This will be the view that renters can expect in the luxury apartment community under construction in LoHi.

The first modern, large, luxury apartment community in the trendy LoHi neighborhood in northwest Denver is under construction.

The 57-unit community, which will have six stories at its highest point and will scale down to four stories, is being built at 17th and Central streets, overlooking Interstate 25 and downtown. It is being developed and is owned by Central Street Capital, headed by V. Robert Salazar. One of Salazar’s more high-profile projects is The Regency: Auraria’s Student Housing Community on the site of a former hotel at 3900 Elati St.

Ryan Carter, a broker with 8Z Real Estate, thinks the new apartment community, will be an asset for the lower Highland area. It is being built adjacent to the Ale House at Amato’s by Breckenridge Brewery.

Well-heeled renters welcome

“I think it is the best use for that space,” Carter said. “First, I think that the views are just great. It is really going to be the first border, or buffer from the highway. I think any type of high-end, for-sale townhome or high-rise condo project might have struggled on that site, but a high-end rental development will just more density to the area, only helping the area’s restaurants and businesses. I don’t see any negatives to it being rental. The renters are gong to be the higher-income people, so it is going to bring the right demographics to the area.”

Indeed, many of the renters, ultimately could end up buying homes in the neighborhood, he noted.

“I think it will attract the well-heeled renter, who is not quite ready to jump in the home-buying market right now,” Carter said.

Lydia Lin, owner of One Realty Real Estate, whose office is only a few blocks from the site, agreed that the apartment community will provide a needed asset to the neighborhood.

Few choices for LoHi renters

“A lot of people ask me about rentals, and there are just not a lot of apartment buildings in the neighborhood,” Lin said. “This will be a great option for people who want to be near downtown, want to be close, but not in downtown. And there aren’t that many options for rentals downtown, either. A lot of those buildings are pushing 100 percent occupancies – the vacancies are really low. So I think this is really exciting. The neighborhood is really hitting the map.”

Luxury apartments are under construction across the street from the Highland pedestrian bridge, and next to the soon-to-open Amato's Ale House.

Lin, however, said some people in the neighborhood may worry about parking. The community will have about 95 parking spaces for tenants, but Lin said that when they have weekend parties or even a few guests over, “I could see another 20 or 30 people parking on the street.”

The development is scheduled to open in late 2011 or early 2012.

Units will range in size from 570 square feet to more than 1,400 square feet for penthouses, said Mike Francone, of Central Street Capital.

“It is a 16-month to-18-month project, so it is tough right now to say what the rents are going to be,” Francone said. “When they do hit the market, they will be comparable to other luxury rental units in the area.”

Currently, most of the newer buildings are charging $1.50 to $1.80 per square foot. So if the new building commanded rents of $1.65 per square foot, monthly rents would start at $940.50.

It will be a U-shaped building and on the third-floor there will be a large patio area with a hot-tub and a grills for tenants.

“It will be a really nice meeting area,” Francone said. “The views are just going to be unbelievable of downtown’s skyline and Union Station.”

The building also will include a fitness center and on the second floor there will be about 3,500 square feet of office space, but Salazar’s company may take up all of it.

Ground-floor bistro

On the ground floor, there is room for three retailers, although two of them can be combined.

They already have a tenant for one of the retail spaces.

The new development is scheduled to open either in late 2011 or early 2012.

“That is going to be a restaurant operated by Justin Brunson, who has Masterpiece Delicatessen, just down the street,” at 1575 Center St., on the ground floor of the Highland Bridge Lofts. “Justin is going to open a new bistro. Our office is nearby, and we just love his sandwiches at Masterpiece. We eat there all of the time.”

Francone expects that the majority of the renters will be “young, hip couples and singles, probably who do not have any kids yet, although it doesn’t mean we won;t get some of those. We might get some empty nesters, too.”

The Mulhern Group is the architect and Sprocket Design-Build, which has developed a number of infill, high-end townhomes and condos in the area – both for itself and for clients – is the general contractor.

“I can’t think of another luxury rental project in northwest Denver that has been built in recent memory, although I am certainly aware that there is another one planned on Zuni Street,” near West 33rd Avenue, said Bill Moore, principal of Sprocket.

Pent-up demand

Although Moore is the general contractor, and is not involved in the ownership, he thinks the development will serve a lot of pent-up demand from high-end renters.

“I think it will do great,” Moore said. “From time to time, we have a couple of high-end condos or townhomes in the neighborhood that we have to rent. We rent them amazingly well and quickly. The people who are renters are the same kind of people who used to be our buyers. Now, they can’t get financing as easily as before, or need to save for a down payment, so they are renting until they can buy.”

Indeed, developer Francone, thinks a lot of the renters will probably earn enough to buy.

The one thing the community does not yet have is a name.

“We’ve been going through some names, but nothing has really stuck yet,” Francone said.

Contact John Rebchook at JRCHOOK@gmail.com

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All short sales in the metro area rose by 48 percent in the first seven months of 2010, compared with the same period in 2009, according to an analysis of data by InsideRealEstateNews.

The vast majority of the short sales were for single-family, detached homes. A short sale is when a lender accepts less than the mortgage amount

There were 2,270 completed single-family home short sales in the first seven months of this year, almost a 42 percent increase from the 1,610 during the same period last year, according to Metrolist data. And the number of condo short sales skyrocketed a whopping 88 percent, although the actual numbers were much smaller – 476 in January through July this year, compared with 253 in the first seven months of last year. Combined

There were a total of 2,746 single-family and condo short sales, accounting for 11.3 percent of the 24,249 closing in the first seven months of this year. In 2009, short sales amounted to 7.8 percent of the 23,803 closing in the first seven months.

Short sales under-reported?

But many brokers are convinced the number of short sales may be higher – much higher- than the official tally shows. Even officials at the Kentwood Co., which supplied the data to InsideRealEstateNews, at this blog’s request, cautioned that the number of short sales may be far greater than Metrolist shows. The number of short sales may be under-counted because many brokers are not checking the correct box on the Multiple Listing Service forms despite the rules being in effect for more than two years. Metrolist provides MLS data for about 4,000 brokers.

Many brokers believe that one third or more of the closings are short sales in the Denver area. Short sales are growing in popularity, although often it is a long tedious and frustrating process, for both the buyers and the sellers.

Short Sales: The New Foreclosures

Tom Cryer, a broker with the Kentwood Co., calls short sales the new foreclosures. Foreclosure filings, overall, were down 19.5 percent in July, but Cryer and others believe that is simply because short sales are filling the space previously occupied by foreclosures.

“Anecdotally, I would confirm that at least one in three showings I set up are short sales or disguised short sale listings,” Cryer said. “I’ve been in Highlands Ranch, Castle Rock and Parker lately, and (short sales) are pervasively present. Moving forward, the data will get more reliable as the market adjusts and absorbs the pain.”

Sonda “Sunny” Banka, a broker with Metro Brokers/Sunny Homes & Associates Inc., also thinks that short sales account for a large percentage of the market.

