Denver's Commercial Market at the Top

Metro Denver's commercial real estate market continues to be a bright star among large U.S. cities. National and international investors have Denver on their radar screen for investment.

Commercial transaction volume is down from the prior year but Denver continues to be a strong market. Absorption continues to be positive, lease rates steady to up, and vacancy rates for industrial, retail and office remain low.

The subprime meltdown of residential real estate has spilled over into commercial financing. Even though commercial properties have an extremely low national foreclosure rate, lenders have increased their down payment requirements and tightened underwriting criteria. Commercial loans are still available to higher quality borrowers. However, the borrowers who need higher leveraged transactions are finding it difficult to finance the transactions. Commercial mortgage brokers are working harder than ever to match up borrowers and lenders.

While most Denver area sub-markets are doing well, the Denver-Boulder I-36 corridor is the one attracting most of the attention. With the announcement of the coming ConocoPhillips move bringing 7,000 jobs to the area, commercial real estate is hot in this sub-market.

Our website: http://www.coloradoprorealestate.com/

Income Property 101: Revisiting the Benefits of Investing in Income Property

In this financial climate, investors need to re-think their allocation of assets between cash, stock, bonds and real estate. We recommend revisiting the 6 advantages of investing in income properties:

Leverage. Investors receive two benefits from using leverage (OPM-Other People's Money). First, the investors have a high percentage rate of return on the invested capital. Second, the investors can grow their real estate investments and wealth to much higher levels with the use of leverage.

Cash Flow. After the payment of expenses, debt reduction and taxes, investors have cash flow to re-invest in the property, buy the next investment, or distribute to the investor(s).

Appreciation. Through the use of leverage, inflation, and the laws of supply and demand investors achieve higher returns and growth than stocks, bonds or cash.

Tax Benefits. When investors dispose of the property they pay a lower capital gains rate than the taxes paid on ordinary income. Investors can defer taxes through the use of 1031 exchanges. Along with deductions for all of the property's expenses, the tax laws let investors deduct depreciation from income to reduce their tax bill.

Reduction in Principal. The income payments that investors receive are used to pay off the investor's mortgage by monthly principal payments, i.e. principal reductions.

Value Creation. Investment properties will increase in value through property improvements that allow for rent increases, thus increasing the value of the property.

"Don't wait to buy real estate...Buy real estate and wait." Robert Allen

See our website at http://www.coloradoprocommercial.com/

Buying and Selling Real Estate With This Financial Turmoil?

Buyers, sellers and investors of real estate are asking us and themselves this week, "What should I do during the financial turmoil we are hearing this week? Here are a few of our thoughts.

Study the markets, interest rates, financing, economic forecasts, inflation, recession and more. Read, listen and ask real estate professionals for their opinions about the local market so that you are prepared to make the right decisions. Surround yourself with reliable experts.

Now is NOT the time to be making emotional decisions. Now is the time to make well-thought out financial decisions.

Our advice is to continue with what you are already doing. There is not a reason to just freeze.

If you are a buyer or investor searching for a residential or commercial property, you can continue your search. Even if you decide not to purchase at this time, at least you have been learning about the real estate that is on the market so you become the expert when the time is right for you. In this market, you might find the ideal property that represents an excellent value proposition and that perfectly meets your needs. If you are able to purchase at a deep discount to market prices, you will limit your downside risk. You're not committed to a financial
transaction until you sign a contract.

If you are a seller, you can keep the property on the market. If you take it off of the market you may miss the ideal buyer. Qualified buyers can still find financing despite what you may be reading or hearing. Yes, the financing is only available to qualified buyers, but that's the way it should have been all along. If you are selling you will need to be realistic about the price you are asking. When pricing your property in a rising market, you want to price ahead of the market. Pricing in a declining market also requires you to price ahead of the market, only on the downside. This way you are keeping ahead of the sellers who represent your competition.

Be smart. Be the expert.

See our website www.ColoradoProRealEstate.com .

Financial Crisis Has Impact on Interest Rates and Real Estate Purchases

This week saw the U.S. financial crisis spread internationally. With all the volatility and uncertainty in the worlds markets, what has been the effect on interest rates and home purchases?

This week we have seen mortgage rates falling. Good news for consumers and businesses if they are able to get the loans. We continue to suffer a liquidity crisis around the world which has constrained lending.

Bankrate.com says of this week's interest rate activity: "The benchmark 30-year fixed-rate mortgage fell 22 basis points, to 6.19 percent, according to the Bankrate.com national survey of large lenders. The mortgages in this week's survey had an average total of 0.4 discount and origination points. One year ago, the mortgage index was 6.5 percent; four weeks ago, it was 6.15 percent... For much of this year, mortgage rates have been extremely volatile. Earlier this spring, it was not uncommon to hear stories of mortgage shoppers who received great quotes, only to discover the rates were no longer available a couple of hours later.

"The National Association of REALTORS® is reporting research that points to an increase in pending home sales in August and an increase in home loan applications.

Our opinion: Buyers are reacting positively to the low interest rates in combination with the lower home prices that exist in most U.S. markets. The Denver Metro market is also reflecting these same nationwide trends.

See our website http://www.coloradoprorealestate.com/ .

Denver Real Estate Market Starting to Recover

The Denver Post, in a October 8, 2008, article points to data indicating an improvement in the Denver residential resale market. Recently released data, The Post says, reveals a 14.1 percent increase in homes sold in September 2008 compared to September 2007, with an inventory decline of unsold homes of 21.1 percent from the prior year. Read more here...

Most Denver area real estate brokers who we have interviewed say that their business is seeing the same increase that coincides with the data. Home sellers are finally reducing their home prices to the point that buyers and investors are seeing a value proposition they cannot resist.

