Buyers wrote contracts on only 3,883 homes in the Denver area in May, a 41.3 percent drop from April, when consumers scrambled to take advantage of the federal home buying tax credits that required a house to be placed under contract by April 30. In April, a record 6,616 homes were placed under contract, while last month marked the worst May since 2004 when 3,529 homes were placed under contract, shows a report released today by independent broker Gary Bauer, based on Metrolist data.

Under contacts were also down 27.3 percent from May 2009, when 5,343 homes were placed under contract.

“They were record drops,” Bauer said. “They were the largest percentage drops from 1990 going forward for any month, both for the consecutive months and year-over-year comparisons.”

Sales fell with tax credits

Bauer and other experts agree that the drop was because the $8,000 tax credit for first-time buyers and $6,500 for qualified existing owners expired at the end of April and require that the homes close by the end of June.

“April was such a frenzy; the numbers were inflated by the tax credits,” Bauer said. “Realtors were working up to midnight on April 30 to get homes placed under contract.Buyers are making multiple offers on homes and sellers were dealing with multiple offers.”

Still, Bauer believes the tax credits were worth it.

“I think we did steal some future sales,” Bauer said. “But in my opinion, it was a worthwhile program. And it has ended while we are coming into the prime selling seasons of the year – June, July and August. I think we are going to have a good prime season, but not a great prime season.”

Deja vu all over again

Peter Niederman, CEO of the Kentwood Co., wasn’t surprised that under contracts fell so precipitously when the tax-credit deadline passed.

“I think I mentioned to you in 2009, when it looked the tax credits were going to expire in November, that November was the only month last year that reported higher sales on a year-over-year basis from 2008,” Niederman said. “In my opinion, that is what happened in April. You had this huge pent-up surge in April, so under contracts were anticipated to fall in May.”

He noted that at Kentwood, the number of showings dropped in May from April, but not as much as the under contracts dropped.

Niederman, in a letter in his upcoming Gallery, a glossy magazine that highlights expensive listings by brokers at Kentwood and Kentwood City Properties, quotes Lawrence Yun, the economist for the National Association of Realtors.

Tax stimulus worked

“The second round of surging sales from the tax credit extension looks as strong as the original tax credit,” according to Yun. “Evidently, the tax stimulus, combined with the improved consumer confidence and low mortgage interest rates, are contributing to surging sales. The housing market now appears to be in a good position to return to sustainable levels even without government stimulus, provided the economy continues to add jobs.”

Niederman said he couldn’t agree with Yun more. And he is not dismayed that the market nose-dived in May, as far as under contracts.

“One month doesn’t make a trend,” Niederman said. Indeed, there were 24,510 homes placed under contract in the first five months of the year, a 4.9 percent increase from the 23,366 during the same period in 2009.

“If you want to look at where the trend is, you need to look at the year-over-year numbers,” Niederman said. “I am encouraged that we are about 5 percent ahead of where we were last year. When you look at the first five months of this year compared with the first five months of last year, we are still ahead of the game.”

Economist Patty Silverstein said that everyone knew that the tax credits would have an impact on home sales activity, but until today’s report, no one knew how big of an impact the market would experience.

“Obviously, from the under contract values, we lost some of the momentum we had in the market,” Silverstein said. “The market was sort of front-loaded. But we are now moving into the prime home sales season, and so we will know in the coming months how much we are moving into a steadier, sustainable pace.”

In fact, she said what is happening in the housing economy is not much different than what is happening in the overall economy.”If you are focusing on a little broader measure, and not just on the residential market, this whole economic recovery is going to see some fits and starts. The recovery, whether you are talking about the entire economy, or the residential market, is not going to be healed in just one year..”

Silverstein said she is more concerned about the 27 percent drop from May 2009 than the 41 percent drop from April. “That does kind of concern me,” Silverstein said. Indeed, May 2009 was not a stellar one for sales activity,with under contracts down almost 16 percent from May 2008. While this was the worst May in six years, there were other dynamics fueling the market in 2004, Silverstein said.  “Keep in mind 2004 was when those outrageous mortgage products started to come on the scene,” Silverstein said, fueling sales until the summer of 2008, when the house of mortgage cards collapsed the entire industry.

Realtors are people, too

Chris Mygatt, president of Coldwell Banker Residential Colorado, said the drop off in under contracts last month were “very predictable,” and the obvious culprit was the end of the tax credits.

But there also was a human factor in play that many people will overlook, he said

“People have to realize that real estate agents are people, too,” Mygatt said. “They have to manage their time like anyone else. They were extremely busy showing properties in April, evidenced by the fact that was the best April on record for under contracts. In May, the agents’ job was to get those contracts they wrote in April closed. So they were working with existing clients to get those homes closed before the June 30 deadline and did not have as much time to spend on drumming up new business. I think the June numbers are going to be very important. I think we may see a little bounce back in showings and under contracts in June.”

