What Usurps Low Mortgage Rates Concerning Housing Activity? Confidence

While I truly understand as a broker the continued optimistic view of housing espoused by my peers; hey its our bread and butter. Yet even with last week’s downdraft concerning mortgage interest rates the housing market did not suddenly spring back to the activity levels of last year and asking prices did not all of sudden increase. There is a fundamental reason why activity did not spike; it’s called confidence or lack thereof.  Let me explain:

  • First: Mortgage rates have been falling sharply over the last three months, which should be incredibly positive for the housing market, but so far reaction has been muted in both home sales and new home construction. Granted part of the drop was due to the inverted yield curve and discussion concerning a Recession on the horizon but the point is…..The average rate on the 30-year fixed is now well below 4%; it was above 5% in November 2018. The drop in rates has not produced a home-buying spree for either new or existing homes.

 

  • Second: The drop in interest rates did have impacts specifically concerning refinancing activity.  This is a mixed message as refinancing may suggest prospective sellers may actually be staying in a home versus selling and moving up or down from their existing residence HOWEVER most who refinance will conduct a cost-benefit analysis i.e. months to recoup the investment and then subsequent savings. Thus due to refinancing one would assume housing availability would be further constrained. However……

 

  • Third: The further drop in mortgage rates did nothing to encourage people to buy, as there was no change in intentions to buy a home, and instead there was a 9 point jump in those that said it’s a good time to sell a house—the most since 1992 when this question was first asked. Of note I am in the same boat as I have literally stopped looking for now and am not enticed by the attractive interest rates.

Consumer confidence fell sharply in August, according to a just-released report from the University of Michigan. The report said consumers felt they needed to be cautious about spending in anticipation of a potential recession. That bled into housing. Again coupled with the gyrations in the equities market, continued volatility concerning tariffs and asking prices that has remained at 2018 levels the Fall season may be worth watching (I suggest from the sidelines) as recession fears and become a self-fulfilling prophecy.

A quote I have used this week with clients both looking to purchase and those looking to sell has been the same: “Sellers believe it is 2018, Buyers believe it is 2020 and at some point the two shall meet in the middle”.

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When the For Sale By Owner Does Not Work Out

As some of the readers of my blog know I live in Cherry Creek North since 1989 (wow that is a long-time). Thus I have been through and boom and bust cycles of the neighborhood. I still remember in the beginning days of The Great Recession when a Craftsman Style Mansion was constructed on the southwest corner of 4thAvenue and Garfield Street (373 Garfield St) as I knew the owner of the duplexes (on the 100’ x 125’ lot which were sold and razed for the 8,000+ SF residence to be completed in 2008.

Fast forward to 2016/17, the mansion makes the news twice.

First in 2016 the owner of 373 Garfield Street filed a lawsuit against his neighbor across the alley concerning impeded access to his garage. Here is the story from CBS Channel 4: Feuding Neighbors Head to Court Over Alley Parking Spot. 

Then in June 2017 the owner of the house enjoyed an extensive article in the respected online BusinessDen periodical in which the owner was planning to place his house on the market as a For Sale By Owner or FSBO. The article titled: Cherry Creek Mansion FSBO: ‘I’m not going to pay 6 percent on a $5 million home’

My favorite quote from the article is as follows: “I’m not going to pay 6 percent on a $5 million home. I’m just not going to do it. I don’t need to,” Neubeiser said. “The home is going to sell itself … If you dangle $156,000 (the 3 percent commission) in front of me, believe me, I’ll jump.”

Well, fast forward two years to July 2019, the home is for sale and guess what it is listed by a real estate broker; here is the listing: 373 Garfield Street listed by Camber Realty.

Of note the co-op commission offered by Camber Realty is 2.8%, thus even if the brokerage listing the home is paid zero ($0.00) at asking of $4,995,000 the seller will still be on the hook for the commission to the co-op broker also known as the Selling Broker, the broker/berkerage who brought the buyer to the table. The amount assuming receives the full asking price: $140,000

Trust me as a homeowner and a real estate broker I understand the desire of FSBO’s; i.e. sellers assuming they will sell their own homes, ascertain a value, facilitate all the negotiations including contesting a potential appraisal shortfall, execute all the paperwork and so forth to save anywhere from 2.5%-6%. Of note many FSBO’s are now paying co-op commissions of between 2.5% and 3% thus savings are even less.