First-time home buyers are moving into the market after several years of pent-up demand is being released. Homes in the under $250,000 price range only have a 2.5 month inventory. Any number under 6 months shows that we are in a seller's market, a shift from the several years of a buyer's market.

Don Nelson, a real estate broker with Keller Williams Realty Professionals, tells this writer that the foreclosure inventory in this same price range has significantly decreased. Don works with a number of investors to acquire discounted bank-owned foreclosures, remodel them, and resell the finished homes to investors or buyers.

See our website at http://www.coloradoprorealestate.com/ .

What is the Impact on Real Estate Post-Bailout?

Fannie Mae (FNMA) and Freddie Mac (FHLMC) are no longer with us as the federal government has taken them over under the Economic Stability Act.

Lawerence Yun, Chief Economist for the National Assoication of REALTORS (NAR) has made some predictions. He says, "First of all, it is likely that mortgage rates will trend down over the short run. But how much of a decline will depend on how actively the government...loosens the mortgage liquidity spigot."

Replacing Fannie and Freddie is the newly formed Federal Housing Finance Agency (FHFA) who has the authority to purchase mortgages. "This will help drive down mortgage rates," says Yun. "That is good for the housing market."
Yun expects the lower mortgage rates will slow the level of defaults in housing and lower rates will return buyer demand to the housing markets, thus lowering housing inventory.

Our prediction is that this should start us over the next two years to a return to a more normal and stable housing market.

For more information go the NAR website.

See our website.

Denver's Arlington Park subdivision in Capitol Hill is part of the larger Alamo Placita historical neighborhood, both being named for the nearby parks. Arlington Park and Alamo Placita Park illustrate the early plan to develop parks facing each other on opposite sides of Speer Boulevard and Cherry Creek. The formal Italian gardens of the Alamo Placita Park section were designed to be viewed from the hillside of Arlington Park (now named Hungarian Freedom Park) which, in turn, was to be viewed from Alamo Placita Park as a meadowed hillside backed by an evergreen forest. Saco DeBoer designed both parks: Arlington Park in 1925 and Alamo Placita in 1927. Take walks through the pleasant, tree-lined neighborhoods and stroll to the nearby affordable restaurants and fine dining establishments. Relax in the Alamo Placita Park and enjoy the Cherry Creek walking and bicycling paths, (Photo taken in 1927).
Website

Built in 1921 this one-story bungalow represents the style of homes built in Denver in the first 30 years of the 20th century. The style is representative of the Craftsman-Style (1890's-1920's) and the Bungalow-Style (1905-1930). The Craftsman-Style in California was inspired by the Arts and Crafts movement led in England in reaction to the mass-production of the Industrial Revolution. This movement advocated a return to the handcrafted arts and the use of natural materials such as wood, stone and tile. The bungalows exemplified the traditions of simplicity and quality construction for Denver's rapidly growing middle class. Some of the architectural characteristics of the Craftsman Bungalows are: low-pitched gable roofs, wide-overhangs, wide porches, exposed wood structures, and square, tapered support columns. Denver's architects of the time adhered to the philosophy of living that looked for a return to the warmth of family and home.

Website

Senate Passes Rescue Plan

The Senate stepped up to the plate Wednesday night and passed the rescue plan by a 74 to 25 vote. This vote now challenges members of the House who previously voted against a plan and now expected to vote again this Friday on the bailout.

Key features of the plan passed by the Senate are:

· $700 billion to buy up mostly mortgage-related distressed assets from financial institutions, with $250 billion immediately available
· Raise FDIC insurance for banks from $100,000 to $250,000
· Tax breaks and credits for both individuals and businesses including:
- Renewal of tax breaks for individuals that were about to expire
- Extension of renewable energy tax credits for businesses and individuals
- Delay of the Alternative Minimum Tax for another year
· Creation of two financial oversight committees
· Establishment of an insurance program by the U.S. Treasury to guarantee troubled assets
· Pay restraints for CEO’s of institutions selling assets or buying insurance from the Government

In recent days, the world’s economies have been facing volatile financial markets, increasing interest rates, and a severe liquidity crisis. What does that mean to us TODAY? Constraints on real estate loans to home and business owners, capped second mortgages and HELOCS by banks, reduced credit card limits, reduction in loans to businesses for the purchase of inventories and payment of payrolls, fewer student loans and on and on…

Talking to my clients, friends and business associates reveals these events are already impacting their lives this week. This crisis needs to be slowed down and reversed before it becomes more severe. Let’s swallow the bitter pill, create confidence, and start the road to financial recovery.
Website

Colorado Governor's 3rd Quarter Economic and Revenue Forecast

Colorado's Governor has just released his Third Quarter Economic and Revenue Forecast.

Here are highlights from the Economic Forecast:

"Although certain parts of the State remain distressed by foreclosures, the current state of the residential real estate market is substantially stronger in Colorado than the rest of the country. According to the Standard & Poors / Case-Shiller index, Denver's real estate market is one of the strongest of any major metropolitan area of the country. In addition, real estate continues to be strong on the Western Slope in response to the continuing influx of oil and gas workers.

Colorado's economic indices continue to demonstrate that the State is comparatively experiencing lower unemployment, greater job growth, and slower inflation than the nation is overall."

For the complete 3Q Economic and Revenue Forecast...

From the OFFICE OF GOV. BILL RITTER, JR.

Website

NAR Statement on Defeat of Economic Stability Act

WASHINGTON, September 29, 2008

The following is a statement by National Association of Realtors® President Richard F. Gaylord:

“The National Association of Realtors® is extremely disappointed in the actions of the U.S. House of Representatives today in failing to pass the Emergency Economic Stability Act of 2008. This legislation is critical to stopping the economic turmoil that millions of Americans are facing. Completing a recovery plan that will end the current economic crisis crippling the housing and financial markets must be accomplished quickly and in a bipartisan manner.

