If at First You do not Succeed Re-list

While I do not necessarily believe the following quote is attributable to Einstein in the context of this blog I find it most appropriate:

Insanity: doing the same thing over and over again and expecting different results.

I use the above quote concerning the some aspects of the real estate market in Metro Denver that I am witnessing. To distill the niche of the market for which this quote is appropriate are the select listings which come on the market, do not sell, are withdrawn or expired and come back on the market at the same or higher price.

Here are just a few select examples:

100 Lafayette Street: A sprawling 2-story post-war suburban style home in the desirable Country Club neighborhood on an expansive lot.

  • 4/2/16           Listed at $1,350,000 – subsequently withdrawn or expired
  • 3/9/17           Listed at $1,300,000 – subsequently withdrawn or expired
  • 5/18/17        Listed at $1,300,000
  • 6/6/17           Price Adjustment to $1,280,000
  • 7/18/17        Price Adjustment to $1,250,000 – subsequently withdrawn or expired
  • 3/18./18        Listed at $1,250,000

As of today this residence will have been on and off the market for two calendar years. During that time, while there has been a $100,000 price reduction or approx. 8% the residence continues to search for a buyer. Yet the pricing over the past year has remained static. Yes, one may argue inventory for the neighborhood continues to be challenged and just waiting for the correct purchaser i.e. one who desires a larger home at a below comparable PSF pricing. I will continue to watch as while the residence has many positives i.e. finished square feet and larger lot. However being adjacent to 1st Avenue, even with a sound/privacy wall will be a challenge for many prospective buyers (I know the challenges;  I have transacted residences along the 200 Block of Colorado Boulevard).

600 High Street: A sprawling large brick potential duplex configuration situated on a coveted 100’ x 125’ lot. Personally I have had my eye on this one for potential redevelopment HOWEVER I too cannot make the numbers work (due to pricing, location adjacent to 6th Avenue and Historic District inclusion) yet its pricing history continues to baffle me:

  • 8/26/14:       Listed at $1,495,000
  • 8/26/15:       Price Adjustment to $1,445,000
  • 11/20/15:     Price Adjustment to $1,395,000
  • 1/9/16:          Price Adjustment to $1,345,000 – under contract and active again
  • 4/8/16:          Relisted at $1,150,000
  • 10/8/17:       Price Adjustment to $1,250,000 (yes adjusted upward)
  • 10/27/17:     Price Adjustment to $1,150,000 (1.5 years to get back to that price)
  •                       -Status to under contract multiple times and falls through
  • 12/11/17:     Price Adjustment to $999,000 (under contract and falls through)
  • 3/23/18:       Relisted at $999,000

At present this residence has been on and off market for 3.5 years. While there had been a substantial price reduction from the original $1,495,000 to a more realistic $999,000 the home has still not sold. I will not get into the details of Time Value of Money and Inflation. Yet I will suggest the history of this house seems to repeat itself, look at the sales history:

  • 7/13/1995:   Sold for $670,000
  • 2/20/1997:   Sold for $670,000
  • 6/15/2002:   Sold for $625,000

Thus between 1995 and 2002 the home actually lost $45,000 (more if factoring in inflation) and now with 3.5 years on the market continues to look for a buyer. While there may be a buyer willing to pay $999,000, when considering in inflation and rising interest rates is it worth the wait coupled with maintenance and carrying costs including real estate taxes.

140 S Claremont Street: This is a home I have watched as I walk by weekly when looking at opportunities in Hilltop. With its coveted location within 2 blocks of Graland as well as Cranmer Park coupled with great curb appeal I have literally watched this home bounce around concerning pricing as follows:

  • 6/15/16:       Listed at $2,375,000
  • 8/30/17:       Price Adjustment to $2,275,000 – Subsequently withdrawn
  • 1/12/17:       Listed at $2,275,000
  • 4/10/17:       Price Adjustment to $2,175,000
  • 6/14/17:       Price Adjustment to $2,075,000 – Subsequently withdrawn
  • 8/7/17:          Price Adjustment to $1,999,000
  • 10/4/17:       Price Adjustment to $1,900,000 – Subsequently withdrawn
  • 4/1/18:          Relisted at $1,950,000

During its almost two years on the market there were multiple price adjustments coming down to $1,900,000 in October 2017 only to be placed back on the market in April 2018 at $50,000 more. Again, I understand spring selling season yet I guarantee you any good broker representing a buyer will review the history of the listing and share with their client before making an offer.

