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BubbleAs a Realtor, out on the town I’m always asked, “How’s the market?” It’s the follow-up question where it really gets interesting.

The last seven years have seen a surge in the metro Denver real estate market as record numbers of buyers look for homes, which in turn has caused prices to jump. The strength in the market has been so pronounced that people are beginning to ask “Are we in another bubble?” It’s a reasonable question given the horrendous experience of the housing crisis, and while no one can ever predict the future with certainty, I see no evidence that we’re heading for a dramatic downturn in the real estate market any time soon. Here’s why:
1. Even with the continued increase in metro Denver home prices (up another 8 percent in the past 12 months) the average inflation adjusted PITI (Principle, Interest, Taxes, and Insurance) payment made in metro Denver is actually BELOW our 35-year average. This means that while prices have steadily risen, buyers are still able to afford their monthly payments, providing plenty of room for continued home price increases.
2. The number of transactions relative to the population of metro Denver is just about at the 25-year average. At the peak of the bubble in 2006 the number of home sales was about 20 percent above the historical average. When we see the number of closed transactions well above our historical average that’s an indication of an overheated market, as it was in 2006. The number of closed home sales is actually DOWN 12 percent in the past year due to the low inventory. No sign of a bubble here.
3. In 2006, many of the deals were closed with low or no documentation mortgages (“liar loans” or “no doc loans”). Today, mortgage underwriting standards are among the toughest they’ve been in decades. This prevents unqualified buyers from purchasing property, which mitigates the chance of the market overheating (fewer buyers means fewer purchases means less chance of the market frothing into bubble territory like it did in the past).
4. Because of relatively high home affordability it’s a lot cheaper to buy than rent in our market. This would not be true in a bubble. For housing price affordability to return to the average level that we saw in the years between 2000 and 2004 either home prices would have to increase an additional 35 percent or interest rates rise to 6.6 percent. Neither is going to happen any time soon.
5. The imbalance between buyers and sellers we’ve seen recently in our housing market (too many buyers/not enough homes for sale) is due to a lack of inventory, not illogical/unrealistic/unsustainable demand from buyers. “Much of the price increases we are seeing are the result of rising demand among investors and homebuyers for a still-limited supply of homes for sale,” said Anand Nallathambi, president and CEO of CoreLogic. This imbalance is a logical correction from years past when we had too FEW buyers in the market. This is how markets are supposed to work, always regressing to the mean over time.
6. Rising mortgage rates will help to temper the possibility of a bubble as well (they are still near 50-year lows but are expected to rise someday). “History shows that a rapid rise in interest rates tends to have little correlation with home prices. Rather, rising rates are more likely to contribute to a decrease in home purchase volume,” wrote Mark Palim in a Fannie Mae commentary. So the positive side of a rise in mortgage rates is that it will reduce the number of buyers and therefore lower the chance the market will rise out of control and end up collapsing in a bubble.
Click on the monthly market snapshot, the inventory of metro Denver homes for sale continues to fall; it’s down another 5 percent from a year ago. Since the inventory is still extremely low (about 5,520 homes on the market where about 18,000 is a balanced market) I am all but certain the demand will still exceed the supply for the next several years and prices will continue to rise for the foreseeable future. No bubble on the horizon yet… Stay tuned!
June 16 - Market Snapshot [5608]

