REALTOR RUMINATIONS

  In Congress, July 4, 1776   

“When in the Course of human events, it becomes necessary for one people to dissolve the political bands which have connected them with another, and to assume among the Powers of the earth, the separate and equal station to which the Laws of Nature and of Nature’s God entitle them, a decent respect to the opinions of mankind requires that they should declare the causes which impel them to the separation.

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.  That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, that whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness………….  But when a long train of abuses and usurpations, pursuing invariably the same Object, evinces a design to reduce them under absolute Despotism, it is their right, it is their duty , to throw off such Government, and to provide new Guards for their future security………….……….

…………And for the support of this Declaration, with a firm reliance on the Protection of Divine Providence, we mutually pledge to each other our Lives, our Fortunes and our sacred Honor.”

Brought to you by our Founding Fathers    

 Lest we become confused by the amount of misinformation that is currently circulating about how and why this country was formed and about our core values!  

 Happy Independence Day to All! 

 Memorial Day, originally called Decoration Day, is a day of remembrance for those who have died in our nation’s service.  Traditional observance of Memorial day has diminished over the years. Many Americans nowadays have forgotten the meaning and traditions of Memorial Day. At many cemeteries, the graves of the fallen are increasingly ignored, neglected. Most people no longer remember the proper flag etiquette for the day. While there are towns and cities that still hold Memorial Day parades, many have not held a parade in decades. Some people think the day is for honoring any and all dead, and not just those fallen in service to our country.  As a reminder of and in honor of those who gave up all of their tomorrows so that we can enjoy today:

“ … Through our great good fortune, in our youth our hearts were touched with fire.  It was given to us to learn at the outset that life is a profound and passionate thing.  While we are permitted to scorn nothing but indifference, and do not pretend to undervalue the worldly rewards of ambition, we have seen with our own eyes, beyond and above the gold fields, the snowy heights of honor, and it is for us to bear the report to those who come after us.… Year after year the comrades of the dead follow, with public honor, procession and commemorative flags and funeral march—honor and grief from us who stand almost alone, and have seen the best and noblest of our generation pass away.But grief is not the end of all.  I seem to hear the funeral march become a paean.  I see beyond the forest the moving banners of a hidden column.  Our dead brothers still live for us, and bid us think of life, not death—of life to which in their youth they lent the passion and joy of the spring.  As I listen, the great chorus of life and joy begins again and amid the awful orchestra of seen and unseen powers and destinies of good and evil our trumpets sound once more a note of daring, hope, and will. “

From an address delivered on Memorial Day 1884 by Oliver Wendell Holmes Jr. 

 One sign of the real estate times is that we are seeing more and more homes advertised as “Short Sales”.  A Short Sale occurs when a homeowner owes more on their property than the property is actually worth, and the bank agrees to accept less than what is owed as payment-in-full.  The bank takes this step in certain cases to avoid the very costly and time consuming process of foreclosing on the property.

Generally homeowners “qualify” for a Short Sale when they fall behind on payments, when they have a legitimate hardship (loss of job, huge medical bills, disability), and when they have little or no equity in the home.    The primary benefit to a homeowner who participates in a Short Sale is avoiding the devastating effects that a foreclosure has on their credit.  If their loan is VA guaranteed, the successful completion of the Short Sale protects their VA eligibility for future VA mortgage loans.  

It is very important in the Short Sale process that you identify and use a real estate agent who has experience and training in not only the mechanics of Short Sales but also in dealing with and negotiating with the “right people” in the bank hierarchy (the Lost Mitigation Department vice the Collections Department).   That agent must know what documents each bank requires for their Short Sale package and must know the different processes associated with different types of loans (FHA vs VA vs Conventional).  In addition the agent must be affiliated with a Title Company who has an experienced Short Sale Coordinator to ensure not only a smooth process but that required documents are prepared accurately and in the time frame needed by the bank.    Because of the training requirements, complexities and difficulties associated with this process most real estate agents shy away from short sales completely.  Unfortunately, that reticence can be devastating to a homeowner.  If the right questions are not initially asked then the possibility  of a short sale in not explored.  This usually leads to a foreclosure or an impossibly short window in which to sell a home prior to foreclosure. 

