Denver Real Estate ~ the sky is not falling
A note to consumers from the pages USA Today and NAR’s Chief Economist:
Lawrence Yun: Consumers need to find out what is going on at the local level and not necessarily take national headline numbers as a point of reference. Sellers tend to be more stubborn in facing the reality of the market, so people who really need to sell need to come down on prices, given the high inventory and seller competition.
Denver real estate consumers need to ignore the National News and look to the statistics in the individual areas they are living or buying in. The real estate market is local.
Our prices never experienced the insane appreciation that happened in other markets. While others were shooting for the moon, we traipsed along at a slow and even pace. Now when other locals are experiencing a sharp decline (read price adjustment) we are not seeing the same in the market.
What we are seeing is a lack of consumer confidence (thank you media) and the inability of people relocating from other areas to be able to purchase a home here, until their home’s sell.
This doesn’t mean All of our Denver real estate is priced well. Much of it is NOT priced to sell, nor is it in show home condition.
What I continue to see are homes that are priced to sell and in great shape, selling. In fact 20% of our sales sell in the first 30 days.
The sky is not falling.
At least not today.
Lies, damned lies and statistics…
Denver Real Estate ~ Take a close look at the sales statistics for real estate sales in the Denver Metro area. At first glance the average sale price has dropped $55,251 from a year ago ($267,259 from $322,510). That is a huge drop that would indicate values have dropped considerably.
But Wait! Let’s look at the Percentage of Sold Properties by Price Range:
Notice the lower prices ranges (single family), everything under $150,000 has seen an increase in volume this year.
Now notice the drop in sales of homes over $500k. We are selling the same number of homes, we are just selling them in the low end of the market.
The decline in value is due to the number of lower end homes we are selling coupled with the decrease in the higher end. A glut of low end sales will skew the average price, pulling it down and giving an inaccurate picture of the market.
Interestingly the middle of the market has not been effected.
First time home buyers, investors are in the market. They are scooping up the low end real estate. Savvy buyers know how to buy (low) and sell (high). People who continue to put their trust and faith in the news media will be saying in a few years, "Gee I coulda bought that for $xxx, but now the market has passed me by and I can’t afford to purchase a home."
Why is my house not selling?
As I go about my daily routine selling Denver real estate, I get asked by home sellers, "why doesn’t my house sell?" That is the $64,000 question.
I wish there was one simple and complete answer, but alas there isn’t. In today’s real estate market we are dealing with factors beyond what I’ve seen in my 24 years in the business. We are seeing sales occur in the first 30 days and others that take 6 months or more.
Typically the reason the home is not selling is either price, condition or location.
What most seller’s don’t take into consideration, they are competing with the market as a whole, not just their neighborhood. True when pricing a home we look to the area for valuation. That is normal and accepted.
What isn’t realized is buyers have many choices. They might like a particular neighborhood or any of the other hundreds of neighborhoods in the Denver metro area. Seldom do buyers (or at least the ones I’ve worked with) hang around waiting for a home to go up in one specific neighborhood.
Most buyers are going to buy based on 1) their budget 2) personal tastes 3) proximity to work and/or schools. These requirements often times have multiple solutions, so your house may work or maybe not.
Condition of the home is a huge factor.
Today most savvy agents and homeowners take the time to prepare the home by hiring a professional stager. We learned a long time ago "the way you live in a home and the way you sell a home are two different things." Hiring a professional to come into the home and either work with your belongs or augment some of their own, works miracles. Simply said.
It has been my personal experience the expense of hiring a stager often comes back in multiples by shortening the listing period and increasing the homes potential. (a great resource for staging is found at Staging rants & ravings)
Another factor that makes a home more difficult to sell is the "dated aspect". A homeowner must consider who the potential buyer will be. In the year 2000 home styles changed. We went from gold fixtures to chrome. Some age demographics will not purchase a home with anything gold in it! Changing out the fixtures is usually a fairly easy fix. However if your home has 1970’s vibrating through it, the makeover my be more than one will want to do. The only way out maybe to price it accordingly and let the buyer bring it up to date.
Homeowners who want to "update" a home, be sure you are up to doing the job, not just right, but complete. There is nothing sadder than having a seller update part of their home. Buyers will come look and the only thing they will see is the undone updating. Yes, buyers are cut from the same "the glass is half empty" mold.
Location is so important.
Buyers shop for the best of everything. If your home has a location with a glitch, say an apartment building next door, or a messy neighbor, barking dog, busy street, backs to a freeway, a blinking sign glaring through the bedroom window or railroad tracks in the back yard, you may have a problem.
Location issues can be overcome. Sometimes the best thing to do with a bad location is tackle it head on. Some buyers actually LIKE homes on a busy street, because they crave the "pulse of the city" nearby. Others might be looking for a home next door to the soup kitchen, because they are into volunteering. Creativity is part of sales. Get creative with a solution.
