Our very special Denver real estate market... as told by the media!

These are very special times in the metro Denver real estate market. Home prices are up, rents are up, inventories of homes both for sale and rent are low and our future outlook continues to look great. We talk about some aspect of real estate every month in this Newsletter but sometimes I think it can be hard to realize just how terrific our real estate market is without taking a step back and looking at the big picture. A great way to do this is to check out the recent press headlines and review the real estate news about our local market. In a word, it is amazing!

Denver back at No. 1 for home-resale price gains

“After trailing San Francisco for year-over-year home-resale price gains in July, Denver tied with the California city for the top spot among 20 major U.S. metro areas. For six of the last eight months, metro Denver saw the biggest one-year gains out of 20 major U.S. markets in the price of detached single-family homes, according to monthly data from the closely-followed report series from S&P Dow Jones Indices and CoreLogic. Other than Denver and San Francisco, no other metro area out of the 20 tracked in the Case-Shiller report series scored double-digit percentage year-over-year price gains. Denver's Case-Shiller home price index reached an all-time high of 172.82, topping July's reading of 171.31. An index reading of 172.82 means that local home resale prices averaged 72.82 percent higher than they were in the benchmark month of January 2000, according to the Case-Shiller report series, based on non-seasonally-adjusted data.”

Denver Business Journal

10/27/15

Denver County home sellers make out big in Q3

“Home sellers in Denver County made out big in the third quarter, where sellers sold for an average of a 41.5 percent gain over what they originally paid. That's according to research conducted by California housing data company RealtyTrac, which placed Denver County at No. 6 in the country for highest percentage sales gains. In September, RealtyTrac said Denver home sales were on pace to set a 10-year record, and median selling prices in Denver set an all-time high this summer.”

Denver Post

11/5/15

 

 

Condos appreciating more than single-family homes in Denver

“Condos in Denver have appreciated nearly 20 percent over the past year, which is nearly four times the national average and well above the single-family home appreciation rate in Denver. According to Seattle online real estate company Zillow, single-family homes in Denver have appreciated 15.9 percent over the past year, while condos have appreciated 19.7 percent. The yearly 15.9 percent increase in Denver single-family home appreciation was the biggest jump in the country while the 19.7 percent annual increase in condo appreciation was the second-biggest jump in the country, trailing only the Dallas-Fort Worth area, which recorded a 20.1 percent annual increase in condo appreciation.”

Denver Business Journal

10/27/15

 

 

 

How does Denver rate among nation’s best places to own a home?

“Where's the best place in the country to own a home? Right here in Denver, according to a new report. Porch.com and Redfin created the new list, based on a survey of about 10,000 U.S. homeowners in 67 markets, and using criteria including: healthy living, commute, climate, educational opportunity, economic opportunity, resident satisfaction, walkability, security and safety, real estate confidence, and tax fairness. Denver did the best, ranking No. 1 in the country, in the categories of health living and climate, and coming in No. 2 in resident satisfaction.”

Denver Business Journal

11/9/15

 

A small Colorado city is rated 2nd best in U.S

“There's a city in metro Denver where housing costs are affordable, home-ownership rates are high, cost-of-living is comfortable, education and health care are sound and quality of life ranks high. And that place is Littleton — the second-best small city in the U.S., according to a new WalletHub study.”

Denver Business Journal

11/3/15

 

 

Metro Denver city named one of 5 best places to live

“It wasn't but a few days ago that a new study named Littleton the second best small city in the country. And that place is Littleton — the second-best small city in the U.S., according to a new WalletHub study. Centennial is the No. 4 best place to live in America, according to a new 24/7 Wall St. report that uses data from 550 U.S. cities with populations of 65,000 or more to determine the best.”

Denver Business Journal

11/6/15

 

 

Denver real estate market growth is fourth highest in U.S, says new report

“The Denver area residential real estate market experienced the fourth-highest increase in a new housing report. The Freddie Mac Multi-Indicator Market Index (MiMI) uses four indicators to track an area's residential real estate growth, including home purchase applications, payment-to-income ratios (changes in home purchasing power based on house prices, mortgage rates and household income), proportion of on-time mortgage payments in each market, and the local employment picture.”

