Economist Shiller Sees Potential for ‘Double Dip’ Recession

With the U.S. economic recovery losing steam, the chances of a second phase of a slowdown are increasing, according to a leading economist.

Speaking in The Wall Street Journal’s The Big Interview show, Robert Shiller, professor of economics at Yale University, said he thought the second dip down of a so-called double-dip recession “may be imminent.”

Earlier this month, he told the Wall Street Journal he thought the chance of a double-dip recession, which he noted is a rare event, was greater than 50%.

More info –>>> http://online.wsj.com/article/SB10001424052748704147804575455370525902224.html

Cisneros: Housing Market OK in Denver

Despite a 27 percent drop in July home resales nationwide, the worst appears to be over for Colorado’s housing market, according to national housing expert Henry Cisneros.

The country’s urban centers are increasing in population and leading the way to housing recovery, said Cisneros, former secretary of the U.S. Department of Housing and Urban Development under President Bill Clinton and now executive chairman of CityView, an institutional investment firm focused on urban real estate, in-city housing and metropolitan infrastructure.

“I see Denver as the prototype of the new urban setting we’re expecting to spread across the country,” said Cisneros, who was in Denver on Tuesday. “Denver is in a class of cities that’s setting the pace of new urbanism.”

Cisneros said one reason for plummeting sales is the expiration of the federal first-time-buyer tax credit that pushed people to buy homes sooner than they otherwise would have.

“Now we have to keep interest rates low so families are encouraged,” he said. “We can’t see economic recovery without housing recovery.”

To bolster the housing market, it’s critical to keep families in their homes so the stock of foreclosed properties does not increase, Cisneros said. Selling homes that already have been foreclosed on before they fall into disrepair is crucial to keeping values in hard-hit neighborhoods up and homebuilders working.

“The truth is, builders are sitting on the sidelines because foreclosed homes out there are 60 cents on the dollar competing with newly built homes,” Cisneros said.

And while mortgage giants Fannie Mae and Freddie Mac have been widely criticized for the role they played in the collapse of the housing market, Cisneros said the 30-year mortgages they provide are the “bedrock of the middle-class family.”

“Those who would abolish Fannie and Freddie need to understand that we still have to have that function performed,” he said. “Every time we’ve allowed the private sector to do it, prices go up. They (Fannie and Freddie) have to be there for the basics. Take them out of the mix, and we play havoc with the American housing market.”

The fate of Freddie Mac and Fannie Mae were the focus of last week’s housing summit, where Treasury Secretary Timothy Geithner said the government-sponsored entities need an overhaul.

Fannie and Freddie were bailed out by taxpayers in 2008 after suffering massive losses as the housing market plummeted.

Despite Slower Sales, Prices are Still Up in Denver

Except for condos, prices are still up in Denver through the end of June. Sales have definitely stagnated as of April 31st, the end of the homebuyer tax credit.

http://dqnews.com/Articles/2010/News/Denver/RRDECO100812.aspx

Denver home market on the rise

The value of Denver homes is on the rise, with houses in the area showing the most value increase of any major housing market outside of cities in California and the Boston area. In an article at INDenverTimes.com, the Zillow.com real estate website issued a report saying that the value of homes in the Denver area increased by 2.5 percent in the second quarter from 2009 to 2010. The national home markets saw a value drop of 3.2 percent. Numerically, Denver ranked 6th, behind San Diego, San Francisco, San Jose, Los Angeles and Boston. The biggest drop in home values occurred in the Miami-Fort Lauderdale area, where the value of homes fell by 15.2 percent. In a related story, the Denver Business Journal reports that housing foreclosures dropped 8.6 percent in the Denver area in July compared to one year ago, or one foreclosure for every 383 properties.

Bye Bye CREC Fuhrer

In the wake of the Erin Toll scandal, the state of Colorado has decided to replace the CREC director with a panel.  Although they won’t say, it’s obviously designed to prevent abuses of power that were common when Ms. Toll was in charge.

http://www.denverpost.com/realestate/ci_15762980

Denver Post – Apt Vacancies at 9 year Low

Apartment vacancies in metro Denver have dropped to an average 6.1 percent, the lowest second-quarter vacancy rate since 2001, when it was 5.7 percent, according to a report released Tuesday.