“If I pulled 50 listings anywhere in the Denver area – in any price range – and I had a buyer that was not interested in looking at short sales, I would probably only have eight or 10 homes to show,” Banka said.

Bobby Burnett, a broker with Keller Williams Realty, thinks that short sales account for 40 percent of the sales activity in the Denver area. His business is “45 percent of 46 percent” short sales.

He thinks that many brokers, new to the world of short sales, aren’t checking the box on Metrolist forms.

“Some brokers do not know enough to check off the box,” Burnett said. “Some of them instead might list it as a short-sale on the comments part, but it doesn’t end up get recorded as a short sale. It’s a monumental task for MLS to police this.”

He also said that he has heard that some brokers do not want to list it as a short-sale, either because their client doesn’t want them to in order to avoid low-ball offers, or because they think there is a “stigma” to a short sale. The flip-side of that is that a short sale may generate more offers from buyers looking for bargains, he said.

Challenging situation

“I will tell you it is challenge,” to make sure brokers check the short-sale box, said Melissa Olson, of Metrolist. “We have no way of validating if it is a short sales, unless, of course, we are contacted and it we look into it.” Brokers can anonymously contact Metrolist about any alleged violation, including failing to correctly list a home as a short sale.

Although the Metrolist rules requiring brokers to check the box saying it is a short sales went into effect in June 2008, some brokers may not know about it, despite repeated reminders send to them by Metrolist, Olson said. At least in the past, some brokers even noted the home was a short sale in public marketing materials, but neglected to check the box.

There are potentially penalties for not following the rules, but Olson said Metrolist is much more interested in educating brokers to the correct procedures than punishing them.

According to Metrolist data, the number of single-family short sales peaked in June at 457, and then fell to 271 in July. That is a 40.7 percent drop, even though all closings only dropped 19.5 percent in July from June. Condo short sales also hit a high in June with 96, and then fell by 36.5 percent to 61 in July.

“I have no idea why that would be,” said Dave Liniger, co-founder of RE/MAX International, when he was shown the data earlier in August by InsideRealEstateNews. “It might just be an anomaly.”

Liniger said that he thinks that short-sale activity will pick up in the Denver area and nationally. Lenders typically lose about 15 percent on a short sale, compared with about 34 percent on a foreclosure sales, according to a national study released in late June by RealtyTrac.

Liniger’s take

Liniger helped draft new federal guidelines for lenders to that went into effect on April 5, under the federal Home Affordable Foreclosure Alternatives, or HAFA program. Although the program did not go as far as Liniger wanted, he said it is a step in the right direction and will help. Fannie Mae was not part of the April HAFA guidelines, but on Aug. 1 began implementing its own version of trying to streamline the short-sale process. FHA and VA also have their own guidelines for short sales.

At first, Liniger said, short sales weren’t as popular as they should have been, because most brokers didn’t know what they were doing. Now, tens of thousands of brokers have taken courses teaching how to navigate the tricky paper-work required for short sales.

Also, lenders are finally beefing up their loss-mitigation departments, after being over-whelmed by homeowners seeking short sales instead of losing their homes in foreclosures. While not perfect, they are much better than they were a year ago at handling the incredible volume of business, he said.

The final piece of the short-sale puzzle are the investors, who bought securitized mortgages, Liniger said. Many consumers may be surprised that it is often nameless investors, not their loan servicer that collects the monthly mortgage check, that actually owns the mortgage and has to sign off on the short sale.

Overseas investors’ role

“Of those investors, 65 percent are overseas,” Liniger said. “They felt they were left holding the bag. After all, they are the only ones not getting paid. The real estate broker got paid a commission at the sale, the mortgage company got its cut, the title company was paid at closing. But the investors are coming around, because they realize they are typically going to lose a lot less if they accept the short sale than if it goes into foreclosure.”

But Ron Woodcock, a broker with RE/MAX Southeast, who has been primarily working with short sales and distressed properties for more than two decades – first in Florida and in recent years in Colorado – couldn’t disagree with Liniger more.

RE/MAX broker disagrees with Liniger

“Dave Liniger is a genius,” Woodcock said. “He is way smarter than I ever will be. I know he is the CEO of RE/MAX, but I think he is wrong on short sales.”

First, Woodcock thinks the short-sale training programs are not very helpful. He said that experience will trump a few hours in a classroom,

And he thinks the April 5 HAFA guidelines have not helped at all, in the vast majority of the cases.

“They maybe help with one out 10 deals,” Woodcock said. “For most lenders, they are voluntary guidelines and they are worthless.”

On two recent deals, Woodcock had to put in calls to the CEOs of Bank of America and GMAC to close short sales. While he didn’t reach the CEOs, he said he got close enough to the top to have have them put the pressure on the local officials to have them close the deals.

Burnett, of Keller Williams, also said the April guidelines have been a bust.

“I think it’s made it worse,” Burnett, of Keller Williams, said about the April 5 short-sale rules. “If it speeds up anything, it speeds up their denial of that short sale.” What happens then is the process returns to square one, he said, wasting the time of both the buyer and sellers.

Fannie Mae getting in the way?

And Woodcock is concerned but what appears to be a recent policy change by Fannie Mae loans. In the past, lenders would routinely postpone foreclosure sales if the owner was working toward a short-sale solution. But last week, a lender told him Fannie Mae’s new rules would not allow it to postpone a foreclosures sale. So instead of a short sale, the home was sold at a public auction last Wednesday by the Arapahoe County Public Trustee.

“If this is their new policy, it is going to lead to a wave of new foreclosures,” Woodcock said. “It is going to be devastating.”

Sunny Banka was the broker on the other side of that transaction, and was as equally as unhappy.

“I went back to my Metro Brokers office, and about three other brokers told me the same thing had happened to them,” Banka said. And Woodcock said a broker in northern Colorado recently told him that she also was told a lender told her that Fannie Mae no longer would postpone a foreclosure auction, even if a short sale is in process.

Fannie Mae, in its new short-sale rules, notes that if foreclosure proceedings have been initiated, the servicer must attempt to schedule a foreclosure sale after a 120-day marketing period, whenever feasible. Also, without Fannie Mae’s prior written consent, a servicer must not consider a Fannie Mae short sale or deed-in-lieu (DIL) of foreclosure,  if a foreclosure sale is scheduled to be held within 60 days of the borrower’s request for a short sale or DIL or if it is determined that the borrower is ineligible for the government’s Home Affordable Modification Program, or HAMP.a foreclosure could be initiated and reasonably be expected to result in a foreclosure sale being held within 60 days of the borrower’s request for a Fannie Mae HAFA short sale or DIL or a determination that a borrower is ineligible for HAMP;.

Henry Cisneros, the former HUD director who was in Denver recently, said he has no knowledge of Fannie Mae not stopping foreclosure sales if a short-sale is pending.  “This is the first I have heard of it,” Cisneros told . “But I do think we need to do everything we possibly can to keep people from losing their homes in foreclosures.”