Denver Business Journal

10/26/15

 

 

Landlords will love this: Denver is 4th-best city in US for owning rental property

“With its rapidly increasing property values, low vacancy rates and good long-term job prospects, Denver is the fourth-best market in the country to own rental housing real estate. Denver ranked high in categories such as vacancy rates (4.3 percent), property appreciation (11.61 percent), and job growth (2.94 percent). "Denver is once again one of the best housing markets in the country to own rental properties in, leaving All Property Management puzzled as to why it doesn't receive more national recognition as a real estate powerhouse," the company said in the second-quarter report.”

Denver Business Journal

10/28/15

 

 

Denver is No. 2 in the U.S. for real estate investment

“If you're looking to make money investing in residential real estate, look no further than Denver. That's because Denver's ranked No. 2 in the nation when it comes providing the best returns on residential real estate investment, according to a new study by online real estate company BiggerPockets. Residential real estate prices increased a staggering 13.4 percent year over year across the Denver metro region," BiggerPockets said in its report. It's been well documented in the Denver Business Journal that Denver's residential real estate prices this year have increased greater than any other market in the country.”

Bigger Pockets

10/15/15

 

 

Foreclosures: Colorado bucks national trend, sees big drop in filings

“If you are looking to buy a home in Colorado, the housing market had another squeeze in the third quarter with a drop in the number of foreclosures. That's according to RealtyTrac's latest Foreclosure Market Report for the state. Colorado, which ranks No. 37 among the states for foreclosures, had a 17 percent decrease in the number of foreclosure filings from the second quarter of 2015 and is down 15 percent from the same time last year.”

Denver Business Journal

10/15/15

 

 

Denver apartment, single-family home rents keep rising in September

“It's quite clear that rents in Denver have risen greatly in the past year, but by how much? Let's just say that Denver's in the top 10 in the country no matter who you ask and no matter what you're renting. Over at Altisource Portfolio Solutions S.A., its data released on Monday indicate that in the third quarter that ended at the end of September, the rents for single-family homes in the Denver Metropolitan Statistical Area rose 14.6 percent from the same quarter a year earlier. Denver's 14.6 percent rise for single-family house rents was the eighth-biggest jump in the country.”

Denver Business Journal

10/19/15

 

 

Single-family home rents hit new high in metro Denver

“Apartment rents in metro Denver might be on a tear, but single-family homes rents are rising even faster, according to a report from Real Property Management Colorado and RentRange. The average monthly rent on a single-family home with three bedrooms in metro Denver reached $1,998, a 13.9 percent increase from the third quarter of 2014 and up 6.7 percent from the second quarter.”

Denver Post

10/7/15

 

 

Denver is sixth-hottest US commercial real estate market: Report

“Denver is the nation's sixth-hottest commercial real estate market, according to a new report. Colorado was cited in the latest report for making important infrastructure improvements: "Public financing is a tough sell. Yet it can be done, as Colorado has demonstrated in passing bond referendums repeatedly." The report continued: ‘Denver has taken advantage of a location and a culture that are attractive to a qualified workforce and exposure to growing technology industries. ... The overall outlook of good to excellent is led by a strong perception of investor demand, the strength of the local economy, and capital availability.’”

Denver Business Journal

10/8/15

 

 

 

 

 

 

 

 

 

 

An Open Letter Response to the Denver Post - Denver's in the Danger Zone?

        The Denver Post published an article on Dec. 9th called “Denver housing market enters danger zone, economists say” suggesting the housing market in Denver has peaked and is heading for a downturn and many of you asked what our reaction to this is. Some of your clients are worried and hesitating to buy and you’re looking for a reaction. Here are two quick thoughts:

1.      It’s important to remember that the job of the Denver Post is to sell newspaper advertising which means they have a large incentive to write intriguing copy which may or may not make any sense at all. Our job is to give our clients thoughtful, professional advice. They are two very different things. Anyone who makes a decision to buy or not buy a home based on an article in the newspaper needs lots and lots of help better understanding the real estate market, something we’re very good at.