The decline is largely a result of more people moving to Colorado and fewer apartments being built, according to industry experts.

The vacancy rate is down from 6.5 percent in the first quarter and 9 percent from the second quarter of last year, according to the report released by the Apartment Association of Metro Denver and the Department of Local Affairs Division of Housing.

The vacancy rate was lower only in two other quarters over the nine-year period: 5.3 percent in the third quarter of 2007, and 5.9 percent in the first quarter of 2008. It was 6.1 percent in the fourth quarter of 2007.

“There’s just nothing (to be built) in the pipeline,” said Gordon Von Stroh, professor of business at the University of Denver and the report’s author. “Anything that’s being built is deed (income) restricted.”

Vacancies also are dropping because renters who had moved home or doubled up are starting to come back to the market, said Jeff Hawks of Apartment Realty Advisors.

“They’ve found that they didn’t lose their job and they’re sick of their roommate,” Hawks said.

And with an estimated 180,000 young adults in the region turning 20 over the next five years and very few apartment projects being built, the vacancy rate is likely to drop even further. There are 17,000 vacant apartments in metro Denver.

“The last time we had that many kids turn 20 was from 1969 to 1975 and we built 75,000 apartment units during that time,” Hawks said. “The real problem in Denver is we can’t build until we raise rents. There’s nothing to move into for this population.”

For the first time in more than a year, all counties reported year-over-year increases in countywide average rents. The metro-wide average rent increased from $870 to $900 a month.

However, when adjusted for inflation, rents are 10 percent lower now than they were 10 years ago, said Ryan McMaken, spokesman for the Division of Housing.

“The population increase will continue to drive down vacancies, but it’s difficult for owners to move rents up because people don’t have the money,” McMaken said. “There’s just not enough wage and employment growth right now to make it easy for owners to increase rents.”

Case Shiller Colorado Index up again for 6th straight period

Denver-area home prices rose an average of 4.4 percent in April from April 2009, marking the sixth consecutive month of year-over-year gains, shows the closely watched S&P Case-Shiller Home Price Indices released today.

The 4.4 percent gain was the largest since the trend began in November 2009, when prices were up 0.5% from November 2008. Each month, the percentage gain has grown.

Still, the 4.4 percent was only good for eighth place of the 20 metropolitan statistical areas tracked by Case-Shiller, as other markets, which previously had shown greater losses than Denver, are now enjoying greater percentage gains. San Francisco showed the biggest gain, rising a whopping 18 percent from April 2009.

Increases may continue

“I think the increases are sustainable,” said Gary Bauer, an independent broker who completes his own monthly report using Metrolist data.

The Denver market, as the nation as a whole, was helped in April as buyers and brokers scrambled to put homes under contract by April 30 to quality for a federal tax credit worth as much as $8,000.

“I think we are going to see much lower increases going forward,” Bauer said. “I do think the Denver market should get a lot of credit for six continuous months of year-over-year increases. But I do think the tax credits helped Denver and every other market in the country. I do think the trend is continuing, but at a much smaller proportion.” Qualified buyers who are seeking the tax credits have until the end of Wednesday to close on the homes.

May figures will be telling

But Tom Cryer, a broker withe the Kentwood Co. is not so sure how sustainable the entire home sales market remains in the wake of the end of the tax credits.

“I can tell you my first response is, “I can’t wait until we see the May figures,” Cryer said. “That will be the end of our six-month run. Absolutely. The front desk is all-knowing and all-seeing. We all have had fewer showings since April 30 and if you don’t have any showings, you don’t have any contracts.”

On the other hand, because Case-Shiller tracks appreciation, and not the number of sales, the end of the tax credits could bode well for Denver, he said. Case-Shiller uses “paired sales” of single-family homes to avoid the “price drift,” or the potential of bigger homes entering the market and skewing the data.