Failed tax-credit deals factor

Meanwhile, Katherine Jolliffe , a broker with 8Z Real Estate, said that some first-time buyers had placed short sales under contract to get the $8,000 tax credit, but are now unable to close on them by the Sept. 30 deadline, and so they are coming back on the market.

Some first-time home buyers snapped up short sales priced $30,000 or $40,000 under the market, but are now finding that there is little to no chance of them closing by Sept. 30. “There is no closing date when you place a short-sale under contract,” she said.

Jolliffe fully preps any prospective buyer who is interested in a short sale.

“I tell them that that it takes a lot of patience,” she said. “If you are not in a hurry, they can be very good deals.”

But she said there is no point in prospective buyers calling her weekly on the status of the short sale. “You might call the bank and they’ll put you on hold for three hours, and when you get someone at the other end, they hang up on you,” she said. Paperwork is frequently lost and has be be misplaced.

“And banks will only work on one short-sale at a time,” so if a deal falls apart -sometimes after months or even a year of waiting -it’s back to square one, she said. Indeed, she said the prospective buyers have walked away from a lot of homes listed in the MLS as “active short sales.” The broker often is hoping to slip in another buyer at the last minute, but she said more often than not, the bank will shut them down and make them begin the process over.

Deal of the Year

Yet, what she calls her “Deal of the Year,” was a short sale.

A family in Wyoming bought a home at the eastern edge of Fort Lupton for $280,000.

“It’s probably worth $100,000 more than that in a half-way good market,” she said. “It’s a brand new home with a five-car garage on a third of an acre. The family didn’t even know where Fort Lupton was. But after seeing this house, she told me, “I guess we’re moving to Fort Lupton.”

But that deal almost collapsed because the husband’s name was listed as a co-owner in the purchase contract at the 11th hour.

“No one told me they were doing that,” Jolliffe said. “It was a nightmare. It took over two weeks to just to get a response from anyone at the bank,” to approve the relatively minor change. Thankfully, the bank did agree to add his name, but it delayed the sale.

“They were homeless for a week, while we were waited for the approval. But they finally were able to close, and they were so excited. That makes it all worthwhile.”

Month	2009 SF	2010 SF	2009 Condos	2010 Condos
January	102	244	12	51
February	127	257	32	72
March	236	331	29	71
April	237	373	47	72
May	253	337	42	53
June	308	457	32	96
July	338	271	59	61
TOTAL	1601	2270	253	476

Contact John Rebchook at JRCHOOK@gmail.com

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The trend of low vacancies and rising rents likely will continue, experts said today.

“There’s been a lot of conversation about multi-family (apartment) rentals growing in popularity, but that is true about rental, single-family homes, too,” said Gordon Von Stroh, a University of Denver business professor and author of the report. Von Stroh said that the population grows, there are not enough new apartments being built to meet the demand, while at the same time new-home construction is a fraction of what it has been when measured by historic levels.

Also, many people who lost their homes either through a foreclosure  or a short sale – when a bank accepts less than the mortgage amount – rent another house, instead of an apartment, said Robert Alldredge, principal of Jericho Properties, a residential property rental company in Lakewood. Inded, three and four bedroom homes have the lowest overall vacancy rates, he said, because they can accomodate families. In some cases, they may even include “extended families,” such as grandparents living under one roof with their childrens’ families, he said.

 The lowest vacancy rates were found in Arapahoe County and Douglas County, both of which reported average rates of 2.9 percent. The highest vacancy rate, likely driven by rental houses left behind by students during the summer break, was 8.6 percent in the Boulder/Broomfield area.

Vacancy rates for all counties surveyed were: Adams, 4.2 percent; Arapahoe, 2.9 percent; Boulder/Broomfield, 8.6 percent; Denver, 3.4 percent; Douglas, 2.9 percent; and Jefferson, 3.3 percent.

Rents rise

The average rent for single-family and similar properties rose year-over-year to $1027.78, rising from 2009’s second-quarter rate of $1016.35. The second quarter’s average rent was down from this year’s first quarter average rent of $1035.56.

“In general, average rents continue to go, up, but not at a rapid pace,” said Ryan McMaken a spokesperson for the Colorado Division of Housing. “With such a low vacancy rate, we’d expect to see more rent growth, but the employment situation is putting some downward pressure on rents.”

Relucant landlords not making money

Property manager Alldredge, however, said few people renting houses are making a killing – or even a profit. An increasing number of people are putting their homes into rental pools, because they can’t afford to bring a check to the closing table, if they were to sell them for a loss. They are known as “reluctant landlords,” who intend to sell their homes as soon as the market improves.

“If a fix-and-flipper bought the home during the last 18 months, they’re probably doing OK,” Alldredge said. “If they paid cash, they’re obviously doing fine, renting it. And if they have an 80 percent loan, they’re probably also doing fine. Everyone else is probably losing money. They’re just not taking as big of a monthly hit as they would if they had to cover their entire mortgage amount.”

People who lose their homes in foreclosure, or in a short sale, typically have had their credit damaged too much to buy another house, despite record-low mortgage rates, he said. “They’re actually making people qualify for a mortgage now,” Alldredge said. “There are people out there who qualify; there are just a lot fewer than in the past. And those who can qualify are just afraid to death to buy, which is why home sales are way down. So they end up renting.”

Average rents for all counties were: Adams, $1094.98; Arapahoe, $999.50; Boulder/Broomfield, $1518.43; Denver, $962.91; Douglas, $1415.34; and Jefferson, $975.25.

The average number of days on the market for single-family rentals and similar properties fell from 54.7 days during the second quarter of 2009 to 47.2 days during the second quarter of 2010., a 13.7 percent drop.  The number of days on the market rose from 2010’s first quarter average of 45.1 days. Condo rentals, however, typically spend 88 days on the market, as there is not as much renter demand for them as there is for houses, Allredge said.

The Colorado Statewide Vacancy and Rent Study is released each quarter by the Colorado Division of Housing. The report is available online at the Division of Housing web site:http://dola.colorado.gov/cdh.

Contact John Rebchook at JRCHOOK@gmail.com.

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“I think being in the middle of the pack, or in the top 10, is very positive for our MSA,” said independent broker Gary Bauer, who released a monthly analysis of the Denver-area housing market based on Metrolist data.

“One of the things we do know it with with the July numbers (for Case-Shiller) we are going to see a dramatic adjustment,” Bauer added. “In June, we continued to have the transition from the frenzy of closings from the home buying tax credits, and prices had continued to stabilize, if not slightly increase.”

Market rebounds

In June 2009, the Denver area housing market showed a 3.6 percent drop from June 2008, according to Case-Shiller. Despite the drop a year ago, that was good enough for third place out of the 20 MSAs, showing how much the market has changed during that 12-month period.

“That is why you have to keep these things in perspective,” said Peter Niederman, CEO of Kentwood Real Estate.  That is true about the entire country’s housing market, noted David M. Blitzer, Chairman of the Index Committee at Standard & Poor’s. “Even with concerns about near term developments, we recognize that the housing market is in better shape than this time last year,” Blitzer said.