“NAR’s focus is on protecting homeowners and the American taxpayers. Protecting Main Street by keeping people in their homes will not only benefit individual families, but also will help stabilize the housing market, which greatly impacts the overall U.S. economy. Across the country, Realtors® see and feel the loss of confidence experienced by both buyers and sellers in the real estate market and they know firsthand that buyers are finding it harder to get mortgages.

“A sharp rise in unemployment and severe hardship for many ordinary Americans would result from the deteriorating liquidity crisis. In addition, interest rates for those who are able to get a mortgage or credit will be more costly. This legislation, if implemented, would quickly restore liquidity to the mortgage market, which would stabilize the housing market and protect homeowners.

“There will not be an economic recovery without a housing recovery, and we hope the Congress will move as expediently as possible to resolve their differences. We commend the House members that today voted for this unprecedented legislation. NAR will continue to advocate this legislation, which will benefit Main Street by restoring market liquidity to the financial markets.”

National Association of Realtors, www.realtor.org

Website

$700 Billion “Bailout” or is it a “Financial Rescue Plan?" Impact on Main Street

Excuse me. I keep referring to the $700 Billion as a “bailout.” The new politically correct term is “financial rescue plan.” Call it whatever you wish, but the reality is the Washington politicians have killed the chance, at least for today, of passing a bill to address the turmoil on Wall Street.

And what about Main Street as this bloody fiasco unfolds. We have the largest liquidity crisis in modern times.

Banks are not lending money this last week. The jumbo loans are going away for homes. First time buyers are disappointed at the prospect of not moving their family into that new home. Second mortgages are disappearing. Sellers cannot sell properties they need to dispose of, and buyers needing a roof over their heads will have to wait. Interest rates are rising, pricing people out of real estate.

A reality--employers cannot borrow money to make payrolls this week. Employee layoffs, if not occurring today, will actually start tomorrow morning. Small and large businesses cannot borrow to buy inventories to stay alive. Consumers can forget financing that new car. College students are facing the reality of fading college loans. Do you have money in an IRA, 401K or pension plan that is invested in stocks as most of us do? Then 7% of your retirement funds just evaporated in one day with the 777 point drop in the Dow as the House failed to pass a bill.

This is not the end of the world! But it sure feels like it this week. Let’s hold our politicians accountable for this mess, whether we believe this bill should have been passed or not. Where is our leadership? This is America and its people deserve the best.

Sanity will return to our economy at some point. Hold on tight for this roller coaster ride as the “courageous,” partisan politicians continue to blame each other and worry about getting re-elected if they vote the wrong way.

Now...here’s my real estate pitch. Bless those brave investors who are liquid and have cash at this point in time. They are the ones who can buy real estate and financial assets and start us on a turnaround to recovery. They deserve to have the large gains they will make by buying low now and selling higher later.

Congress Agrees on $700 Billion Bailout Deal

Members of the U.S. Congress announced early Monday morning, September 28th, that they reached an agreement to the $700 billion bailout of the financial markets. The House of Representatives is voting on the bill on Monday morning and the Senate is expected to vote on Wednesday. President Bush has expressed support for the bill.

After two weeks of turmoil in the worldwide financial markets, coupled with a strong resistance from main street Americans, Congress and the President have agreed to a structured bailout. Now it is time for the media pundits to wade through the details of the plan and explain how the taxpayer will be affected.

Of interest to most of our readers will be the positive and negative impacts to interest rates, mortgages and foreclosures. Many buyers and sellers of residential real estate have been frozen for the last week and reluctant to make a decision until more clarity is brought to the situation. Our commercial clients are continuing with their real estate plans, but watching the economic situation carefully.

Some of our clients who have been heavily invested in the stock market told us they were rapidly selling their stock out of the market for the last two weeks to invest in real estate. After seeing their holdings erode as the stock market declined they are ready to invest in the bargain real estate prices that exist in the Colorado market. See our website.

Report on the 2008 CABI Conference

The Colorado Association of Business Intermediaries (CABI) held its 2008 Annual Conference in Denver this week. The association is composed of members who are Business Brokers, Intermediaries and Commercial Real Estate Brokers who broker transactions for the sale of businesses and related real estate sales or leasing.

The keynote speaker was Steve Mulhauser from the Small Business Administration (SBA) Colorado District office. He presented a number of significant changes in SBA Lending regarding appraisals for commercial real estate and business valuations. Other topics presented at the conference included: "Deal Structuring Techniques" by Christian Blees, CPA; "Use Retirement Funds to Purchase a Business" by Larry Carnell of BeneTrends; "Strategic Partnerships" by Earl Kemper, a wealth advisor; and "Specializing in Your Success" by Shawn Sanborn, CEO of Sanborn and Company.

The Colorado Association of Business Intermediaries is a non-profit trade association whose primary purpose is promoting education, professional standards and cooperative communication among Business Brokers and Intermediaries. All of the Business Broker and Intermediary members are licensed Real Estate Brokers in the State of Colorado, to ensure a high standard of professionalism. More information on CABI.

Website

Congress Announces Breakthrough on Bailout

Leaders in the Senate and House announced a breakthrough in the negotiations for the White House $700 billion bailout at 12:30 a.m. EST on Sunday, September 27th. The announcement makes it clear the legislators have agreed in principal and will commit the agreement to paper overnight and expect to sign it during the day on Sunday. Asian markets open on Sunday afternoon and Congress is rushing to meet that deadline. The problem began with bad real estate loans and the record number of foreclosures and declines in home prices. Then the financial markets were rocked by a number of collapses and mergers. The announcement did not give details of the tentative plan. The devil remains in the details.