I get it; within hot/in-demand markets why pay a commission when you can sell it yourself. From experience I have witnessed FSBO’s languish on the market and after losing months of time to save a listing commission the house is them listed with a full-service or discount brokerage. Yet in the interim the seller has been paying on the mortgage, lost valuable time in marketing and prospective showings being a FSBO.

Now as the overall real estate market begins to cool and inventory increases I predict FSBO’s will be less common. Yes I know many marketing channels exist for FSBO’s and there is the false belief that brokers are taking commissions just to place a listing on the MLS and sit back. If that were the situation I would be composing this blog from The Maldives and not my office.

 

 

Are Auto Sales Flashing a Potential Warning Sign for Residential Real Estate

It is assumed for most people the largest purchases are their homes and cars; known as the ultimate in durable goods in economic parlance.

Thus some recent news from the automobile market started to get me wonder are trends in the two markets similar?  The catalyst for my question? The luxury German automakers all reported a slow-down in sales.

Granted the article I lined to above also mentions macro forces i.e. tariff/trade-war, Brexit and other issues however the bottom line is the same; luxury auto sales are slowing.

The same can be said about luxury housing on both coasts and in Denver, which is witnessing price adjustments to the downside concerning luxury residences.

Manhattan’s high-end apartment prices suffer as NYC real estate cools.

Luxury home sales see biggest slump in nearly a decade.

Now I am the first to admit luxury car sales and luxury home sales are probably not the best leading indicators of an economy’s health. Then how about run of the mill cars?

Between 2009 and 2016 sales of new cars and trucks rose steadily the longest growth streak since at least before the Great Depression. Millions of Americans traded up to bigger and more sophisticated vehicles decked out in leather and outfitted with gee-whiz electronics and safety features.

The same trend happened in housing with the housing growth streak beginning in 2010 as green-shoots started to peak out of the carnage of The Great Recession. The growth in housing sales and prices seemed to run unabated until approximately 2017.

Back to cars, concerning automobiles sales to individual buyers are now falling. Even once popular sport utility vehicles and pickup trucks are sitting on dealer lots for longer stretches. I know; do not feel sorry for car dealers as they have a 7-year boom cycle. Yet how about the effect on our overall economy?

Let’s consider auto sales: Consumer purchases, which are known as retail sales, fell 3.5 percent in the first half of the year to their lowest six-month total since the first half of 2013, according to J.D. Power and Associates. Such sales are considered a more accurate measure of demand than total sales, which include purchases by fleet operators like car rental companies. Related, AlixPartners, a consulting firm with a large automotive practice, estimates that sales will drop more than 2 percent in 2019, to 16.9 million vehicles. The firm expects the industry to sell 16.3 million vehicles next year and 15.1 million in 2021.

While not delving into too much detail concerning economics one should note a slowdown in auto sales as noted above could weigh on the United States economy. The auto industry is the largest manufacturing sector and makes up about three (3%) percent of our gross domestic product. Automakers, parts manufacturers and dealers directly employ more than two million people. Car companies spend billions of dollars every year on research and development.

On a more micro level consider the following concerning AutoNation with more than 325 franchises, AutoNation is considered an industry bellwether and other dealers often follow its lead. AutoNation has been paring inventory for the last three months, and now has 64,000 new vehicles in stock, 9,000 fewer than a year ago. The company has been limiting orders to top-selling models and cutting back on vehicles that tend to languish for weeks or months and often need to be heavily discounted or sold at a loss.

Personally I see similarities concerning the housing market including price adjustments, longer days of market and homes that are not in prime high-demand neighborhoods or located on busy streets languishing on the market.

One additional parallel concerning housing and cars; the average price of new vehicles has risen to around $35,000, while interest rates on auto loans have edged higher. That means people have to be willing and able to spend more to buy a new car than they were just a few years ago.

Sound familiar? While housing prices are adjusting downward in most markets prices are still at or close to record highs, demand for entry-level housing is not being met and even though interest rates on a conventional mortgage can still be had for under 3.75% the housing market seems to be directionless.