2.      Nobody can perfectly predict the real estate market. Nobody! Not the Fed, not the big banks, not Wall St., and certainly not the Denver Post. And we can’t either. All we can do is assemble the copious and relevant data and try to make some sense of it in order to advise our clients. Choosing a single metric as the Post has done and trying to predict a downturn is at best misleading, at worst downright scandalous.

Will we have a correction “in the months and years ahead” as the Post speculates? Sure. Someday the market will peak and start to settle down. But I don’t think it will happen for a number of years for several reasons, such as:

1.     Even with the increase in metro Denver home prices the Housing Affordability Index is still well above the rate it was during the last upturn in the market between 2002 - 2006. The HAI is the median price of a home compared to the median income, taking into account the prevailing mortgage rate. So, given that homes are still relatively affordable given median (and, by the way, increasing) wages and low interest rates, we haven’t entered bubble territory.

2.     The number of transactions relative to the population of metro Denver is just about at the 25-year average. At the peak of the bubble in 2006 the number of deals was about 20 percent percent above the historical average. When we see the number of closed transactions well above our historical average that’s an indication to me of an overheated market, as it was in 2006. We’re nowhere close to that.

3.      As we led up to the last bubble in 2006, many of the deals were closed with low or no documentation ("liar loans” or “no doc loans"). Today, mortgage underwriting standards are the toughest they’ve been in decades. This prevents unqualified buyers from purchasing property, which mitigates the chance of the market overheating (fewer buyers means fewer purchases means less chance of the market frothing into bubble territory like it did in the past).

4.      Because of reasonable home affordability it’s still cheaper to buy than rent in our market, especially at the lower end. This would not be true in a bubble. For housing price affordability to return to the average level that we saw in the years between 2002 and 2006 either home prices would have to increase an additional 20 percent or interest rates would need to reach 6 percent. Neither is going to happen any time soon.

5.      The imbalance between buyers and sellers we’ve seen recently in our housing market is due to a lack of inventory, not illogical/unrealistic/unsustainable demand from buyers. This imbalance is a logical correction from the past downturn years when we had too FEW buyers in the market. This is how markets are supposed to work, moving in cycles and always regressing to the mean over time.

6.      Rising mortgage rates will help to temper the possibility of a bubble as well. So the positive side of a rise in mortgage rates is that it will reduce the number of buyers and therefore reduce the chance the market will rise out of control and end up collapsing in a bubble.

Here are a few metrics I watch closely to look for signs of a weakening housing market:

- Housing inventory. When the inventory of homes for sale rises, supply will begin to balance with demand and slow the price increases. We’re still at record-low inventory so I don’t expect to return to a balanced market for several more years.

- Number of homes sales. If we see a spike in homes sales (most likely due to increased inventory of homes coming on the market) we can expect a slowdown in the housing market to follow just as we saw after our home sales spiked in 2006. At this time, we are right at the 30-year average of homes sales/year/capita which tells me the market is not overheated.

- The economy. Metro Denver has a booming economy which is contributing to our strong housing market. If the economy begins to falter that will affect housing. I see no sign of that happening anytime soon.

- Interest rates. Low interest rates have contributed to relatively high home affordability, continuing to help the housing market. If interest rates spike that will decrease affordability. But no one can predict interest rates and trying to do so is simply a waste of time.

          For these and many other reasons I believe our market will continue to be strong for the foreseeable future, but of course it can't grow indefinitely. Since the inventory of homes for sale is still extremely low I think the demand will still exceed the supply for the next 3-4 years and prices will continue to rise for at least the next few years. No bubble on the horizon yet. Stay tuned!

How many properties do you need to retire?

I meet a lot of investors who say that their primary reason for investing in real estate is to build passive income so they can retire someday. But when asked what income they need or how many properties they need to retire, most investors don’t have a clearly defined goal. After seeing this pattern in a number of investors, we set out to answer the question “How many properties do you need to retire?” I think you’ll find the answer, and surprising! Let’s start by looking at today’s market. We hear a lot of investors saying things like: “I can’t find a deal” “There are no properties on the market” “Everything is over-priced” “There’s no way an investor can make money in this market.”