Press Release: KW Commercial Names Steve Hewson as Director

Denver, CO - KW Commercial is pleased to announce that Steve Hewson has been named as a Director in the recently launched KW Commercial division of Keller Williams Realty.

Hewson is also a member of a newly formed KW Commercial Group in the Denver-Boulder Metro area along with experienced commercial realtors, Dennis Quinn and Steve Bimm. The Commercial Group’s market specialties include office, industrial, retail, land, investment, and multi-family. Their commercial services provide for brokerage, leasing, residential and commercial development, consulting, property management, and M&A business brokerage.

The requirements for a KW Commercial Director include a recognized level of experience and volume of closed transactions, client and customer references, and a commitment to a high level of commercial real estate education.

As a Director at KW Commercial, Hewson will bring a new focus to developing and marketing the commercial division’s capabilities in the Colorado marketplace. In addition, he will be involved in training and educating other real estate agents. “I look forward as a Director to working with this newly formed commercial division within Keller Williams Realty”, commented Hewson. “It provides an opportunity to bring a vast set of resources, training and an extensive agent network to assist our clients.”

For more information go to our website.

Announcement: KW Commercial Merger

ANNOUNCEMENT: Fort Collins Real Estate merges with Keller Williams (September 2008)Fort Collins Real Estate is joining forces with Keller Williams of Northern Colorado to create the region’s only full-service residential and commercial company under a single roof, according to Keller Williams Operating Principal JoAnn Johnston.The merger represents a ground-floor opportunity to launch Keller Williams International’s new commercial division in Northern Colorado, said Mike Jensen, who has owned Fort Collins Real Estate since 2003. Fort Collins Real Estate specialized in commercial, investment and residential real estate. Keller Williams of Northern Colorado has offices in Fort Collins, Loveland and Greeley, focusing primarily on residential sales. Fort Collins Real Estate’s 25 brokers and agents will join KW’s force of 192. See our website.

Press Release: Keller Williams Realty Announces Plans for Commercial Division

AUSTIN, TEXAS (July 16, 2008) - "Our goal is to expand our platform and make Keller Williams Realty the real estate company of choice in both the residential and commercial worlds by providing our associates the technology, marketing tools, and resources to succeed in the commercial business,” said Mark Willis, CEO of Keller Williams Realty. “We want to create synergy and referrals between the residential and commercial sides of our Keller Williams offices, increasing the income and production potential of all our agents.”
Buddy Norman, a veteran of commercial real estate has joined Keller Williams as president of the new division. Norman has more than 18 years of experience in the commercial real estate industry, including leadership within international firms, such as The Staubach Company and Burnham Real Estate, which was acquired by Cushman & Wakefield. He has led the development of new business divisions and trained commercial agents all over the U.S. including Dallas, Atlanta, Washington D.C. and San Diego. A consistent top producer, Norman has averaged approximately 400,000 square feet per year of commercial leasing and sales transactions over the last 10 years.
“There’s such a wide spectrum of commercial real estate experience within Keller Williams Realty,” said Norman. “We intend to build a strong commercial division paralleling the success and growth of the Keller Williams residential division." See our website.

Press Release: Steve Hewson, Dennis Quinn, & Steve Bimm Form a KW Commercial Group

DENVER, CO—June 1, 2008—The Denver Northwest Market Center of Keller Williams Realty today announced the formation of a KW Commercial Group, comprised of Realtors Steve Hewson, Dennis Quinn, and Steve Bimm.“For some time, our market center has been providing our clients with both commercial and residential services,” commented Team Leader Heidi Greer Mosher. “The formation of the Commercial Group provides a new focus. These three agents bring many years of experience in providing commercial and investment real estate services to clients.”
The Commercial Group’s market specialties include office, industrial, retail, land, investment, and apartments. Their commercial services provide for brokerage, leasing, residential and commercial development, consulting, and business brokerage.
“This commercial capability combines with the well-known Keller Williams residential strength to bring an even wider array of services to our clients,” remarked Steve Hewson. “Many clients have a need for both services, and now, they can find it all under one roof.” See our website.

Announcement: KW Commercial Launch

AUSTIN, TEXAS-March 20, 2008-We are pleased to announce that 2008 will mark the launch of the Keller Williams Realty Commercial Division [KW Commmercial].
Our goal is to make Keller Williams the commercial real estate platform of choice by providing our commercial associates the technology, marketing tools, and resources to succeed in their commercial businesses…
We are also honored to announce that Buddy Norman, a true leader in commercial real estate, has joined the Keller Williams family to spearhead this new venture.
Buddy has more than 15 years of experience in the commercial real estate industry — including leadership within international commercial firms, such as Cushman & Wakefield and The Staubach Company. He has built new divisions and trained commercial brokers all over the U.S. — including Dallas, Atlanta, Washington D.C. and San Diego. A consistent top producer, Buddy has averaged more than 400,000 square feet per year of commercial leasing and sales transactions over the last 10 years.
Buddy will serve as the President of Keller Williams’ Commercial Division, and will be working closely with a Commercial Advisory Council (CAC) of top commercial brokers within our company that will guide the launch and implementation of this new division.
We know that with the leadership of Buddy, our Commercial Advisory Council, and your input, we can truly build a Commercial Division that will create the commercial real estate platform of choice…
Mark Willis, CEO, Keller Williams Realty, Inc.Mary Tennant, President and COO, Keller Williams Realty, Inc. See our website.

Press Release: Bimm Joins Keller Williams and KW Commercial

DENVER, CO-January 7, 2008-The KW Commercial Group and the Denver Northwest Market Center of Keller Williams Realty announced today that Steve Bimm has joined its team.

"We are thrilled to have Steve join our team with his extensive background in land development and construction," said Heidi Greer Mosher, the Market Center Team Leader. "His experience will help carve a niche for himself in the Denver Northwest Market Center."

