Its Official – Denver’s Real Estate Market has Hit Bottom!

This statement is accurate for homes priced in the under $350K range. How do we know this? The numbers tell us. Several factors play into the rally. Low interest rates, the First Time Home Buyer Tax Credit, pent up demand among Sellers, and a shift in the composition of distressed property sales to name a few.

REO volume, after strong gains for four years, is running at 2007 levels so far this year. REO volume, Jan-July, declined 31% between 2008 and 2009 and in June of 2008 hit an all time high of 1300 bank owned closings. As of Q1 2009 that number has plummeted to just above 600. Short Sales are on the rise from a low in January of 2008 of about 95 up to just under 400 in July 2009.

This recent run-up in foreclosures and short sales mirrors Denver’s last foreclosure boom. Last time (which peaked in 1988 at 3.8% of Denver homes in foreclosure), it took four years to fully recover from the foreclosure hangover. This time the peak came in 2008 at 3.5%.

And even though overall sales volume is still down, average detached-single-family property discounts have been trending up (2.7% discount) for regular homes, but have declined dramatically (-.5% discount) in recent months for foreclosure properties. REO homes under $185K are increasingly selling at a premium, not a discount, if they are under contract in less than 5 days (selling at premium of 8.5%). Intense competition and multiple bids are driving up prices. A strong sign that we are have hit the bottom and are on the rise.

What’s next for home prices? Our Guesses for 2009:
• Higher price points will have more REO activity
• Inexpensive homes under $200K will appreciate
• Mid-Priced homes $200-$350K have much less REO activity, sales volume has held steady in many areas and might continue in 2009
• Near-Luxury homes $350-$1MM with more than 12 months of inventory is a Strong Buyers market and prices will come under pressure for the few sellers that must sell
• Luxury homes ($1MM+) is a train wreck with over 60 months of inventory this will be the last segment to recover.

Real Estate Code of Ethics

Colorado is unique in so many ways - from the natural beauty of the Rocky Mountains to our beer brewing Mayor, John Hickenlooper. One of the most powerful differences is the way we do real estate. Yesterday I had the opportunity to take the National Association of Realtors® Ethics class. Here are a few of the things I learned:
- Our real estate Commission was voted #1 in the country for 9 years running.
- The NAR Code of Ethics & Standards of Practice contains 17 Articles outlining a code of conduct and establishes obligations that maybe higher than those mandated by law. These guidelines are geared to protect the consumer.
- Colorado is 1 of only 23 states in the nation with true Buyer Agency Relationship agreements. When I bought my first home in 1987 I was more than a little surprised to discover that even though I had a Buyer’s Agent, my agent in reality worked for the Seller as a sub-agent.
- Of the 41,000 real estate agents in Colorado only 24,000 subscribe to the NAR Code of Ethics. So the next time you buy, sell or invest in real estate make sure your agent has taken the Realtor® pledge.

I PLEDGE MYSELF
To protect the individual right of real estate ownership and to widen the opportunity to enjoy it;
To be honorable and honest in all dealings;
To seek better to represent my clients by building my knowledge and competence;
To act fairly towards all in the spirit of the 
Golden Rule;
To serve well my community, and through it my country;
To observe the REALTORS® Code of Ethics and conform my conduct to its lofty goals.

Great class Wally. Thanks for being a brilliant teacher!