“Rug Pulled Out From Underneath” Colorado Market
A housing report from the Coloradoan. “Throughout much of the year, Colorado led the country in the number of foreclosures. Mortgage lender Lou Barnes said most of the foreclosure activity stemmed from loans that required little or no down payment or was in areas with soft housing markets. He said soft markets in Larimer, Weld and Adams counties and in eastern Longmont have come to be known as the ‘foreclosure belt,’ where a glut of new housing has depressed prices of existing homes.”
“‘That means the buyer from three years ago who’s in trouble now can’t get out of their house,’ he said. ‘If you’ve got less than 5 percent equity in your house and prices aren’t appreciating, you can’t afford to sell your house.”
“In Larimer County, 1,748 homes were listed in either pre-foreclosure or foreclosure on a Web site. Weld County listed 3,036 homes in foreclosure in 2006. Nearly 800 Boulder County residents defaulted on their mortgages in 2006, making for the highest number of foreclosures in the county in nearly 20 years.”
The Denver Post. “Foreclosures blighted entire neighborhoods from Pueblo to Greeley. They also caused home values to fall for mortgage-paying homeowners across the Front Range.”
“Critics inside and outside the mortgage industry say certain loan terms increase borrowers’ risk of default. In its reporting, The Post found a correlation between 100 percent loans and foreclosures. Of nearly 1,000 foreclosures during one month in Adams, Arapahoe and Jefferson counties, more than half involved no-down-payment loans.”
“Currently, ‘the mortgage broker will find an appraiser he likes to use’ on every sale, said Ivor Hill, an appraiser on the attorney general’s mortgage fraud task force. That makes it too easy ‘to influence the appraiser to the desired value.’”
“‘The perspective on the street is that no one is looking. In the off chance you get caught, nothing will happen to you,’ said Chris Holbert, president of the Colorado Mortgage Lenders Association.”
“Homes nestled in the foothills close to Denver usually have gorgeous custom layouts and are built on large lots with spectacular views.”
“But those unique features haven’t been enough to keep the real estate market from slowing in recent months in the hills above Boulder, around nearby Nederland and in places like Evergreen and Conifer in Jefferson County, according to Metrolist. The housing market in Estes Park is ‘off 10 percent,’ said Tom Adams, a real estate broker in the town.”
“‘We’re picking up the bad PR off the Front Range, in my opinion,’ he said. ‘They don’t understand this is a good market to buy real estate, especially if you are a baby boomer looking to retire.’”
“Homes in all price ranges sat vacant this fall in Evergreen and Conifer as Realtors scratched their heads, trying to figure out how to entice buyers.”
“Two houses priced in the low $300,000s went unsold, as did one at $895,000. In fact, only half as many homes in Evergreen-Conifer sold during October as sold in the same period the year before, according to Realtor Tupper Briggs. ‘Our market had the rug pulled out from underneath it in September. October was very slow,’ Briggs said.”
“In the second quarter, home sales in Conifer ZIP code 80433 dropped 18 percent over the previous year, although sellers got nearly 98 percent of their asking prices. In Evergreen ZIP code 80439, a total of 131 homes sold in the $500,000 range, but prices dropped almost 10 percent from the year before.”
“‘I can’t blame the buyers that are waiting on the sidelines. They didn’t want to buy a property today that would be worth less six months from now,’ Briggs said.”
“Nederland appears to have been hit a lot harder, according to data for ZIP code 80466 from Metrolist. The mountain town west of Boulder, near Eldora ski area, experienced a more than 14 percent price drop on homes averaging $330,000 in the second quarter, and a 30 percent drop in sales, according to Metrolist.”
“Higher-end properties have ‘been very slow,’ said (broker) Bill Goodacre. ‘There was a foreclosure in Boulder County (of a house) that was over $1 million. It was overpriced,’ Goodacre said.”
The big lie here in Colorado continuously spouted out by the real estate industry has been that the housing problems are confined to the trashy areas of Denver, Adams County, Weld County, etc. That is not really the case, as this article shows. It is just a matter of time before we see articles like this about Washington Park, Belcaro, Bonnie Braie, Polo Club, Cherry Creek, etc. The tidal wave is coming. My mother-in-law’s 1920’s house in Wash Park is appraised by the County at $55,000 for the “house” and about $350,000 for her small single lot. One really should remove a digit from the lot price to get the “true” value.