Back to the definition of insanity. While I am not suggesting the above examples are insane. I believe it is more a function of the market or the PERCEPTION of the market i.e. unabated demand, low supply and continued low interest rates. Yet the markets are a changing i.e. interest rates are ticking up, inflation is on the horizon and the equity markets are buoyant yet the charts are showing a downward trend from their peak i.e. 10% off the high of 3 months ago.

I do not fault the brokers or their clients i.e. the sellers…..this has happened to yours truly!

My awakening began in 2012; the market has just experienced the Great Recession and was beginning to show signs of activity. I will not disclose the address of the residence as it has since been sold and closed, however the neighborhood is the NW quadrant of Cory-Merrill.

The house a pop-top (first and to this day the largest on the block) sold after renovation in October 2005 for $810,000. While 1-2 years before the peak of the market the buyers in retrospect over-paid for the residence based on the opinion of myself and other brokers. In addition to purchasing the house for $810,000 the buyers added an additional $40K in interior cosmetic upgrades while neglecting the rear-yard (usually a strong selling feature for most buyers), thus in their house for $850,000 in 2005 Dollars.

I was contacted in early 2012 about listing the residence. The sellers planned on retiring and relocating beyond Denver. I visit the residence with a peer broker armed with comparable sales data. My co-broker and I confer and suggested based on empirical data i.e. sales comps an asking of $715,000. Now the saga begins; per the seller’s request the house is listed in April 2012 for $819,000! Yes, $819K or $100K+ over what we suggested.

  • 4/25/12:       Listed at $819,000
  •                      -3 weeks, one showing off an open-house.
  • 5/15/12:       Price Adjustment to $739,000
    • -Seller still believes this is the eventual selling price dismissing our $715 suggestion based on verifiable comparable’s one month earlier.
  • 9/30/12:      A mutual termination concerning the listing and I am thankful as endured  50+ showings and not one single offer.
  • 10/4/12:       Relisted with another broker for $739,000
  • 11/2/12:       Price Adjustment to $725,000
  • 12/14/12:     Sold for $710,000

In addition to the $100K loss i.e. $810,000 paid in 10/2005 to the $710 paid in December 2012 over the 7 years, during my 10 months as broker the seller’s paid in excess of $40,000 in mortgage and carrying costs only to sell the residence for what my peer and I suggested 10 months earlier.

On a more technical basis, here are the inflation adjusted #’s: The $710,000 in 2005 was actually $834,673 in 2012 Dollars, thus their real dollar loss was closer to $225,000.

The lessons are simple:

  • For sellers, even in a hot sellers market be realistic.
  • For brokers, while a listing may look attractive, if it does not sell, it is a challenge both financially and psychologically for all parties.
  • For buyers, trees do not grow in the sky, they need soil and moisture.

Finally from Wall Street: “Do not fight the tape”…..the DJI is off 10% from its high of 26,616, trading at 24,037 as of this posting, interest rates are going up per the Federal Reserve Minutes, inflation is an actual concern on the horizon and wages while ticking up are still considered stagnant.

My humble suggestion, price correctly and sell immediately, the market conditions known as Goldilocks can change to Papa Bear in a moment’s notice.

Sell like its 2016 not 2005.

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Gyrations can Happen in the Housing Market as Well

The whipsawing of the equities market over the past few days has been challenging for many with the assumption the market will continue to rise. When the equity markets settle the forensics will probably blame a combination of leverage and obscure volatility index trades as the culprit.

Yet what about our Denver housing market?

Earlier this week I posted an article from CNBC concerning a home in Denver listed at $500K, which generated 100+ showings over the weekend. The issue haunted me as 1) at $500K still above the average cost of a home in the metro area, 2) with such interest are prospective buyers chasing a commodity versus a home i.e. low inventory, high-demand and 3) hindsight can be most appreciated.

Concerning hindsight; I take evening walks. Lately I have been keeping an eye on a home close to my residence. In the interest of privacy I will not disclose the address however I will share the following:

Neighborhood: Strong, desirable for families within the City and Country of Denver, well-respected public elementary and middle schools as well as a popular private school.

Street: Literally on the border of the neighborhood, on a minor arterial i.e. two-way, but one-lane in each direction. The street dead-ends about a mile north so not a major arterial mostly neighborhood oriented traffic. Within two blocks of a neighborhood oriented commercial low-scale retail development and within 4 blocks of a neighborhood park, all amenities.