Today’s report represents “old news,” for people who live and work in the Denver-area, but Case-Shiller is important for “seeing how Denver fares against other parts of the country,” Niederman said. And Niederman likes how Denver stacks up.

“I think the numbers are great,” Niederman said. “We are still holding steady. It seems like some of these other markets have these huge peaks and valleys, while we have sustainable growth. Our market has shown an increase in inventory, so it is not as robust as it has been. But I like where our market stands right now. I really do. If we were showing these huge increases, it would not be sustainable, and would not be good for the overall market, because that would mean it is becoming over-heated.”

Record-low rates key

And while the government’s tax credit program, which required buyers to place homes under contract by April 30 has ended, the super-low mortgage rates can save home buyers today far more than tax credits, valued up to $8,000, Niederman said. “The real story for buyers are these low mortgage rates,” Niederman said, hovering at historic lows around 4.2 percent.

Tom Cryer, a broker with Kentwood, noted that within a 500-mile radius, the Denver region is the most densely populated, which bodes well for a recovery. And it may come faster than many expect, he said.

“This market could really turn on a dime,” Cryer said. “It reminds me of 1989, when you could put an Aurora condo on your credit card. You could buy them for $5,000. Two years later, there was no supply left at all. Everyone was suffering from, what do you call it, GKY – Go Kick Yourself. I think people are going to be kicking themselves now, for not taking advantage of these low prices and unbelievably low mortgage rates.”

Still, given the economic realities, it is had to convince people that it makes sense to take a hit on their current home, and more than by making it up by buying a nicer home in the neighborhood where they really want to live. “I think there is just enough economic activity in Denver that keeps people from jumping off the ledge, but not enough to have them jumping with joy,” Cryer said.

Jeff Bernard, a long-time Realtor who now focuses on Internet marketing consulting for imediaWSI Inc., said he is surprised more people aren’t taking advantage of low rates and relatively low prices, which have made Denver homes extremely affordable by historic standards. ”It continues to baffle me is the fact that more people aren’t taking advantage of the housing affordability,” Bernard said.  Rates are so low today that it could drop a monthly principal and interest payment to about $800 from $1,500 for the same home in 2006, he said.

“The question I have for people is: “Would you rather be a buyer or a seller in today’s market? When I throw that question at people, every single one of them says they would rather be a buyer.”

Bernard said the political rhetoric that the housing market has collapsed and is never coming back, may be dissuading some people from taking advantage of today’s market condition. “Maybe we have to survive the elections, before the market returns,” he said. “Unfortunately, if everyone is believing allof the bad news they are hearing, especially from the political viewpoints, what that is doing to consumer confidence is killing it. The two driving factors for real estate are affordability and consumer confidence.”

National outlook

“The monthly composites cover June and the national index covers the second quarter, when the government’s program for first time home-buyers was winding down,” noted Blitzer, of Standard & Poor’s.

“While the numbers are upbeat, other more recent data on home sales and mortgages point to fewer gains ahead,” said Blitzer. He noted that  California’s cities “have moved from some of the hardest hit to three of the four leading cities based on year-over-year gains. Among the other hard hit cities, the news is also a bit encouraging – Las Vegas, however, remains among the weaker cities.” And 17 of the 20 MSAs and both composites “saw home prices increase in June over May – LasVegas was down 0.6%, Phoenix and Seattle were both flat. Through the second quarter, 15 of the 20 MSAs and both Composites have positive annual growth rates, and no market is registering a double-digit decline. The worry starts when you remember that the Homebuyers’ Tax Credit has expired, foreclosures are still at high levels, and July data on home sales and starts were very, very weak. The inventory of unsold homes and months’ supply data were particularly troubling. If this relative weakness in demand continues, it will likely filter through to home prices in coming months.” San Francisco showed the biggest one-year percentage gain, rising by 14.3 percent. San Diego was No. 2 at 11.2 percent. Phoenix, showed a 6.0 percent gain, while Las Vegas, declined by 5.2 percent.

Long-term, Denver’s housing market has gained about 29.19 percent from January 2000, compared with an overall appreciation of just under 48 percent for the 20 MSAs. Denver’s long-term appreciation is very close to the inflation rate during that period. Washington, D.C., showed the most appreciation, with home prices rising an average of 85.77 percent from January 2000. Detroit continued to be the only MSA to lose value over the long-term, with homes values falling by almost 30 percent since 2000.

Metropolitan Area	Increase since 2000	May to June Change	1-Year Change
Atlanta	9.74%	1.7%	2.0%
Boston	57.83%	1.2%	3.4%
Charlotte	17.24%	0.7%	-2.7%
Chicago	24.9%	2.5%	-0.1%
Cleveland	7.26%	1.3%	0.8%
Dallas	21.14%	1.0%	1.2%
DENVER	29.19%	0.7%	1.8%
Detroit	-29.96%	2.5%	0.8%
Las Vegas	1.77%	-0.6%	-5.2%
Los Angeles	75.66%	0.6%	9.2%
Miami	46.92%	0.4%	1.1%
Minneapolis	25.91%	2.5%	10.7%
New York	72.76%	1.3%	0.2%
Phoenix	10.96%	0.0%	6.0%
Portland	48.73%	0.5%	0.2%
San Diego	63.82%	0.4%	11.2%
San Francisco	42.55%	0.3%	14.3%
Seattle	45.83%	0.0%	-1.8%
Tampa	38.58%	0.2%	-1.6%
Washington, D.C.	85.77%	1.7%	7.3%
Composite-10	61.04%	1.0%	5.0%
Composite-20	47.97%	1.0%	4.2%

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John E. Fuller founded his namesake commercial real estate firm 55 years ago. He has now sold his remaining stake in the commercial real estate firm and has bought 100% of Fuller Western Real Estate.

John E. Fuller, founder of Fuller and Company Commercial Real Estate in 1955 has sold his interest in that firm and simultaneously purchased 100 percent  interest in Fuller Western Real Estate. The price was not disclosed.

“This is an opportunity I couldn’t pass up,” said Fuller, chairman and CEO of Fuller Western said. ”It will enable Fuller Western Real Estate to expand its services into the brokerage of commercial and industrial real estate, serving the many regional commercial clients we have represented successfully for over 55 years.”

$2 billion in sales

While at Fuller and Co., Fuller and his team grew the firm to $2 billion in annual gross sales with more than  300 employees to become one of the largest and most successful firms of its kind in the region. The company recently aligned itself with Cassidy Turley of St. Louis.

Fuller Western recently moved to its new headquarters building near Broadway and Mineral in Littleton and has begun building its commercial division with the addition of seasoned veterans, John Fuller, Jr. , and Bob Leino, commercial brokers, with others to be added in the near future. Burt Fuller, president and chief operating officer of Fuller Western, Jack Kavanaugh, executive vice president of the farm and ranch division and his many brokers throughout Colorado and Wyoming, including Fuller’s full-service office in La Veta, Colorado, will remain in their positions.