Buyers
If you agree that we’re not headed for a bubble any time soon what does this mean for you as a buyer? I think it means you should consider buying a home IF it makes sense for you to do so. Are you running out of room at home? Expecting a baby? Have an awful commute? Want to live in a nicer neighborhood? Looking for a better school district for the kids? There are a lot of great reasons to move. But don’t buy a home to speculate on the market; buy because it’s time for a new home. Call me anytime to discuss what your options are and how I can help you find a wonderful place to live.
Sellers
We have been discussing the incredible strength in our housing market. If you’re looking to sell your home this should be very welcoming news! The inventory of homes on the market is at an all-time low and prices are up. Call me and I’ll be happy to run a complimentary Comparative Market Analysis on your home to let you know what it might be worth. It’s great information and costs you nothing.
Investors
The most recent “Metro Denver Area Residential Rent and Vacancy Survey” shows the great news continues for landlords. According to the report:
“The overall vacancy rate for the metro area for the fourth quarter of 2015 was 3.1 compared to 3.9 percent for the previous quarter, and 1.5 percent for the fourth quarter of 2014. It was 2.0 percent in the fourth quarter of 2013, 1.7 percent for the fourth quarter of 2012, 2.1 percent for the fourth quarter of 2011, 2.0 for the fourth quarter of 2010, 5.5 for the fourth quarter of 2009, and 4.9 percent for the fourth quarter of 2008.”
In the U.S., more millionaires owe their wealth to real estate investments than any other single source of income. Today’s market could not be better for long-term buy –and-hold investors. Call me to find out more.

Vacancy Rates
Adams 3.9%
Arapahoe 4.0%
Boulder/Broomfield 2.7%
Denver 3.1%
Douglas 1.7%
Jefferson 2.6%

Everybody loves Zillow. I love Zillow. I love how excited it gets buyers and sellers when they see a home they love or what a neighbor’s house is selling for; a useful tool in many ways, for better or worse, it empowers the consumer. I look at Zillow to see what my clients/potential clients are taking as accurate information… and then I do my homework. The #Denver #realestate market is moving so quickly that even agents and appraisers can have a hard time keeping up. Public record algorithms don’t have the ability to distinguish the differences in the quality of one property from the other, upgrades, location, or if there’s a crack house next door. Algorithms don’t call other agents to inquire about that “Coming Soon” sign or have the latest data on solds as it takes some time to record.
The Los Angeles Times recently published an article that lays it out quite clearly. Though a “Zestimate” can have a low margin of error, it can also be alarmingly high. Imagine a scenario where you’re meeting with your perspective agent thinking that your home is worth 26% more than what it will really sell for.
Sellers, armed with the Internet, often have an idea in their heads about their home’s value. When I pull comparable properties, show them what the list vs sold prices are and how many days on market it’s taken those homes to sell, they may find a different story. Sometimes the news is good, based upon my data, their home may be worth more than they think. Other times it can be a let down.
Buyers burn the midnight oil searching Zillow then send me a link to their dream home. When I hit the MLS at 7 a.m. most often I find that this dream home is under contract… or sold three months ago. If you’re looking to buy a home, I’ll send you to REColorado, the consumer website linked to the Denver Matrix MLS I use so we can work together efficiently. It’s updated throughout the day, has great home search capabilities and saves me time looking for your real home, not the one someone’s already moving in to.
All this to point out that you now have access to a lot of information about my business. A lot of it is helpful and a whole lot of fun, but none is as accurate as hiring a professional; one who specializes in finding the right home in the right neighborhood that suits your needs. If you’d like an “Exact-i-mate” about what your home might sell for in today’s Denver market, give me a call I’d be glad to sit down with you and show you your market value and why.

Denver is a crazy-hot real estate market right now with low inventory and multiple offer situations, especially in desirable neighborhoods like Park Hill. Whether you are buying, selling or both, you’ll need to be very prepared and your first step is finding the right Realtor®. Listen to what the Bernuths have to say about their experience.

Jim and Mary Bernuth wanted to downsize from their beautiful Congress Park bungalow to something smaller but with the same charm.We looked at many homes but the heat turned up when their Congress Park beauty went under contract. Like most current sellers, they were nervous about finding the right replacement home and timing both transactions to make a seamless move. We found “The One” and quickly put in an offer… which was rejected. The sale of their home was complicated on the buyers’ side, adding to the stress. Thank you, Jim and Mary, for sharing how it turned out for you and why you recommend TracysDenverHomes for your real estate needs. Click here for more information on the current Denver market.