Now I do not know how the Federal Reserves monetary action of last week i.e. cutting Fed Funds rates by 25 basis points AKA .25% will have in igniting the housing and auto markets, two markets tied to loan products I believe the following quote sums up my feeling from a family run 6-showroom dealership in the heartland “After such a long period of growth in a cyclical industry, we know we’re headed for a recession.”

Of note as this blog was composed the day prior of the Fed Rate Decision the following article crossed my desk post composition courtesy of The New York Times:  Lower Rates Already Hit Housing. They’re Not Helping Much.

 

Alexa Help Me Purchase a House

Full disclosure my wife has an Amazon Prime membership. Of note I do not have an Alexa and use Amazon rarely. With the above disclosed I am intrigued……….

When I heard the announcement I did not know how to react. Yet as I pondered the partnership between Amazon and Realogy Holdings I realized in its most basic terms Amazon is taking their disruptive (I use disruptive concerning traditional retail) retailing model and applying it to traditional real estate practices.

Let me explain.  First I would have assumed Amazon would have partnered with Zillow, Redfin or other post millennial i.e. Year 2000 real estate entities that desire to be disruptors. Then I realized Amazon is not truly a disruptor, instead it is another unique channel concerning retail distribution and is now venturing into real estate. For Realogy Holdings some of their traditional brokerage brands include but are not limited to Coldwell Banker, Sothebys Realty, Century 21, Better Homes and Gardens and others the partnership may reverse their decline in value i.e. falling from a $7B market capitalization in 2013 to around $600M in mid-2019 which is disheartening as the real estate market nationwide was on a tear during that period. Of note, year to date Realogy Holdings stock is down 80%.

The new Amazon entity titled TurnKey will initially integrate 3,000+ brokers and will launch in 15 markets, including Phoenix, Los Angeles, San Francisco, Denver and Washington, D.C. Of note New York (where Corcoran, a Realogy Holdings franchise is active) where I also have a license is not included in the initial launch.

For prospective buyers using the TurnKey referral service their value of benefits Amazon will provide will range from $1K to $5K, depending on the sale price of the home. To qualify for the maximum benefit, a home would need to cost at least $700,000, while homes sold for $399,000 or less will qualify for the minimum $1,000 benefit. The benefits Amazon will offer range from smart home products like its Echo devices and Ring doorbells to move-in and home maintenance assistance through Amazon Home Services.  I already see the Board of Nest wondering who they can partner with.

The incentives offered by Amazon are meant to address the trend of home shoppers looking for properties themselves, which has been among the biggest drag on profits for brokerage houses i.e. one can see the inverse valuation charts concerning Zillow and Redfin when compared to Realogy Holdings.

While some agents now list properties themselves on sites like Zillow for interested buyers and thus cutting their parent companies out of potential commissions the majority of brokers on Zillow and similar sites are affiliated with traditional brokerage entities and are using Zillow as a marketing channel.

It is too early to know if this partnership model will be a success. For Realogy Holdings the news of the partnership pushed the stock up 25% when the announcement crossed the tape thus some would argue immediate success.

However as many of my readers know I have been in the real estate market for longer than I care to admit. Before the recent disruptors it was the limited service brokerages, which were going to turn the traditional brokerage on its head and in turn decimate the industry.

More recently it is the Zillow’s, Rex and others using algorithms and distributions channels to change the landscape of the marketplace. And Redfin, using traditional brokerage practices yet offering rebates and discounts to entice clients.

What will be interesting to witness; the slowdown in real estate, which is happening now, how will it affect earnings moving forward. The slowdown is evident with the glut of luxury properties on the market. Even with interest rates below 4% housing sales are stagnant in much of the country yet the overall economy should be buoying the housing market i.e. low unemployment, high consumer confidence and a strong US Dollar.  Yes affordability is an issue yet most bubbles build their foundation when affordability is challenged and irrational exuberance takes hold.

While algorithms and so forth may provide some guidance real estate is NOT a blender or a pair of pants. Each residence is truly unique and each transaction is singular. I honestly do not now if the partnership will be a success or a boondoggle. Concerning the real estate disruptors Wall Street is betting they will be successful yet have any of them experienced a down market and recession? I know a few limited service real estate firm brands that are hanging out with the Pets.com sock puppet at the unemployment office.

