If your Broker advises Earth Tones maybe it is time for a new Broker

In all seriousness, there is absolutely nothing wrong with earth tones and neutral colors when preparing a residence for sale. Yes I do believe one’s personal tastes and color choices may be challenged by prospective buyers. While I always advise “it’s just paint”, color and the perceived work involved to change can cloud a prospective buyer’s judgment.

However I am seeing more and more houses staged (which I have always been an advocate of as one is truly presenting a lifestyle advertisement and not just four walls). In addition I am always amused with headlines such as “Subway Tile is Out” just begging for one to open the article to find out what’s truly in. And by the way in my humble opinion Subway Tile in white is truly timeless as has been in existence for 100+ years and the gloss sheen always presents a clean and simple presentation, just remember the tight grout line.

Again I am not against earth tones and neutral colors including one color us brokers reference often; “Realtor White” which has been known to cover over many issues.

So what are the Color Trends for 2018 and how can you the home seller use them?

  • Darker is Dominating: It could be houses are larger or we are feeling more secure, darker colors seem to be the trend. Paint experts are encouraging bolder choices with darker hues. Setting the tone, PPG Paints was one of the first to release their new “it” shade for the year with Black Flame, a color described as a rebirth of classic black with deep tones of indigo. On a personal note I am in the process of updating a kitchen and we are actually painting one wall with Chalk Board Paint which allows us to use the wall as a true chalk board! Yes we will finally rid ourselves of the note pad on the refrigerator which really looks ridiculous on a Subzero with the glass doors.
  • Metallics are the new neutrals: Also predicted to be popular in 2018 is Pantone’s Intricacy Palette, which features neutral metallics with accents of dramatic red and yellow. This particular look is especially suited for accessorizing otherwise traditional spaces. I have witnessed such use in entry foyer’s and secondary rooms with coordinating accent pieces i.e. pillows, frames and so forth. Guess what? It works and makes a memorable impression without being shocking. As inventory begins to climb, making your residence stand-out against the competition may be beneficial especially if you are within a planned community/subdivision.
  • Intense color lovers: Embodying a contemporary spirit, Sherwin-Williams has released three bright color palettes for the year: Unity, Connectivity and Sincerity. From social media to technology, each is inspired by the qualities of modern culture. Yes you too will now have an Instagram worthy residence (or at least eye-candy for prospective buyers).

The question is how to put this all together. I am a firm believer some have an eye for design, either born with or trained, I am not one of them. Granted I understand good design when I see it and can opine on what sells and what may be challenging yet I know someone will comment how do I make the components mentioned above work in my own home.

  • Use the 60-30-10 rule.The idea behind this timeless decorating tip is to incorporate your primary color into 60 percent of the room. Your secondary color will take up 30 percent, and your accent color 10.
  • Vary one color throughout.To create a relaxing vibe, go monochromatic and let your main, secondary and accent colors be varying shades of the same hue.
  • Find what feels right.If a formula of 30-30-20-20 works better for you, go ahead and break the rules. Just remember to take note of the color balance in your room.

Finally I cannot stress enough the following:

1) Test a small area before purchasing gallons and gallons of paint.

2) Let it dry before you decide if it works or not.

3) View during different hours of the day and evening and consider different light bulbs as cool and warm, incandescent, CFL, LED can drastically influence color perception.

4) Prepare properly before painting; Kilz is a homeowners best friend for primer as is blue painters tape.

5) It’s only paint, its not structural, can easily be changed.

As a broker I can usually opine as I take into account the architectural design (I still remember a postmodern house’ interior painted in colors of a Southwestern Discotheque circa 1985, new owners repainted before moving in and secured a $15,000 concession), regional tastes and so forth. Concerning top-tier listings I will usually bring along an experienced interior designer or color specialist and let them offer opinions as I have many peers from graduate school in my Rolodex. Again, it’s only paint.

 

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Home Prices in Metro Denver Continue to Rise but…..

As a real estate broker and subscriber to our local Multilist service in Denver known as www.REColorado.com (and the site with the most accurate and up-to-date real-estate information) I am provided with information and overviews of the markets on a monthly and annual basis. Thus a year in review and a look back.

In 2017 the average home price in the 12-county metro area rose to $433,000.

For comparison, the average home price in the same area in 2015 was $362,000 and in 2016 was $400,000 or $61,000 and $33,000 gains respectively. Considering inflation has been marginal and barely measurable i.e. below the Federal Reserves target of 2%, the real-dollar gains continue to impress.

Home Sales Volumes: 2017 witnessed the highest number of actual home sales totaling 53,739 totaling $23.3B. In 2016 sales totaled 51,617 units at $20.6B and in 2015 51,510 units sold at $18.6B. Thus a small year over year increase coupled with limited new construction the trend could be considered steady with underlying values exceeding inflation. Of note historically until this past generation home prices nationally usually mirrored inflation with obvious regional anomalies.

As a broker based in Denver’s Cherry Creek Neighborhood and educated as an Urban Planner (graduate of CU Denver) I view the market activity within the City and County of Denver as the overall indicator of the metro area market as the City is the center of commerce, the largest most dense in the metro area, limited land for additional sprawl/growth and other factors.