 “My vision is to keep Fuller Western Real Estate a boutique firm of seasoned specialists,” John Fuller said. “We will continue to serve our farm and ranch clients with the same commitment as we have for the past 16 years, but we will become a much more viable force in Colorado real estate with the addition of our commercial and industrial division. This will benefit both our farm and ranch and commercial clients.”

Fuller is a past chairman of the Greater Denver Chamber of Commerce, past chairman of the Denver Board of Realtors, and a 2007 Inductee to the Colorado Business Hall of Fame.

Contact John Rebchook at JRCHOOK@gmail.com

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This is the first privately financed medical office building in the Uptown hospital district in more than a decade.

Denver-based Fleisher Smyth Brokaw announced today that it will build a $32 million, 95,000-square-foot medical office building at the southern edge of the Uptown Hospital District near downtown Denver, in what it says is the first private development of a medical office building in the Uptown area in more than a decade.

The Class A building at the southwest corner of East 17th Avenue and Lafayette St., is an easy walk to Exempla/St. Joseph’s Hospital, the Kaiser Permanente Medical Campus, Presbyterian/St. Luke’s Hospital and the Rocky Mountain Hospital for Children. The new building is part of Fleisher Smyth Brokaw’s long-term strategy to acquire and develop a significant medical office building portfolio in the Denver metropolitan area.

Fleisher Smyth Brokaw also announced that a major Denver medical practice has agreed to lease the entire top floor of the building. “Securing this prestigious practice as our lead tenant for 25 percent of the building will jump-start our leasing efforts,” said Glen Sibley, president of Fleisher Smyth Brokaw. He said the building will be financed from a combination of private equity, institutional equity, bank debt, and potentially tax credits. It will open in mid-2012.

Another look at the planned building in Uptown

The building will feature office floor plates of 22,000 to 25,000 square feet on floors five through eight and can accommodate an ambulatory surgery center, state-of-the art imaging services and a variety of other medical services. Ground floor retail/restaurant uses will complement the “growing vibrancy” of the 17th Avenue corridor, Sibley said. Structured parking for more than 300 cars is planned for the development. The top two floors feature an atrium. All office levels feature striking views of the downtown skyline and the Front Range.

“The high quality of the building, flexible floor plates, in-building parking, embedded technology and particularly strategic location adjacent to the mid-town medical campuses will be very attractive to a wide variety of medical office users,” said Sibley. “This new property can accommodate medical practices from as small as 800 square feet to 25,000 square feet”.

Designed by Denver architects The Mulhern Group, the building takes design cues from 19th, 20th and 21st century Denver buildings. It will include state-of-the-art Medical Office Building features and will incorporate the latest “green building” technology. Saunders Construction will build the building. Fleisher Smyth Brokaw will begin pre-leasing the property immediately.

The building will help create jobs, both in the short-term and long-term, Sibley said.

Economic engine

“In the short-term, it will create about 100 construction jobs for a year, while it is being built,” Sibley said. “In the long-term, we think it has the ability to generate about 200 permanent jobs.” The jobs, he said, will run the gamut, from extremely highly paid to entry level positions. Our building, along with the plans to build a new St. Joe’s Hospital, an effort that is underway as we speak, will offer some new opportunities regarding medical practices and research and health-care options that do not exist with the current existing inventory of space. Our building will serve the full spectrum of job creation, from the most highly paid physicians, scientists and other professionals, to other relatively lower-wage jobs.”

Plenty of housing choices

Sibley thinks the area housing market will get a boost from the new jobs.

“There is a wide-variety of housing stock in that immediate area, which is in walking distance from our building,” Sibley said. “There are 1890s vintage mansions available, as well as new public housing mixed in with market-rate properties. Housing, like the job, runs the gamut from the very high-end to public housing, and everything in-between. Not all neighborhoods provide such a variety of housing options.”

“This building is the next step in our plan to significantly increase our medical office holdings in the Denver and Front Range marketplace. We believe Denver will continue to experience solid growth in medical sector employment,” said Michelle Brokaw, CEO of Fleisher Smyth Brokaw.

Here is a ground-floor perspective of the planned medical office building in Uptown.

The property’s amenities include a patient drop-off area, first floor retail space, a comfortable lobby, covered in-building parking, high speed elevators, physician parking and expansive insulated glass. Access is easy via 17th Avenue, 18th Avenue and Park Avenue.

Fleisher Smyth Brokaw LLC is a privately-owned real estate firm. The firm specializes in the acquisition, development and asset-management of office, retail, and industrial properties in the Denver/Boulder metropolitan area. Owned by Michelle Brokaw and founded in 1987, Fleisher Smyth Brokaw has acquired or developed more than 40 properties, representing in excess of two million square feet of office, medical office, mixed-use, and residential buildings. Fleisher Smyth Brokaw continues to focus on the acquisition, investment and development of office and medical office properties throughout Colorado.

 Contact John Rebchook at JRCHOOK@gmail.com

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Here is the first look at the proposed design for the new boutique building on the Argonaut site at Colfax and Washington Street in Capitol Hill.

Like the idea of a boutique building on the Argonaut site? Vote at the end of this blog.

The old and vacant Argonaut Wine and Liquor store building in Capitol Hill will be torn down later this year, to make way for a smaller, new building to be constructed at the corner of Washington Street and East Colfax Avenue, officials associated with Denver’s busiest liquor store have confirmed to InsideRealEstateNews.

While a tenant for the new building, anticipated to have about 950 square feet of space has not yet been chosen, one possible operator would be Jim Pittinger, better known as “Biker Jim,” who sells gourmet hot dogs made out everything from bison to wild boar meat, from carts.

This building will be razed to make way for a new boutique that will take its architectural cues from the Argonaut-store to the east.

The old liquor store has sat empty since the new, larger one was built immediately to the east, almost two years ago. The two-year anniversary for the new 40,000-square-foot store, with more than 12,000 bottles of wine, beer, liquor and other items, will be in early December. Not only is the new store about twice as big as the one to face the wrecking ball, but it has been lauded as the most energy efficient liquor store in the world. The building sports everything from roof-top solar panels, water-free toilets, and even a machine to recycle tons of cardboard.

“We’ve looked at about 20 alternatives,” for the old store, since the new one was built, said Scott Robinson, whose family owns the store, which traces its history back to 1934. “We’ve looked at everything from tearing the building down and build a new one, to building structured parking.”

He said the Main Street zoning would not allow them to simply tear down the building, and increase the size of the parking lot. However, he said they did consider seeking a variance that would allow them to raze it and increase the size of the parking lot.

New zoning code helps

BYG, or Buchanan Yonushewski Group, designed and built the new Argonaut store and is designing the boutique on the site.

Brad Buchanan, principal of the the Buchanan Yonushewski Group, said the recent overhaul of the Denver zoning code provided them with another option – tearing down the old building and constructing a new one on the parking lot.