Pricing is the most important factor.
When all else falls reduce the price. Statistics have shown a property that has 10 showings and not offers is over-priced. Homeowners who insist on a price that home buyers aren’t grabbing need a reality check, or to remove their home from the market.
Overpriced homes that get shown and are getting good feedback maybe being used as an example. Buyers are comparing values and if one home isn’t selling and the other one is, perhaps being the bridesmaid again and again means it’s time to adjust for the market.
When it comes to real estate there is a mathematical equation that works time and time again.
Price=Sale.
Find the right price and find the sale.
Colorado Foreclosures Maybe Heading for Time Out Room!
Two lawmakers in Colorado are introducing a bill to enable judges to extend a foreclosure for up to 90 days. The extra time could be used to work out a settlement as opposed to the homeowner losing their home to foreclosure.
The problem with mortgage workouts is time. So much of what needs to be done takes an extraordinary amount of time. The workload of the persons dealing with homeowners is overwhelming I am told. In fact much of the time the bank is trying to determine who actually owns the loan and who has the say in what can be worked out or not.
Homeowners facing financial issues should not delay in contacting the mortgage holder. The longer you wait, the less likely you will be able to work out a solution.
Many homeowners do not realize as soon as the bank files a Notice of Election and Demand for Sale, the clock starts ticking. The homeowner must redeem the property by making up the back payments or coming to an agreeable settlement with the mortgage holder. All this takes time.
The Clock Keeps Ticking…
Homeowners do have alternatives to foreclosure. Forbearance agreements can be arranged so the homeowner can pay the delinquent payments on the "back end" of the loan. Some mortgage companies will restructure the loan so the homeowner can stay in the home.
Colorado provides a Foreclosure Hotline to the public seeking to AVOID foreclosure. 1-877-601-HOPE Trained counselors help those in trouble find alternatives in repayment plans, modifications to the mortgage agreement or selling the home prior to the foreclosure.
Home Improvements
Home improvements are often very costly, both in money and the time it takes to undergo a renovation. I’ve had
clients who actually moved out of their homes while the home was being redone, thus absorbing a double cost of living, in addition to the cost of renovation.
When you are spending money like that you want to be sure you 1) really love what you are doing to the home 2) understand what the ROI will be when you go to resell 3) the renovations will appear to others, not just you and your family! Many times the cost of renovations far exceed the return on investment upon sale. When that occurs the homeowner must understand the renovations are for his pleasure only.
Recently I was showing a daring home an investor had purchased as a "fix and flip". As I toured the home with my clients, we were excited about it possibly being The Home! Then we got to the main bathroom. This is where our excitement ended.
The bathroom was very narrow. It was an old house where the main floor bath was the bathroom that serviced the house, including 3 bedrooms and the visiting guests. In the bathroom there was a toilet, sink and a bathtub, all very normal appointed, but the issue was the space.
The toilet was squished very close to the tub. A person of normal height could not easily use the toilet without their legs being pressed up against the tub.
Why on earth would any builder in their right mind complete a renovation with this very obvious negative arrangement? Perhaps the builder himself was 4′9"! A person of this height might be able to use this toilet in comfort.
Functional Obsolescence occurs in real estate frequently because styles change, tastes change and in the case of the squished toilet, people get bigger!
When renovating a home, take into account today’s taste in style and what is appealing to the broadest audience. They are your future buyers, ignoring them may cost you.
There are other faux pas home renovation homeowners make when trying to improve their homes. Most recently I’ve been seeing many beautifully finished basements with game rooms, extra bedrooms serviced by a 1/2 bath. Yikes! The rule to follow here, if you have a bedroom the bathroom needed to make a completely sweet finish must be at the very least a3/4 bath. The best scenario would be to have a full bath, that means a toilet, sink and tub/shower.
My clients have passed up at least 4 lovely homes that didn’t follow this rule!
Yes, full bathrooms cost more, but if you are going to renovate, do it right or don’t do it at all!
Another important rule to remember in real estate is one we Realtors learn early on.
Cost does not equal value.
Just because a renovation cost "$X" doesn’t mean your home will increase by "$X!" In the cases above, I would venture to guess the renovations SPOILED the home, not improved it!
Before you renovation, do your research. Talk to your Realtor about the lastest trends and styles. Pretend the renovations are finished and you have to sell your home. Will the neighborhood uphold the current value you have in the house? If not, are you OK with that?
Over-improving for the neighborhood is a fatal sin that cannot be forgiven. Well it will be forgiven if you throw enough CASH at it! Only the homeowner can determine if that is OK, it’s his cash after all!
