Finding Denver Homes Continues to be a Challenge

Denver’s supply of homes for sale in the metro area continues to be an issue with just 337 more listed for sale in the first 2 months of 2018 versus 2017 (8288 v 7951). The days on the market continues to hover in the 6 day range while the median prices is up $40,000 from $350,000 to $390,000 for January & February. The heart-breaker for Buyers is that on March 5th there were only 3,908 “active” listings available for purchase. The overall indication is that in the 7 county metro Denver area we will continue to see that kind of appreciation as well as a very strong “Sellers” market for the foreseeable future. For a bit of the “national perspective” read on…

In any given market, inventories fluctuate based on supply and demand considering area and price range. The National Association of REALTORS considers a balanced market to be a six-month supply of homes.47945268-250.jpg

If it takes longer than six months to sell, it is thought to be a buyer’s market and less than six months, a seller’s market. Most buyers and sellers probably feel a balanced inventory is more like three months’ supply of homes.

The inventory of existing homes has been reduced to approximately 1.5 million houses which is 10.3% lower than a year ago. According to the Federal Reserve Bank of St. Louis there are 5.7 months’ supply of new homes currently on the market in the U.S.

Inventory has a direct impact on price. When demand is constant, but inventory is reduced, price tends to increase because the same number of people are trying to buy a smaller than normal number of homes.

As easy as it is to recognize the signs of spring, one should be able to spot the direction prices will be moving. When prices and mortgage rates are increasing, buyers are affected by not being able to afford the same price or size of homes.

While the Denver area has fewer homes for sale (this has been caused by the builders cutting back drastically in the 2008 era and we are now short of single family homes by between 50,000 and 80,000) there are other parts of the country that offer a: great life styles and b: more economic housing choices that support both full time & silver collar work forces. As a Certified Residential Specialist and a Senior Real Estate Specialist I can help you identifying those opportunities. So contact Pete, an SRES for a consultation.

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Your Refund Could be the Difference

As we make relations with lenders, and expand those we have had over the years in Denver, we find that there are new and innovative loan programs available for buyers of all types. Some are obvious like the VA zero down. Others you have to hunt for like a 1% down conventional product. And they go up from there. Yet all the new ones might be helped by a good income tax refund…maybe, after you read this we should talk.

One of the silver linings to filing your income tax return is finding out that you are going to receive a refund. If you happen to be one of these fortunate taxpayers, your next decision is what to do with it. With the average tax refund around $3,000, it could be the difference that makes a home a reality sooner rather than later.Denver

Many would-be buyers think it takes 10% or more down payment to purchase a home, but actually, it can be much less. There are VA and USDA mortgages that have no down payment for qualified buyers. FHA has a 3.5% down payment program and FNMA has 3% down payment mortgages for qualified creditors.

Closing costs for originating new mortgages can easily range from two to three percent of the purchase price but most lenders will allow the seller to pay part or all of them based on the agreement in the sales contract.

While the average tax refund might not cover the down payment on the median price home, it certainly helps. Your refund could make it as simple as 1-2-3 to get into a home.

  1. Get the hard, cold facts for the homes and mortgages in your area and price range.
  2. Get pre-approved with a trusted mortgage professional.
  3. Start looking at homes.

Call me at (303) 880-5585 or Pete of Contact Me to get started.

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Denver Has Fair Skies on Horizon

The new tax is certainly something all of us in Denver are concerned about…How does it effect me? I am not a tax consultant but there is a summary here and a link to more information from the National Association of Realtors. If you need a good tax CPA here in Denver, use the contact link at the bottom and I will connect you.

Buyers who have been concerned about what might happen to the tax laws affecting home ownership should feel more comfortable about moving forward with their decision to purchase. The 2017 Tax Cut and Jobs Act passed by Congress and signed by the President continues to treat real estate as a favored investment.Denver

Whether it is for a home to live in as your principal residence or to use as rental property, the tax laws are in place but other dynamics to be concerned with are not; mortgage rates are expected to rise as well as prices.

Reasons to buy now:

  1. The mortgage interest deduction is intact for most taxpayers.
  2. The capital gain exclusion for principal residences up to $500,000 remains in place.
  3. Taxpayers can elect annually to take newly increased standard deduction or itemize deductions whichever will benefit them the most.
  4. The house payment with taxes and insurance is most likely cheaper than the rent.
  5. Rents will continue to rise making the difference even greater in the future.
  6. Lock-in the principal & interest payment with a fixed-rate mortgage.
  7. 30-year mortgage terms are available to most borrowers.
  8. Prices will likely increase due to lower inventories and several years of low housing starts.
  9. Section 1031 exchanges, capital gains and depreciation remain the same for rental properties.

For a summary of specific real estate provisions in the 2017 Tax Cut and Jobs Act, click here.