Interestingly sales volume in Denver did not follow the trend of the overall metro area.

  • In 2017 13,043 homes sold in Denver for $6B. (- over previous two years)
  • In 2016, 13,265 homes sold for $5.6B (+ over previous year)
  • In 2015, 13,053 homes sold for $5.1B

While one may view the reduction in home sales year over year as troubling, I would suggest looking a little deeper. First statistically the actual physical number of homes sales year over year has been steady with almost no statistical variation. During the 3 years the amount of closed volume based on dollars went from $5.1B to $6B this is a major increase in both real dollars and by percentage.

Or in more simplistic terms, the number of homes sold in 2015 and 2017 was about even, a difference of 10 homes less in 2017 versus 2015 HOWEVER the difference in sales dollars during the two-year period went from $5.1B to $6B, a difference of $900M.

Thus, one could surmise values within the City and County of Denver continue to outpace the metro area and demand is outstripping supply. Yet there is an additional variable; Denver in general has more percentage of sales from non-traditional single-family homes i.e. condos and townhomes. Through November of 2017 within Denver 12,168 residential properties sold with 7,602 of transactions recorded in MLS as single-family homes and 4,566 belonging to condos or townhomes.

Over 1/3 of properties sold were in the multifamily space usually a less costly product versus the single-family home (and yes I am aware of multimillion dollar condos in downtown and Cherry Creek yet their volume is somewhat insignificant against the overall sales volume i.e. limited impact on actual sales dollar numbers).

The question or the BUT… in the title is? Can the City and County of Denver sustain this valuation increase or are we looking at a market that may in fact be over-heated and not-sustainable? I do not know the answer as only future activity can answer this question.

HOWEVER 1) If I were considering selling a residence, I would place it on the market sooner than later. 2) Interest rates are forecast to increase due to the stronger national economy thus placing potential pressure on sale prices and 3) reports of decreased in-migration and increased outmigration are troubling yet not surprising as the State has witnessed this in past business cycles i.e. late 1980’s energy bust, mid 1990’s expansion, late 1990’s plateau, mid 2000’s boom and later 2000’s Great Recession.

While I do not believe we are headed into a recession anytime in the immediate future, the growth in real-dollar values coupled with low-inflation is just not sustainable within traditional economic theory (coupled we have very short memories). While some suggest low interest rates have fueled the housing market as it has the equity market; unlike stocks, housing is not liquid. My advice and the future may prove me incorrect however I would suggest a “Yellow Light” proceed with caution and keep looking ahead for potential issues.

 

Listing in Winter – What Is Going to Maximize the Value

While most homeowners are preparing for the holiday season, those astute owners who are contemplating placing their residence on the market have already contacted brokers with the question “What is going to maximize the value of my sale?”

This is a truly diverse question as each and every home in unique. Yes some would suggest curb appeal (I completely agree however if placing a home on the market in winter before inventory rises, curb appeal especially in snowy climates may be moot). Others mention paint/ carpet and so forth. Yes however exterior no, too cold for paint to adhere and interior great idea but again if north of the Mason-Dixon line, do you really want to air-out the house with sub-freezing temperatures outside?

The following are a few tips I suggest to homeowners contemplating selling sooner than later i.e. placing their homes on the market before the traditional spring rush. Coupled with potential changes in tax laws concerning deductibility and other revisions, this could be a unique selling season coupled being in the 8th year of an expansion which some argue is getting long in the tooth.

As a homeowner, sometimes the work it takes to keep your house in order seems endless. But what if you knew all your improvements were ultimately increasing the value of your property? Read on for a few tips that can help make your home an even better investment.

Opt for replacing instead of remodeling — On average, replacing items in your home yields a better return on investment (ROI) than remodeling projects. Rather than completely redesigning the layout of your living room, consider installing new soundproof windows or switching out your front door. The lead-time can be shorter this time of year as contractors and suppliers are looking for work in tis traditionally slower time of the year for such work.

Keep it simple — Generally, the simpler and cheaper the task, the more likely it is to have a higher ROI. Extravagant jobs such as installing smart appliances in your kitchen or putting in a high-tech security system may not be worth it in the end. Instead, scale back a bit and opt for painting your walls a fresh new color, deep clean your home or add some crown molding. Remember the more particular the taste and wow factor you may be alienating potential buyers. We have a saying in our broker meetings K,I,S,S = Keep It Simple Stupid. While tongue in cheek remember you are the seller, let the next buyer improve or revise to their unique tastes.

Don’t forget the exterior — Curb appeal projects also tend to have a bigger impact. Once again, a little goes a long way, so consider a few strategically placed planters (let the prospective buyer imagine spring flowers or even better illuminated planters, switch out the front door knob/lock-set and replace outdoor lights concerning both design and energy efficiency (LED bulbs have longevity as a benefit). As mentioned above these tasks can be completed during the winter months without too much hassle.

Follow the rules — Before you start making any major changes, be sure to check that you’re abiding by your homeowners association rules and regulations as well as city codes and ordinances. All counties and cities are different, so the best way to find out if you need a permit is to contact your local planning and zoning office. While in a covenant controlled subdivision this is a given even in cities there may be overlay Historic Districts or demand to bring improvements to existing code versus being grandfathered in. My advice, keep all correspondence and permits visible and when the Home Inspector arrives keep copies of all paperwork visible.