If you or anyone you know may be in a position that a Short Sale is a best worst solution please contact us immediately.  That also applies to those of you who do not live in Colorado.  We can do the bank negotiations and monitor the process regardless of what state the home is to be sold in.  The important thing is to talk before you list so that you understand all of the ramifications and options. 

 Many of today’s homeowners have never been in a declining real estate market.  They believe that housing markets always go up and that no one ever loses money in real estate.  They have assumed an appreciating market in many of their financial decisions from the kind of ARM they have chosen to a decision to refinance and take cash equity out of their homes. What we all are seeing now is that the real estate market is like any other commodity market in that it appreciates and depreciates over time ; however, with an ever increasing vector.So, how to sell homes in a declining market?  The first thing to understand is that if your home is not correctly positioned in the market then no matter how many advertisements, open houses, mailings, and home warranties your agent provides there will be no buyer excitement and your home will not sell. Advertising is great for agent branding and for identifying future buyers but since your home is not a product it will not sell your home.  Buyers determine the price of homes and savvy buyers and their agents watch neighborhoods in which they are interested waiting for their energy priced home to appear on the market. 

Your real estate marketing consultant must:

· Frankly discuss how to sell your home in a declining market not just ask you at what price you want to list.

· Know and be able to show you whether you are in an depreciating or appreciating market, and be able to discuss the implications.

· Be able to tell you what home prices (not average prices) have done in the last several years in your neighborhood.· Be prepared to tell you where to position your home to generate an energy price and what that means.

· Be able to measure and know whether or not your home is property positioned and make recommendations on what to do.

If your home has had fifteen showings statistically the buyer for your home has already seen it.  The reason that you have not gotten an offer is where your home is positioned in the market and the lack of an energy price.  Now more than ever you must know how your agent plans to sell your home. 

A recent article in the Denver Business Journal stated that foreclosures in Colorado are up 40% in 2007 when compared to 2006.  There are three types of lies:  lies, damn lies, and statistics so I immediatly checked to see the numbers from which those statistics were computed.  In 2006 there were 28,509 filings while in 2007 there were 39,915.  Having looked at the supply side I wanted to look at the demand side:  a total of 25,320 homes in foreclosure were sold in 2007 compared with 11,395 sold in 2006.  Subtracting those two numbers from the total foreclosures for the past two years and you get somewhere around 31,709 foreclosed homes still either on the market or sitting in a bank inventory somewhere unsold.  The numbers for the Denver metro area in January 2008 showed a total of 24,489 homes and condos on the market and not all of them are foreclosures. 

All of the news in not bad; however, nine Colorado counties had foreclosures fall last year - those counties are experiencing an increase in oil shale development and mineral extraction activity.  Another half full observation, whereas two years ago Colorado had one of the worst, if not the worst, foreclosure rates in the country it has now been surpassed by other states such as Nevada, California, and Florida.  This may mean that our foreclosures have stabilized relative to the rest of the country and that the worst may be behind us.  That remains to be seen. 

One word of advice for those of you who are thinking about selling your home in the near future.  Please consult a real estate professional when it comes to determining a price for your home.  There are several public databases out there that preport to allow you to determine value.  My observation of them is that they are not the best source of data on home sales.  To get the correct data you need to know what homes have sold for and what other concessions were made by the seller to make the sale happen.  The Multiple Listing Service is the only place that you can get that information.  Why is that important?  In this market homes that are overprices SIT ON THE MARKET, as in DO NOT SELL.  Right priced homes sell and sell in a reasonable amount of time.

We are all attuned to the Main Stream Media telling us how bad that the real estate market is.  Is it bad in some areas, especially where real estate speculators have taken some inordinate and ill-advised risks; yes.  Is it not as bad in other areas; yes.  Rather than tell you what the market in Denver is like I will share some statistics with you and let you draw your own conclusions.  I will do that by looking at two indicators year on year.  First I will look at number of properties sold for 2006 and 2007.  I will then look at average prices for 2006 and 2007.  Average prices for the year are an accumulation of the monthly average prices that are then averaged over the year.  Please look at the numbers and draw your own conclusions about the Denver market.