Bimm has 30 years experience in the land development, heavy construction management, and civil engineering industries. In addition to real estate, he is the principal of his own land development consulting firm, Advanced Development Services Group, LLC.

In real estate, Bimm specializes in vacant land sales and acquisition, marketing of development parcels, and bulk lot disposition and sales to builders.

Heidi Greer Mosher, Team Leader/CEO, Keller Williams Realty Professionals

See our website.

Commercial Investors See Denver Industrial Property Headed Up

In a lecture at the Denver Metro Commercial Realtors Association (DMCAR), Paul Kluck of Trammel Crow shared his views on the current Denver Metro industrial property market.

The net absorption (demand) of industrial properties in this market in 2006 is increasing significantly from the downturn of 2002 through 2005. This is an increase of approximately 1 million square feet net absorption in 2005 to 4 million in 2006. Correspondingly, vacancy rates have been declining. Even though demand is increasing, speculative building has not created any significant supply in 2006 to fill that demand. This year has seen only 1 million square feet added in new construction.

In Klucks’ view, Denver experiences cycles in the Denver industrial property market every 8 to 10 years, moving through 4 cycles: Phase 1 Recovery, Phase 2 Expansion, Phase 3 Hypersupply and Phase 4 Recession. He believes we are at the end of Phase 1 and starting to move into the Phase 2 Expansion which is indicated by declining vacancies, new construction and growth in rents. This would give the local market another 4 years of upside investment potential. Major developers - ProLogis, Majestic, Pauls Corp, Lauth, Mountain West, Panattioni and Opus - have plans in 2007 to add 2.2 million square feet in speculative building to take advantage of the increasing demand.

If you wish to contact Paul Kluck, you may email me at stevehewson@comcast.net . See our Website.

Investor News: Colorado Apartment Vacancy Rates

We have previously reported declining multi-unit vacancy rates (6.7%) and increasing rents (up by 2.6% in the third quarter) in the Denver Metro Area (denverpost.com). Seeing an opportunity, larger buyers have moved into the Denver market from other states to invest in the undervalued multi-unit apartments.

The Colorado Division of Housing recently released their most recent Vacancy and Rent Survey for the larger Colorado areas outside of the Denver-Boulder area. Areas in the under 3% vacancy range are: Aspen, Eagle County, Grand Junction, Glenwood Springs, Gunnison, Salida, Buena Vista and Alamosa. All of these are in the mountain areas. In the 3-5% range are Durango, Southeastern Colorado and Canon City. Some of the areas in the over 5% vacancy category are: Greeley (7.3%), Loveland (8.0%), Fort Collins (8.1%), Steamboat Springs (8.6%) and Colorado Springs (11.3%). See our website.

Denver Jobs and Real Estate Gets Boost from Boeing-Lockheed

The Metro Denver area is already moving in the direction of lower unemployment rates (Denver 4.2% and Boulder 3.6%). Now Boeing and Lockheed issued a press release stating they are forming a joint venture called United Launch Alliance (ULA) that will be headquartered in the southwest area of the city. The Denver Post reported that it “is expected to bring up to 700 high-paying jobs to the south metro area…” The headquarters will be located initially in Jefferson County in their Waterton Canyon facility. Our prediction is that prices at the mid-to-upper end should experience some firming for that part of the metro area.

Colorado Mountain Prices Moving Up

The values of Colorado Mountain homes and vacation real estate have been steadily rising. The prices in the upscale resorts of Aspen/Snowmass, Vail and Telluride have had dramatic increases, reaching new highs, and pricing some people out of those markets. With that, there has been a shift to the other ski resorts of Keystone/River Run, Breckenridge, Copper Mountain and Winter Park.

This last week we heard from Michael Lytle, a friend of ours and real estate professional in Keystone with Slifer, Smith and Frampton Real Estate. He called and sent me a note about the activity in his area. He reported, “the real estate market in Keystone is getting tight, particularly in River Run Village. There are only 27 active listings in the entire village today…down from nearly 200 listings just 18 months ago. That’s an 85% reduction in the River Run inventory in the past year and a half.”

In this writer’s opinion, I believe we still have a significant way to go with prices in the mountain areas. Historically, when mountain real estate turns the corner upward, there are price improvements for a sustained period of time.

New construction is currently taking place, but in many mountain areas, such as Summit County, there will be a limited supply for the increasing demand. The surrounding national forests will prevent building in the future.

The shift in demand and prices we are seeing is largely attributable to baby boomers with the financial ability to place their investments in second and vacation homes in the Colorado resort areas. In terms of assets and age, the baby boom generation is starting to reach this point and may have at least another ten years to drive this demand.

The vacation possibilities in the mountain resorts are endless: downhill skiing, cross country skiing, golf, tennis, boating, fishing, hiking, rafting, ice skating, cycling, and on and on…

We believe there is still a window of opportunity to invest, so we are urging our readers to take a look and decide if this is where they would like to be before prices reach even higher levels.

If you would like to reach Michael Lytle in Keystone/River Run, you may email stevehewson@comcast.net .

Denver Real Estate Helped by Low Unemployment

Denver’s real estate market should be pleased with the most recent jobless statistics released today by the U.S. Department of Labor. The Denver area is reported to have a low 4.2 percent unemployment rate – less than the 4.5 percent rate for the nation as a whole. This is down from the metro Denver’s August rate of 4.4 percent and September rate of 4.8 percent. In January of this year, the jobless rate in Denver was at a recent high of 5.3 percent and has been moving downward throughout 2006. Boulder has also seen a decline in the unemployment rate to a low 3.6 percent. For more information see the U.S. Department of Labor at http://www.dol.gov .