Pre-Sale Inspection: I actually did this for my personal resale in the Spring of 2017. I had embarked on a cosmetic renovation as the home was pushing 30+ years old. While still contemporary in design the reality is the laminate counters needed to go, as did the Miami Vice inspired plastic towel bars and so forth. The inspection came out fine however unbeknownst to us the electrical panel we had for the home had been “recalled” in 1990. We purchased the residence in 1989. Long story short we replaced the panel, which would have been flagged by any qualified inspector and thus removed a potential major inspection issue.

 

The Internet Says My House is Worth

Or Why a Licensed Brokers Price Opinion and Valuations Matters

During the last few years Denver real estate market valuations were literally growing exponentially. While many factors contributed including in-migration and low interest rates, many appraisals were literally not keeping up with recent sale prices. Of note the vast majority of real estate financed will require an appraisal as a condition for the loan.

While few brokers are licensed appraisers, we do have the skill set to review comparable’s, ascertain present market conditions i.e. supply and demand coupled with other unique characteristics of a property and hopefully provide guidance concerning a realistic market value concerning sale or purchasing.

Yet in discussing the market conditions and challenges with peer brokers many of us are running into prospective clients who advise us the value of their properties based on real estate sites such as Zillow, Trulia, HomeSnap, Neighborhood Scout and others which provides valuations, forecasts and past trends.

Please note I am not against Zillow or similar sites; I too use the sites for guidance and information especially when I am asked to opine on a residence or a neighborhood I am not overly familiar with. Yet I also know the limitations of their information, which is based on data mining and gathering of information from public records.

One more than one occasion I have had clients advise “Well (fill in the blank site) says my house is worth $XXX,XXX”. I always caution the realistic valuation may be vastly different that what a website may advise especially one that is not locally based nor its information reviewed by humans i.e. brokers or appraisers. We have all viewed the sites advising what a property’s market value is and a forecast. While not necessarily inaccurate, I would not stake my professional reputation on such valuations. While I do not fault such sites as Zillow, Trulia and similar and I do respect their methodology i.e. using technology to ascertain valuations from various sources, let me provide a real life example of why the site’s information should always be verified by an actual broker, appraiser or similar.

Within the Cherry Creek North neighborhood of Denver are The Harrison Townhomes, 262-268 Harrison Street; 4 row house units with common walls. Designed by a world-renowned architecture firm the units constructed in 1984 continue to be considered contemporary. While providing its owners a striking design and unique design features including vaulted ceilings, the units are also adjacent to a major roadway adjacent to the east lot-line, Colorado Boulevard.

Within the past 7 months two of the interior units, #266 and #264 were sold. The two units are of similar size and their valuations as of today’s date November 13, 2017) is similar.

On Zillow 266 Harrison St. is valued at $507,596

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On Zillow 264 Harrison St valued at $495,237

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Now if you look at the screen shots provided you will see some immediate differences most notably 266 Harrison is shown as having 1,780 SF while 264 Harrison St is shown as having 1,650 SF.

While 140 SF may not seem to make a major difference i.e. the size of a walk-in closet; in a neighborhood where lower-end properties trade for $300PSF, do the math i.e. $42,000. Of note the discrepancy may be attributed to the following per the listing information as provided on http://www.REColorado.com which is the regional multilist for Metropolitan Denver:

266 Harrison Street was measured by an appraiser with the appraisers measurements and as-built included in the supplemental documents.

264 Harrison Street measurements were obtained from the Denver Assessors Records.

Now the few pictures shown will advise a tale of two units.

266 Harrison Street was renovated prior to being placed on the market. The renovation brought the unit to the desires of contemporary buyers including newer stainless kitchen appliances, granite counters, new energy efficient windows, paint, refinished floors, trim work, mechanicals (HVAC/Electrical Panel) and even exterior updates. While appearing staged, it is actually the seller’s furnishings.

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264 Harrison Street is an identical floor plan however from the pictures one may easily ascertain the unit is dated from the laminate counters in the kitchen and bathrooms to the earth tone color scheme popular in the late 1990’s. Most of the interior and exterior is original to the 1984 construction (I was able to review previous sales of the unit) showing wear and tear and consistent with age.

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So now we have two units of similar age. Granted one unit has been extensively renovated, the other in a condition closer to the original construction from 30 plus years prior.

Giving Zillow the benefit of the doubt, Zillow has advised a $12,000 difference in valuation with the increase associated with #266, the renovated unit. Disregarding the size difference noted, the $12,000 difference accounts for an approximately 2.5% difference between the somewhat similar units which actually share a common wall. Thus understandable especially if one relies on public records and data mining for valuations.

Now the real truth based on easily attainable public records:

266 Harrison Street sold and closed in April 2017 for $535,000 – $1,500 Concession

Net Effective: $533,000 (or +$25,904 over Zillow’s present valuation)

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Thus two units, quite similar and sharing a common wall were valued within $12,000 of each other today yet within 7 months of resale had a $95,000 difference and both vastly divergent from Zillow’s valuations. Of note while the Denver market did slow down seasonally, the market did NOT correct 20% during those 7 months between the closings of the two sales.