“I think this is very exciting,” said Buchanan, the architect who designed and built the new building two years ago, and is designing and constructing the new boutique building. Because the new building is smaller than the existing one, it will create about 30 to 35 new, much-needed parking spaces, he added. The boutique building will be constructed with materials to match the new building to the east, Buchanan said. A glass curtain wall will face Colfax, and the entrance is proposed to be on the eastern side in the parking lot, facing the new building, although Buchanan said that is flexible and could be moved.

The size of the building also is flexible, he said. While the current idea is a 950-square-foot building, he said it could be made larger, depending on the tenant.

Main Street zoning

“This is an excellent use of the new Main Street zoning,” Buchanan said. “It brings more retail to that important corner along Colfax. And it gets rid of a really ugly building. Everyone wanted to see that eyesore torn down. It was a real blight on the neighborhood.”

Stephanie Salazar, economic development director of the Colfax Business Improvement District, said the new plan sounds “awesome,” especially if the architecture of the boutique ties into the structure to the east.

“I think as long as they are compliant with the Main Street zoning, and the design fits in, it sounds like a big improvement and we would support it,” she said. “We certainly will be glad to see the old building go. And we certainly know they have a need for more parking. And Scott (Robinson) indicated to us that they might be able to provide the property for public purposes from time to time.”

On the other hand, she said the association also probably would have supported redeveloping the old building.

“From an environmental perspective, it is nice to be able to save and re-use existing buildings,” she said.

“And sometimes what people call redevelopment, is just a matter of keeping one or two walls of the new building, so it really is new construction. I guess we always thought the old building would end up being scrapped.”

Indeed, a former commercial real estate broker who lives in the neighborhood, said he has a multiple restaurant scheme for the existing building that he thinks would better serve the site, neighborhood and the new Argonaut better than the tiny new building. However, he has neither spoken to the Robinson family about his plan, nor does he have any tenants lined up, although he insists he could.

David Fried, a senior vice president of Cassidy Turley Fuller and Co., is leasing the new building that will open next year. Buchanan said they are at the early stages of leasing. He said many prospective tenants probably are not even aware of the new building yet.

Main and Main

“There’s going to be a lot of interest in that building,” Buchanan said. “It really is Main and Main. It’s a very high-profile corner on Colfax and in Capitol Hill.”

One person who is already interested in the new building is Biker Jim Pittinger. If he does lease it, it would be his second restaurant. He currently is working to open his first restaurant in a 1,900-square-foot building at 2148 Larimer St., which will have about 65 seats, as well as a patio that could handle another dozen or so diners.

Biker Jim hot on site

“Your timing is cool,” Pittinger told InsideRealEstateNews on Thursday. “My broker spoke to David Fried (the broker listing the property) yesterday.” Pittinger currently sells his gourmet dogs for $5 each on Saturday and Sunday at the parking lot at Argonaut. During the week, lines form daily around his cart at Arapahoe Street and the 16th Street Mall.

Contact John Rebchook at JRCHOOK@gmail.com.

“I think it would be great,” Pittinger said last Sunday, while grilling dogs at Argonaut. “Just look at this. It’s a great corner. But I don’t know where the they are as far as negotiation.” On Friday, he told InsideRealEstateNews that “there isn’t really any reason to write about us and Argonaut unless or until we get an arrangement worked out with those guys for the space. Not saying it isn’t gonna happen. Not saying it is, either.”

Buchanan said that whoever the tenant is, it must complement Argonaut.

“It definitely won’t be a liquor store,” Buchanan said. “And it won’t be a marijuana clinic, either. Believe me, they’ve gotten a lot of calls from people who want open a marijuana dispensary there. It’s not going to happen.”

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I can honestly say that by most measures, there has never been a better time to buy a home in the Denver area.

You all know the reasons.

Mortgage rates are at historic lows, hovering around 4.3 percent for a 30-year-fixed rate loan.

Sellers, whether they are individual or banks, are motivated, providing bargains for qualified buyers. Many homes, especially at the higher price ranges, are selling for not only far less than what they commanded three or four years ago, but less than the replacement cost.

The number of unsold homes on the market, while still low by historic standards, rose 14.6 percent in July from July 2009, giving buyers more choices.

No sense of urgency

Yet, I have never seen a time when there appears to be more home buyer apathy in the Denver area. The key ingredient of a robust buying market is missing: A sense of urgency.

Of course, the reluctance to sign on the dotted line goes well beyond Denver.

Everyone here saw the report by National Association of Realtors this week that dominated headlines. To recap: Nationwide, existing home sales in July fell 25 percent from a year ago and 27 percent from July 2009. In Denver, existing home sales were down 19.5 percent from June and 26.6 percent from July.

MUF-bust

Blame it on what I’m calling the MUF – Media, Unemployment and Fear

The fear factor, of course, is fed by the lack of consumer confidence, which is a nice way of saying that for the vast majority of people, there is no guarantee of that they will be able to hold on to keep your job. And while the unemployment rate is 8 percent in the Denver area, slightly better than the nation’s, earlier this year I attended a conference where the chief economist for the Colorado of Department of Labor and Employment said when you include people who are severely under-employed, or who have just given up on trying to find a job, the actual unemployment rate is probably at least twice what the official statistics show.

All of that, of course, impacts peoples’ ability to take advantage of great mortgage rates and attractive home prices. In addition, a recent RE/MAX International report said that 29 percent of the homes in the Denver area are underwater. In other words, almost a third of the homeowners don’t have any equity in their homes, making it very difficult to move-up.

Beyond all of those fundamentals conspiring against buyers, there is the media, which largely missed the housing melt-down, and doesn’t plan to make that mistake again. It’s trying to get ahead of the curve, whether that is a double-dip recession, deflation, inflation or all of the above.

There are more reports in the media, including InsideRealEstateNews, my blog, about the downside of buying homes than I have ever seen.

Shooting messenger doesn’t help

But don’t shoot the messenger.

It’s simplistic to say just because there are critical stories about homeownership in the New York Times, The Wall Street Journal, Denver Post or InsideRealEstateNews, for that matter, they are driving away buyers.

First, just because they are exposing the downside, or potential downside, of buying a home, doesn’t mean they are wrong. And frankly, with my blog at least, I’ve devoted far more space to fundamental reasons that bolster the case for now being a good time to buy a house than the reverse.

And be aware that the press tends to be much more of a mirror, reflecting what is going on, then an engine that powers a trend.

Yes, undoubtedly some people are reluctant to buy a home, because of nasty headline, and there have been plenty of them. A recent one in the New York Times shouted: “Housing Fades as a Means to Build Wealth, Analyst Says.”

And closer to home, I recently wrote about a report from the Everitt Real Estate Center at CSU, in conjunction with the Colorado Association of Realtors, which claimed that overall, homes in the six-county Denver area have only appreciated 7.1 percent from 1999 to 2009.

In other words, if you bought a home for $100,000 in 1999, 10 years later, that same home would only be worth $107,100.

Other reports, whether from Metrolist, S&P/Case-Shiller, or the U.S. Government’s Federal Housing Finance Agency, have reported long-term gains many times 7 percent during that period.