Foreign Investment in US Residential Real Estate Plummets

In the late 1980’s my thesis for my Political Science degree was titled Direct Foreign Investment in Downtown Denver. In the late 1980’s while the Denver regional economy was decimated by the downtown in oil prices and subsequent move by industry players to consolidate in Houston and Calgary what was interesting is the long-term commercial real estate holdings by foreign nationals including Germany, Mexico and Canada. Some owned whole buildings; others owned land-leases and so forth.

Foreign investment in the United States dates back to the Revolutionary War when France lent money to the United States. More recently the foreign investment activity has been active in residential real estate. Of course the blockbuster deals in New York i.e. purchases by Russian oligarchs, South Florida by South Americans and California and Vancouver by Chinese make the headlines. Yet even here in Denver smaller investors from around the world have been purchasing real estate, which I mentioned in an earlier blog.

When our US Dollar is weaker against other currencies coupled with our Rule of Law orientation AND deeds real estate in the United States is attractive. As the US Dollar is the currency of choice around the world as stable and reliable so goes our real estate. Yet recently inflows of foreign capital into our real estate markets are lessening.

During the last two years foreign investment in U.S. homes has plummeted due to as a strong U.S. dollar, threats of trade wars and a global economic slowdown. Also currency controls in China concerning outflows from the country and constraints on Russia nationals.  Added to this is are additional constraints concerning tracking of monies used to purchase real estate.

Foreigners purchased $77.9 billion-worth of existing houses in the year from April 2018 through March 2019, a 36% drop from the previous year and half the amount spent in 2017, according to an annual report released Wednesday from the National Association of Realtors.

Since crawling out of The Great Recession in tandem with growth of incomes in China, Chinese buyers have been the biggest spenders from other countries on U.S homes. However deteriorating trade relations i.e. tariff threats and stricter regulations from the Chinese government have successfully stymied the flow of Chinese investment in U.S. real estate. Of note speculative real estate projects in China are also starting to face headwinds.

By NAR’s estimate, total sales to Chinese buyers fell to only $13.4 billion, a six-year low in the year through March. That’s less than half of what they spent from 2017-18.

In addition to deteriorating relations with China, a strong U.S. dollar and shifting economic conditions are largely to blame for the slowdown.  A strong dollar makes it harder for foreigners to purchase U.S. homes or even travel to the U.S. In one of the more extreme examples of the past year, a Brazilian buyer would now need to spend 22% more Brazilian Reals to buy the same house in the U.S. than they did a year ago.

With U.S. median home prices rising by 4% on average during April 2018 through March 2019, U.S. home prices measured in British Pound, Euro, or Chinese Yuan rose by 5% and by more than 10% when using the Indian Rupee or the Brazilian Real currencies” according to the NAR report.

After Chinese buyers, Canadian, Indians, Mexicans and British buyers spend the most each year on existing homes in the U.S., respectively—all of which pulled back from buying homes over the past year.

British buyers spent the most of any nationality per home, with a median sale price of US $510,700. Still, their activity in the U.S. housing market has dropped off by around two-thirds over the past two years, according to the most recent figures. The issues surrounding Brexit and the subsequent weakness of the British Pound may be partially to blame.

Florida was the most popular destination, with one-fifth of all foreign buyers headed to the Sunshine State where British accented English co-mingles with Russian, Spanish and Portuguese. California came in second, attracting around 12% of all foreign sales, followed by Texas and Arizona.

While Colorado does not make the top inflows concerning foreign currency into real estate foreign investment is a component of our real estate markets. As mentioned in Denver we have foreign buyers purchasing rental homes. In the mountain resorts foreign purchasers are quite prevalent.

The decrease in foreign investment is not necessarily a negative as markets including Vancouver and Toronto are readjusting downward and becoming available to local purchasers versus investors and speculators. If I were developing on Billionaire’s Row in Manhattan and along the east coast of South Florida I would be a more than a little bit concerned.

The Numbers May be Large Reality is kept up with Inflation

Recently I read about a house in The Denver Country Club neighborhood which has changed ownership in less than 2 years. As it was an off-market i.e. not marketed in the MLS little is known about the circumstances of the sellers and so forth. What intrigued me was not the ownership history but instead the sales history.

Collectively we hear how Denver’s housing market is one of the most expensive in the country. How home sellers have experienced exponential gains since The Great Recession, and so on. Thus I decided to track the history of 363 High Street which can now be rented for $10,000/month.