I will admit each seller has different motivations and this could account for a divergent in closing prices HOWEVER, #266 Harrison was listed at $527,500 and sold for over asking within 9 days on market while #264 Harrison originally came on the market at $549,950 and when closed the listing price was $474,900 and closed much below after 182 days on the market.

Again I am not bashing Zillow or similar sites. I believe such sites do offer valuable information and insights and again I too peruse the sites for my own work. However I would caution placing too much emphasis on the valuations and forecasts provided as the most accurate information is best obtained via a true human real estate professional i.e. broker, appraiser or similar who is locally based.

For many their residence is probably their largest investment, most indebted and special to them. No matter the market conditions as real estate brokers and appraisers we are looking out for our client’s best interests; can an aggregator of data provide the same trustworthiness?

And you thought Denver was expensive

Yes we have all read the headlines including one of the nation’s hottest markets, record average prices and so forth. While hard to believe Denver is still much cheaper than many coastal cities. Being licensed in New York I too watch the real estate market in Manhattan and am well aware of the $100M sale of an apartment at 157 West 57th Street as well as $50M+ sales along Billionaires Row. Of note not all is rosy in the ultra luxury segment of Manhattan Real Estate: http://www.businessinsider.com/foreclosures-at-one57-new-york-billionaires-row-2017-6. 

On a recent visit to Hong Kong I visited the Engel and Voelkers Hong Kong Shop located in Mid-levels, a mixed use neighborhood of apartments and neighborhood oriented commercial located above Central (the Central Business District) and accessed via one of the world’s longest escalators (which run up the hill most of the day with the exception of the morning rush when they run downhill). While I was flabbergasted to see listings for 400 SF flats with asking prices over $1M USD, what caught my attention were the recent sales in a neighborhood called The Peak.

The Peak aka Victoria Peak is the most prestigious neighborhood in Hong Kong and many would argue in the world. Located above the hustle and bustle of Hong Kong The Peak neighborhood is home to a limited supply of single-family and apartment homes most offering jaw-dropping views of the Hong Kong’s truly iconic skyline and across the water to Kowloon.

The exclusivity and prestige of The Peak seriously cannot be matched even in a city where land is literally reclaimed from the sea. British and other Europeans first settled the Peak in the 19th Century; the elevated location providing a natural respite from the Hong Kong summers. If visiting Hong Kong, a must-visit is The Peak Tram. For a sample of what views you may enjoy: As seen from Victoria Peak.

Now for prices: In June 2016 an under construction home measuring  9,212 SF sold at 15 Gough Hill Road. The closing price HK$2.1Billion or USD $269,180,730.00, yes over $269M or just over $29,000 PSF based on present exchange rates.

Granted, # 1 & 3 Pollack Path considered a more prestigious street did have a sale in January 2016 recorded at HK$2.8 Billion or USD $358,907,640.00 however with 51,000 SF this was considered a bargain at just over $7,000 PSF and consists of 8 units (word on the street, possible conversion into a single family home).

So the next time you feel Denver is becoming over-priced just be glad you are not in Hong Kong searching for a home. If considering a visit to Hong Kong, an easy destination to visit, no visa required and English is widely spoken (from Denver one-stop options via United through San Francisco, Chicago and Tokyo) be sure to visit the Hong Kong Tourism Board and download their excellent apps. Of course if you find yourself considering real estate in Hong Kong, contact me as I can provide a referral to my peers in the local Engel & Voelkers Shop.

Of note when visiting I usually stay at The Renaissance Harbour View in the Wan Chai neighborhood adjacent to the Hong Kong Convention and Exhibition Center. On this most resent visit I stayed at the JW Marriott within Pacific Place, a mixed-use development of luxury hotels including and adjacent to The Upper House (be sure to dine or at minimum have a cocktail at Cafe Gray), Island Shangri-La, Conrad Hong Kong, office and a luxury retail mall (including a beautiful Shanghai-Tang store) all connected to the Admiralty MTR Station.

What a Hole in the Ground May Indicate About the Health of the Real Estate Market

I have lived in the Cherry Creek North neighborhood long enough to watch our neighbors to the south i.e. Cherry Creek East blossom into a diverse neighborhood from rental and condo high-rises to townhomes, mid-height rentals, an assisted living facility and oh so many townhomes built usually as rows versus the duplexes you see north of 1t Avenue (as most of Cherry Creek East is zoned Planned Unit Development).

On my walk this afternoon I was stopped in my tracks at The Cassidy (basically S. Harrison Street between Cedar and Bayaud Avenues). I had watched over the past weeks as the earthmovers excavated for the foundation with the assumption of full ceiling height basements. The units directly to the south seem to have sold and thus now a larger lot with plans for 37 units and a well-known broker who represents many new developments in the area as listing broker and sales point person.

What stopped me in my tracks was not the glossy marketing sign; it was what someone attached to it. Someone had cut out and highlighted the foreclosure notice on the property dated 9/28/17 from The Denver Post. Yes, the foreclosure notice.