We pulled out some recent transactions that we’ve closed for investors and analyzed them to see if they were good deals. To make this applicable to the average investor, we looked for deals that came straight from the MLS - no wholesalers, no door knocking, no direct mail campaigns, nothing fancy; just a regular property that was listed on the MLS for anyone to purchase. This home was a 3 bed/2 bath/1 car garage, 1250 sq ft. that we closed on for a client of ours in May of 2015. The property was found on the MLS. It had been on the market for 30 days before our client put in under contract. Price = $169,000 Property needed $3,000 in repairs Taxes = $886 per year Insurance = $900 per year Rent is $1,550 per month Investor put 20% down on a 15 year fixed rate loan at 4.125% Knowing all of these numbers we plugged the info in to our property analyzer spreadsheet and here’s what we found out. Total cost to purchase the property, closing costs, repairs = $42,047 Monthly cash-flow after accounting for expenses, vacancies, mortgage payments = $215 per month Cash-on-Cash Rate of Return = 6% Cap Rate = 8.7%

Now I know the first thing that a lot of investors will do is look at this and say: “$215 a month cash-flow??? I wouldn’t get out of bed for $215 a month!!!” But it’s important to look at the details. This investor opted for a 15 year loan, so instead of doing a traditional 30 year loan and generating “instant gratification” cash-flow of $568 per month, our investor looked at the long-term and determined that principal reduction and owning the property free and clear was more important than making an extra money right now. There’s no right or wrong answer, it’s whatever you decide as an investor. I think we can all agree that a 6% cash-on-cash return isn’t that great, but an 8.7% Cap Rate is solid for a decent property in a nice area in many markets, so let’s look at our analysis to see where this property goes in the long-term. Again using our cash-flow analyzer we took the analysis out to year 16 using the following assumptions: 5% annual rent increase 6% annual appreciation (80 year average for the entire U.S.) Expenses increasing at 3% annually Vacancy factor of 3% annually We feel that these estimates are pretty standard for most markets over the long-term but with the cash-flow analyzer you can adjust these variables yourself to come up with your own scenarios. What did we find in year 16? The principal balance on the loan is no $0 since the investor selected a 15 year term. You own it free and clear! Net cash-flow on the property is now $26,428 per year or $2,202 per month. Property value is now $288,000 and there are no liens on the property.

 On an original investment of $42,047 we are returning $26,000+ per year on an asset that is now worth 10 times our initial cash investment. That is a strong cash-on-cash return (greater than 60% annually). We’d say that this is a fantastic deal and the best part…. we didn’t do anything special to find this property. It was on the MLS for the taking, nothing tricky, nothing fancy, just a regular house with regular tenants. Back to our original question… How many of theses properties do we need to retire? The answer to that depends on how much money you need on a monthly basis of course. If you only need $2,200 per month then you might only need 1 property. But if you need $5,000, $7,000, $10,000 or more to retire comfortably, then you’ll need to have more than 1 property. Let’s say that you need an income of $80,000 per year or $6,600 per month, you would need to have 3 properties just like this one and at the end of your 15 year term; you would have your cash-flows setup and you would be ready to retire and relax.

Video: In-Depth Denver Real Estate Market Trends, 3Q 2015

Here is a detailed look at Denver market trends. If you are wondering about a bubble in our market or if it is too late to buy, Lon welsh and I have answers to your questions. Go fullscreen to see slides better. From our 3Q company meeting.

How to work in a strong seller’s market!