The 300 block of High Street is a beautiful street, probably one of the finest in the city representing the opulence of early 20thcentury Denver mansions as the Gold Coast shifted from Capitol Hill south and east closer to The Denver Country Club.

The home at 363 High has gone through 5 owners in 22 years as follows:

9/12/96:       Sold for $660,000 ($1,077,465 in 2019$)

10/9/01:       Sold for $1,701,000 ($2,461,577 in 2019$)    -Gain of 157%

9/28/16:       Sold for $2,400,000 ($2,561,355 in 2019$)    -Gain of 60%

10/12/18:     Sold for $2,950,000 ($3,009,162 in 2019$)     -Gain of 18%

07/19             Selling for $3,050,000  -Gain of 3.2%

Thus while the numbers are impressive the gains have mirrored inflation almost to the dollar over the years.  Concerning the most recent sale from 2018 to 2019 while the 3.2% gain may seem respectable; after commissions, closing costs and fees there is probably a loss.

For comparison during the most recent ownership of 363 High St:

  • The S&P 500 closed on 10/12/18 at 2,728.37.
  • On 7/12/19 the S&P 500 closed at 3,013.00.
  • The gain approx. 10% not including dividends.

 

 

Has the Denver Housing Market Reached its Peak and now on the Descent?

Let me begin by advising I am not a pessimist. However headlines from other cities around the world has indicated the housing market which has seems to have been in auto-drive since crawling out of The Great Recession has witnessed its peak and is beginning to retreat.

According to REColorado aka as our MLS and best source of activity data concerning the housing market in the metro area during June 2019 there were 9,520 active listings for the Denver metro market, up 7.07 percent from May and up 28 percent from one year earlier. Ok, I am first to admit our prior months/years inventory of for sale homes was truly constrained.

Concerning pricing the news is a little more positive. As inventory increased, sale prices dipped on a month-over-month basis. The average sales price for a single-family home was $547,461, down 0.82 percent from May but up 1.26 percent year-over year, while the average sales price on a condo was $370,442, down 2.16 percent from May but up 2.5 percent from one year earlier. While these gains are far from the numbers we were witnessing this shows the market is matching inflation and is moving towards a more normal orientation.

I have continually advised the luxury market is a predictor of the overall market. Upper-tier listings seem to be having more price adjustments and longer days on the market.

According to Brigette Modglin, Denver Metro Association of Realtors (DMAR) Market Trends Committee member “While things seem to be pointing in the right direction with more inventory in the luxury segment of the market, sales of single-family luxury homes were slightly down from 1,067 sales year to date in 2018 compared to 1,038 year to date in 2019, a 2.72 percent decrease. She goes on to advise “Diving into the numbers, they still look good as we are in a more balanced market and all signs show this is good for both buyers and sellers in the Denver Metro Luxury Market.”

I will be curious when the books are closed for 2019 how the overall market does. Concerning the luxury market  and to some extend the overall housing market I believe there is additional room for adjustment downward. Just too much inventory (luxury and conventional) and too few buyers. Of note the equities market is again towards record highs coupled with low interest-rates. Housing should be selling at a brisk pace yet we are witnessing increased inventory, prices barely matching inflation and a downdraft concerning the sale of luxury homes.

I am suggestion caution ahead. While I do not see a significant downdraft in values I believe the increased inventory, stagnant price growth coupled with low-interest rates may spook some more homeowners to be sellers thus increasing supply which will in turn lead to I believe year-over-year price declines.

Demand for Rental Apartments hits 5-Yr High Across The Country

As the national economy hit a milestone today having achieved the longest expansion on record news comes out that demand for rental apartments nationally has hit a 5-yr high. While this may all seem to be positive news I remain skeptical.

According to The Wall Street Journal the number of move-ins during the second quarter shot up 11 percent compared to last year citing data from RealPage. That surge caused the national occupancy rate to hit 95.8 percent, according to the report.

In Chicago and Houston, demand grew particularly strongly, as move-ins outpaced new construction by an almost 3 to 1. Smaller metro areas witnessed big rental price increases as well, including Wilmington, N.C., where rents jumped by 7.4 percent, and Huntsville, Ala., where they rose by 6.4 percent.