Market Snapshot september I’m frequently asked where the real estate market is headed and when we will get back to some kind of equilibrium. The truth is it’s extremely difficult to accurately predict the future but here’s what I know: Right now we are experiencing one of the strongest seller’s markets in our history and we’re a full six and a half years into this market recovery. The reason is simple: we have much more demand for homes (buyers) than we have supply of homes (sellers). What’s fascinating to watch is the dynamic build on itself. It looks something like this:
1.Buyers make offers on homes and continue to lose out to higher offers.
2.Buyers get increasingly frustrated and begin to get more aggressive with their offers.
3.The momentum builds on itself until we see what is occurring today, with multiple offers on a propertythe norm rather than the exception.
4.The multiple offer dynamic almost always bids prices higher than the original asking price.
5.The buyers that lose the bid learn from the experience and become more aggressive on their next offer.
6.Then back to Step 1, until the buyer bids high enough on a property to finally get an offer accepted.
The result of course is the tremendously strong seller’s market we have experienced for the past several years. And this seller’s market is not going to change any time soon, at least not until we get back to some kind of balance in the market between buyers and sellers. I don’t see that happening for at least several more years. In the meantime, if you’ve thought about selling your home, now might be a great time to find out what the market is like in your neighborhood and see what your home is worth. It’s almost certainly worth more than it was just a few years ago. Drop me a line and I’ll put together a professional Competitive Market Analysis on your home so you have the data to make the right decision.
Another question my potential sellers often ask is if they sell today, can they find a replacement home in time to move? In a market like ours this is a very good question. Fortunately, there are a number of things savvy sellers can do to take advantage of the seller’s market and put themselves in a good position when looking for their replacement home.
Here are a few:
1.First and foremost, work with an experienced agent to write a strong, professional offer on the home you want to buy. In a dramatically competitive market like we have now, weak, poorly written, unprofessional, and bad offers just aren’t taken seriously. There is both an art and a science to writing a strong offer. Call me and I’ll explain more about how to write an offer that has a great chance of getting accepted.
2.Add a contingency clause to your contract to buy another home. The clause would say that you will close on the home you are purchasing once your own home sells. The problem with this is that it somewhat weakens your offer as many sellers don’t want to accept a contingency when they can sell quickly to the next buyer. But occasionally we do run across a seller that is in no hurry and is happy to wait for the buyer’s home to sell.
3.Lease the home you just sold from the buyer for a period of time while you are looking for your new home (this is called a lease back). Some buyers do not want or are not able to move into their new home immediately and this permits them to earn rent from you for the period of time you are shopping for your next purchase, a win-win situation. 4.Look into a new construction purchase. Builders are building as fast as they can in this market to keep up with demand and there may be inventory of completed or soon-to-be-completed homes that could suit you. 5.Arrange to stay with family or move into short-term rental housing until you find your next home. While not a perfect solution I believe it’s far better to inconvenience yourself for a short period of time than to settle for anything less than your dream home!
september graphic
“Denver apartment rents rising three times the national average”

This was the Denver Business Journal’s Sept. 2 headline. Denver rents have increased another 7 percent in the past year, which is three times the national average of 2.3 percent. And given the continued lack of rental inventory, rents are expected to continue increasing at a strong pace. Sooooooo…. 1.If you’re a renter it might be time to consider looking into buying a home to get out of the rental market madness! 2.If you’ve ever thought about buying a rental as a long-term investment now might be the time to learn how to purchase a safe, cashflowing property. Interest rates are still near record lows and rents havenever been higher, a wonderful combination for any real estate investor.

Mortgage rates continue to hover at near-record lows. For homeowners looking to upgrade to a larger, better home, low rates combined with low home inventory are making this a great time to upgrade to a larger home with very nearly the same monthly payment. We have several recent examples of clients selling their current homes and getting into a $40,000 – $50,000 more expensive home with the exact same monthly payment. Please give me a call or send me and e-mail and I’ll do a free analysis to see if this might be a good scenario for you to take advantage of.