Metro Denver’s November Real Estate Statistics

The statistics for last month were released December 7th by Denver’s Metrolist MLS. The numbers show the inventory of unsold homes has declined steadily for the last 4 months and down 7.4% from the prior month. These numbers support the anecdotal evidence that sellers are waiting for better home prices and that the normal seasonal decline is also taking place. Therefore, the assumption may be made that sellers are withdrawing their homes from the market and, and simultaneously, refraining from listing them. January, after the holidays, typically sees an upswing in sales activity. The inventory of 27,530 homes is still up by 8% from November 2005. The number of homes sold in November was 3,565, down 13.7% from the prior month and down 3.8% from the same month in 2005.

The median price of single family detached homes has seen a steady monthly decline from July through September, except for an increase of $4,100 in October, and then a decline of $7,600 in November. Condo median prices experienced an increase of $3,750 from $152,000 in the prior month to $155,750.

The average days on the market for a seller’s home continued to hover, as it has in 2006, around the 100-day mark, but up from 103 days to 110 in November.

Summary for October:

Total of all homes:
Inventory 27,530
Homes Sold 3,565
Avg. List Price $285,441
Avg. Days on Market 110

Single family detached homes:
Inventory 20,392
Homes Sold 2,785
Median Price $240,000
Avg. Days on Market 103

Condos (condominiums and townhomes):
Inventory 7,138
Homes Sold 780
Median Price $155,750
Avg. Days on Market 134

Source: Metrolist, Inc.

Contrarian Investing in Denver

Contrarian investors have long been noted as the wisest of all investors. They do it the right way - buy low and sell high. They invest when the market is all doom and gloom, the news media is negative, and the cost of their investment is at a low point.

Look at the Denver real estate market as reported by the media (and this blog). Colorado has the highest foreclosure rate in the nation. Homebuilders have excess inventory of homes because they have overbuilt. State and Federal officials are investigating title companies, appraisers and lenders. Sellers are having to hold on to their homes longer. Buyers are nervous about making the leap. And on and on...

Here is what smart, contrarian investors see. They look at what is currently good about the metro Denver economy that will drive growth in the future: low unemployment rates, increasing job growth, lower fuel prices, low interest rates, excellent availability of mortgage money.

We often look at the newspaper, television reports, or online news discussing the "national" real estate market. Then, we make the mistake of applying it to the local Denver market. The East Coast and West Coast real estate has risen dramatically in recent years, while Colorado and most of the central part of the U.S. has seen steady, or only small increases, in home prices.

The definition of a contrarian is: "An investor who buys when most people are selling and sells when most people are buying. In practice, this is very difficult to do, partly for psychological reasons, but if done successfully can improve returns (definition from telusplanet.net)."

Denver Multi-Family Apartment Update

Investors from California, Arizona and other states have moved to the Denver multi-family apartment market to acquire real estate for the last several years. These larger investors are coming from over-valued markets to the undervalued Denver market. This has not failed to catch the attention of investors focused on the lower end of the multi-family market who realize that values still exist in this segment.

So what is driving this move? The Denver Post reports that “Apartment vacancies dipped while rental rates increased during the third quarter [of 2006]...” The newspaper goes on to say, “The vacancy rate for metro Denver dropped to 6.7 percent, compared with 6.9 percent the previous quarter, according to the Apartment Vacancy and Rent Survey” released this past week by the University of Denver. The current vacancy rates are a marked improvement over the double-digit vacancy rates experienced in Denver for the last few years. The Post continues, “The rental rates increased 2.6 percent to $865.76 for the third quarter.”

Why are vacancies decreasing and rents increasing? Colorado continues to experience lower unemployment rates and an improving economy. People, particularly the younger demographic, who have been living with others or at home while the economy had slowed, are now feeling enough confidence in the local economy to move back into the apartment market. Other real estate experts speculate that the high rate of home foreclosures has forced previous homeowners to also move back into the rental market.
If you have other ideas or opinions, please email us with your thoughts to Steve@ColoradoProRealEstate.Com .

Apartment Vacancy Rates Decline in Denver Area

This on-line source for Colorado and Denver real estate markets frequently opines on the investment opportunities for apartment and other residential income properties. Apartment vacancies are declining and rental income is improving in most areas in and near Denver. Broomfield, Colorado is a northern suburb which is indicative of the overall market. The Broomfield Economic Development Corporation reports on 3,309 apartments. The BEDC recently reported quarterly vacancy rate trends as follows:

Vacancy Rate

June 2005 13.5%
September 2005 10.2%
December 2005 10.5%
March 2006 7.7%
June 2006 5.6%
September 2006 2.7%

Denver Homebuilders Continue with Heavy Inventory

Denver area homebuilders continue to experience heavy inventories of new homes. Sales declines of new homes have followed a downward path much like the recent resale residential market. Buyers are waiting out the market as a result of reading the negative press articles, hearing that interest rates may increase, and experiencing a longer time to sell their existing single family residence or condo. Meanwhile, homebuilders are finding that potential buyers are cancelling their contracts to purchase that new home. "Through June, Denver builders saw an 11.1 percent decline in sales to 11,017," according to the Denver Post.

Those who are ready to buy will find homebuilders giving incentives such as deep discounts in the purchase price or offering free options. (The end of the year is approaching and publicly stock traded builders will not want to be caught with unsold homes on their books at reporting time).

Of course, the builders continue with competitive financing. It is a buyers market, so be ready to negotiate for a better price. Builders are sometimes offering much higher commission rates as an incentive to real estate agents to bring them buyers. Hint to the Buyer: Ask that real estate agent to part with some of that commission to get an even better deal. Please, agents, do not flood me with comments. After all, we recommend any new buyer to utilize an experienced REALTOR to assist with reviewing the contracts and to conduct negotiations.
www.ColoradoProRealEstate.com

Tax Exclusion When You Sold Your Home

David Strother, a CPA in the metro Denver area and a friend of our consulting business, provides us this year-end real estate tax planning tip from his Monthly Newsletter:

If you sold your main home, you may be able to exclude up to $250,000 of gain ($500,000 for married taxpayers filing jointly) from your federal tax return. This exclusion is allowed each time that you sell your main home, but generally no more frequently than once every two years.

