‘Resale Market Biting Back At New Homes’: Colorado
The Denver Post has this update from Colorado. “Metro Denver also is seeing a slowdown in activity. New home sales fell 5.3 percent in the first half of the year, with a 16.7 percent decline in the second quarter compared with a year ago. Now it appears that a weak resale market is biting back at new-home sales. One of every five new-home contracts in metro Denver was canceled in the second quarter before the sale, typically because buyers had difficulty selling their current homes.”
“In Colorado right now there are 24,326 single family homes for sale. Last year at this time there were just under 18,800. In 2002 there were about 17,000 homes on the market. And on top of it all, Colorado has the highest foreclosure rate in the country.”
“Rebecca Zirkel’s job relocated nearly a year ago. She’s been trying to sell her home in the Hill Top/Mayfair neighborhood ever since. ‘Two years ago you’d get an offer in a week or two. Now you are lucky to get a showing in two weeks,’ Zirkel said.”
“The house directly across the street from Rebecca Zirkel’s is also on the market. There are a few more for sale signs down the block. That is a big part of the problem. ‘There are so many houses on the market now, there is so much more competition than there used to be two years ago,’ said Zirkel.”
“In July, home sales dropped to their lowest level since January 2004 as the number of unsold homes rose to a new record.”
The Rocky Mountain News. “The Denver-area housing market is experiencing far more weakness at the lower end of the market than at the upper end, in contrast to the cooling of luxury-home sales in many other parts of the country. Economist Michael Kone said the Denver market is ‘behaving a bit differently’ from the overall U.S. market.”
“‘The bottom end of the food chain is where there is a lot of pain,’ Kone said. ‘We’re looking at some real weakness in the lower end and pockets of strength in the upper end.’ In Adams County, for example, his analysis indicates that 20 percent to 25 percent of the lower priced homes on the market are in foreclosure.”
The Denver Post. “Timothy Lewis knew he could not save the house. So when the foreclosure notice came, he packed. Lewis, a 43-year-old craftsman who makes house doors for a living, can no longer afford the ranch house he bought with help from the Federal Housing Administration. ‘I just can’t make it. The mortgage is too big,’ he said. ‘It’s so far behind now, I’d need $15,000 to save it.’”
“A key factor in the state’s record-setting wave of foreclosures, critics say, is an FHA program that allows people to borrow more than their houses are worth with little or no money down. Nearly 6,000 FHA loans have wound up in foreclosure in Colorado in the past two years, and during that time the program allowed more than 25 percent of FHA buyers to use gifts as down payments.”
“Recent studies say HUD itself exacerbated the problem by sanctioning the gift program, which lets home sellers cover a required 3 percent down payment by routing it through a nonprofit organization. The seller then typically raises his price to recoup the money. An appraiser OKs a slightly inflated house value. Closing costs and FHA insurance premiums get folded into the home loan, and the buyer ends up borrowing more than the house is worth.”
“‘If it wasn’t FHA, it would be fraud,’ said John Head, a Denver lawyer who represents victims of mortgage-fraud schemes.”
“To buy the house he is losing, Lewis said he participated in a down-payment gift program to sell his previous home. The buyer’s agents ‘asked me to sell it for more,’ he said. He agreed to raise his price by $4,000 and donate an equal sum to a third party providing the buyer’s down payment for an FHA loan. The family ‘lost it a year later,’ Lewis said.”
“A small number of mortgage brokers account for a large number of Federal Housing Administration loan foreclosures in Colorado. All passed what federal officials call a rigorous application process for the right to originate federally insured loans.”
“Michael Richardson, said his business was effectively closed by December 2004, six months before the Denver field office terminated its right to approve FHA loans. ‘My company got infiltrated by a mortgage-fraud ring,’ he said. ‘In about seven months, they did enough damage to me to put me out of business.’”
“Richardson said he fired five employees in one day after discovering they had been recruited by a man who supplied false loan-application information, Social Security numbers, driver’s licenses, pay stubs, to qualify buyers for homes. ‘Anything that particular borrower was missing, they’d fix it,’ he said.”
“Richardson, who had been in the mortgage business for 26 years, said the people who ruined Primero and put many buyers in homes they could not afford have not yet been charged with any crime. ‘I’m out of business. Two-and-a-half years later, they’re still committing fraud every day,’ he said.”
And the analysts and brokerages who ripped off *trillions* from investors during the dot.com mania are still all employed, doing the same thing, after paying tiny inconsequential fines to the SEC so the SEC could lie to the public and say they were actually trying to enforce the regulations- which they werent.
the SEC was founded by joe kennedy, who was known to be one of the most corrupt wall street con-men of his era. Does anyone really think he designed it for the purpose of enforcement? HELL NO! The SEC only has one function- to make the unwashed masses of investors THINK there is some enforcement, thus making them more likely to dump money into the biggest casino on earth.
you would be surprised. i was drinking with someone who used to work for our company and now works for one of the huge wall street houses. he said their IT people ran a script against real data by accident, generated billions of $$$ of orders and incurred an SEC fine of tens of millions of $$$.