I’m frequently asked where the real estate market is headed and when we will get back to some kind of equilibrium. The truth is it’s extremely difficult to accurately predict the future but here’s what I know: Right now we are experiencing one of the strongest seller’s markets in our history and we’re a full six and a half years into this market recovery. The reason is simple: we have much more demand for homes (buyers) than we have supply of homes (sellers). What’s fascinating to watch is the dynamic build on itself. It looks something like this: 1. Buyers make offers on homes and continue to lose out to higher offers. 2. Buyers get increasingly frustrated and begin to get more aggressive with their offers. 3. The momentum builds on itself until we see what is occurring today, with multiple offers on a property the norm rather than the exception. 4. The multiple offer dynamic almost always bids prices higher than the original asking price. 5. The buyers that lose the bid learn from the experience and become more aggressive on their next offer. 6. Then back to Step 1, until the buyer bids high enough on a property to finally get an offer accepted. The result of course is the tremendously strong seller’s market we have experienced for the past several years. And this seller’s market is not going to change any time soon, at least not until we get back to some kind of balance in the market between buyers and sellers. I don’t see that happening for at least several more years. In the meantime, if you’ve thought about selling your home, now might be a great time to find out what the market is like in your neighborhood and see what your home is worth. It’s almost certainly worth more than it was just a few years ago. Drop me a line and I’ll put together a professional Competitive Market Analysis on your home so you have the data to make the right decision. Another question my potential sellers often ask is if they sell today, can they find a replacement home in time to move? In a market like ours this is a very good question. Fortunately, there are a number of things savvy sellers can do to take advantage of the seller’s market and put themselves in a good position when looking for their replacement home. Here are a few: 1. First and foremost, work with an experienced agent to write a strong, professional offer on the home you want to buy. In a dramatically competitive market like we have now, weak, poorly written, unprofessional, and bad offers just aren’t taken seriously. There is both an art and a science to writing a strong offer. Call me and I’ll explain more about how to write an offer that has a great chance of getting accepted. 2. Add a contingency clause to your contract to buy another home. The clause would say that you will close on the home you are purchasing once your own home sells. The problem with this is that it somewhat weakens your offer as many sellers don’t want to accept a contingency when they can sell quickly to the next buyer. But occasionally we do run across a seller that is in no hurry and is happy to wait for the buyer’s home to sell. 3. Lease the home you just sold from the buyer for a period of time while you are looking for your new home (this is called a lease back). Some buyers do not want or are not able to move into their new home immediately and this permits them to earn rent from you for the period of time you are shopping for your next purchase, a win-win situation. 4. Look into a new construction purchase. Builders are building as fast as they can in this market to keep up with demand and there may be inventory of completed or soon-to-be-completed homes that could suit you. 5. Arrange to stay with family or move into short-term rental housing until you find your next home. While not a perfect solution I believe it’s far better to inconvenience yourself for a short period of time than to settle for anything less than your dream home!

Awesome rent vs. buy tool!

Trulia built a great tool to help you determine whether it makes more financial sense for you to buy a home or rent. Check it out at http://www.trulia.com/rent_vs_buy. All you have to do is answer a few simple questions and the system tells you whether it makes more financial sense over the next seven years to rent a unit or purchase. As you see from the graphic you move the slide bar on the five questions back and forth to represent your situation and the model will tell you how much you will save by either renting or buying. Trulia put a huge amount of thought and research into this tool so I think it’s worth a couple minutes of your time to see what you can learn – you’ll really like it.

Big Updates in the Lending World

Ever since the mortgage meltdown of 2008, it seems like it has been impossible for buyers to qualify for new loans. Following the 2008 crisis and well in to 2011 it looked like every lender required 20 percent down, excellent credit, and outstanding income in order to qualify for a new loan. Most buyers felt they would never be able to meet these requirements. However, the most recent three years have started to bring some flexibility back to the mortgage market. More specifically, we’ve seen some outstanding developments over the last six months that are really exciting for buyers: - FHA reduced their annual mortgage insurance fee by 0.5 percent. This equates to a savings of $80 per month on a $200,000 home. - The minimum down payment for conventional loans has been reduced to only 3 percent. This means you can purchase a $200,000 home with as little as a $6,000 investment. - New down payment assistance programs provide either a grant or a repayable second lien for the majority of the down payment, requiring the borrower to contribute as little as $1,000. - Investment property loans are available with as little as 15 percent down, allowing many smaller property investors to get back into the market. If you’re considering buying a property and haven’t been prequalified yet it’s worth your time to speak with a loan professional and see what they can do for you.

Bubble or No Bubble?