The Residence (From Public Remarks): Amazing home in _________ under $600K!! Don’t miss out on this incredible opportunity to live in desirable ________. This beautiful brick bungalow has an updated kitchen with breakfast bar, seating area, and stainless steel appliances. Bright living room with wood burning fireplace and coved ceilings on the main floor and another large family room in the basement. Home has fabulous refinished hardwoods and a large master bedroom. Large backyard with deck and covered front porch. Ample amounts of storage in the laundry area as well as the garage and attached shed. Walking distance to great restaurants, amazing parks, and one of the top-rated elementary schools in Denver. 4th Bedroom in basement is non-conforming.

Style: Bungalow, pre-WWII Construction

Size: Approx 1,100+ SF Main Level, 1,100+ SF Fully Finished Basement

Configuration: 4 Bedrooms/2 Bathrooms

Garage: 2-Car

Lot: 6,750 SF

Now the Pricing History: Please note I am just using month and year to retain some privacy. Of note during its history dating to July 2012 from the images associated with the listing there was no major exterior or interior renovation that I could ascertain.

  • Jul. 2012:       Placed on market for $450,000 / 30-Yr Interest Rate: 3.55%
  • Sep. 2012:      Price reduction $450,000 – $425,000 / 30-Yr Interest Rate: 3.5%
  • Dec. 2012:      Expired, taken off market NO SALE

——————————————————–

  • Jun. 2015:      Placed on market for $492,000 / 30-Yr Interest Rate: 4.05%
  • Jun. 2015:      Taken off market NO SALE

———————————————————-

  • Jul. 2015:       Placed on market $519,000 / 30-Yr Interest Rate: 4.05%
  • Aug. 2015:     Price reduction $519,000 – $498,000 / 30-Yr Interest Rate: 3.91%
  • Sep. 2015:      Price reduction $498,000 – $475,000 / 30-Yr Interest Rate: 3.89%
  • Jan. 2016:      Sold and Closed: $445,000 / 30-Yr Interest Rate: 3.88%

__________________________________________

  • Jan. 2018:      Placed on market for $600,000
  • Jan. 2018:      Price reduction $600,000 – $585,000
  • Jan. 2018:      Price reduction $585,000 – $575,000
  • Feb. 2018:      Price reduction $575,000 – $565,000 / 30-Yr Interest Rate: 4.38%
  • Feb. 2018:      Goes Under Contract

In the above example between 2012 and 2016 one could argue the value did not change. While our collective memories can be subjective; in 2012 we were finally seeing viable sprouts post Great Recession yet it was not until 3.5 years later that the original asking price of $450,000 ($483.182 in 2018) from July 2012 was realized i.e. sold and closed Jan 2016 for $445,000 ($457,000 in 2018).

Now the home is back on the market. From Jan 2016 when the house sold for $445,000 and was placed back on the market last month for $600,000 or basically a 35% gain in two (2) years.

Now granted at the last asking i.e. $565,000 the potential gain is 22%. Yet from July 2012 to January 2016 one could argue there was no gain or most likely the market gained yet the listing was overpriced to when listed in 2012.

Now for some history. Going back to the days before the great recession:

  • 6/1993:         Closed for $120,000 ($204,725 in 2018) / 30-Yr Interest Rate: 7.21%
  • 10/1995:       Closed for $156,000 ($252,347 in 2018) /30-Yr Interest Rate: 7.64%

In the two year period noted above the house appreciated by 30%

The sellers of the house I believe desire to repeat history i.e. within a 2 year period asking for a 22% gain.

The following is added on Feb 7, 2018: In reviewing MLS this morning a classic Mid-Century Modern listing expired. Asking is $1.5M. A beautiful renovation/update as I remember viewing the residence when it was for sale in 2009 sold for $610,000 ($700,949 in 2018). Even more to my surprised I pulled the Chain of Title, the same home sold in 2004 for $629,000 ($820,876 in 2018). Thus in 9 years the home lost $19,000  (during which time  the local economy went from exuberance to recession). That same house was most recently listed at $1.5M. Considering the renovation and factoring for inflation $1.5M while high is not necessarily irrational yet the market has spoken i.e. 85 days on market and no sale. The prior sale in 2009 the home was on the market for 562 days or over 1.5 years! As a wise professor once said off the cuff “History does repeat itself

The question is are such gains sustainable or are we on the verge of irrational exuberance concerning housing prices?

The average price of a single-family home sold in 2017 reached $480,140, an increase of 8.7 percent from 2016. The median sold price, the point where half the homes sell for more and half for less, was $410,000, an increase of 7.9 percent.

Condo prices rose even more on a year-to-date basis, hitting an average sales price of $318,904 in 2017, up 10 percent from 2016, with a median sales price of $270,000, up 12.15 percent from 2016. This is not to be unexpected i.e. affordability both in sales price and overall upkeep.