And what about Highlands Ranch, Parker, Aurora, the old Stapleton, the old base…have they ever slowed building there? I haven’t been to the Denver area for a couple of years but when last there, contruction was literally everywhere. I remember a new highrise in DTC going in…wonder if it ever sold out.
I don’t have a good grip on all of the construction going on but Stapleton, Lowry, Aurora, Parker, etc., and those areas are still heavy with new construction. There are lots of loft buildings going up near downtown Denver and along the lightrail line. The official word is that these things are still selling but I don’t believe that much is selling. I know that the Boulder market has slowed quite a bit. I work in the same building as a real estate office and things there are dead.
how far is CO % from peak ?
Weird - I grew up in the Washington Park Neighborhood - in 1977, my mom bought her house for $18K. In those days a person had to put a down payment on a house and show proof of income, so, prices reflected a person’s ability to pay. If you had told my mom or our neighbors back then that the homes would be work $500K - they would have laughed at you.
Bubble mentality and easy credit have really warped everything.
“‘We’re picking up the bad PR off the Front Range, in my opinion,’ he said. ‘They don’t understand this is a good market to buy real estate, especially if you are a baby boomer looking to retire.’”
I thought I just read this about FL. I must be losing my mind.
This man is patently insane as EVERYONE knows that all of the baby-boomers are retiring to Florida. Or Arizona. Or Vegas. Or Rancho Cucamonga. Or Albuquerque.
Don’t forget Maine - this is Boomertown - the oldest state in the U.S. and getting older.
Don’t worry. Kinkos and Clonaid will soon we forging a strategic alliance to manufacture moneyed boomers to fill these homes.
‘They don’t understand this is a good market to buy real estate, especially if you are a baby boomer looking to retire.’”
Except that it’s going to get cheaper to buy in a few years. Why not wait.
Note to all realtors, builders, FB’s and the like. The whole retiring baby boomer wild card does not exist. It is pure fantasy. A justification created and used by developers and realtors to build/sell overpriced POS’s. The painful truth is that most retirees are not rich, and do not move away from friends and family. So all of you waiting for this salvation may as well get a comfy chair, 15 years worth of food an booze, and a DVD of “It’s the Great Pumpkin Charlie Brown.” Either that, or lower you f****** prices, and a lot.
“The painful truth is that most retirees are not rich, and do not move away from friends and family.”
Very true. Most folks want to spend their senior years in familiar surroundings, close to friends and family. The thought of living among total strangers in FL or AZ is outright troubling to many.
Your right George. I’m 59, just retired and plan to stay in Michigan near my family and grandkids.
Bantering Bear…could you back up your theory about boomers or is this just “your” opinion.
Am not sure what portion of my post you are referring to, but as far as baby boomers saving the day in the bubble markets, take a look at the US Census report for the age group 55-74. Only 26% of them moved at all. And of those that DID relocate, only 20% left their respective states. Most moves are within their own regions.
http://www.census.gov/prod/2003pubs/censr-10.pdf
Based on all of the information I have read, this census report included, it is probable that 93% of all boomers will remain in their same state. And of those that do leave, the southern states are where they will likely end up, first and foremost. Retiring boomers will not save this bubble. Besides, they were the most responsible for it.
Colorado leads the way down in 2007?
Hope so, I want to move back with cheap enough RE that my wife can work and I can ski. HAHAHHAHHAHAHA!!!!!!!!!!!!!1
hubrispie,
The data show ZERO foreclosures in 2006 for Belcaro, Bonnie Brae and Polo Club.
And, if you really believe that Wash Park lots will be selling for $35K, then you are delusional. Could they fall slightly in nominal dollars? Yes. Could they fall in real dollars over the next few years? Yes. But no more than 10%.
It was a lot worse in 1986-89 and prices in the neighborhoods you mentioned did NOT fall (in nominal dollars).
,dave
Good areas will always hold up better than less desirable areas. But preditcions of percent redcution in prices is fool hardy. If a full RE retreat occurs all will be hit badly, and by an indeterminate amount.
In the current market, 10% is just noise.