The Cassidy Foreclosure Notice
Someone posted the foreclosure notice as published in The Denver Post (9/28/17) on the marketing sign.

While foreclosures were front and center during the Great Recession of a few years back, lately all we see are cranes on the horizon and continue talk about growth and the desire for Amazon to locate HQ2 to Denver.

Yet maybe it is irrational exuberance rearing its ugly head or our desire not to confront reality. I have been forecasting a downturn documented in this blog for months. Even the Wall Street Journal mentions rent-concessions and other activities, which may suggest not only is the boom loosing steam but also we may be moving into an overbuilt scenario.

Yes record prices were recently paid for the Steele Creek Apartments in Cherry Creek (of note the original developer Eric H. Bush who assembled the land on which Steele Creek was developed recently committed suicide). While I am not suggesting any nexus, I would just be concerned when we have record sale prices and 7 blocks east a foreclosure on massive lot on which 37 for-sale units were proposed.

Just food for thought.

Does the Record Sale of Steele Creek Apartments Cherry Creek Signal a Top

I remember when Steele Creek Apartments were proposed for the Southeast corner of Steele Street and 1st Avenue, at the time occupied by a few Class C buildings and a discount dry cleaner.

With the news hitting that the building set a new record on a per-unit basis for the sale of an apartment building of $570,000 per unit does the valuation make sense even considering future equity appreciation?

Working in both New York and Denver such numbers are not surprising as in NYC such a deal would be a steal especially for a newer construction building minus any rental controls, statutory affordable housing or long-term leases. Yet Denver is not New York.

Granted we have seen other close to blockbuster deals in Central Denver concerning rental properties as excerpted below from my morning daily read BusinessDen including but not limited to:

However are these deals good money-chasing returns, which are far from guaranteed? One could argue Denver at present is in an up cycle with record high rents (even though some buildings are offering rental incentives). Yet I am concerned as follows:

The New Rental buildings are oriented to deluxe and luxury tenants offering studio to 2-bedroom configurations limiting marketability to affluent singles and couples. In New York and San Fracisco the highest prices on bith a per-unit and PSF basis are “family-oriented” apartments considering of usually 2-4 bedrooms and minimum 2 bathrooms where a family can be reside comfortably.

Is there a glut on the horizon in the marketplace? Between Lower Downtown and Cherry Creek along the Speer Boulevard/1st Ave. corridor we are witnessing new buildings sprouting up like weeds with the assumption that demand for luxury rental apartments will continue unabated.

The Millennial Generation Will Age: I am witnessing it in my real estate practice; millennial’s are pairing up, starting families and due to price pressure are looking at homes to purchase in outlying Denver and suburban neighborhoods; not much different how Brooklyn became chic when Manhattan rents became unaffordable (with some help from Michelle Williams and Maggie Gyllenhaal and for us old timers, Patty Duke lived in Brooklyn Heights).

If the Influx Slows Who Will Rent these Apartments? While certain buildings have a reputation for attracting empty nesters (25 Downing Street) and those whose change in lifestyle may necessitate move to an apartment from a home (The Seasons at Cherry Creek), while renting is an option, many opt to purchase. Again anecdotally I know two empty-nest couples who moved from Country Club to condos, one in downtown, one in Cherry Creek.

What is Trendy Today is a Maintenance Headache Tomorrow: We see this in buildings throughout Capitol Hill, the party rooms with the naugahyde chairs on brass wheels and the pool table that has seen better days or the pool which requires constant expensive maintenance and upkeep.

While I understand the attractiveness of the cost on a per unit basis when compared to other in-demand cities including San Francisco, The Northeast Corridor (from Boston to Washington DC), Los Angeles and so forth those cities have physical geographic constraints and draconian rent-control laws which circumvents true market supply and demand laws thus raising rents on the free-market inventory.

Thus I do not see how the numbers work based on existing rental rates even when factoring in equity appreciation and nominal inflation. Granted there is always the option of conversion from rental to condo. The process includes upgrading the common areas and interiors of unitsoriented to the for-sale market AND developing a legal condominium, HOA and so forth. Not unheard of in Denver i.e. The Barclay (which when first converted were offered with developer backed below-market financing), Brooks Towers and other buildings have experienced such conversion.

However at present transaction cost per unit, is there really the demand for the $600K one bedroom condominium? We have seen such sales in smaller boutique developments including 250 Columbine (which does have a Starbucks on the retail level), but it is rare and definitely a niche market.

From experience such condos sell to those looking for a pied-a-terre in which their primary residence is NOT Denver or potential investment however for a decent cash-on-cash return the rents do not justify the selling price.

In New York City developers take the opposite approach developing condos and if the plan if sales do not meet the pro-forma then re-branded as a rental with the option to sell individual units when the market strengthens.

At present looking at prices coupled with construction activity I would be “short-selling” the apartment market if such a vehicle existed. Long-term I may be proven wrong, however within the three-five year time horizon and even in the present as leasing entities/developers are offering rent concessions, I would be more concerned versus excited at the blockbuster record prices being recorded.