Yet concerning incomes, the average salary in Denver, Colorado is $60,370. As of Q4 2017, the trend in wages is down 0.3 percent. The cost of living in Denver is 12.1% higher than the national average.

And why am I concerned?

  • Average salaries are not keeping up with housing costs.
  • Building permit activity has been most active in rental housing a market many believe had peaked in 2017 and with new construction continuing a potential glut coupled with lessening demand.
  • Lower interest rates may be permitting more leveraging. Yes borrowing standards have tightened YET there are still loans with just 3% to 5% down. Thus if the housing market cools there is the possibility of residences with negative equity.
  • Real Estate Taxes may increase. As assessor data is complied every two years the increase in underlying valuations will translate to higher tax bills.
  • The Goldilocks Economy: We came out of a deep recession with some caution, which seems to have dissipated as the economy continues to expand. Yet with expansion comes higher interest rates (as the Federal Reserve hopes to keep inflation in check) and partially what spooked the equity markets.

Equities are liquid and thus volatility with such liquidity can be expected. 5% moves in the Dow Average were not uncommon over the past 20 years. While housing values in general do not fluctuate I would argue the uptrend is flattening and to proceed with caution.

As the example above illustrates timing can be important. If one is purchasing today for the long term i.e. 5-7 plus years or longer I would not necessarily be concerned especially if able to lock in an attractive interest rate.

However if one assumes the market will only continue to go up, continue to exceed inflation and generate oversized returns year after year…..just remember negative equity, short sales and foreclosures are in the rear-view mirror and could be accelerating.

Remember Goldilocks needed a nap as well.

Mad Men Personified in Hilltop Listing

I am always on the look out for the unique, interesting and overall conversation worthy. While mid-century modern has been in vogue for the last 5-10 years and of course the Krishna Park neighborhood of Denver is full of mid-century gems, I recently ran across a listing in the Hilltop neighborhood, another repository for mid-century modern homes.

280 S. Grape Street would easily be transplanted to the Hollywood Hills. With its open floor plan, geometric design, large plate glass windows and sprawling land area, the home was and continues to evoke the ethos of the blending of the indoor/outdoor lifestyle.

With over 4,000 finished SF and a large 9,000+ SF lot, some lucky buyer will truly enjoy what is definitely one of the finest examples of a mid-century designed home within the Hilltop neighborhood. From the beamed ceilings and kitchen layout,  one could easily see Julius Shulman and his box camera shooting the interior and exterior.

Granted the location just north of Alameda Avenue may be a deterrent to some prospective purchasers. However from experience (and having an Arquitectoncia designed residence backing to Colorado Boulevard), there are always tradeoffs. While Alameda does carry traffic with well designed plantings along the south property line coupled with the north oriented yard, the next owner will be the envy of many mid-century modern fans.

Bring the high-ball glasses, the bar cart, some narrow lapeled jackets and blast some Etta James on vinyl via some  AR speakers and I will bring the appropriate cocktail snacks.

At Opportunity Knocks at #1 Colorado Boulevard

For years I have walked by #1 Colorado Boulevard, a stately 2-story brick home on a corner lot. Dominating the NWC of Colorado Boulevard and Ellsworth Avenue, the stately residence dates back to 1939 when Colorado Boulevard was a prestige street. Of note directly across Colorado Blvd at 4001 East Ellsworth Avenue is the original home of one of the founders of the law firm Holland and Hart.

Before World War II the two structures must have been most impressive, located at the pinnacle of a hill moving north from Alameda Avenue. The Hilltop side home has been renovated and is presently an impressive single-family residence.

The future of 1 Colorado Boulevard is more uncertain. Presently configured as two residences with separate electrical meters it is being marketed as a redevelopment opportunity including the complete razing as the present zoning allows townhouses of 3 stories in the site.

The location would allow for phenomenal views over Cherry Creek and the greater valley to the south. While Colorado Boulevard will be a deterrent for many prospective buyers; if I had the financial means I would consider converting back to a stately single-family residence and updating to compensate for the location i.e. place triple-pane glass in the windows, build a sound wall on the east-side of the lot and so forth.

The asking is $600,000 which I believe is correct considering the size of the residence and the lot. Granted the residence is being sold “as-is” and I would assume needs a full interior renovation. Of note the last sale dates back to 1971 when the residence sold for $94,900 ($274,000 in today’s dollars).

For the astute buyer with a vision, to be able to purchase 3,900 SF with four(4) bedrooms and four(4) baths; while not necessarily a fix and flip, with a longer-term vision, a viable option at a below market valuation.