Yet there are some disconnects in the marketplace. While apartment construction is nearing a 30-year high most of the products coming on line are for higher-income earners (those most capable of purchasing a home), leaving the market for affordable rentals significantly challenged. We have witnessed this phenomenon in Denver over the last 5 years where prior to the expansion Denver was considered an affordable place to reside.

Also some pundits suggest the demand for rentals is in part due to the over-priced housing markets in many cities coupled with continued low-inventory.

I see a few different versions of the statistics having been in the real estate market for more than two decades:

  • Housing purchases are strong when there is a collective feeling that the marketplace is stable or expanding as traditionally housing costs have kept up and usually exceeded inflation making one’s residence a wealth builder. Are people renting due to lack of for sale housing inventory? Or due to uncertainty about where housing prices go from here?

 

  • When monthly rental expenditures exceed those of a mortgage for-sale housing usually receives a boost as a mortgage allows one to purchase with leverage and take advantage of various attributes of home ownership including building of equity, tax deductions and potentially additional leverage i.e. HELOC versus a rental which offers none of those attributes.

 

  • While driving around the most in-demand neighborhoods in Denver the new apartment buildings are all around from Cherry Creek to Country Club Towers, the former CU Health Sciences Center to Golden Triangle/Speer Boulevard corridor. However many of those buildings are now offering incentives to entice leasing activity usually in for form of a month-free or other compensation.

I honestly do not know what to make of the market conditions. While are equity markets continue to make new highs it seems C-Level executives are sounding cautious and already raising concerns about future earnings.

If our economy is so strong why have interest rates not risen? Historically low interest rates are an indicator of a sluggish economy in need to stimulation.

With mortgage rates still below 5% why is there not even higher demand for housing purchases or have housing prices so severely exceeded income levels that only those down-sizing or moving from a more expensive locale can afford to buy.

While I do not consider myself a pessimist, I too am sitting on the sidelines ensconced in a rental for the immediate future as inventory remains strained, prices to me see high i.e. I do not believe there will be appreciable equity growth in the next 3-5 years and the monies we have allocated for a future home seems to be doing better in the equity market versus the housing market…..only time will tell.

 

 

 

 

Is Recent Home Flipping Activity Warning of a Slowdown in the Market

While most of the country is enjoying an economic boom including housing which may be buoyed by low interest rates an interesting statistic crossed the wires last week: Home flipping in the U.S. has hit its highest rate since 2010*. The 49,000 homes that were flipped in 2019’s first quarter represented 7.2% of the total volume of sales.

Now before the other shoes drops please remember back to 2010, not even a full decade prior. The country was still in the depths of The Great Recession. Terms such as foreclosure, short sale, jingle-mail and so forth were in the daily vernacular of real estate brokers like myself. And many astute fix and flippers saw opportunity i.e. cheap homes, low-interest loans and potential opportunities once the market righted itself.

Ok, the other shoe: Despite the percentage increasing, the actual number of flipped homes fell by 8%, while the number investing in properties to flip declined by 11%. The median sales price of flipped homes was $215,000. With an average profit of $60,000, down $8,000 from a year earlier.

Now there could be many reasons for the down statistics above including lack of inventory, higher costs for materials and labor and so forth.  Yet let’s dive in a little deeper……

*Just over 49,000 single-family homes and condos were flipped in the first quarter of 2019; according to a recent report by real estate data firm Attom Data Solutions.

These homes comprised 7.2% of all home sales nationwide during that time period, representing the highest home-flipping rate since the first quarter of 2010. However do not consider this an indicator that the market is all peaches and cream…..

The number of homes that were flipped was actually down 8% from the previous year to a three-year low. And the number of investors engaging in home flipping has dropped 11% over the past year. Add to this the gross flipping profit was $60,000, down $8,000 from a year earlier to a three-year low. The take-away while home-flipping activity is increasing gross profit and Return on Investment (ROI) is decreasing.

Some brokers who work in this niche of the market are wondering if investors/fix & flippers are watching as their profit margins drop, time on the market increasing i.e. longer time on the market, most costly to hold have decided to sell now with the assumption that demand and thus prices will continue to weaken.

What is interesting as I noted a few weeks ago interest rates are at 18 month lows YET housing activity for which we are in what is historically the most active season is not increasing.