I am sure that my mother-in-law hopes you are correct about the 10% depreciation limit. Is there some foundation for this figure or is this just a hope? My mother-in-law’s property was purchased originally for $4,000, year of 1942, $400 downpayment at 4% interest. I think its value was probably around $85,000 back in 1990. The market rental value at this time would probably be around $1,100 at best since it is only 1000 square feet with two small bedrooms and bath. Hmm. I don’t think that would support a $400,000 purchase price less 10% with all of the carrying costs of the property.
By the way, there may be no foreclosures right now in these areas (you will notice that I did not say that there were) but there were many HUD homes and homes in foreclosure in this area in the late 1980’s. Just a little history for the other readers since I am sure that you know the history already….
$1,100 x 150 = $165,000
There is your true value. Oh yes, this will get ugly.
From 1997 through 2000 I was a realtor in Denver metro. I showed a client a foreclosed property in Washington Park that was trashed it was the worst that I have ever seen. It sold in 1999 for 135k
No worries. Dave has spoken. No more than a 10% decline is in the bag.
I’m going to buy in Polo Club. Here’s the reasoning:
If Polo Club goes down 10%, and everything else goes down 40%, I’m ahead 30%! Now where else can you get a 30% better return than with RE?
Backstage, LOL and rolling on the floor!!!!!
Backstage: Can I have your number? I’ve got $100K just wallowing in a 5.3% CD that I think you could make into a million!!!!!!
waxman, your client did good.
Did you buy this year or last Dave?
No, and he didn’t sell any either in his job as a used house salesman.
I’m opening myself up, I know, but I tend to agree with Dave. I think the outlying suburban areas, even the very nice ones, will suffer much more than places like Cherry Creek, Wash Park, & Highlands.
“Homes in all price ranges sat vacant this fall in Evergreen and Conifer as Realtors scratched their heads, trying to figure out how to entice buyers.”
Dumb realtors, lower the prices to fair market value, you may wonder what that is. It means what people are willing to pay for a property.
Well gang, if you absolutely must buy in the next year or so, buy a foreclosure. Just avoid communities where a significant number of homes are in foreclosure. That usually means avoiding new (
“Well gang, if you absolutely must buy in the next year or so, buy a foreclosure”
Even then, I’d wait till they start to pile up. The bank’s won’t be giving any good deals till the inventoty piles up.
My friends who bought in Telluride in the mid-80’s have done extremely well and they tell me that although the market has slowed down considerably, it’s still a great investment because the rich folks it attracts are fairly bulletproof.
I have no plan to buy there and actually like Ouray better. If I were to buy in Ouray, I’d wait 2-3 years. I believe Ouray is gaining in popularity so one consideration is that in general it’s a bad time to buy RE but the other consideration is to buy in before everyone hears about the place.
“it’s still a great investment because the rich folks it attracts are fairly bulletproof.”
Done.
Just added XXX City to the list of its different here markets.
Yeah, the trouble is that anybody who could sign their name on a loan could act rich and bid up these “special places”.
Ouray is one of the most beautiful places in the world!
See “Elkhorn Custom” on this page. Expensive but that is a nice area!
http://www.ourayrealproperty.com/
Beautiful. The scenery in the photos right underneath it (8 acres) is magnificent. It sounds like a lot of money per acre though for what looks like rural land, i.e, asking price is over $20,000 an acre. Also, it looks like the nearest alpine ski areas are almost an hour away and the nearest hospital is 30 miles.
I’m just curious, who pays that kind of money an acre so far out in the middle of nowhere. I’d have expected like $5,000 an acre.
Wow, are there any bulls left on this blog?
I will be bullish once I see the indicators that show the market has actually bottomed. We are not there yet.
Are there any real bulls left anywhere outside insane asylums and Casey Serin’s abode?
Gekko is a bull, who pretends to be a housing bear in order to mask his actual purpose of trying to interest GFs in buying stocks.
What is a “GF”?