Contact Pete

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Historical Perspective

We bought our 2nd home in Denver (actually unincorporated Arapahoe County known as Englewood) in 1981 and we were so excited to have a 12% first loan and a 13% 2nd…life was good. Not as good as my first house in Montana at 5.75% in 1972. As one contemplates the interest rates and their history a half point shift may seem huge today; rates have been so stable for a number of years but others probably have a different perspective. So read on…

In 1968, mortgage rates were 8.5%. The next year, rates went down to 7%. Homeowners could buy a 15-20% larger home for the same payments if they could find someone to assume their mortgage.Denver rate history2a.png

FHA and VA mortgages were very popular in certain price ranges and they allowed anyone to assume the mortgage regardless of the credit. If you could find a person to take over your note, you were free to qualify for another mortgage.

In October 1981, mortgage rates reached 18.63%. A $250,000 mortgage had a monthly principal and interest payment of $3,896.46. As astronomical as that rate sounds, people were still buying homes and were good investments.

Four years later, they were still over 12%. The monthly payment was $2,571.53. Believe it or not, people were excited to be paying only 2/3 what they had to pay a few years earlier.

Fast forward to late 1991 when the rates went below 9% and that same payment was to $2,015.16. At the turn of the 21st century, rates were 8.15% and that made the payment $1,860.62. Not much change in rates during that decade.

If we look around the housing bubble, late 2008, the rates were 6.04% and the payment was $1,505.31. By 2009, mortgage rates had fallen below 5%. The lowest mortgage rate was 3.31% on November 2012 with a payment of $1,096.27.

Rates fluctuated for the next few years until now, and most of the experts are expecting them to be above 5% by the end of 2018. Rates have increased each week for the last six weeks to 4.38% with payments of $1,240.12.

The average mortgage rate for the past 47 years is a little over 8%. The real estate and mortgage markets are cyclical. Rates have been historically low for a long period but will probably continue to rise. Most buyers don’t pay cash and mortgages enable them to purchase now. Based on history, even 8% would be an excellent rate. Until it reaches that point again, everything lower is a bargain.

Contact me if you want to talk more.

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The “Right” Agent and the “Right” Home

Most of my 32 years in the real estate business in Denver I have represented as many buyers as I do sellers each year. This allows me to give buyers insights into the neighborhoods they are considering as well as what Sellers are thinking and how they are responding to offers so the buyer can make their offer stand out. To say the neighborhoods in Denver are diverse is a bit of an understatement. The buyer can find this kind of intel extremely useful (never about a specific house or seller they are considering). And I can share with the Sellers what the buyers are thinking as they walk through homes they are considering as well as what is being offered in the competing neighborhoods. The home seller is counting on me to be candid and straight forward in my assessment of their home. But on to the topic…

Some buyers think that finding the right home is the critical part of the buying process and that is how they determine which agent to use. While it is important, there may be a broader skill set to consider when selecting your real estate professional.what Denver buyers want-2017.png

The most recent NAR Profile of Home Buyers and Sellers indicate that 52% of buyers do want help in finding the right home to purchase. There was a time when the public did not have access to all the homes on the market, but the Internet has changed that.

Helping to negotiate the price and terms of sale were identified by almost 25% of the buyers. No one wants to pay more than is necessary and the terms of the sale can be as important as the price.

The next largest area of assistance that buyers value has to do with financing and the paperwork. Even if a buyer has been through the process before, it very likely could have been several years and things have probably changed.

Since the cost of housing is dependent on the price paid for the home and the financing, a real estate professional skilled in these specialized areas can be very valuable in finding the “right” home. An agent’s experience and connections to allied professionals and service providers is equally important.

Ask the agent representing you to specifically list the tools and talent they have available to address these areas.

Then contact Pete to see what he can offer.

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Denver & Tax Law Changes…There Are Convincing Advantages with Standard Deduction

Lots of folks in Denver are asking what are the new tax laws going to do to my taxes? Read on. Then contact me if you need more.

The new tax law doubles the standard deduction and it is estimated that over 90% of taxpayers will elect to use it. However, even without considering tax benefits, homeownership has convincing advantages.denver

Besides the personal and social reasons for owning a home, one of the most compelling is that it is cheaper. Principal reduction and appreciation are powerful dynamics that reduce the effective cost of housing.

Amortized loans apply a specific amount of each payment to the principal amount owed to retire the loan over the term. Some people consider it a forced savings account; when the payment is made, the unpaid balance is reduced.

The price of homes going up over time is appreciation. While there are lots of variables and it is not guaranteed, it is easy to research the history of an area and make predictions based on supply and demand.

Interest rates are still low and can be locked-in for 30 years. Without considering the tax benefits at all, the appreciation and the amortization dramatically affect the “real” cost of owning a home.

Consider a $250,000 that appreciates at 2% a year for the next seven years instead of paying $2,000 a month in rent. In the example, the payment is less than the rent being paid even including the property tax and insurance.

Denver rent vs own 020518.png

When you factor in the monthly principal reduction and appreciation and consider additional owner expenses like maintenance and possible homeowners association, the net cost of housing is considerably lower than the rent. In this example, reduced cost in the first year alone is more than the down payment required on a FHA loan.