To qualify for this exclusion of gain, you must meet ownership and use tests.

Ownership Test: During the 5-year period ending on the date of the sale, you must have owned the home for at least 2 years.

Use Test: During the 5-year period ending on the date of the sale, you must have lived in the home as your main home at least 2 years.

If you and your spouse file a joint return for the year of the sale, you can exclude the gain if either of you qualify for the exclusion. But both of you would have to meet the use test to claim the $500,000 maximum amount.

If you do not meet the ownership and use tests, you may be allowed to exclude a reduced maximum amount of the gain realized on the sale of your home if you sold your home due to health, a change in place of employment, or certain unforeseen circumstances. Unforeseen circumstances include, for example, divorce or legal separation, natural or man-made disasters resulting in a casualty to your home, or an involuntary conversion of your home.

If you can exclude all the gain from the sale of your home, you do not report the gain on your federal tax return. If you cannot exclude all the gain from the sale of your home, use Schedule D, Capital Gains and Losses, of the Form 1040 to report it.

For more information, you may reach David through his website at http://www.davidstrothercpa.com/ and see IRS Publication 523, Selling Your Home.

Under U.S. Treasury regulations, I am required to inform you that any tax advice contained in this document or any attachment hereto is not intended to be used, and cannot be used, to avoid penalties imposed under the Internal Revenue Code.

Downtown Denver Ready for a Boom?

The Denver downtown area looks as if it is poised for a significant period of growth over the next several years. Downtown Denver real estate has seen several booms in the past. The last occurred in the early to mid 1980’s when the oil shortage of the 70’s stimulated oil companies to create a significant demand for office space in Downtown Denver. In addition to the oil boom, the city had growth tied to a strong national economy and a healthy technology sector. At that time, whenever we looked at the Downtown skyline, there was another building going up with cranes towering against the sky. The oil boom ended, the economy slowed, and technology suffered a decline. The demand for office space dropped quickly; vacancies increased.

Now the downtown area is seeing office space with low vacancy rates, the new downtown convention center has been completed, and job growth in Denver in 2005 and 2006 is creating a need for more office space.

With the demand for more office space and the new convention center, hotels are being attracted to the area.

Condos and Lofts are being built in the LoDo area and Golden Triangle, with more in the plans. Apartment/Condominium conversions are taking place on the periphery of the downtown, including Capitol Hill.

Developers are eyeing the declining and worn out retail space in the Downtown area along the 16th Street Mall and looking at plans on what can be done. The new residents in the area are asking for a large supermarket and more retail shopping.

ColoradoBiz magazine lists new hotel development and plans that includes the Hilton Garden Inn, Residence Inn, Four Seasons Hotel, Embassy Suites Hotel, Homewood Suites Hotel, a Best Western Hotel, and a proposed Denver Athletic Club Hotel. ColoradoBiz reports, “’It’s amazing, it is historic,’ says “Dr. Colorado,” aka historian Tom Noel. But… ‘It’s comparable to what we have every 30 years, and of course Denver is a boom-and-bust city,’ Noel added.”

What do you think?

Metro Denver’s October Real Estate Statistics

The statistics for last month were released yesterday by Denver’s Metrolist. The numbers show the inventory of unsold homes remaining steady in the Denver area. Home resale inventory had a small, but positive 5.5 percent move downward from September to 29,722 homes, still up by 12% from September 2005. The number of homes sold in October was 4,133, close to the same number for the prior month and for the same month in 2005.

The median price of single family detached homes had seen a steady monthly decline from July through September, but saw an increase of $4,100 to $247,600 in October. Condo median prices declined for the third straight month to $152,000 and from the prior month’s median of $156,250.

The average days on the market for a seller’s home continued to hover, as it has in 2006, around the 100-day mark at 103 days.

Summary for October:

Total of all homes:
Inventory 29,722
Homes Sold 4,133
Median Price $280,551
Avg. Days on Market 103


Single family detached homes:
Inventory 21,948
Homes Sold 3,224
Median Price $247,600
Avg. Days on Market 96

Condos (Condominiums and Townhouses)
Inventory 7,774
Homes Sold 909
Median Price $152,000
Avg. Days on Market 126


Source: Metrolist, Inc.

Westminster Colorado Gains Deepak Chopra’s Wellness Center

Deepak Chopra, well-known spiritual guru, has made the decision to locate his Ananda condominium project and wellness center adjacent to the Westin Westminster Hotel, owned by Inland Pacific. The center, called the Rocky Mountain Chopra Center and Spa, includes a $40 million luxury residential and hotel condominium property with 17,000 square feet of retail space. Chopra also has wellness centers located in California, New York and Georgia. The development will be located along the Boulder/Denver corridor. Condominiums start in the $200 to $300 thousand range. This development represents a “shot in the arm” for this part of the City of Westminster which was economically impacted by the melt down in the early 2000’s of high technology companies, most notable of which were Sun Microsystems and Level 3, located in the nearby Interlocken office park. More...

Colorado Has Distinction of Most Expensive Home in U.S.

Colorado has the distinction of having the most expensive home in the country ever listed for sale, according to reporter Al Lewis of DenverPost.Com. The Aspen, Colorado home is the mountain home of Saudi Prince Bandar bin Abdulaziz and his wife, Princess Hafia. It is listed for $135 million, topping Trump's Palm Beach, Florida mansion listed at $125 million. The 27 bedroom home is located on a mountain on a 95 acre lot and has "every amenity you can think of," according to the property manager quoted in Lewis's article. It is has a permanent staff of 16, but bumps up to over 50 when the Sultan is on the mountain.