 

 

 

 

As Real Estate Transactions Slow Take A Seasonal Breather Bring in Some Hygge

With the Fall Season chill in the air a perfect opportunity to add some levity to my blog and discuss the somewhat abstract concept of Hygge. I was actually introduced to the term while visiting Copenhagen during late November. It was quite chilly; the humidity literally penetrated multiple layers of clothing (of note I stopped in H&M for a scarf, hat and gloves set) and mid-day twilight led to early darkness due to the city’s northern latitude.

Yet the hotels, restaurants, shops and private residences (of note, if visiting must experience Dine with the Danes) had a warmth that is described as Hygge. Even the streets had a coziness as the street lamps were secondary (bulb hanging in the middle of the right-of-way) to the illumination emitted by the large candles in the windows of shops and restaurants literally bathing the narrow pedestrian oriented streets in candle light.

Thus as our days here in the northern hemisphere get shorter I wanted to share te following insights as you prepare for the autumn and winter to come (and if planning on placing your residence on the market during the Fall/Winter when inventory is limited, great options below concerning staging beyond the cookies in the oven..

You know that cozy contentment that comes with spending a Sunday morning reading a good book and drinking a cup of hot tea? There’s actually a Danish word for it. Hygge (pronounced hue-guh) is a feeling described as charming, comfortable, familiar and simple. Sound nice? Keep reading to learn how you can incorporate this hug-like feeling into your home.

Bring the Outdoors In — Embracing the calm that comes with nature is one aspect of hygge. You can do this by revamping your color scheme with earth tones, adding various natural elements and textures or simply burning a forest-scented candle. Personally I enjoy the scent of the mountain towns in winter, a mix of wood-burning and pine.

Maximize Your Light — The more natural light you can bring into your home, the better. Pick window treatments that will allow as much light as possible or go with no treatments at all. Instead, add a film to your window to reduce solar heat and maintain privacy. In Colorado we are blessed with 300+ days of sunshine a year coupled with mild winters.

Find Your Center — Even if you don’t have a fireplace i.e. living in a condo or apartment, moving your furniture around a primary focal point, like a coffee table or book shelf, will add a sense of comfort to your space. Arrange your furniture in a semicircle and watch how naturally conversation flows when you have guests over. If you wish to splurge consider building a mantle and a faux fireplace and of those who have a closed up flue, consider a candle arrangement in the fireplace.

Create a Relaxation Station — Designate a specific nook in your home where you can go to decompress and recharge. String up some lights, arrange some candles and have a soft blanket and quality chocolate nearby. Trust me one can park and visit Godiva and make it out within one hour at The Cherry Creek Shopping Center or consider Endstrom on University Blvd in Cherry Creek North.

With this notion of coziness built into their way of life, it’s no wonder the Danish are considered among the happiest people in the world (even though their tax rates is by our standards are quite high). Try implementing a few of these hygge tips to create a sense of well-being and contentment in your home.

 

 

 

Why Continued Positive Comments About the Housing Market Scare Me

As a broker I make my living assisting clients purchasing and divesting of their real estate holdings. In this market of ever seemingly positive news I should be thrilled. Yet as a 20+-year broker licensed in two states I have some serious concerns on the macro level, which truly reverberates beyond home sale statistics.

At present the Denver market as well as the US market looks very healthy. Demand is high, employment and wages are growing, and mortgage rates are low.

However based on reports out this past week, if one reads between the numbers and taking into account history and growth trends, the market is quite challenged. Not at present but longer term we may be setting ourselves up for a dramatic shift in the economy and wealth accumulation.

There is continued strength in the overall national housing market with prices 6% higher than the same period one year ago. Some local markets continue to show double-digit growth in prices. Metro Denver’s year over year was 7.9%. Such numbers are driven by the simple law of supply and demand and specifically the limited supply at the lower end of the market. Thus lower end homes are witnessing significant price appreciation due to more competition while higher end listings are languishing or having price reductions (see my last blog).

While I have mixed feelings on Zillow and similar sites, their insights and digesting of data is always an interesting read: “It sets up a situation in which the housing market looks largely healthy from a 50,000-foot view, but on the ground, the situation is much different, especially for younger, first-time buyers and/or buyers of more modest means,” wrote Svenja Gudell, chief economist at Zillow in a response to the latest home-price data. “Supply is low in general, but half of what is available to buy is priced in the top one-third of the market.”

So why is the inventory and supply on the lower end of the market so challenged? A few reasons and many can be seen in your local neighborhood:

Conversion of Inventory from Home Ownership to Rental: During the Great Recession which many of us brokers also call “a housing crash”, investors from large hedge funds to Ma and Pa purchased 100’s of thousands of foreclosed properties. While some were fix and flips, the vast majority became income-producing rentals. At present according to the U.S. Census there are 8 million more renter-occupied homes than there were in 2007.

Granted some renters may be scared off from purchasing and while the investors could cash out and after paying simple capital gains have a nice windfall, at present the cash-flow on rentals is one of the most attractive investments in the market coupled with the underlying equity appreciation of the real estate; thus the motivation to sell is limited. In turn lower end and moderate homes are not coming on the market in meaningful volume.

New Home Sales are Down: In August 2017 there was a 3.4% monthly drop concerning new home sales. If demand is so strong shouldn’t new home sales be booming? Well, it is again simple economics and in this case pricing.