This is a self fullfiling prophecy, Contingent on selling current property. If everyone accepted reality and dropped prices at once, we would have void which will be filled
Heard this on the way home:
http://news.yahoo.com/s/nm/20060825/bs_nm/financial_hrblock_stocks_dc_1
“NEW YORK (Reuters) - Shares of H&R Block Inc. (NYSE:HRB - news) tumbled 11 percent on Friday, a day after the largest U.S. tax preparer warned it would take a charge related to its struggling mortgage unit, and the stock was downgraded to “neutral.”
The charge of $61.3 million, or 19 cents a share, is related to $102.1 million in pretax losses is related to the rising numbers of Block’s subprime mortgage customers falling behind on loan payments”
Sub-prime falling apart. Uh-oh.
Sorry that I don’t know how to do the tinyurl thingie
Open a new window. Go to http://www.tinyurl.com. Cut and paste the URL/address. Good luck.
PS to the H&R BLock.
Their write offs are for the guarentees on mortgages they packaged & sold.
H&R BLock was responsible for loans they created ONLY when the borrower defaults during the first 3 payments.
So these are flipper loans? People who never intended to hold the house?
I can’t imagine why anyone buying a house to stay in it at least for a couple of years, would default in the first three months. The numbers above seem to indicated that this is happening a lot.
Just when I think I have some idea of how ugly this is going to get, some other piece of info. comes along that blows me away.
And I’m not even that financially savvy like many of the people who regularly post here.
just came back from northern colorado and the denver area. Only thing you can say is that houses are like cars. No one wants a used model.
Open land as far as the eye can see and building everywhere. Real building or preparation for building next year. Every year houses get nice new features so the old models’ prices depreciate on a square foot basis.
One weird thing. I paid a visit to a few sub-divisions just to look. This is in Broomfield, at a huge development called the Broadlands. Toll Brothers and a few other builders’ developments looked OK with cars in the driveway and no resales. They had a custom home sub-division that my wife and I went to look at and literally every other home was for sale. This is in an area where new homes start at $800,000 because they are all custom builds and huge. The lower end didn’t really see any for sale signs, but it could be because of HOA rules.
Up by Fort Collins and Loveland things are slow, but they are going to build at lest 1000 homes next year because a new hospital is opening. They also built a few malls so there has to be growth. But then again, why buy a used home when you can buy new.
The endless strip mall development between Fort Collins and Denver is intended to support all the new housing projects. I wonder how many of them can survive if housing stalls? BTW, who shops at all those specialty stores?
“The buyer’s agents ‘asked me to sell it for more,’ he said. He agreed to raise his price by $4,000 and donate an equal sum to a third party providing the buyer’s down payment for an FHA loan. The family ‘lost it a year later,’ Lewis said.”
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This is yet another hint at the problems this credit bubble has created. I term this a classic example of rtificial appreciation.
Try this on for size:
I’ve been in e-mail conversations with Rich Toscano regarding this ‘phenomenon’ of 100% financed nothing down borrowers who ask the seller to jack up the sales price to cover or offset sellers paying for buyers closing costs.
Our office closes scores of 100% ARM nothing down transactions where the average closing costs paid by the seller on behalf of the borrower is just a sliver under $10,000. (High due to our median sales price in Seattle/King County being roughly $425K) So the seller and buyer mutually agree to increase the sales price by this amount.
The question remains: how in the heck are lenders allowing this? How in the world are appraisers not noting this information within the appraisal that this practice is in fact a “concession”, no? Appraisers please chime in?
Here’s the real kicker: since the sales price in jacked up by x amount guess who is using this sales price as a comp for justifying another home’s sale or list price? You got it….appraisers and Realtors. See the spiraling up affect? This is classic artificial appreciation and NO-ONE IS REPORTING ABOUT IT’S AFFECT ON THE MARKET! IMHO, this is one of the PRIMARY reasons for housing prices to get out of hand. Rich says it may or may not be statistically relevant. I this it is very relevant.
What’s worse: buyer’s that have 100% financing arranged and are the successful bidders on a Multiple offer situation— then they ask the seller to jack up the price more! This has happened thousands of times across the country. These people are immediately upside-down in a flat market.
In EVERY SINGLE 100% financed transaction we have closed through our office, the price was jacked up to offset the buyer’s closing costs paid by the seller. And, in just 2005 alone, 71% of every purchase transaction we closed were 100% ARM nothing down transactions.
What a lovely situation our country is in. And for all the agents that are now hitting their keyboards sending me hate mail suggesting I’m a turncoat, please save yourself the trouble. It is a lending problem at it’s core. This is not a local problem within local bubbles, it is national.
Tim
“S-Crow”
the closing costs aren’t a big deal. it’s the transfer taxes that some local governments charge that are crazy. my wife knows someone that tried to buy a house a few years ago in NYC. Around $350,000 she wanted a loan with 0% down. Broker told her to bring $30,000 to the closing to cover closing costs, taxes, and the transfer taxes which are most of it that the various levels of government charge on RE transactions. A lot of New Yorkers are getting bit by the 4% additional tax on all RE over $1,000,000. This is probably why there is a slowdown here. In addition to the thousands of $$$ in regular taxes you need to bring another $40,000 just to pay for this additional tax.