Remodeling Magazine publishes the latest Cost vs. Value Reports each year. The values vary in different parts of the country, so they compile the trend reports accordingly. Research into the appropriate renovation will provide valuable insight as to whether the whole idea is a good one or not.
If after you examine the facts and the renovations are for pure personal enjoyment because you plan to live in the home for a long time, then go ahead renovate. A home is a castle, if we can’t enjoy living there what’s the point. Just remember when you go to sell, your enjoyment may have come with a bigger price tag than expected.
Denver Real Estate Market Trends
While much is being said about Denver real estate trends, the statistics are not looking all that bad. As of March 2008:
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While the combined average price in the Denver Metro area is $21,000 less than a year ago, the drop in values began to level off from February to March this year with a loss of only $1300.
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The total available inventory for sale decreased 3.46% from the same time last year. With builder inventory at the lowest in recent history, sellers can expect values to begin increasing soon.
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The Absorption Rate dropped considerably from February, down 6.4 weeks, with the average days on market receding to 111 days from last March’s 119 days.
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The Median Sold Price increased to $224, 900 in March. The February median was $221,500.
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The total number of all homes and condos contracted for sale was 5,874 just 246 less than March 2007 total of 6,122. Sales are still strong.
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The national average 30 year fixed mortgage interest rate as reported by Freddie Mac was 5.88% on April 10. The 30 year rate has held steady under 6% for the last 30 days.
Denver’s housing market strong
Yesterday I received a telephone call from John Rebchook, the real estate journalist for the Rocky Mountain News. 
John shared with me some very good news contained in a report by PMI. You can read the whole news here; PMI Study: Denver’s Housing Market strong
Hearing the contents of the U.S. Market Risk Index is music to my ears. Finally an outside source who has a vested interest in providing good data is handing us a positive report! Denver continues to out-perform other Metro areas. As far as real estate is concerned we have a future and it is good.
Really.
There is not a day that goes by where I’m not talking and/or working with people who are relocating to the Denver area. So many are in a holding pattern until their homes sell in other areas.
No doubt our market isn’t going to light on fire anytime soon, but there are homes selling. In fact as in my example in the paper, we are finding more and more buyers are competing for the good homes.
Properties that are priced right and nicely cared for sell quickly. In fact I showed one last week to a client who couldn’t (actually wouldn’t) write an offer until his wife could see it. She can’t get here until this week. Well, you guessed it, the property is already under-contract. Congratulations to that seller, they did very well. I’ll just have to go find the Mrs. another home this week.
Yes, the Denver real estate market is selling. Prices may be down in some areas, but in others they aren’t judging the entire market by the overall stats is a HUGE mistake. Buyers and sellers have to look at the micro market in the area they plan to buy or sell. Assuming that statistics are a "one size fits all" rule, is harmful.
Call a pro, let your pro show you the facts, the whole facts. Then make your decision.
Sellers, you have to sell three times not once!
Putting your home on the market these days seems to be so complicated. Resale homes have to complete with builder models and the rest of the resale competition. The competition is rough!
Savvy Colorado brokers make sure their homeowners know the value of staging the home, so they hire a stager to provide professional advice to the seller. Stagers arrive at the property with a bundle of suggestions to help make the home more marketable.
Yes, that means yet another "to do list" for the homeowner. Once the staging is compete, the photographer comes in to perform their magic for the MLS.
The home goes on the market and hopefully the phone begins to ring with requests for showings.
BUYER SALE #1
If the seller is lucky the showings provide a ready, willing and able buyer, who wants to buy the home.
The offer is written and accepted, then the inspections begin.
INSPECTOR SALE #2
Now if the seller has maintained the home the SECOND SALE to the home inspector will be a piece of cake. If not, the seller may end up having to do some repairs. Either way the if the seller can get through this process with the buyer still willing, the next step might be the toughest.
APPRAISER = SALE #3
Yes, the last and final step is to make sure the seller’s home value is in line with the market. The current real estate market has been effected by foreclosures and the liquidity crisis in the financial industry. Appraisers are being required to be very conservative in their values plus the fact many areas of Colorado have been designated as "declining" by the private mortgage companies.
In my office we are seeing appraisals come back lower than the sale price. When this happens the seller has a couple choices.
- The seller (or seller’s agent) has the right to provide comparables that might better fit the property. It is up to the appraiser to determine if the new comparables are better suited to the property, if so the appraised value can be adjusted.
- The seller doesn’t have to sell the property if the value is not equal or greater than the appraisal. The seller can keep the property and lose the buyer.
- The seller can reduce the price of the home and sell it to the buyer at a reduced price.
- If the buyer feels the appraisal is out of line and doesn’t mind paying more for the home than it appraised for, they can do so. But the additional amount must be over and above the minimum down-payment required by the lender.
FOR YOUR INFORMATION
- Appraisers are generally looking at no more than 90 days back for sold comparables. Sold comps older than 90 days are likely to be irrelevant.