In August just 2 percent of newly built homes sold were priced under $150,000, and just 14 percent priced under $200,000.

Builders advise they desire to build more affordable homes yet profit margins or the lack of is causing constraints. Builders blame the higher costs of land (exurbs with lower cost land is falling out of favor with 1st time home buyers who desire to be closer to urban centers), labor, materials and regulatory compliance i.e. building and zoning codes (and this is before the hurricanes decimated Houston, southern Florida, Puerto Rico and the US Virgin Islands which will demand laborers and materials to rebuild leading to eventual inflation in those industries and supply chains.

One could argue that market forces will eventually realign the housing market. Yet when this will happen is anyone’s guess. Considering we are still in a “Goldilocks economy for housing i.e. jobs and income continue to grow, interest rates remain at historically low levels, financing rules have become more flexible and inflation remains tame at below 2% annually. So what is the problem?

At present our inventory of new and existing homes is static with numbers similar to those found in the mid 1990’s a full 20+ years ago HOWEVER during those 20+ years the country’s population has expanded by 60M. Couple this with a mismatched market as home prices will not come down as long as there are buyers out there willing and able to spend more and more money for less and less house as we have witnessed in hot markets i.e. San Francisco Bay Area, The Northeast and other markets.

Longer term is my concern. We have witnessed locally in Denver our market moving from purchasers to renters. Good for investors not so good for individuals concerning personal wealth. Homeowners are known for making big-ticket purchases i.e. appliances and upkeep and maintenance sustains the construction sector i.e. additions, roofing and so forth.

If we move towards a renter oriented housing market fewer Americas will be able to save and grow their money associated with the ownership and upkeep of a personal owner-occupied residence. Due to demand rents may continue to rise (as less inventory on the market) and thus renters will have less disposable income to spend which will ripple through the economy beyond housing.

Yet Denver may be the litmus test for the national economy as follows:

Upper-End of the Market: is slowing dramatically as prices rose to fast and thus not sustainable. Upper-end buyers are usually market savvy and thus will be more cautious entering the market. Even in the Country Club neighborhood I have witnessed price-drops and re-listings at lower prices all in an effort to generate activity; would have been rare one year ago

Lower-End of the Market: Supply is outstripping demand with the average home in Metro Denver over $410K; yet incomes/wages have not kept up as the average worker is slowly being shut out of the market and thus will be a perpetual renter,

Rentals: The vast majority of new rental buildings are priced at luxury levels (just look at the cranes in Cherry Creek North). Yet that market is slowing and many of the existing buildings are struggling to attract tenants and now offering rental incentives. Yet additional buildings continue to come out of the ground.

Zoning and Entitlements: In Denver while zoning has allowed additional density and not without controversy i.e. slot homes in Cherry Creek, while beneficial to rental development, most rentals are oriented to single and couple households, with few exceptions most new multi-family buildings are not designed for families or larger households.

The above is just some food for thought. Add an existential crisis and this housing “House of Cards” may come to an ugly resolution. While I am not predicting another housing crash, the off-balance market is not sustainable and the overall repercussions to the overall economy have not been considered, quite dangerous.

As a Buyer What Your Broker Wants You to Know

As the real estate market in Metro Denver slows or as many of us believe moves towards a more balanced market between sellers and buyers, choices and opportunities will expand for all in the marketplace. In discussing market conditions with peer brokers we began to discuss what we desire the buyers we represent to know before and during their house hunt.

Knowing One’s Budget and Realistic Expectations: One of the issues related to historically low interest/borrowing rates is buyers are looking at a monthly payment versus actual valuations. Coupled with low down payments in an up valuation market this is not an issue. However in a traditional market when a 2% appreciation may be considered healthy i.e. matching inflation such a pro-forma can be an issue when one believes homes should rise 10%, 15% or 20% per year as the norm and may be projecting such a forecast into their future planning.

What most brokers (including me) suggest is to immediately us a home affordability calculator. While not perfect this tool will allow prospective buyers to have a general baseline concerning affordability i.e. a budget and price range. The second step we suggest is to secure a mortgage pre-approval letter; a process involves a lender reviewing a client’s finances and determining how much it’s willing to loan for a home. No matter the market listing brokers and their clients i.e. sellers understand a pre-approval (not to be confused with a pre-qualified) letter shows intent and seriousness. Finally we look at smaller yet potential challenges i.e. real estate taxes, upkeep/maintenance costs and lifestyle i.e. condo, single-family residence and other factors which may not be part of the initial calculus concerning home ownership.

Do Not Contact the Listing Agent: As brokers we know with the Internet and other marketing tools information about a listing is ubiquitous. And yes the Listing Agent would probably be the most knowledgeable about the residence he/she is selling. Of note, the information provided on the web through various distribution channels is only as accurate as the original input.

Yet the Listing Agent is the advocate for the seller. As a buyer it is important to communicate through your buyer-broker whose fiduciary interest is to you. By allowing us, your buyer broker to interface with the selling broker we are showing A) you are represented by a knowledgeable and competent professional and B) We have a strong working relationship. When one contacts the listing broker directly this can undermine the working relationship AND place a buyer in a secondary position with the Listing Broker whose fiduciary duty is to their seller (unless one becomes a Transaction Broker which is rare).