You mean the government is forcing folks to pay them money for the privilege of being able to sell their “private property”? Shocking!!!! What will they think of next? Probably start taxing water or airwaves or some such nonsense. Oh, wait? Never mind.
Vote Libertarian.
No, S-Crow has it right, you missed the point. Every time this happens it raises the value of comps, so comps are including the sum of any number of closing costs continually added on and on, ratcheting things up. And yes, it is fundamentally a lending problem, not a Fed problem. The Fed controls money concentrate, so to speak, but the real creation of money comes from decisions by lending institutions. The Fed is not the economy’s mommy, for godsake! Cheap shots at the Fed are stupid and childish and show a lack of education, IMO.
Wow, worse than I imagined. Tough times ahead folks.
Thanks for sharing.
thanks from germany
- ‘Two years ago you’d get an offer in a week or two. Now you are lucky to get a showing in two weeks,’ Zirkel said.”
- Two years ago … when will these folks STOP LIVING IN THE PAST!
- “The Denver-area housing market is experiencing far more weakness at the lower end of the market .
Economist Michael Kone said the Denver market is ‘behaving a bit differently’ from the overall U.S. market.”
- Of course Mikey Konehead thinks that Denver is ‘different’
Wait until the LOWER END MARKET here in So Ca gets rolling! There are a boat load of folks who were unqualified for these lower end 500k homes that are going to make Denver look good.
“‘The bottom end of the food chain is where there is a lot of pain,’ Kone said. ‘We’re looking at some real weakness in the lower end and pockets of strength in the upper end.’ In Adams County, for example, his analysis indicates that 20 percent to 25 percent of the lower priced homes on the market are in foreclosure.”
Hey Ben, clean your desk… this was a good week! hehehehe
Msg. -to john head -Denver Lawyer.
“If it wasn’t FHA it would be fraud”!
You Mr. Head are a blooming IDIOT! Fraud is Fraud! no matter who commits it!
IT is FRAUD! IT was our government -HUD and the FHA have been committing one fraud or another since the S&L bailout! maybe before?
Yes, you football fans out there Jack Kemp, when he ran HUD, willingly participated in permitting the government to steal billions of dollars from the poorest of the poor ..so they could sell it to their buddies.
Oh and unless you basketball chumps want to know how you get into the act..Ask MAGIC where and from whom he bought a lot of real estate from - HUD… I know he was in Las Vegas…buying land called enterprise zones to aide the poor communities, awhile back!
If I am wrong about MAGIC point it out… But KEMP is busted!
see Catherine Austin Fitch - story…google it!
You know, as I keep reading these stories (Thanks to Ben and other Posters), I begin to get a better sense of just how much fraud was involved in pumping up prices. There was never anything fundamental going on, just speculators and con artists at work. The fundamentals are what will bring this back to earth I imagine.
Peace
Alscam Greensperm was one of the biggest culprits - but it ALL is a big scam. The CPI is fudged, inflation is fudged, everything is completely stacked against the regular person. You don’t have to look far. IPOs are not for the avg Joe - and look at the backdating of stock options. Then combine that with the fact that the avg Joe is as dumb as a doorknob - esp on financial matters and you have a very EASY manipulation of the masses. And they willingly comply because they are sheeple, lemmings.
It really is too bad.
“Michael Richardson, said his business was effectively closed by December 2004, six months before the Denver field office terminated its right to approve FHA loans. ‘My company got infiltrated by a mortgage-fraud ring,’ he said. ‘In about seven months, they did enough damage to me to put me out of business.’”
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mortgage-fraud ring? Uh Ok … not your fault, just like Lay at Enron..
Coloradans,
Anybody know what the deal is with Livermore, CO? I was tooling around some realty web sites, and darn near all of the Glacier View Meadows subdivision is for sale. Lots of the houses are obviously vacant, and they build dates run from the late 70s to recent.
I tried finding some dirt on the sub, and all I found was some report about Uranium showing up in the well water. I wonder if it’s a mass panic because of that, or something else. Please advise.
I am writing from Grand Junction, CO. We are experiencing an energy/housing boom. A Denver golf course/housing LMUC developer is proposing a 382 unit near Fruita, Colorado. What are the chances of his avoiding the national downturn in housing prices?
pardon me,
…a 382 housing unit development…
I put the chance of them avoiding the downturn in housing prices at roughly 0%…..although that might be a little high (I’m trying to be as optimistic as possible).
0% is generous, i’d put it closer to 0%, but then again 0% or anywhere in the 0% to 0% +-0% is a safe range.
There’s not many high paying jobs in Grand Junction, CO. What are they thinking?
Folks,
Thanks so very much for your encouragement! My farm is next to The proposed LMUC and we are fighting it with every (legal) means at our disposal. However, the local city council (the town of Fruita) is very much under the sway of the developer and it’s been a long, uphill struggle. If the basic economics of western Colorado hold true, the energy boom will eventually soften…and then what if the housing market softens as well?