Low-priced homes no longer driving market force

“If you figure that the tax credits did not impact the move-up or move-down market very much, but primarily had an impact on the low-end of the price range, now, moving forward, those people at the lower-rung of the market, no longer have incentives to be part of the market,” Cryer said. “Could that mean that as we go forward, the bottom of the market has been taken away? Here is my updated prediction: The average price of a home cold go up, now that the bottom has been taken away, but the number of transactions will go down.”

Also, with fewer transactions, big sales will have a disproportionate impact on the overall numbers, he said. For example, a broker in his office recently put a home under contract for $2.8 million, which previously had been listed at $5 million.

“One $2.8 million sale makes up for a lot of $150,000 transactions,” Cryer said.

Case-Shiller doesn’t tell you what your home will fetch

Cryer said that while reports such as Case-Shiller “make for interesting conversations and I love to hear about and discuss this kind of stuff,” the truth is that it has little to do with what any individual can fetch for his or her home.

“Real estate is still a Main Street kind of business,” Cryer said. “Clearly, we have some blocks and enclaves in the Denver area that are just still performing very poorly. And we have other enclaves that are so hot you can drive through them and hardly see a For Sale sign. It’s all about “location, location, location,” while 60 days ago it was “timing, timing, timing,” when the the tax credits were still available.

Stephen Holben, a custom home builder, agrees with Cryer that real estate is very local

“As I have expressed before, (Case-Shiller) has nothing to do with the value of anybody’s property,” said Holben, principal of Holben Building Corp. “But it has been embraced as though it does, so what can you do? If it helps people function again, post on a billboard. I’ve been in this biz for almost 40 years, and I’ve never seen people behave as they are these days. We’re into year six of what I call The Great American Housing Beatdown.”

On a national level, “Home price levels remain close to the April 2009 lows set by the S&P/Case Shiller 10- and 20-City Composite series,” said David M. Blitzer, Chairman of the Index Committee at Standard & Poor’s. “The April 2010 data for all 20 MSAs and the two Composites do show some improvement with higher annual increases than in March’s report. However, many of the gains are modest and somewhat concentrated in California. Moreover, nine of the 20 cities reached new lows at nsome time since the beginning of this year. The month-over-month figures were driven by the end of the Federal first-time home buyer tax credit program on April 30th. Eighteen cities saw month-to-month ngains in April compared to six in the previous month. Miami and New York were the two that fared the worst in April compared to March. New York is the only MSA to have posted a new relative index lows  with April’s report. Other housing data confirm the large impact, and likely near-future pullback, of the federal program.” He added that May data separate from Case-Shiller shows a “sharp declines in existing and new home sales and housing starts. Inventory data and foreclosure activity have not shown any signs of improvement. Consistent and sustained boosts to economic growth from housing may have to wait to next year. “

Court fines mortgage firms for “targeting” hispanics in Greeley

A Weld County judge on Thursday imposed civil damages and penalties totaling $629,203 against the defendants in a predatory lending practice scheme that targeted Hispanic homebuyers in Greeley.

Weld County District Judge Daniel S. Maus imposed the penalties and damages against four individuals and a company, J.C. Distinguished Finance LLC.

The Colorado Civil Rights Commission alleged that the four and J.C. Distinguished Finance engaged in such egregious and deceptive lending practices that the Hispanic homebuyers were eventually forced into foreclosure.

According to investigators from the Civil Rights Division, the defendants – Dean Juhl, Charles Brandt, Flora Carmona and Jessica Feliciano – lured the buyers to the Gateway Estates and Gateway Lakes subdivisions to purchase homes which they were not financially qualified to purchase.

The great majority of the new homeowners didn’t speak English and were given false information about the financing of their homes, according to the Civil Rights Division.

Juhl, a former director of the failed New Frontier Bank, was a partner with Mark Strodtman, in JS Real Estate which built and sold homes in three subdivisions in Greeley – Gateway Estates, Gateway Lakes and Grapevine Hollow.