Based on the assumptions stated, the down payment of $8,750 could grow to $73,546 in equity in seven years. Can you name another investment with this kind of potential that also provides you a place to live, enjoy, raise your family and share with your friends?

Use this Rent vs. Own to make projections using your own numbers and price range. We’re available to answer any questions you have and to find out what it will take to own your own home.

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Lower Your Expenses without PMI

With so much appreciation here in Denver, a refinance on a 300,000 FHA loan could save you as much as $250 per month. Check with your Realtor about the current estimated value and then call a trusted lender to get more details…and read on…

Mortgage loans for more than 80% loan-to-value typically require private mortgage insurance. Mortgage insurance reimburses the lender if a borrower defaults on a loan. PMI is expensive, and homeowners should be aware of how to remove it when certain conditions have been met.31001236-250.jpg

A borrower can request in writing for the lender to cancel the PMI when the mortgage balance has reached 80% of the home’s original appraised value. However, they are required to eliminate it when the balance reaches 78%. It is a good idea to monitor this, especially if additional principal contributions are being made to pay off the loan early.

Other methods to eliminate PMI sooner than through normal amortization include the following:

  • If the value of the home has increased, the owner may consider refinancing with a loan that does not require PMI. There will be refinancing charges involved but you can determine how long it will take to recapture those costs from the monthly savings.
  • Some lenders will consider using a new appraisal to verify that the home’s mortgage is below the 80% requirement. Find out in advance from your lender if they will accept this procedure and get the names of approved appraisers they will recognize. The cost of an appraisal could range between $450 to $600.
  • Another strategy is to make additional principal contributions on a regular basis to reduce your mortgage balance to 78-80% level that would allow the lender to eliminate the PMI.

Mortgage insurance is not required on VA loans regardless of the loan-to-value. FHA mortgages made after June 3, 2013 are required to have Mortgage Insurance Premium for the life of the loan. For FHA loans made prior to that date, the MIP should automatically cancel when the loan-to-value ratio reaches 78% and has been in effect for a minimum of five years.

To obtain additional information specific to cancelling your mortgage insurance, contact info can usually be found on the annual statement provided by your mortgage servicer.

If you want a list of good Denver lenders…contact me.


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Downsize to the Right size? – Littleton

Downsizing can be a difficult process. There are so many questions:

Do I sell or keep my Littleton (other) home?

What do I do with my dining room set?

Where would I move to?

How would this effect my retirement plan?

And what about the will and estate plan?

Could a reverse mortgage work for me?

It is a free seminar; no, more of a panel discussion, on January 30th at the Buck Center in Littleton at 10:00 AM. RSVP to 303-880-5585 or contact me via e-mail.


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Ready for Retirement

Too many of us in Denver of the older generation have not planned well for retirement. We hope the younger generation can learn from our mistakes. Read below, but in the meantime…

DOWN SIZE or RIGHT SIZE? Seminar on January 30th 10:00 am at the Buck Center in Littleton. Join us by RSVP to 303-880-5585 ext 3. Learn how to buy a home with a reverse mortgage and have no payments. What floor plan is best? Can I age in Place? What might it do to my estate plan? How about my Medicare? What is a silver collar city? TOO many questions for an e-mail or blog post, but our cadre of experts will be happy to address your concerns.

It can be shocking to hear how many people spend more time planning their vacation or next mobile phone purchase than planning for retirement. It is hard to imagine that they are expecting Social Security will take them through their golden years. A person who has paid in the maximum each year to social security can assume to receive about $30,000 a year.denver

Every adult in the work force, should go to to find out what they can expect based on their planned retirement age. Since it probably won’t be the amount you need to retire comfortably, at least you’ll know how much you’ll be short so that you can devise an investment plan.

There’s an easy rule of thumb used to estimate the investable assets needed by the time they retire to generate a certain income. The target annual income is divided by a safe, conservative yield to determine the investable assets needed.

A person who wants $80,000 annual income generated from a 4% investment would need investable assets of $2,000,000. If a person had $500,000 now, they would need to accumulate $1.5 million more by the time they retire. They would need to save about $100,000 a year to be ready for retirement in 15 years.

If saving that amount does seem possible, an IDEAL alternative could be to invest in rental homes. The familiarity of rental homes like owning a personal residence can reduce some of the risk. Rentals also enjoy other characteristics like income from the operation, depreciation in the form of tax shelter, equity buildup from the amortization of the loan, appreciation and leverage from the borrowed funds controlling a larger asset.

Some investors explain the strategy by buying good rentals with mortgages and having the tenant to retire the debt for you. Single family homes offer the investor an opportunity to meet their retirement and financial goals with an investment that is easily understood and controlled.

A Retirement Projection calculator can give you an idea of how many rental homes you’ll need to supplement your social security and other investments.

Contact me to register


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Aging in Place Begins Early: Report

Aging in Place…

How does this resonate with you? Take a read at

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