As we near the end of the summer selling season our housing market continues to march forward. Every month since February has brought a record high average home price in the metro Denver area, with average prices approaching an astounding $425,000. Amazingly, half of all Denver's new homes for sale sell in six days or less, which is the fastest in the country. The latest Case-Schiller report says we have the highest 12 month price increase of any of the Top 10 Cities it tracks (Denver 10 percent price increase, San Francisco 9.7 percent and Dallas 8.4 percent). The strength in the market has been so pronounced that logical, informed people are beginning to ask whether we’re setting ourselves up for another bubble. Good question. While no one can ever predict the future with certainty, I see no evidence that we’re heading for a dramatic downturn in the real estate market any time soon. Here’s why: 1. Even with the increase in metro Denver home prices the Housing Affordability Index is still well above the rate it was during the last upturn in the market between 2002 - 2006. The HAI is the median price of a home compared to the median income, taking into account the prevailing mortgage rate. So, given that homes are still relatively affordable given median (and, by the way, increasing) wages and low interest rates, we haven’t entered bubble territory. 2. The number of transactions relative to the population of metro Denver is just about at the 25-year average. At the peak of the bubble in 2006 the number of deals was about 20 percent percent above the historical average. When we see the number of closed transactions well above our historical average that’s an indication to me of an overheated market, as it was in 2006. We’re nowhere close to that. 3. As we led up to the last bubble in 2006, many of the deals were closed with low or no documentation ("liar loans” or “no doc loans"). Today, mortgage underwriting standards are the toughest they’ve been in decades. This prevents unqualified buyers from purchasing property, which mitigates the chance of the market overheating (fewer buyers means fewer purchases means less chance of the market frothing into bubble territory like it did in the past). 4. Because of reasonable home affordability it’s still cheaper to buy than rent in our market, especially at the lower end. This would not be true in a bubble. For housing price affordability to return to the average level that we saw in the years between 2002 and 2006 either home prices would have to increase an additional 24 percent or interest rates would need to reach 6 percent. Neither is going to happen any time soon. 5. The imbalance between buyers and sellers we’ve seen recently in our housing market is due to a lack of inventory, not illogical/unrealistic/unsustainable demand from buyers. "Much of the price increases we are seeing are the result of rising demand among investors and homebuyers for a still-limited supply of homes for sale," said Anand Nallathambi, president and CEO of CoreLogic. This imbalance is a logical correction from the past downturn years when we had too FEW buyers in the market. This is how markets are supposed to work, moving in cycles and always regressing to the mean over time. 6. Rising mortgage rates will help to temper the possibility of a bubble as well. "History shows that a rapid rise in interest rates tends to have little correlation with home prices. Rather, rising rates are more likely to contribute to a decrease in home purchase volume," wrote Mark Palim in a Fannie Mae commentary. So the positive side of a rise in mortgage rates is that it will reduce the number of buyers and therefore reduce the chance the market will rise out of control and end up collapsing in a bubble. Here are a few metrics I watch closely to look for signs of a weakening housing market: 1. Housing inventory. When the inventory of homes for sale rises, supply will begin to balance with demand and slow the price increases. We’re still at record-low inventory so I don’t expect to return to a balanced market for several more years. 2. Number of homes sales. If we see a spike in homes sales (most likely due to increased inventory of homes coming on the market) we can expect a slowdown in the housing market to follow just as we saw after our home sales spiked in 2006. At this time, we are right at the 30-year average of homes sales/year/capita which tells me the market is not overheated. 3. The economy. Metro Denver has a booming economy which is contributing to our strong housing market. If the economy begins to falter that will affect housing. I see no sign of that happening anytime soon. 4. Interest rates. Low interest rates have contributed to relatively high home affordability, continuing to help the housing market. If interest rates spike that will decrease affordability. But if you’ve been reading this newsletter for years you know that no one can predict interest rates and trying to do so is simply a waste of time. Some day if interest rates move upward we may see an effect on the housing market but there’s no reason to believe that’s going to happen any time soon. For these and many other reasons I believe our market will continue to be strong for the foreseeable future, but of course it can't grow indefinitely. Since the inventory of homes for sale is still extremely low I think the demand will still exceed the supply for the next 24-36 months and prices will continue to rise for at least the next few years. No bubble on the horizon yet. Stay tuned!