GF= Greater Fool
The phucked buyer (FB) and greater fool (GF) are now in real estate, but consider that the FB and GF will probably soon be those who are now in the stock market. Maybe the next thing is bonds since interest rates will go down because of a contraction in the economy and all those foreign bondholders will want out of anything having to do with US dollars. It’s difficult to predict because what happens in the markets seems to be based on what people believe, but also on computer modeling and experience. I also have faith that paper printed in a very complicated way to prevent duplication because it is considered valuable, can be exchanged for food, clothing and shelter. However, this paper is worth considerably less than it was fifty years ago, and its value changes compared to other paper printed in a complicated method found in foreign countries. Considering how complex the markets are, I am reluctant to heap scorn on the FB & GF because I could easily find myself one in the future. Men and women are born to suffer and if they are not, then they will find a way to mess things up so that they will suffer. For some, the next step is religion to find solace from all the hazards of life, and there again faith, belief and experience play a part.
Has he ever said anything related to housing? All he parrots is Fox News this, Right wing that and My Stocks are up 10000000%.
Tom adkins guest on BullsBears and Cashing in FOX is a turd.
This guy is the last guy on the Titanic screaming … “It wont sink”
Why on earth would anybody be buying stocks now, at these insane P/Es and with insider selling running something like 16:1 over insider buying.
Because there is alot of money out there and its not buying residental RE. So much money that public companies are being bought and taken private.
Funny British musical housing parody
http://www.youtube.com/watch?v=2t8YTvdYXws
Spot on!
Just watching FOX … it was great.
Bears laid out No Doc Neg Amort Lots of Inventory increase in Day of Market.
Straight faced with hard numbers… also added the Bulls like the internet days will be carried out.
The bulls just laughed and kept saying up 10% in 2007. How wrong they are…
Lots of talk each week and the numbers look worst for bulls going forward.
“He said soft markets in Larimer, Weld and Adams counties and in eastern Longmont have come to be known as the ‘foreclosure belt,’ where a glut of new housing has depressed prices of existing homes.”
CA has a glut of new housing as well as CO, but it is different here, as they did not get the massive appreciation that we did, which masks subprime rot on household balance sheets and overbuilding thanks to flippers and second home buyers speculating on high future appreciation forever. Now that CA prices have started to fall, it is hard to imagine that it will take long for us to overtake CO in the foreclosure department.
GS, that is a good theory. I wonder about San Diego. As I said on another post I was just there over X-Mas and am moving back.
I am still mesmerized by the prices I see, and all the new capacity coming online downtown. That has to be a toxic brew.
Dukes —
When you visit town, go to the Camino Del Norte exit off I-15, then head west (through 4S Ranch and on to Black Mountain Ranch).
Then on your next area housing tour, drive around Carlsbad to the east of I-5 up behind Legoland. You will soon discover why I don’t believe Phoenix has much of an edge over SD in the overbuilding department.
I will check out those areas, I am very familiar with both, although that was 4 or 5 years ago. We will be living much closer to downtown, we are looking to rent a little bungalow in Mission Hills if possible.
We always lived in P.Loma, or OB. But, we like the Mission/Bankers Hill area…we have plenty of time are in no rush and I think we will find something decent.
“I am very familiar with both, although that was 4 or 5 years ago.”
All the better for the shock effect you will experience! I will eagerly anticipate your then-and-now comparison
.
It’s no thanks to fish-wrap like the Colorado Springs GAZETTE that the truth about the housing bubble is seeping into people’s consciousness here. The real estate section of the paper that comes out every Saturday is written almost entirely by RE industry insiders, who are local clones (albeit more shameless) of David Lereah and Leslie Appleton-Young. The GAZETTE passes on their claims uncritically, for the most part - it appears to be an editorial policy that only rare, powder-puff questioning of some of the more outrageous NAR-speak is allowed. To the extent that locals are becoming aware that something is amiss in the housing market, it’s because of the steady drumbeat of negative national news, the growing awareness and reporting of the foreclosure numbers here, and neighbor-to-neighbor networking that has clearly picked up on the fact that all those greedy, delusional sellers demanding last year’s prices aren’t seeing any traffic or offers coming their way. The only houses that are still selling are the ones priced well below the competition: most come on the market priced too high, and just sit for months. The NAR-touted Miracle Spring Revival has caused a lot of sellers to pull their homes off the market recently, though inventories are still running well ahead of last year’s. When a huge overhang of FB-owned houses gets dumped on the market after the Superbowl, things are going to get very tragi-comic when the promised uptick gives way to a full-scale sellers’ panic.