Strodtman, who fled to Mexico after the Civil Rights Commission and the Weld County district attorney began an investigation, was convicted last November of felony racketeering, theft and forgery. Strodtman was sentenced to 31 years in prison for his real estate activities.

Strodtman and Juhl allegedly steered their Spanish-speaking customers to Charles Brandt and Jessica Feliciano of J.C. Distinguished Finance LLC to obtain mortgages based on fabricated applications.

Carmona, an employee of JS Real Estate, often acted as a translator in the transactions.

A business card for JS Real Estate read in Spanish, “Good Credit, Bad Credit, No Social Security Number, Approved, 0 Down Payment.”

The Civil Rights Commission also alleged that Strodtman made discriminatory statements such as, “The whole Hispanic population can be likened to trained pigs coming to trough; you give them reason to come, and they’ll come and give you all their money.”

Among the allegations against the defendants was that they inflated the home prices, failed to explain or disclose the terms of the loans, targeted homebuyers with damaging loan products and induced them to buy with promises that were never kept.

Juhl, Brandt, Feliciano and J.C. Distinguished Finance were each ordered to pay a $25,000 civil penalty. Carmona was ordered to pay a $10,000 civil penalty.

Another $319,203 in damages was assessed against the defendants and $200,000 in non-economic compensatory damages was also ordered.

Homebuilders Buying up Lots – Good Sign for Market Rebound in Denver

Denver Post: Despite softening sales in the new-home market, national homebuilding companies in the Denver area are continuing to buy lots, significantly driving up prices from where they were a year ago.

It’s part of their push to have communities to build in when their existing inventory runs out and to position themselves for an economic turnaround.

The push to buy lots comes even as sales of new homes collapsed in May, falling 18.3 percent nationally compared with the same period last year.

“At the end of last year, we had just one active community that we could still sell homes in in 2011,” said Matt Janke, director of land acquisition for Meritage Homes’ Denver office.

Over the last six months, Meritage Homes has snapped up about 600 lots in 13 communities, and the company isn’t stopping — it closed on four land deals last week.

“As long as I can underwrite the deal and the market data supports the deal, we will continue to buy,” Janke said. “We have no cap on what we can buy.”

Meritage recently bought 72 lots in the Smoky Hill corridor for $43,000 apiece from an investor who paid $24,000 each last summer, Janke said.

“It’s still a fantastic price, but it shows there’s an appreciation in the market,” he said.

Scottsdale, Ariz.-based Meritage Homes is the ninth-largest homebuilder in the U.S., based on homes closed. As of March 31, the 25-year-old company had 149 actively selling communities in 12 metropolitan areas.

David Crowe, chief economist for the National Association of Home Builders, said national builders are flush with cash and ready to spend it, but they’ll be careful not to buy lots too far in advance of when they actually plan to build homes.

“They made a lot of money in the euphoria of the mid-decade, and they held onto it,” Crowe said. “They are smart enough to understand that homebuilding is cyclic and good times are often followed by not-so-good times.”

Like other companies, national homebuilders were able to take advantage of changes in the tax law that allowed them to refile taxes from previous profitable years.

“That added to cash advantages because they refiled and got refunds,” Crow said.

Aaron Smith, senior economist at Moody’s Analytics, said Denver’s economy is better than that of other cities across the country, so it’s not surprising homebuilders are ramping up their inventory.

“House prices have held up very well,” Smith said. “You guys have strong demographics, population growth is quite strong and doesn’t show signs of slowing, and you’re heavy in technology. Technology is one of those sectors that does well in recovery.”

First-time buying market

Click on image to enlarge

In the past six months, KB Home Colorado has acquired five new communities and has several more under contract, said Rusty Crandall, president of the company, which builds exclusively for first-time buyers.

“This is a great time for us to increase our market share, but we’re doing it within our strategy of buying finished lots and getting into the price point for first-time buyers,” he said. “We’re still actively looking, and we are trying to continue to gain market share in Denver.

“We’re pretty high on Denver and think it has a great future.”