But if the CSU analysis is accurate, it is particularly chilling in a couple of respects. The most obvious reason is that homeownership has long been pitched as a good, long-term investment. As the late Texas developer giant Trammell Crow once said: “The secret to great wealth is to own real estate and live a long time.”

Are homes long-term investments?

But if you dig a little deeper, if the conclustions from CSU are correct, it is even more ominous. During that stretch of time, the inflation rate was 28.8 percent. In other words, if your home after 10 years of ownership is worth only $7,000 more than what you paid, you’ve actually lost close to $22,000 in real dollars – without even including the cost of buying and selling. That is because your $100,000 in 1999 dollars has the same buying power as $129,000 in 2009 dollars.

The CSU analysis concludes that only Douglas County and Broomfield County, with a 10-year appreciation rate of 26.3 percent and 24.5 percent, respectively, came close to matching the inflation rate. In Arapahoe County, the long-term gain amounted only to a half of one percent, and Adams County saw a 2.7 percent decline.

But to be fair to homeownership, and put it in perspective, there were not a lot of investment opportunities that performed well during that period. The S&P 500, for example, lost almost 10 percent from 1999 to 2009.

That said, buying a home is not like owning a broad-based index like the S&P 500. No one owns an “average” home, just like no one has an average kid. Buying a home is much more akin to buying an individual stock. In other words, make the right purchase, and your individual investment can soar, no matter how the overall market performs. And unlike a stock, something made of bricks and sticks, very seldom falls to zero.

Still, for generations raised on the notion that home prices can only move one way – up – the recent downturn is jaw-dropping.

$6 trillion in home values lost

Nationwide, it’s been estimated that $6 trillion dollars of housing wealth has evaporated since 2005. SIX TRILLION DOLLARS. To put that in perspective, that is about a trillion dollars more than the economies of either China or Japan. In my book, it’s pretty staggering to have lost more in home values than the GDPs of the world’s second and third largest economies!

And if you use a conservative, back-of-the envelope calculation, Colorado’s share of that $6 trillion loss equates to about $120 billion. (Colorado accounts for about 1.7 percent of the owner-occupied homes in the U.S., but the median price of a home in the Denvr area is about 31 percent higher than the national medium) In other words, the loss in home values is more than six times the size of the State of Colorado’s budget of $19.2 billion.

Dean Baker, co-director of the Center for Economic and Policy Research, a think-tank in Washington, D.C., estimates it will take two decades to recoup that $6 trillion, and when adjusted for inflation, we will never again see the peaks we experienced in 2005 and 2006.

That’s a lot of doom and gloom. And when you include the so-called “shadow market,” of unsold homes being held by banks, which haven’t hit the market yet, there is concern that home prices will tumble yet again, as sellers are forced to compete with another wave of distressed properties. In other words, another reason not to buy today.

Yet, you would think that given all of the negatives in the market that no one is buying a home. And that is simply not true.

Sales volume rising

In the first seven months of the year, buyers paid $6.2 billion for homes in the Denver-area, almost 7 percent more than the $5.8 billion during the same period in January. Granted, 2009 was a terrible year, and much of the activity was fueled by the federal home buying credits, even though the subsequent drop in interest rates will far surpass the $8,000 tax credit for first-time home buyers.  Still, this marks the first time since 2006 that Denver has experienced a year-over-year improvement in sales volume.

Earlier, I talked about the CSU analysis that traced home appreciation in the Denver area starting in 1999.

Now, let’s visit another metric: Home ownership rates.

According to the 2000 U.S. Census, the homeownership rate in Denver stood at 52.5 percent, a decade ago. By contrast, the homeownership rate in Archuletta County 70.6 percent in rural Baca County, 67.1 percent. Now, part of that, might be due to family owned ranches.

Making money not only reason to buy

But consider other parts of the country. In New York City, a decade ago, the homeowership rate was a meager 30.2 percent. In Buffalo, where home prices basically never rise, the homeownership rate was 43.5 percent.

In Chicago, the homeowership rate was 43.8 percent, while in Freeport, Ill., a rural town of about 25,000, the homeownership rate stood at 68.2 percent. The overall home ownership rate in California was 56.9 percent, but only 35 percent in San Francisco.

When the 2010 Census data comes out, the percentages are sure to be different, but I’m betting the delta between homeownership rates in rural areas, where real estate appreciation is typically not the reality, wtill remain far higher than in bigger, wealthier metropolitan areas.

Certainly, many people are priced out the housing markets in places such as New York or San Francisco. Even if you have a good income in those places, you may not be able to buy a home, unless the market goes your way and you can use the increased value in your existing home to trade up. But to do that, you have to get in the game – take the plunge and all the risk accompanying buying a first-home.

But the flip side of that, and I apologize for taking so long to get to my point, is that people buy homes in places where they don’t look at theme as a growth stock, destined to go through the roof.  If you talk to people who live in small towns across the country, they will tell you the same story. Unless something happens that makes the town a trendy tourist attraction, or a big company move in and goes on a hiring spree, their only appreciation comes from paying down their mortgage. Yet, that does not deter them from buying, instead or renting

Although I in no way have a crystal ball, I suspect once people weather this current part of the housing cycle, they will continue to buy homes in the Denver area. But they won’t buy homes with dollar signs blurring their vision.

Instead, they will buy a home because the it meets the needs of their family, it is in the right price range, they like the street, they like the school district,  it is convenient to work. While they won’t ignore the potential for appreciation, it won’t be the driving force, either. When people start buying for the right reasons, they may buy more homes than ever.

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Foreclosure filings in Colorado’s largest counties plunged by 29.5  in July from July 2009, the fourth consecutive month this year that foreclosure activity has dropped from the comparable month last year, according to a state report released today.

The Department of Local Affairs’ Division of Housing reported that monthly foreclosure filings totals have been down year-over-year every month since April. Foreclosure sales at auction fell 15.4 percent during July as compared to July of last year.

There were 2,718 new foreclosure filings in July compared with 3,855 filings in July 2009. There were 1,581 foreclosure sales during July, and 1,869 foreclosure sales in July of last year.

From June to July this year, foreclosure filings rose 0.2 percent, and foreclosure sales at auction fell 10.9 percent. Foreclosure filings are the initial filing that begins the foreclosure process, and foreclosure sales totals are the total number of foreclosures that have been sold at auction at the end of the foreclosure process.

Downward trend

“We continue to see a generally downward trend in both new filings and foreclosure sales at auction,” said Ryan McMaken, a spokesperson for the Colorado Division of Housing. “The decline in sales at auction can be attributed at least in part to the success of programs like the Foreclosure Hotline. However, since foreclosure activity is so closely tied to wages and employment right now, the trend in filings could change at any time in response to the overall strength of the economy.”

Foreclosure activity varied by county. The counties with the largest decreases in foreclosure filings from July 2009 to July 2010 were Weld and Denver, where filings decreased by 38 percent and 39 percent, respectively. Mesa County was the only county surveyed where filings increased. Year-over-year filings in Mesa County increased by 24.6 percent.