Five Essential Things You Need To Know About Our Home Buying Market

This year has kicked with an array of experts trumpeting the Denver housing market's strength and resilience. Inventory is at record lows, home prices continue to rise, and foreclosure activity has ebbed to lows not seen since before the 2007 downturn. Spring and summer is the time for selling houses. The months of April, May, June, and July typically account for more than 40 percent of all housing transactions annually, thanks in large part to good weather. 1. Inventory shortages: "The story of the day is on the inventory front," stresses Lawrence Yun, chief economist of the National Association of Realtors (NAR). It's a sentiment echoed by many. The number of available homes in metro Denver has plunged to a record low, thanks to both an abnormally small supply of existing homes for sale and a dearth of new construction not keeping pace with the current demand. 2. Increased Competition: In addition to a dwindling supply of available homes, the number of buyers has surged. And not just traditional buyers - investors have comprised a sizeable chunk of the buyer pool since the downturn and continue to do so. Real estate investors are responsible for about 25 percent of the existing home sales each month. You, the prospective buyer, need to be prepared to move fast if you find a property you'd like to buy. "Buyers need to be patient because many will be outbid by others and might have to bid on multiple homes," cautions Jed Kolko, chief economist of Trulia. Yes, indeed. 3. Cash is Still King: Given the steep competition, all-cash buyers who can close a deal relatively quickly offer great incentive to sellers. "Cash will still be king if there are multiple bids because from a seller's view, they want a deal with fewer hiccups, "says Yun. My sellers are surprised to hear that about 30 percent of home sales each month are all-cash purchases. 4. The Good News: Lending Tree chief executive Doug Leboda says in light of the recently unveiled new home-lending standards, lenders are slowly starting to make it slightly easier to get approved. Talk to a couple of lenders, they’ll tell you things have improved over the past few years on the loan front. 5. More Good News: We are seeing a definite correction in the appraisal business. A few years ago appraisers were consistently under-valuing properties, reacting to the over-conservative nature of their shell-shocked underwriter patrons. Today we are seeing the vast majority of appraisals coming in at value, killing far fewer deals than in the past.

The Denver real estate market midyear report!

Welcome to the real estate market midyear report! Here’s what we’re seeing. 1. Average Home Price: The average price of a home in metro Denver leapt another 12 percent in the past 12 months. I believe 2015 will continue to play out very strong and here’s why: The number one driver of home price change is the amount of inventory on the market. Our market inventory continues to drop, down another 17 percent from this time last year for single-family homes (down 19 percent for condos and townhomes!). Until inventory comes back on the market there will continue to be tremendous upward pressure on prices as demand outstrips supply. Where will the new supply of home inventory come from? It won’t be bank-owned properties and shortsales. The metro Denver economy is strong and unemployment is low so there will be very few distressed properties on the market for the foreseeable future. The additional supply will eventually come from home owners who finally realize what a great market it is to sell and decide to put their home up for sale. When this will happen is anyone’s guess. We’ve seen very little evidence of home owners making this realization so far, as evidenced by the continued lack of inventory on the market. Sooner or later though inventory will begin to appear. That’s your sign of a changing market. But this might take several more years which is why prices will continue to rise strongly. 2. Number of Homes Sold: Because there is so little inventory in our market the number of homes sold is actually going DOWN year over year, not up. There were 9 percent fewer homes sold in June, ’15 than June ’14 simply because there is no inventory to sell. It’s the very definition of a seller’s market. 3. The Condo/Townhome Market: Incredibly enough the condo market is doing even better than single-family homes! Prices are up 16 percent in the past year and inventory is down 19 percent creating a blistering hot market for attached homes. Just like for the single-family home market I don’t see any evidence this will change any time soon. Until more condo inventory comes on the market prices will continue to rise. Expect strong price increases for the next several years. 4. The Investor Market: Denver is still a great place to invest in real estate. The fix and flip market is strong for those who can find underpriced homes to buy and repair. They’re out there but it takes tools, patience, and work to find them. Once you get one fixed up, selling is the easy part because of the lack of competing inventory. The buy and hold market will continue to be extremely profitable for long-term investors. Interest rates and vacancy rates are still near record lows and rents continue to rise – a record 10.8 percent per year the past three years. It’s not difficult to buy a rental property in today’s environment and put it on the path to be paid off in 12-15 years. Just think how your life would change if you owned a couple of rental properties free and clear! For building long-term wealth it’s tough to compete with rental property ownership. That’s the one thing that will never change.