Over the past year, land specialists Jim Capecelatro and Mike Kboudi of Fuller Real Estate have sold 4,400 lender-owned lots for $59.5 million. The buyers — both builders and investors — have paid cash for the properties, and multiple builders are bidding on them.

“The banks and other sellers today have the ability to sell for a number that makes sense to a builder,” Kboudi said. “And the builders have cash in their pockets to be able to spend money on land right now.”

Fuller had a total of 13 bids on 305 finished lots at Fallbrook Farms in Thornton. MDC Holdings, which builds under the Richmond American Homes label, won the bidding war, buying the property for $13 million. It expects to start selling at the community this fall.

“It was a very sought-after property,” Capecelatro said. “It’s just a very family-friendly community that had the right lot prices and sizes.”

Nationwide, Richmond American has taken control of 120 communities over the three quarters ending March 31, including lots in more than 15 communities in Colorado, said Zane DeHerrera, spokesman for the company.

Richmond American takes a conservative approach to buying land and typically has no more than a two- or three-year supply, he said.

“In today’s housing market, the same fundamentals apply,” DeHerrera said. “However, a homebuilder has to be even more focused. You have to buy great locations and build exceptional floor plans at the right price. And the cliche ‘cash is king’ has never been more relevant.”

Investors saw opportunity

For the past few years, while the national homebuilders were sitting on the sidelines, investors had been taking advantage of the opportunity to pick up lots at deeply discounted prices.

Over the past few years, Real Capital Solutions, formerly Colorado & Santa Fe Land Co., has bought about 5,000 lots nationwide, said Marcel Arsenault, chairman and chief executive of the company. But the re-entry of the national builders has forced the company to adapt its strategy to buy in smaller markets where the big companies aren’t going.

“The price of lots has been bid up as the national homebuilders have come out of the bunker and realized the whole industry isn’t going to implode,” Arsenault said. “They have more cash than we do. They’ve paid prices we, frankly, can’t afford to pay. We’re finding it more difficult to buy finished lots.”

While national builders are snapping up lots, small local builders are still struggling to get financing to buy lots and build homes.

“The banking issue hasn’t gotten any easier,” said David Tschetter, chief executive of Colorado Custom Homes. “The big guys are sitting on a fair amount of capital, so it makes it a little easier for them to maneuver in those constraints. But for the smaller and medium-sized guys, it’s as difficult as it has been, and it will continue to be difficult.”

New Town Builders is among the smaller companies selling off lots to focus on infill locations such as Stapleton and Bradburn, said Gene Myers, president and chief executive of the Denver company.

Last week, Myers sold 94 lots in Lafayette’s Coal Creek Village subdivision to BMB Colorado LLC of Scottsdale, Ariz. Earlier this year, BMB sold 47 lots at Coal Creek to Meritage Homes, which started construction Tuesday on its model home, said Luigi Talarico, manager of BMB Colorado.

“They plan to be built out in the next 18 months,” Talarico said.

BMB, which recently started a homebuilding company, BMB Builders Inc., will start building in the community by Aug. 1.

Meanwhile, New Town doesn’t have a single bank loan and is instead funding construction with private money, Myers said.

“The recovery is showing great preference to national companies and big guys,” Myers said. “But really, the only business that’s too big to fail is small business because we employ 80 percent of the employees in this country.”

Denver Post – Foreclosure Filings Down in May

May foreclosure filings dropped to their lowest level in 18 months in Colorado, a sign that homeowners may be getting more leeway in repaying or restructuring their loans.

New filings in metropolitan Colorado counties fell to 2,633 in May, a 17.7 percent decline over the same month last year, according to the state Division of Housing.

Denver, Douglas, Larimer and Weld counties saw the steepest drop over last year, while Mesa county recorded an increase in new foreclosures. The monthly report only covered the 12 most urban Colorado counties.

“The news was unexpectedly good,” said Ryan McMaken, a Division of Housing spokesman. “The fact that this was such a low number over the past 18 months — that’s cause for cautious optimism.”