Five Essential Things You Need To Know About the 2015 Summer Home Buying Market
This year has kicked off with an array of experts trumpeting the Denver housing market’s strength and resilience. Inventory is at record lows, home prices continue to rise, and foreclosure activity has ebbed to lows not seen since before the 2007 downturn. Spring and summer is the time for selling houses. The months of April, May, June, and July typically account for more than 40 percent of all housing transactions annually, thanks in large part to good weather.
1.Inventory shortages: “The story of the day is on the inventory front,” stresses Lawrence Yun, chief economist of the National Association of Realtors (NAR). It’s a sentiment echoed by many. The number of available homes in metro Denver has plunged to a record low, thanks to both an abnormally small supply of existing homes for sale and a dearth of new construction not keeping pace with the current demand.
2. Increased Competition: In addition to a dwindling supply of available homes, the number of buyers has surged. And not just traditional buyers – investors have comprised a sizeable chunk of the buyer pool since the downturn and continue to do so. Real estate investors are responsible for about 25 percent of the existing home sales each month. You, the prospective buyer, need to be prepared to move fast if you find a property you’d like to buy. “Buyers need to be patient because many will be outbid by others and might have to bid on multiple homes,” cautions Jed Kolko, chief economist of Trulia. Yes, indeed.
3.Cash is Still King: Given the steep competition, all-cash buyers who can close a deal relatively quickly offer great incentive to sellers. “Cash will still be king if there are multiple bids because from a seller’s view, they want a deal with fewer hiccups, “says Yun. My sellers are surprised to hear that about 30 percent of home sales each month are all-cash purchases.
4.The Good News: Lending Tree chief executive Doug Leboda says in light of the recently unveiled new home-lending standards, lenders are slowly starting to make it slightly easier to get approved. Talk to a couple of lenders, they’ll tell you things have improved over the past few years on the loan front.
5.More Good News: We are seeing a definite correction in the appraisal business. A few years ago appraisers were consistently under-valuing properties, reacting to the over-conservative nature of their shell-shocked underwriter patrons. Today we are seeing the vast majority of appraisals coming in at value, killing far fewer deals than in the past.

Buyers– If you’ve been considering buying a home it’s critical to understand the amazing tax benefits you’ll enjoy. Talk to your CPA to get professional advice, but here’s a brief look at some of the tax benefits of home ownership:
1.The Purchase. The IRS says that in most cases loan discount points and origination fees are tax deductible to the buyer, regardless of who pays them.
2.Mortgage Interest. In general, you can deduct interest charged on a loan used to acquire or improve your principal residence in the year that it is paid. In the early years of a loan, most of your monthly payment is interest, so this can really add up. If you are in a 28 percent federal tax bracket, this can have the effect of lowering your borrowing costs by almost a third.
3.The Sale. If you have owned and occupied your principal residence for at least two of the past five years, you can earn up to $500,000 on the sale of that house and pay no federal income tax whatsoever. That’s assuming you are married – singles get up to $250,000 tax free. You can do this as often as every two years for the rest of your life with no limit on the number of times you do it! The one restriction is that you MUST own and occupy the house as your principal residence.
Sellers– Month after month in this newsletter we have discussed the incredible strength in our housing market. If you’re looking to sell your home this should be very welcome news! The inventory of homes on the market is at an all-time low and prices continue to climb. Call me and I’ll be happy to run a complimentary Comparative Market Analysis on your home to let you know what it might be worth. It’s great information and costs you nothing.
Investors -For years our clients have been buying rental properties in metro Denver to build their long-term wealth. Our record low vacancy rate is a big driver of why rental property has performed so well. First, the lower the vacancy rate the higher the demand for the property. More demand means landlords can be more selective with prospective tenants and can also charge higher rents. Rents have skyrocketed the past few years because the vacancy rates have remained so low. One of the reasons vacancy rates are so low is that many people still cannot qualify for a loan. I don’t expect this to change in the foreseeable future. We’ve had a huge shakeout in the lending industry and lending guidelines are still much stricter than they were a few years ago. Until lending standards ease up more I expect vacancy rates to remain low and keep my investor clients happy. If you’ve ever thought of investing in a condo or house as a rental property call me and I can show you what the numbers look like and what options you might have. Graphic Mortgage The mortgage market continues to remain strong with historically low interest rates. Low rates combined with low home inventory are making this a great time to sell your home and move up to a larger home with the same or lower monthly payment. We have several recent examples of clients selling their current homes and purchasing new ones costing $40,000 – $50,000 more with the exact same monthly payment. Drop me a line and I’ll do a free analysis to see if this might be a good scenario for you to take advantage of!

