Here’s and example of the Green Valley Subdivision in Denver, Colorado

Notice that once current home values cross the value of what was paid on the 1st position loan, there is a spike in foreclosures.

Foreclosure rates in Green Valley Ranch

just to add some more perspective…

An example of a highly localized collapse of home prices common in many cities.

It’s something to think about. It’s not just a matter of a few bad loans, lost jobs and problems paying health expenses, for many neighborhoods that may be close to a similar tipping point. Because of the substantial amount of money invested into Green Valley Ranch, I would expect that they’ll recover from the collapse within 5 years as the foreclosure sales work through the system. For other neighborhoods in Denver, I’m a lot less optimistic.

If you know me, you know that this is what I do.  I want to know why and how, so, I did a little checking in the MLS and public records.

  The unit I saw had previously sold for $204k but was now listed at $60,000 in a building that every unit had previously sold for over $150k.  A few even sold for up to $250k.   What makes it suspicious is that there were no real upgrades to justify 204k.  In fact, the value today is probably about $80,000 if it was cleaned out.   No electrical or plumbing upgrades to the building.  Some newer windows and a few new light fixtures in the hallway.  That’s it.    Now it is possible to get $160,000 for this type of unit if it’s done right.

 Some developers who do a killer job on the conversions do make top dollar.  They add roof top decks, change the curb appeal, improve all the common elements and put about $30,000-$60,000 into each unit upgrading the kitchen, bathrooms and finishes.  The units I saw at this place weren’t like that.   For this building though, the appraiser would have to be blind not to notice that the doors were missing handles and nothing that was described in the MLS was actually completed. (business center, fitness room, etc..) 

It’s painful to see because you really don’t get a redo on a condo conversion.  It’s to late.  The building is still a dump.  Can you imagine trying to coordinate an overhaul of the building with 24 different owners.  It’s going to be a blight to the neighborhood for a long time.

They bought the property for $2.9 mill and sold the units for a total of $4.8.   15 days after they closed on the property, they were already selling them.  6 at a time.  Many of the buyers bought multiple units.   They were 80% sold out in 2 months.  In the middle of winter during 2005-2006.  That was not a great time for selling condos,  even nice ones.

It seems like if you wanted to make 1.8 million fast the dirty way, you could get people who were going to file bankruptcy purchase these properties using stated 80/20 loans.  The paper values would support the apparent protection of the 1st lender and the 2nd would be carried back by the seller.  It’s all just funny money right?  Seller kicks back some money to the buyers for the ’service’.  The buyers then try to rent the properties out and never make a payment.  When it all goes south, they just walk and let the properties foreclose.   Now, I’m not saying that is what happened here, but I do think it happens.

I know there are people who believe that the only one they’re hurting when they do this is the lender.  That frustrates me.  It gives the entire industry a bad name.  Especially when a lot of people need to work together to decieve the lender.  It’s no wonder that the agent that listed the property had his license just long enough to do this deal then leave the business by going inactive.  The building had been listed as having an agent owner so he must have been involved.  I wonder what his employing broker was thinking.  Probably wasn’t.  I wonder if the buyers weren’t actually in on it and had their credit ruined by an investor who made a lot of promises he didn’t deliver on.

I’d love to give you the address and name the players…but that seems to get people in trouble.  No, I can’t flat out say that there is some fraud involved but it makes you wonder doesn’t it.

HQHomes.com implemented a new website that has one of the better IDX solutions (just shy of a custom solution) available for searching for homes in the area.  We feel that real estate search is the cornerstone to any long term success for a real estate website.  Considering what our search looked like originally.  This is a huge step up.   One of the features I find the most useful is an RSS feed for the paticular search that you want.  We hope our clients find that this search is better than any currently in use by a competing brokerage.

HQHomesBlog is going to be the outlet for much of our statistical research on different Denver neighborhoods.  We also plan to let this be our up to date platform to give our view of the markets.   We have been delivering a newspaper to some parts of Denver with some good response but find  that most people don’t have the time or desire to open a good old fashioned newspaper.  By the time they look at it, it’s out of date.  The blog will hopefully fill this gap while decreasing some of our costs. 

One of the better side effects of blogging, besides traffic to the website, is the fact that readers and those interested in our company can get a better feel for the neighborhoods they’re interested in and the agents that work in those neighborhoods.  

I’ll be a frequent contributor on the site.  Feel free to stop by and give your opinion of what we are doing.

The media loves to overstate fact in order to generate some fear.  They love to stumble across the financial equivalent of the ’if it bleeds it leads’ statement targeted to get the public to stop and stare.  Scared out of their wallets, afraid to make a move.   Combined with their love to oversimplify, they start getting dangerous.  They love to pretend their audience isn’t intelligent enough to make their own decisions.  Instead, they make the decisions for you.  That’s not conducive to good investing in housing or otherwise.   Most investors know they can’t just buy the stocks that get hyped each day on CNBC.  They know they need to dig a little deeper.  Sometimes when most people are saying sell, that’s when you need to be buying.

Real estate can be just as complicated as the stock market but thankfully, real estate moves a little slower.  There’s a lot more real estate markets and homes out there than all the stocks that Mr. Cramer claims to have in his head. (I think he’s claiming 2000…)  Certainly, the opportunities in housing have to exist.  I know what and where they are in my area and I’m sure if you work hard enough, you’ll find them in your area too.  

Anyway,  Cramer was on his show yesterday and mentioned that with the rate cuts, he thinks it could be a good time to buy a house again.   Funny part is that, during the time between his first public denunciation of real estate and his recent reprieve, not much has changed in Denver or anywhere else.  Just the Fed’s interest rates.  Mortgage rates will eventually follow but truth is they weren’t bad three months ago.  Some of the outlying areas of Denver will have some issues with the foreclosures, that hasn’t changed.  Maybe the only thing that changed is the fact that media feels it needs to put a new twist on the news.  

 For the most part, the new urbanism movement in Northwest and Southeast Denver has helped those areas of the city through most of the slump.  In fact, I pity the people that passed on the home they wanted in these areas based on news that they should be waiting for a better deal.   Most buyers are looking for the 20% price reduction that will never come.   It’s their loss.  I’ve said it before.  The rest of the country’s problem isn’t necessarily Denver’s problem.   We are not immune from the problems but all the factors that contribute to a strong local economy are still in place.   So don’t get worked up when you hear incredibly outlandish statements saying to ‘do this’ or ’don’t do that’.   There are always opportunities if you know where to look.  I’m sure a sane Jim Cramer would admit to that.

 …have you ever noticed Mona Lisa’s wandering eye?  Maybe she spotted a deal over the artist’s shoulder.