 Silence is Golden: On the rare occasions I host an open house I am always amused at the conversations I overhear. It is similar to the home-flipping shows in which a hidden camera and microphone are set up to capture before and after comments (I will not opine on the ethics of such actions). Yes as brokers we ask probing questions i.e. are you working with a broker? How many houses have your looked at? Any general impressions you would like to share and so forth. If I am listing the house I am representing the seller and the questions I am asking will facilitate my marketing efforts. However the answers may provide insight concerning the prospective buyer; information you may not wish to share except with your buyer broker i.e. motivations, budget, timing and so forth. This is truly proprietary and should only be shared with your buyer broker.

Thus (and a lot of brokers will be angry with me), when attending an Open House please keep your comments beyond ear shot at a minimum. In WWII there was a quote “loose lips sink ships”; while not as dire, go against human nature and discuss the home outside or be sure you are out of hearing range of the broker or their confederates. Even better see if your buyer broker is available to attend with you or set a private showing with your broker so you can discuss the home sans others overhearing.

Trust Your Broker; The Internet is Not Truly WYSIWYG: I actually enjoy when my client’s forward listings they have found on the Internet and I am one of the few. Their actions suggest to me they are serious and doing research. Yet I also understand the frustration of brokers. Many clients will send every listing within a 50 mile radius or similar. A few tips:

  • WYSIWYG: Known as What You See Is What You Get is not necessarily true. Listings on the Internet like most marketing channels are promoting the finest attributes of the property. Do you really believe the listing broker is going to post a picture of the freeway adjacent to the home or the junkyard across the alley? Of course not! Tip: if there are a limited number of pictures or pictures of the neighborhood dominate I would be more skeptical. Even the smallest of residences have a wealth of images available. The reality is your broker probably knows the neighborhood, possibly the residence and has access to information from title companies, assessors records and other sources to provide a truly balanced picture of the residence on the market.

 

  • Billboarding: It is amazing when you input an address of a home for sale and the results include every broker in the market showing the listing. With today’s technology when a listing is loaded into the local multilist service with few exceptions the information is distributed to multiple channels. Thus the information is now in the public domain. Of note my firm is even more proactive as we have a company intranet, which promotes our our listings to our offices worldwide if we wish. The issue is the information presented in the public domain may be inaccurate.

For example my personal residence, which I sold and closed in April 2017 continues showing as “For Sale” on multiple sites including one of the most popular valuation sites 5 months after closing. I once had a listing which was presented on a “Owner Will Carry” site sans my permission; all the calls I received were from prospective buyers looking for a specific product i.e. an owner will carry option, unfortunately a financing method my client would not entertain. The service billboarding the listing was doing a disservice to their clients many who paid for access to this supposed proprietary list of residences available with a seller who is willing to carry a mortgage.

  • Your Broker is In the Know: Your broker will have access to the most up-to-date information and as mentioned prior is your advocate and communication channel with the listing broker and their seller client. Even if a property is Under Contract your broker can inquire if the seller is entertaining back-ups, if the existing contract may fall through and so forth. Thus use your broker and their experience and expertise to your fullest advantage.

Fear of Commitment: I am probably one of the rare brokers who has not continually bought and sold during their career for their own account. Readers of my blog know I was in my previous residence for 27.5 year! This has to do more with not a big fan of change and it was and still is a great residence yet my lifestyle changed. I do, as most brokers do understand the purchasing of a house is a big commitment and not one to be taken lightly.

Buying a house, especially one’s first residence is a big step and commitment. As part of our client review and why we request pre-approval letters and so forth is a sense of commitment from our clients as in general brokers are not compensated unless a transaction closes. We also understand life presents us all challenges as no one’s employment is ironclad and other issues can question one’s commitment concerning home purchase into doubt. Yet with careful planning and foresight coupled with communication, commitment phobia can be curtailed.

As I advise clients a residence is not necessarily a ball and chain (and trust me there is the same look every one has when they review the mortgage repayment schedule at closing, I call it the Ball and Chain look). There are always options from resale to rental to refinancing and so forth.

An acquaintance I met while walking in my neighborhood one day mentioned a unique situation; she is single, a senior citizen with a larger home yet straddled with a sub-prime mortgage and job loss. If she sold her home; even with a strong market the proceeds would just cover the outstanding mortgage and penalties accrued over the past 6 months. Thus her credit report would be healthier yet she would be homeless.

As an acquaintance and not a broker we discussed and I suggested checking out the following blog on Seniorly concerning programs for seniors looking for roommates or housing. The upside for the owner of the home, the opportunity to collect some income, dig herself out of the financial hole and have a peer in residence. While not for everyone a viable alternative to selling and having no equity to fall back on or worse, foreclosure and being forced from the house.

As Brokers we are truly your advocates. As there some bad apples out there? Of course just as in any profession. However the vast majority of brokers I know and trust are those who truly look out for their client’s best interest and desire to build long-term relationships and a referral network based on honest quality service.

Happy House Hunting.