I have three additional comments concerning what I believe will be a soon to be upon us slowing market and one that may actually witness price drops.

First is the cooling of the luxury market across the country. In NYC we have witnessed a glut of luxury condos coming on the market and buyers sitting on their hands. Not only in New York City but also in Miami and throughout the country. Of note the first signs of positive indicators concerning climbing out from The Great Recession was the astute buyers acquiring luxury homes usually for cash that had been severely discounted.

Second is the influx of the iBuyers, the tech firms using algorithms to make instant home offers are proliferating across the country. Zillow in particular, has said it is investing more money into its home-buying and flipping operation, Zillow Offers, which launched last year. Yet here in Denver so far the short-term iBuyers have not been so successful. The following articles from BusinessDen are most insightful:

Third is the proliferation of the reduced fee brokerage signs I am witnessing and new entries into the market i.e. Rex Real Estate and others. The proliferation of signs from Redfin, Trelora and others may suggest strength in the market i.e. go the lower-cost option as the market is strong. I see the opposite i.e. as the market weakens and profit margins retreat sellers may opt for a lower-cost brokerage option to increase their already shrinking margins.

As many readers of my blog know we have been looking for out next home as well. In discussion with our financial planner we have decided to put that on hold for the immediate future as prices seem inflated and shorter-term upside seems limited. Yes we are long-term owners and can take advantage of low interest rates. However historically low-interest rates are indicative of a market needing a growth catalyst, thus personally I believe there are better options for our capital concerning the immediate future.

Of note I am not sure if I will be posting on Monday July 1st, 2019, may actually take a few days of personal time off.

 

Neighborhood Identification Does Matter in our MLS and Online Distribution Channels

Last Monday I was preparing for a showing for a client, 3 homes on the same block in the Washington Park neighborhood. The three homes, two Bungalows and one English-Norman Cottage are all similar in size. The homes range from $620,000 to $825,000.

Let me disclose the listing brokerage, a firm that markets reduced cost has been notified of the error.

However what was curious was one particular listing 435 S. University Blvd. The home looks spectacular i.e. a renovated bungalow. While the master bedroom is in the basement which is not uncommon for bungalows which have not been popped the master includes a very nice en-suite bathroom and the majority of the basement is finished.

I then looked at the listing history as follows:

  • 5/30/2009: Sold for $390,500
  • 9/08/16: Placed on market asking $675,000
  • 9/26/16: Price Reduction to $595,000
  • 5/30/17: Listing Expired
  • 5/15/19: Placed on market asking $649,000

Thus the home has been on and off the market for over 2.5 years, it happens, yet one issue arose for which I have notified the listing brokerage, the neighborhood/locale for which the house is located is identified as Cory-Merriell. HOWEVER, the house is actually located in the Washington Park neighborhood!

The following is the email I sent to the brokerage when I spotted the error:

Just a courtesy….concerning your 435 S University Blvd listing (which I am showing later this afternoon) the neighborhood is actually Washington Park.

On MLS you have the listing neighborhood as Cory-Merriell. However Cory-Merriell’s northern border is Mississippi Ave i.e. 5 blocks south AND Cory-Merriel western boundary is on the east-side of University Blvd and your listing is on the west-side of University Blvd.
While an oversight may be missing potential buyers looking for Washington Park.
In this day and age of Internet Marketing and distribution channels that exceed triple digits it is of utmost importance that the information presented in the MLS which provides the information to those distribution channels is correct. Granted if searching by address not an issue HOWEVER if searching by neighborhood who knows how many lookers missed 435 S. University due to this seemingly minor error.
The Response: Noted, we appreciate the heads up.

The reality is white geographically the neighborhoods are almost adjacent i.e. 5 blocks concerning their eastern and western borders, the neighborhoods are vastly different from home styles to demand and pricing. Thus a serious error.
Locally the Denver Metro MLS aka www.REColorado.com does offer drop-down menus for neighborhoods and they can be over-ridden. An example, the condo complex Monaco Place is technically in the Hampden neighborhood however with 200+ units and a large multi-square block parcel many brokers will identify the neighborhood as Monaco Place. However to confuse Washington Park and Cory-Merriel may have truly impacted the marketing of the listing.