Year-over-year, Mesa County was also the only county to report an increase in foreclosure sales at auction. Sales increased 133.3 percent in Mesa County year-over-year. Sales fell most in Larimer County and El Paso County where they decreased by 31.1 percent and 32.4 percent, respectively.

The county with the highest rate of foreclosure sales was Weld County with a rate of 598 households per foreclosure sale. Mesa County came in second with 660 households per foreclosure sale. The lowest rate was found in Boulder County where there were 2,966 households per foreclosure sale. The largest increase in foreclosure rates since 2009 was found in Mesa County where the foreclosure rate increased from 1,540 households per foreclosure to 660 households per foreclosure, year-over-year.

The Division of Housing’s monthly foreclosure report surveys foreclosure activity in the 12 largest counties of Colorado. The report is a supplement to the division’s quarterly foreclosure report that includes all counties in Colorado.

County	July 09	July 10	% Change
Adams	490	350	-28.6
Arapahoe	590	435	-26.3
Boulder	145	99	-31.7
Broomfield	34	31	-8.8
Denver	634	387	-39.0
Douglas	222	162	-27.0
El Paso	530	353	-33.4
Jefferson	390	295	-24.1
Larimer	232	156	-32.8
Mesa	130	162	24.6
Pueblo	137	88	-35.8
Weld	321	199	-38.0
Total	3855	2718	-29.5

Note: There is a poll embedded within this post, please visit the site to participate in this post's poll.

The full report is available on the Division of Housing blog: http://divisionofhousing.blogspot.com/

Contact John Rebchook at JRCHOOK@gmail.com

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Former HUD Secretary Henry Cisneros spoke on a wide-variety of housing and real estate topics in Denver today.

Is it time to write off the second-home write off? Cast your vote at the end of this blog.

The mortgage deduction on second homes may need to be eliminated to help reduce the federal debt, former HUD Secretary Henry Cisneros said today in Denver.

Cisneros, who was also was the four-term mayor of San Antonio, said this morning that he knows he is “parting with his home-building brethren” by taking that position. Many of the homes in Colorado’s mountains, for example, are second, vacation homes. Cisneros is the executive chairman of Los Angeles-based CityView, which is developing the Peloton housing community in Boulder.

Bipartisan Task Force

During a wide-ranging interview with reporters,Cisneros noted that he serves on a bipartisan task force looking at ways to trim the nation’s debt. He said the debt had been about 30 percent of the GDP historically, has doubled to about 60 percent, and in the next 10 year or so it is projected to be “100 percent-plus of the GDP.” Later Tuesday afternoon, in a private interview with InsideRealEstateNews, Cisneros clarified his position on eliminating the second-home mortgage deduction, noting that the Bipartisan Policy Center Debt Reduction Task Force has not “reached the debate phase yet,” so he can’t say he officially opposes eliminating the second-home mortgage deduction.

“But It is hard to defend the interest-deduction for second-homes, vacation homes,” Cisneros toldInsideRealEstateNews.

In order to combat the growing and long-term debt problem, Cisneros said that some “common sense” measures must be taken. He said he has “pledged to keep an open mind,” on a wide number of ways to reduce the size of the debt.  To get the debt under control, ultimately will take a mixture of new taxes, cutting government expenditures and growing the economy, he said ”We can’t just grow ourselves out of the problem,” he said. “It will take all three- new taxes, cutting government spending and economic growth.” Cisneros said that the task force is focusing on ways to reduce the debt, as opposed to the “year-to-year deficits.”

“Dagger in the heart”

It would be a disaster to eliminate the second-home mortgage deduction, especially at a time when the vacation housing market is on the ropes, said Jim Cook, of Colorado Group Realty in Steamboat Springs, .

“Tell that liberal Cisneros – Henry -Hank – that is the stupidest goddamn thing I have ever heard,” Cook said. The mountain resort housing market, he said,  “is all ready destroyed” because of the economy, and removing the second-home deduction ”would just put the dagger in its heart.” Rather than eliminate the mortgage deduction, Cook said that a better idea would be to increase transfer fees, as long as a portion of the fees are given to the county to help fund affordable housing.

Cisneros, when told of Cook’s comments, understood his frustration and reluctance to eliminate a major financial incentive to buy or own a vacation home.  Currently, homeowners can write off up to $1 million in mortgage interest on either a first or second home. “You hate to do anything to deflate the housing industry, especially at this vulnerable time,” Cisneros said. “But the problem of the debt is not going to go away and we are going to have to make some very tough choices.”

Primary home mortgage deduction safe

However, Cisneros said one thing that will remain in place is the deduction on most mortgages for primary residences. Increasingly, pundits have talked about eliminating the mortgage write-off, which costs the Treasury about $120 billion annually.

“It is not going to happen,” Cisneros said about the mortgage deduction for most homeowners. “That is a third-rail in America. It’s like saying you’re going to privatize Social Security, or something. It’s embedded in the American psyche. ”

Fannie, Freddie need to stick to knitting

Meanwhile, on other issues, Cisnersos, who last week attended the U.S. Treasury Department’s Housing Finance Summit, said he opposed eliminating Fannie Mae and Freddie Mac, although he wants them to return to their core businesses of supplying a secondary market for mortgages. He said Fannie, Freddie and FHA-insured mortgages, and other government programs, account for about 9 out of every 10 mortgages made, and that volume can’t be picked up solely by the private sector, as some would like. He said country’s such as Mexico, which do not have a secondary market to provide liquidity for making mortgages, do not have a homeownership rate as high as in the U.S. He did say that Fannie and Freddie had strayed from its mission of providing liquidity in the market. Instead, it packaged risky mortgage instruments that led to Fannie and Freddie being taken over by the government, as the nation’s housing market collapsed for the first time since the Great Depression. Cisneros said executives at the institutions had become more interested in paying themselves “huge bonuses, making them some of the highest paid people in Washington,” rather than serving their core duties.

“Fannie and Freddie should be restructured to focus on the essential mission of providing liquidity for housing purchases,” Cisneros said. “That mission must be performed for the American housing sector to prosper.”

Fan of tax credits

Cisneros also said he still thinks the federal home buying tax credit was a good idea, despite the National Association of Realtors’ reporting today that existing home sales fell by 27 percent in July from June, twice what analysts had predicted. He said the tax credits helped the housing industry and the economy, at a time when both were vulnerable. Cisneros also lauded Denver Mayor John Hickenooper for using federal stimulus money to keep people from losing their homes to foreclosure through the Take Root Denver program. The program will allow the city to buy, rehabilitate and re-sell more than 450 foreclosed homes through 2013 ”I believe we need to do everything we can to keep families in their homes, and not lose them in foreclosures…It is hard to envision a national economic recovery that doesn’t include the housing sector, since it is such a large part of gross domestic product.”

Contact John Rebchook at JRCHOOK@gmail.com.

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