward to 84.5 from an earlier reading of 84.7  For more information, click the link below.

http://www.msnbc.msn.com/id/26072833/

Mike’s Comments:    There have been 20% less foreclosures filed in the past quarter. The foreclosure inventory in SW Denver is about half of what it was last year at this time. Does that alone mean we are coming back, no. But the market is definitely stabilizing in more areas than it is suffering. There are still pockets that have a long way to go. It maybe two years before Commerce City stabilizes. On the other hand, there are spots like Harvey Park that have only 3 months of inventory. That’s a sellers’ market.

Deb’s Comments:  This news certainly echoes the actual activity that we seeing in the market right now.  Buyer confidence is coming back, and we are seeing more multiple offer situations and quite a bit of the foreclosure inventory is getting cleaned up off of the market through most of the Central Denver and the South/West suburbs.   

Lisa’s Comments:  Over the weekend The Denver Post had an article on the front page of the paper regarding this very subject.  The article basically reported that foreclosures are affecting the wealthy as well as the middle class.  The media’s job is to report on all of our economic woes… high gas prices, declining stock market… real estate foreclosures… However, it is so important to remember that Denver’s economy is bouncing back! 

Metro Foreclosures Drop in Q2

Finally, some good news on foreclosures: Filings in the seven-county Denver area in the second quarter fell by 7.5 percent from the first quarter.  There were 6,992 foreclosure filings in the metro area in the second quarter, compared with 7,565 filings in the first quarter.  For more information, click the link below.

  http://www.rockymountainnews.com/news/2008/jul/07/rate-denver-area-foreclosures-slows-q2/