What’s new in the Denver Real Estate Market?
The question I’m asked all the time by friends, colleagues and clients who are still renting is whether it’s too late to buy a home. “Are we heading for a big downturn?” and “Are we too deep in the market cycle to buy?” they wonder. For those of you who read my newsletter and know me well the following will sound familiar but it bears repeating: timing the real estate market perfectly is extremely difficult (maybe even impossible) and those who try usually fail. So don’t try to time the market. Instead, look at factors like the ones below to see if homeownership is right for you.

1. You should buy a home when you feel it’s the right time in your life to do so. Don’t try to time the market, instead time your life. Are you getting married? Sick of paying skyrocketing rents? Looking for a bigger place for you and your family? Want your own backyard for the kids to play in? Want to be part of a neighborhood community? Plan on staying in one place for a number of years? Want to build long-term wealth? These are the types of questions you should ask yourself when considering whether you want to own a home. To the extent you say yes, home ownership might be the answer for you.

One important stat to keep in mind is that the average rental household in the U.S. has a total net worth of only $5,500. In contrast, the average homeowner has a net worth of $195,500 — that’s 36 times those who rent! Over the past 15 years, this multiple has ranged from as low as 31 times to as high as 46 times the net worth of renters. You don’t want to try to time the market, but over the long term home ownership is the tried and true path to wealth accumulation and financial security. (So is owning rental property, by the way. Call me if you’d like to learn more about that as well.)

2. Interest rates remain at record lows but this can’t last forever. No one knows when they’re going to rise (remember, you can’t time the market!), but rise they will at some point in the future. Though home prices have gone up the past several years, low interest rates continue to make homes relatively affordable (especially compared to renting). Once interest rates do rise the window of home ownership affordability will truly begin to close for a lot of potential buyers and they will be sorry they didn’t act when interest rates were at 50-year lows.

To illustrate the numbers, assume you are purchasing a $210,000 home with a 5 percent down payment. The Principle + Interest payment at 4 percent interest would be $952 per month. Just a 1 percent interest rate increase to 5 percent would result in a payment of $1,070 per month for a total increase of $128/month and $1,416/year. Now assume that rates tick up to 6 percent. That increase would result in a 21 percent increase in payments from $952 to $1,196. Where you really see the effect of these increases is when you hold the property for the full 30 years. On a $200,000, 30-year fixed-rate mortgage that increases from 4-5 percent, the borrower who obtains the 5 percent loan would pay an additional $42,772 in extra interest as opposed to the borrower who paid just 4 percent interest. That’s 21.4 percent of the total loan amount! This is why a lot of folks who don’t purchase a home while interest rates are near record lows are going to regret it down the road.

3. The main reason the average home owner has so much more personal wealth than the average condo owner is that over time, homes appreciate in value. Over the past 44 years, homes in metro Denver appreciated 6 percent per year, about 1 percent above the inflation rate. If you buy a $200,000 home, you can expect over the long term its value to rise about 6 percent every year. This means you’d make $12,000 in appreciation the first year, an additional $12,720 the second year, another $13,483 in the third year, and on and on. It’s that simple. So if you want to build wealth, your best bet may be to take advantage of these numbers and buy a home for the long term. I can help you do this. Call me and let me show you how.

Olive Exterior

Brick Ranch For Sale in Montclair (Click here).