Total Properties Sold         2006                2007

Single Family Homes         39,208              38,845

Condominiums                 11,036               10,944

Average Sold Prices

Single Family Home         $317,112           $310,418

Condominiums                $188,745          $180,321

Much has been made in the press about the sub-prime market and it’s relationship to Adjustable Rate Mortgages.  I thought that a listing of the ten states with the highest precentage and the ten states with the lowest percentage of Adjustable Rate Mortgages would be informative and might be an indicator of where mortgage problems will remain for a while.  I have included the District of Columbia in the mix and yes I know that the District is not a state.

Highest Percentage ARMs

Nevada  40.3%

California 38.2%

District of Columbia 33.2%

Arizona 32.1%

Florida 29.5%

Colorado 27.2%

Washington 24.5%

Virginia 23.6%

Hawaii 23.3%

 Lowest Percentage ARMs

Oklahoma 9.6%

South Dakota 10.2%

Arkansas  10.4%

North Dakota 10.7%

Nebraska 11%

Iowa 11.6%

Louisiana 11.8%

Wyoming 12.2%

Texas 12.4%

West Virginia 12.5%

Here are the statistics for the month ending November 30, 2007. 

Homes Under Contract

                               All Homes        Single Family      Condos

This Month           4007                          3175                  832

Last Month           4645                          3667                  968

Nov 2006                4139                          3269                  870

Total Homes Currently Listed

This Month        27,137                      20,603                6524

Last Month        28,928                      21,947                6981

Nov 2006             27,530                      20,392                7139

                                                  Average Sold Price

                              Single Family                      Condos

This Month          $297,812                           $165,533

Last Month          $289,754                           $176,222

Nov 2006               $310,562                           $199,747

Year to Date        $311,939                           $180,510

Year to Date 06  $316,819                           $189,295

Not to appear to be an alarmist, which I am not; here is a spot check on the housing market just published today.  Standard and Poors housing index, which has been reported since 1987 fell 4.5% in the latest quarter as compared to the same quarter a year ago.  The fall, when compared with the previous quarter’s figures is 1.7%.

 Here are some figures for various cities around the country:

Cities Where Home Prices Rose Over Last Year

Seattle 5.7%

Charlotte 5.6%

Portland 2.8%

Atlanta 0.8%

Dallas 0.5%

Cities Where Home Prices Fell Over Last Year

Tampa - 10.1%

Detroit - 9.3%

San Diego -8.3%

Phoenix - 8.0%

Miami -7.8%

Las Vegas -7.6%

Washington D.C -7.2%

Los Angeles -5.7%

San Francisco -5.2%

Cleveland -4.1%

Minneapolis -4.0%

New York -3.8%

Boston -3.6%

Chicago -1.3%

Denver -0.4%

What does this mean?  It means a harder sell for people who must sell their homes due to relocation or for that ARM getting ready to increase.  For the increasing ARM category if lending institutions will not or cannot (due to poor credit scores) renegotiate the loan it could mean significantly increased monthly payments or possible foreclosure.

Not a real rosy view just before Christmas but facts are facts and must be reported.

Here are the statistics for the month ending October 31, 2007.  You will notice more homes under contract than in September, but not as many as in September a year ago.  There are still a lot of people who qualify for mortgages and who are looking for homes in the Denver Market.  In addition notice the reduced number of homes on the market.  This is partly a seasonal trend and partly because some sellers have withdrawn their homes from the market due to the onset of the winter months.  Foreclosures still tend to inflate the number of homes for sale and unrealistic expectations by the banks as to price are keeping those homes on the market for too long.  Prices are down for both Single Family Homes and Condos reflecting the still large supply of homes on the market.

Homes Under Contract

                               All Homes        Single Family      Condos

This Month           4645                          3667                  968

Last Month           4329                          3453                  876

Oct 2006                4715                          3746                  969

Total Homes Currently Listed

This Month        28,928                      21,947                6981

Last Month        30,335                      23,027                7308

Oct 2006             29,722                      21,948                7774

                                                  Average Sold Price

                              Single Family                      Condos

This Month          $289,754                           $176,222

Last Month          $305,459                           $181,458

Oct 2006               $306,307                           $189,202

Year to Date        $313,079                           $181,724

Year to Date 06  $317,332                           $188,771