I’m hoping the California investor who owns the house I’m renting will agree to letting me rent month to month after my current lease runs out this Summer, as I can just sit tight and smugly observe while all the induced stupidity, greed, and cluelessness that has kept the market from entering its long-overdue freefall, dissipates in the face of soaring inventories, foreclosures, and distress-selling.
Well here we are on the eve of 2007 and the bulls are charging out of the pen early.
I think you’re all going to get your heads lopped.
This entire scam of a RE market has turned to a primary trend of BEAR.
Bear markets historically do not last for fewer than 5 to 8 years, and continue an entire generation, or 15 to 20 years.
The bear market in interest has been for 20 years. That has been the duration of the bull market in RE. I’m not talking about an increase in property values, but a primary trend bull market.
It’s laughable to think it started in 2000 or 2003.
This is quite a show. So glad I am an observer.
This will drag out for a damn long time, with a few dead cat bounces.
Those who say RE goes up and down but always goes up have not studied bear markets, as they are referring to short or mid term markets.
“I think you’re all going to get your heads lopped.”
I am expecting the lopping to occur at the other end of their anatomy. I offer my condolences in advance to 2007’s gelded bulls.
Ruth,
Am I missing something? I haven’t seen too many housing bulls on this blog. We’ve had some demented and sad specimens like LV Landord and PV Tom, but they tend to ooze away once the reality of the imploding housing bubble hits home.
ooze away, LOL
It will start to get really interesting when the lenders stop lending money or strictly tighten their lending standards. Just imagine how few non-homeowners there are in this country who can buy outright or put 20%, 30%, 50% down on a property. The present homeowners will have no reason to buy (since they already own and prices are not going up anymore) and everyone else who has this money (i.e. the smart money) will wait to buy only when prices hit fair value or below fair value. The credit bubble will pop with all of its attendant collateral damage. The only question will be the government’s response and its impact…. I am sure that the government’s response will help some people (most likely the banks and a few select others) but those who bought in the last 5 years will get hosed…..
Colorado officials entertain the idea that we need stricter lending standards to deal with our foreclosure problems. That is true in the long run. However, in the shorter run, tightening standards will be like taking the heroin addict off of his drugs cold turkey. Perhaps, good for him long term, but requiring him today to watch the dead baby crawl along the ceiling like in the movie Trainspotting.
Yep. At some point in time the lenders are going to have to stop pretending all those incredibly irresponsible loans they made circa 2004-2005 are actually performing. Once that fiction melts away, the credit-tightening will begin in earnest. The paucity of creditworthy buyers, combined with the near-certainty of an exponential increase in distress-selling, means there’s going to be some SWEET deals for debt-free renters sitting on substantial down-payments.
Why? Aren’t Japanese banks still carrying non-performing loans from the 80s? I thought that was one the factors contributing to the decade long recession of Japan — banks unwillingness to write off non-performing loans.
Because of their asiatic mentality. It’s a cultural thing mostly.
In Asia you must never never never lose face. So by carrying eternenally a loan, you have to never admit it was a big big big error.They probably call it a long term credit management temporary suspended perpetually accumulating little problem. Asiatics are like that. They are a little bit crazy in Japan. By the way at least 35% of the free loans were to the japaneese mafia, the yakuza, to speculate in what else?
MOSTLY REAL ESTATE !!!!!!!!
Sayonara 2006! Arigatto 2007!
In Asia you must never lose face. So you keep yout perpetually bad loans. You name by another name and you never admit you made a huge error. Most of the loans were borrowed for what? What else! REAL ESTATE SPECULATION ! And 35% of the loans were made to criminal gangs related to the Yakuzas! Nice democracy and real nice bankers. They just love a good gangster. It’s a real story. So essentially the japaneese mob got in the 80’s a lot of free loans and perks that they do not intend to payback. Sayonara 2006. Arrigatto 2007 !
Does anyone feel knowledgeable enough to speculate whether all this threatens the banking system.To this layman’s eyes it does in that a bad loan avalanche takes down banks in a domino effect but what do I know? Any speculators?
Hi from Australia … as goes the US, there goes the rest of the English-speaking world (at least) sooner or later.
We still have are more or less intact bubble - largely as a consequence exporting raw materials to China and Japan - but oops when Walmart sells less gizmos and gadgets, etc., because things went crazy in real estate here too (for instance).