I fell in love with this cute little brick ranch home in Denver’s Montclair neighborhood the moment I opened the door! There was a sign in the yard, FOR SALE BY OWNER but I just knew I had to list it! The front of this brick ranch home is sweetly elegant. There are three bedrooms/ two baths, beautiful hardwood floors, a very charming vintage full bath upstairs and a bright white kitchen.Your kitchen window overlooks Kittredge Park so you’ll always have the feeling of open space and natural light streaming through your windows. The basement is fully finished and has a non-conforming bedroom, nice sized great room and nifty little space for an office, study or guest room (I love the custom built-in bookshelves!). The back yard is private and just the right amount of space; not too much to keep up, but plenty of room for the gardener, the dog, or both. Enjoy a summer party under the covered patio and give me a call when you do! Did I mention the giant garage? Well it has a really nice, big garage. Click the link above to see the video and call me if you’d like to see it. Or just call and say hello!

6217_s_josephine_way_MLS_HID853570_ROOMkitchen2Notes from the Denver Real Estate Market trenches: I’m seeing a lot, and I mean a LOT of multiple offer situations and better luck shopping for homes during the week rather than the weekends. Savvy listing agents are holding open a date when offers will be presented to allow maximum exposure and showings, then driving buyers to compete and close. Buyers, tired of this cycle and anxious to get under contract, are getting good at moving quickly and great buyers’ agents (that’d be me 😉 are adept at writing strong offers that will get accepted. A few oddities I’ve noticed: homes are coming “Back on Market” after being Under Contract and I’m seeing price reductions. The first tells me that Buyers may be getting caught up in the feeding frenzy and, wanting to win, may offer more than they’re comfortable with. There could also be inspection issues but what I’m seeing doesn’t look like it fits into that time frame. The second one, price reductions, indicates that there may be listing agents and sellers who enter the market over-confident with their pricing and need to adjust.
Remember, a house is not a hamburger. You can’t just show pretty pictures and charge what you like. A house is an emotional commodity and only worth what a buyer is willing to pay for it. So… even in a Sellers Market, the Buyer dictates the price. Now, on to the data from Metrolist:
May 2014 Snapshot Image 669x310

DENVER – June 6, 2014 – Signaling the start of the summer buying and selling season, the real estate market for the Denver metro and surrounding area saw increased activity in May as buyers scooped up available inventory despite near record prices.
The pace of home sales picked up during the month of May, as the number of sold properties rose 19 percent month over month. In particular, demand for single-family attached homes saw a marked increase, rising 25 percent over last May.
Inventory in the Denver area continued its upward trend, as active listings increased 15 percent from April, and the number of new listings climbed 11 percent month over month. However, the market is still very competitive, as days on market saw a 17 percent decrease in May. Homes are moving quickly, averaging only 29 days on the market.
“We have seen a very active start to the summer selling season. The market is moving quickly, but an increasing inflow of new listings is a positive sign,” said Kirby Slunaker, president and CEO of Metrolist. “The market absorption rate highlights a high level of demand for properties and a reduction in days on market.”
The average single-family attached+detached property spent just 29 days on the market in May, down 34 percent over last year. There is currently a supply of just seven weeks’ worth of inventory in the Denver metro and surrounding area.
Continuing a 36-month trend, average sold prices were up 2 percent from April. Prices for single-family attached+detached homes reached $333,955, up 8 percent.
“As the largest MLS in Colorado, we are committed to providing agents and consumers with innovative tools and resources to navigate their way through this fast-paced sellers’ market,” said Slunaker. “In addition to having the most accurate, current and up-to-date property information, REcolorado.com is providing new innovative tools such as INRIX Drive Time™, which is available to assist consumers in making educated decisions as they work with their REALTOR®.”

May Stats Bar Graph 754x480

About REcolorado.com
Before entering the market, buyers and sellers can get free access to up-to-the-minute housing information throughout the state of Colorado at REcolorado.com. The website offers advanced search features and filters for price and location, as well as home values and scheduled open houses. This comprehensive local resource enables both buyers and sellers to enter the housing market well informed.
About Metrolist: Metrolist is the largest MLS in the state of Colorado, supporting the largest network of REALTORS® with the most comprehensive database of real property listings throughout the Front Range. Realtor-owned since 1984, Metrolist provides leading technology solutions to real estate agents and brokers to better serve buyers and sellers. More information about Metrolist is available at www.REcolorado.com.