Housing Recovery! Housing Recovery?

“Fresh evidence suggests the Denver-area housing market may be in the early stages of recovery, even as the national housing market faces an even bigger slump.”

“Housing is a bargain in the Denver area compared with many other places,” states Mike Foster, director of land acquisitions for Century Communities.

“Denver is a low-risk market. It will be easier for companies to relocate to our market than to relocate to other markets,” continues Foster.

“Is it all roses in the Denver marketplace? No. But it is not as bad as all of the doom-and-gloom talk either,” affirms real estate agent Gary Bauer.

I’m not ready to stand here and guarantee that the Denver market will recover in the next 6 months. I’m not ready to promise double digit appreciation. There are too many houses on the market and the real estate finance industry is still finding itself. Basically, there are too many unknowns. However, the future doesn’t appear to be all doom and gloom. There is hope!

“Not long ago, Denver was the most expensive housing market ‘anywhere in the U.S. without a beach.’ But because the Denver-area housing market has been flat for so many years, it will recover faster than other areas that, until recently, saw a huge run-up in prices.”

-“Home Prices Hint at Turn.” Rocky Mountain News Business 2. 9/27/07

Who Cares?

"You just need to treat every deal like it might close."
"I can't."

Tuesday, two loans died. I had to make two difficult phone calls to good people who need to refinance.

"I'm sorry. I can't help you refinance right now." I proceeded to try and help provide a plan of action that will allow them to refinance as soon as possible, but the ugly truth is that they are stuck in adjustable rate mortgages that are adjusting. They are going to have to scrimp and save to pay their bills each month.

I was sick.

1 - I saw a few thousand dollars in commissions slip away.
2 - I couldn't help my clients.

I'm not going to pretend like my clients welfare is my only concern. Not true. I have bills to pay. I have my own mortgage to worry about. Loans are my income!

I'm also not going to act like my dissapointment and heartache were reserved for my checking account alone. It flat out sucks being in a position where you have to tell someone that their payments are going to continue to go up and there is nothing that I (or anyone else) can do about it. Bottom Line: We're dealing with peoples' homes here! There is a lot on the line!

Yesterday, I asked a client not to lose any sleep at night. We are working out some credit issues for him. I truly hope he slept well.

I didn't. I laid in bed trying to think of different scenarios and how to make this refinance a reality. Afterall, shouldn't you trust your home loan with someone who will lease sleep at night over your financing, so you don't have to?

I take great pride in caring a lot about every deal and more importantly, about caring about my clients' financial well being. Some days, I'm sleepless. Some days, I feel sick. Some days, I get to shake hands with satisfied clients who have either bought a home or saved hundreds on their mortgage. Those days keep me coming back and are the reason I love my job.

Winners & Losers...

In all markets, there are always winners and losers. It doesn’t matter if you are vested in stocks, commodities, precious metals or real estate.
**Note: If you own a home, you are a real estate investor!
Right now, the real estate industry is taking a beating due to a credit crunch (% of people with access to financing) and huge inventories (foreclosures + new developments).
Losers: Those who have adjustable rate mortgages in declining neighborhoods.
Why? They can’t refinance! This is horrible. I’ve encountered numerous files where the borrower has done everything right. They pay their bills and take care of the property. Unfortunately, their neighbors lack the same commitment and/or resources. Their homes have been foreclosed upon and driven down prices. Ugh…
Losers: Those who wish to sell their home.
Why? Their house may not be worth what they paid for it, they may have lost out on profits that existed a couple of years ago, it will likely take much longer to sell and there are fewer eligible buyers! Ugh…
Winners: Those who are preparing to buy their first home!
Why? Over the long term, homes will appreciate. Treat your home like an investment! Use a competent agent who will provide good comparables!
Winners: Long term real estate investors!
Why? Fewer eligible buyers + thousands with foreclosure damaged credit + huge home inventory = Higher rents and more cash flow potential properties! Once again, you must buy right!
Losers, don’t lose hope (or sleep). Maybe you can rent out your current residence or even do a lease to own! Maybe, you’ll just have to sit tight for a couple of years while the market recovers. There is hope & a light at the end of the tunnel!