We were fortunate (perhaps) about five years ago, because we put 10% deposit down on an oldish, small, AUD50k house, which is now “valued” at about 120k … and our area is not “desirable, so imagine what’s happened elsewhere!
By dint of larger instalments than we had to pay, we now owe about AUD35k, but even that is probably more than the house is really worth … I’m 63 and have gained certain perspectives over the years, e.g. to do with fiat currencies and usury, though I’d be pressed to quantify my impressions. But ultimately, of course, if and when the USD, AUD, pound, euro, etc. become worthless, then all property etc. becomes worthless too, barring some new measure for whatever is left of our consumerist tail-end of industrial civilisation … all rather mind-bending when the “value” of things is measured by currency that’s intrinsically valueless.
Meanwhile (unfortunately) it seems we ain’t seen nothing yet and - though who knows the timing - possibly what’s to come will make the Great Depression look like the good times. Might as well make the most of whatever each of us have now … sure as hell not even Helicopter Ben nor even Iraqi oil (had it been seized securely) can indefinitely delay a day of reckoning.
“May you be cursed to live in interesting times.” Happy New Year everyone.
Here is Montgomery county (Dayton), Ohio, we have the honor of being the #1 foreclosure area in the US for 2006. On my street (of which I rent my house) there are 10 homes available, 4 of which were foreclosed on. 2 of them multiple times!!!
The reality is the banks do not care about people who get foreclosed on with ARM loans. Banks LOVE ARM loans. They get all of their interest money during the “tease” phase of usually 3 to 5 years and after that, when the payments get jacked up to a point where the owner cannot pay, they foreclose. The next person comes in with an ARM loan and the process starts all over again.
If the government was remotely interested in resolving foreclosures, it would outlaw ARM loans, it would control credit card interest rates next.
I live in Western Australia and we have just experienced the biggest mineral’s boom in living memory here. The city i live in ( Mandurah ) is about the 2nd biggest growth area in Australia and the msot desirable place to live ( via some recent poll ).
The point I want to make is that we have experienced 45% price increases across the board for property in the last 12 months on average ( ive personally had 120% gain on investment ) but now its turned nothing is selling and the volumes are growing exponentially of properties up for sale.
I would think that in our geographic location ( most isolated capital city in the world = Perth ) the game is up for property here but the big question here is how bad would the bubble be if it burst ? 10% 20% who knows but its interesting reading from people who are a few years ahead of us on the ecomonic clock.
Andrew.
I lived in Western Australia for about 30 years (until 1998) but have been in South Australia since. But, in any case I know the boom and bust cycles of WA and they can be quite severe … but nothing in comparison with what is probably coming, once the US economy tanks and Chinese (formerly more Japanese) demand for iron ore drops.
I doubt that Andrew wants to take over this site any more than I do - not at all - but Western Australia is a kinda economic “Wild West” (perhaps you folks have heard of Alan Bond) and sorta outguns even the wildest of US speculators.
Considering that the underpinning of economies is resources/commodities - which WA is very rich in (from gold, to iron ore, to bauxite, to sheep and wheat - then if, as Andrew says, the game is up with real estate in WA, then WA might be considered to be a ‘barometer’ of even global events and what is to come.
The real reason WHY prices are so high on real estate is because of GREED. The cost of buying and even renting is way out of control.
The best thing for this state and the country in general, is to have a total and complete economic meltdown where everyone can really know what it is like to do without and live a more humble life.
House prices will continue to climb as long as the US dollar continues to fall. In reality there has been zero profit on home sales in the last 5 years because our dollar has dropped significantly in value. Whats real scary is if the dollar continues to drop and real estate crashes… You get a double whammie with very few surviving.
I do mortgages in NY and the market hear has dropped considerably since last February. Most applications I take now are 100% no money loans with bad credit or refinances paying off credit card debt or home equities. So basically BCD lending will continue to thrive due to America’s bad credit problems.
Many realtors I have dealt with the last 4 years have disappeared this year and only the top 10% really do any sales. I always chuckle at the Sunday paper here though. You always have those idiotic realtors saying the bubble has burst and its up from here. Of course they never say why they think it has burst or where it is going.