- The lending rules are changing every day for every loan. Our company is advising buyers to have 2 loan options, maybe with 2 different lenders. Plan A and Plan B.
- Lenders and their support system are at the mercy of the market.
- This too shall pass.
WHAT SHOULD A SELLER DO?
First it is important to know that homes ARE selling. In fact we sold more units this year than last. The issues we are facing can be resolved, but it means some sellers may not get the price they want for their home. The best way for a seller to know where they stand is to do a very realistic analyst of the homes sold in the neighborhood.
- Track homes sold and update every 30 days.
- Watch the current and seasonal trends. Realize the market has busier times of year, so this month’s numbers should be compared to the same season last year.
- Consider the absorption rate. If it is increasing that means longer days on market with more homes competing. Most likely that means values will decrease.
- If values are declining, make a decision to stay with the market or GET OUT.
GOOD NEWS
Even though the Denver real estate market seems to be taking a big hit in values, much of the metro area is not that bad off. In fact 20% of the homes that sell, do so in the first 30 days.
As a seller the goal should be to be one of those that sell in the first 30 days. The homes that are selling typically are in mint condition. The sellers have taken extra care to price and package the home so it is very attractive to a buyer, inspector and the appraiser.
When selling a home, be sure to speak to all three buyers, and the home will get sold.
Home owners in trouble have the FED on their side
There isn’t a day that goes by where we don’t hear or read a story about a home owner having trouble making house payments. The Foreclosure Crisis continues with more and more communities trying to figure out what to do to help. The Federal Government is taking a strong look at various solutions.
Federal Reserve Chairman Ben Bernanke said this week.
“In this environment, principal reductions that restore some equity for the homeowner may be a relatively more effective means of avoiding delinquency and foreclosure. ”
“Reducing the rate of preventable foreclosures would promote economic stability for households, neighborhoods and the nation as a whole. Although lenders and servicers have scaled up their efforts and adopted a wider variety of loss-mitigation techniques, more can, and should be, done.”
Interesting how the Big Guy has a different twist to solve the problem. I’ve only heard of lenders reducing their interest rates for home owners in trouble. That just means the mortgage payment is made more affordable, especially with the adjustable rate loans that topped out at unmanagable highs.
By reducing the loan amount to give the mortgage holder instant equity means home owners who must sell might be able to use this adjustment to get out of their home without having to lose it to the bank.
Bernanke’s reasoning for giving the home owner equity was to take stress off the homeowner and give him financial incentive to stay in the home.
I’m not sure I agree with Mr. Bernanke on this. Given a choice between taking a lower interest rate or a reduction of loan amount, I would have to make my decision based on my future plans.
If my intention was to stay in the house, the lower interest rate would be more attractive in the long run.
If my life situation was such I had to move, my preference would obviously be the principal reduction.
So the solution aka Bernanke is not “one size fits all.” Of course nothing in life is…
Bottom line, the market may stink, but the strategy is still the same. If you live in an area of declining values and don’t have to move.
DON’T MOVE. DON’T SELL. STAY PUT.
On the other hand if you are thinking about downsizing, moving up or investing, now is the time to do it. What you lose on your current home you will gain equally if not more by acting now.
Really.
There is Life After Foreclosure
Please feel free to call on me if you have questions. I welcome your click or call.
Nehemiah Wins…Good News in the Down Payment Assistance Arena
Just got an email notice regarding the popular Down Payment Assistance program called Nehemiah.
Dear Colleague,
I am pleased to announce that Nehemiah was victorious in its litigation against HUD!
Judge Lawrence K. Karlton of the United States District Court for the Eastern District of California upheld Nehemiah’s motion for summary judgment. The Court Clerk’s Office is directed to enter judgment and close the case.
To be clear, the U.S. Department of Housing and Urban Development’s (HUD) rule to ban private down payment assistance as proposed in the “Standards for Mortgagor’s Investment in Mortgaged Property” regulation published October 1, 2007, is permanently set aside.
Mary Steinmeyer, Certified Mortgage Lender
This program enables home buyers to ask the seller for a "grant" for their mortgage down payment. The seller grants the down payment to the buyer via the Nehemiah program. Nehemiah charges the seller a fee for then doing the paperwork and passing the down payment along to the buyer.
This is good news for buyers who lack a mortgage down payment. With down payment assistance they may be able to purchase a home.
I say "may" because typically the seller inflated the price of the home to account for this bonus to the buyer. The appraisal becomes the issue if the value of the house cannot be met. In some markets this may be difficult.
Just the same, buyers say a little thank you to Judge Lawrence K. Karlton. If you ever see him on the street, perhaps buy him a beer! 
This site brought to you by Kristal Kraft, a licensed Colorado Real Estate Broker