When this sells, it will certainly distort the median price home figures for the month, don't you think?

For additional information from DenverPost.com on this topic, click More ...

Colorado Association of REALTORS Opposes Amendment 38

With only one more day to go before the elections, it seems appropriate to comment on at least one issue that may impact not only REALTORS, but also investors and owners of Colorado real estate. Amendment 38 that will amend the Colorado Constitution seeks to expand the ability of citizens to propose changes to the state and local laws by making it easier to place measures on a ballot by petition.

The Colorado Association of REALTORS (CAR) Issues Political Action Committee is against Amendment 38 for the following reasons:

"Under Amendment 38, CAR's opponents could decentralize their anti-REALTOR [actions] by initiating growth moratoriums, restrictions to signage and marketing tactics, and instituting taxes or creating taxing districts that affect transactions, effectively 'cherry-picking' the most susceptible counties, municipalities, school districts or larger special districts where such issues could be vulnerable."

"Amendment 38 provides for narrow special interests to hijack our ballots to push pet projects."

"Amendment 38 is an expensive hassle for Colorado voters. Voters have twice before rejected similar amendments..."

"It will extend initiative and referendum (I&R) to all 2,500+ units of government in Colorado...Amendment 38 provides for the reduction in signatures to qualify a measure; relaxes or eliminates altogether the requirement that petitions may only address one subject at a time; and relaxes the stringent tests for verifying the accuracy of petition signers and circulators."

For further information contact CAR at http://www.coloradorealtors.com or review the 'Analysis of the 2006 Ballot Proposals' by the Legislative Council of the General Assembly at http://www.coloradobluebook.com .

Colorado Unemployment Remains Low

The U.S. Department of Labor announced the most recent jobless statistics on Friday. The Denver area is reported to have a low 4.4 percent unemployment rate - the same as the low 4.4 percent rate for the nation as a whole. This is down from the metro Denver 4.8 percent rate for the prior month and the 5.0% rate for the same month one year ago. In January of this year, the jobless rate in Denver was at a recent high of 5.3 percent and has been moving downward throughout 2006. For more information see the U.S. Department of Labor at http://www.dol.gov .

Investors Note Colorado Real Estate Auction

Investors in lender owned and REO properties should take note of this auction. Hudson and Marshall will be in Denver on November 18, 2006 to conduct an auction of foreclosed homes. The properties will be sold “as is, where is” with no inspection periods, a 30 day close, a cash contract executed, 5% earnest money at the auction, and a lender letter or proof of funds. The homes are available for preview prior to the auction. Bidders are allowed to use a REALTOR to assist them. Real estate commissions will be paid by the seller.

Hudson and Marshall also utilizes an online bid process to bid on the homes prior to the auction for those wanting to buy the properties directly from the lenders before the auction takes place. There are 80 properties currently scheduled for the auction at the DTC Sheraton Hotel. Another, smaller auction is taking place in Colorado Springs several days earlier.

Hudson and Marshall is the largest company auctioning lender owned/REO properties. To check on the detailed terms of the sale and to find out information about the properties see their website at http://www.hudsonandmarshall.com/ .

Colorado Foreclosure Rate Highest in Nation

Realty Trac, a provider of foreclosure information and listings, said on November 1, 2006: "Colorado posted the highest foreclosure rate in the nation for the second consecutive quarter, reporting one new foreclosure filing for every 127 households — 2.9 times the national average. After declining almost 13 percent between the first and second quarter of the year, foreclosure activity in the state was back up 24 percent from the second to the third quarter, with 14,374 properties entering some stage of foreclosure — the eighth highest foreclosure total in the nation."

The number of foreclosures in Colorado has been attributed to: First, overbuilding by homebuilders that has kept a lid on price appreciation of existing homes. When homes are not appreciating and homeowners have to sell quickly due to loss of a job or being relocated, they may have to sell at a loss if they have not had time to build sufficient equity. Second, A weak jobs picture in Colorado in the last few years has caused an inability on the part of some homeowners to make their mortgage payments. Third, the misuse of adjustable rate mortgages may be fueling a new round of foreclosures. Now that interest rates have been climbing, homeowners may not be able to keep up with the increase in mortgage payments.

The good sign is that Colorado is currently experiencing lower unemployment rates, increasing job growth, lower fuel costs, and a hint of steady interest rates in recent weeks.

Is this the time for investors or first time homebuyers to begin to analyze properties and take advantage of the excess of lower priced properties? Our opinion is, yes. It may be another real estate cycle before we see buying opportunities at these low prices again.

Denver Residential is Mixed Market

The Denver Post reports that home price increases in the Denver Area have declined to a 2.7% rate in the second quarter. “…the market struggles with a near record 31,664 unsold homes in August. Appreciation of home values has begun to slow throughout the Denver Metro Area.” In the Economic and Market Watch Report by the National Association of Realtors, “prices still rose 4.3% from a year ago” in the Northern Colorado markets.

The Denver Area condominium market continues to be impacted by the heated real estate market of the last several years when interest rates were low and condo owners decided to put their condos on the market and buy new construction. In our opinion, now is time for renters to make a move. Renters can purchase a nice 2 bedroom, 2 bath condo for the same amount they are now paying for rent on an apartment. For the same reason, investors should be taking a look at condos as long as they are certain of the direction that HOA fees are headed for in that particular development. www.ColoradoProRealEstate.com

The Denver area is still experiencing different levels of activity depending on location. Properties located closer in to the downtown area continue to maintain stronger pricing while home resales in the suburbs are weak in areas where sellers are competing with an oversupply of new homes by the builders.