Hold Your Horses!

Reminder: We want our clients to be informed & educated!
The fed cut short term rates by a half point last week. That means lower interest rates for real estate finance, right? Not so fast! Rates for a 30 year fixed actually inched up slightly over the last week. Check out this article from bankrate.com to learn a bit more.
http://bankrate.com/brm/news/mortgages/20070920_rate_cut_affect_mortgages_a1.asp
History says that the chances of rates following after a rate cut are close to 50/50!
“There is zero causation between mortgage rates and the Fed reducing its target for the federal funds rate,” says Dan Dowling, president of United Mortgage Capital Group.
Why?
· Mortgage rates fluctuate based upon investor predictions concerning long-term inflation.
· Mortgage rates react to market forces. For example, prior to the short term rate cut, rates had dropped from 6.82% to 6.32% over the past 8 weeks!

Quote of the Day

"Somewhere along the path to and from irrational pessimism, this real estate bust may deliver the place you've been looking for."

**Time Magazine, 9/14/7 http://www.time.com/time/magazine/article/0,9171,1661682,00.html

Time for a Recession?

“Detroit, Cleveland and some smaller Rust Belt cities are experiencing a traditional bust, in which economic woes spread to housing. In San Diego, the housing decline seems to be a self-generated phenomenon, the product of too-high prices and too-crazy lending practices.”
Basically, there are a lot of reasons that the housing industry is struggling. Economic woes obviously go hand in hand with housing woes. People without jobs are going to struggle to make their payments. No shocking revelations here….
The big question is “Will housing woes result in an economic recession?”
Housing prices have dropped 3.2% nationally during the past 12 months. Over 36,000 in the mortgage industry have dissipated over the course of the past year. “46% of new jobs between 2001 and 2006 in the US were credited to real estate, residential construction and other housing related Labor Department jobs.”
Managing director of the Economic Cycle Research Institute, Lakshman Achuthan, says, “Having a jobs report come in negative does not mean that a recession has started.” The risk, however, is there.
Time for some personal insight… I don’t believe a full blown recession is at hand. Inflation looks to be stable which could me a rate cut in the very near future. The federal government is becoming actively involved as government backed programs are loosening up a bit and providing relief for some distressed homeowners.
Bottom line: There are a lot of bad loans out there that are going to keep a large inventory on the market BUT builders are pulling out, government backed programs are expanding and Wall Street seems to be settling down a little bit. Not all subprime loans are destined for foreclosure. Most subprime borrowers do pay their mortgage and do know the terms of this mortgage. I’m proud to be one of them.
**Statistics and other information drawn from Time Magazine 9/24/07.
http://www.time.com/time/magazine/article/0,9171,1661682,00.html

Slimeball?

I recently shot an email off to a realtor whose client may be interested in our condo. Mid e-mail I stopped and asked myself what I was doing and why. Am I doing this for the buyer or for myself?

The honest answer is that I'm selling this condo for myself (and Tanna). Why? This was a business investment. I've put a ton of time, taken a lot of risk and worked like crazy to complete this project.
-My time is worth money. If I contracted this project out, it would have tripled my costs!
-This is an investment and I need to be see a return on this investment!

The fact that someone else will be able to buy their first home is nice. It makes me feel good to help make that a reality, but that is not why I bought a house and completely remodeled it!

So... am I a slimeball?

Absolutely not. This is a win-win situation. No one has ever told me that the condo is over priced! It's a fair deal and I truly believe the new owner will be stepping into some equity.

I win. I sell my condo and make a little bit of money for my efforts.

They win. They are homeowners stepping into a fully remodeled condo in an established neighborhood with instant equity!