Mygatt was pleased to see the number of unsold homes on the market last month to rise 6.2 percent to 22,016 from 20,734 in May 2009, and increase by 2.1 percent from the 21,565 homes in April

Pragmatically, however, sellers would have been better served to have their homes on the market earlier, to take advantage of the tax credits.

“Yes, they should have, and that was what agents were telling them,” Mygatt said. “We did not have enough inventory in April, which was frustrating for buyers. But a lot of sellers just couldn’t get organized in time. If you aren’t involved in selling and buying homes all of the time, you don’t realize that it can easily take one or two months to get a home prepared to sales. You have to replace the carpets and paint it and clean up the clutter.”

Still, with the exception of May 2009, the current unsold inventory is the lowest May since 2002, when only 14,173 homes were on the market.

“That shows we do not have an excessive inventory of homes on the market,” Mygatt said. “We can easily absorb the extra homes on the market, without creating an imbalance between supply and demand and hurting pricing. We’re heading towards a more normalized market.”

Most metrics smoking

David Simonson, of RE/MAX Professionals, said the tax credit drove sales in the lower-priced part of the market. “It stimulated a lot of people looking in the $100,000 to $200,000 range into the low $300,000 range,” Simonson said. “Realistically, we are looking at a little wave – a little up, a little down. If you look at everything but the the under contracts, everything else was great.”

For example, the average price of a single-family home that closed last month was $273,285, about 4 percent higher than the $262,066 in May 2009, and the median price of a single-family home rose 4.5 percent to $230,000 from $220,000.

And the 4,365 home closings represented a 20.3 percent increase from the3,628 closings in May 2009 and a 4.2 percent increase from the 4,188 in April.

Also, the 2.1 percent increase in the supply of unsold homes in May from April, bodes well for the market, he said.

“I’m surprised in a good way,” Simonson said.

Market on upswing?

Jack O’Connor, a principal of RE/MAX Professionals, said that May marked the third consecutive month of continuing year-over-year increases in monthly sales. “Historically, three straight months of increased sold-data would signal a market on the upswing,” O’Connor said. “Since the tax credit artificially increased sales in April, watching this data over the next three months will confirm whether Denver is truly on the rebound, or if we are still bouncing along the bottom of the market.”

Meanwhile,  although job growth during the first half of the year failed to live up to expectations, Denver is now being widely cited as a city that will out-perform the national market in job growth and job stability for the next several years, O’Connor said.

Jobs key

“When there is a pool of jobs, people move to take advantage, which lowers inventory and drives prices up,” O’Connor said. “In this particular market, those buyers would have the additional advantage of buying at historically low conforming rates, at a time when average prices look comparatively favorable. That prompts properties to move and for appreciation to occur.”

O’Connor, who analyzed the market using a different methodology than Bauer used, found that there were 4,237 closed sales in the eight-county area in May, 10.4 percent higher than the 3,782 in May 2009.  O’Connor’s research also found that there is a 5.1-month supply of homes on the market priced below $500,000.  At current absorption rates, that would be considered a seller’s market, he said. By contrast, there is currently about a 30-month supply of unsold homes priced at more than $750,000, O’Connor said.

“The upper end phenomenon hasn’t been seen in 50 years,” O’Connor said. “It creates an unusual opportunity for a buyer that has been waiting to move up from a lower price range, to be able to get a sale at close-to full price on the seller side, and to pick-and-choose on the purchase side at very favorable interest rates.”

Year	Under Contract	Closed	Single-family Average Price
2010	3,883	4,365	$273,285
2009	5,343	3,628	$262,066
2008	6,338	4,664	$228,500
2007	6,353	5,081	$318,904
2006	6,459	5,010	$315,257
2005	6,735	5,013	$305,730
2004	3,529	5,241	$294,040
2003	2,773	3,914	$275,879
2002	3,247	5,140	$268,952

Contact John Rebchook at JRCHOOK@gmail.com or 303-945-6865.

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The overall vacancy rate fell to 6.5 percent in the first quarter, a 22 percent drop from the 8.4 percent vacancy rate in the first quarter of 2009, bucking a seasonal trend of falling rates, noted Gordon Von Stroh, the University of Denver business professor who authored a report released today by the Apartment Association of Metro Denver and the Department of Local Affairs’ Division of Housing,

And while monthly rental rates are basically flat, the smart money is that they are poised to rise.

That can be seen in demand from buyers. Today, when an apartment community is placed on the market, there are typically at least 30 offers coming in, while a year ago, the market was at a virtual standstill, said Terrance Hunt, an apartment broker with Apartment Realty Advisors.

Tax credit not creating exodus from apartments

Even the the federal tax credits of $8,000 for qualified first-time home buyers ( as well $6,500 for some move-up buyers ), which expire today, have only had a nominal impact on the rental market.

Hunt does have one renter in an apartment he owns who asked to go on a month-to-month rent, because he has a condo under contract that he hopes to close by the June 30 deadline for the tax credits.

Despite the tax credits, low interest rates, and sellers willing to part with their homes at realistic prices, there is not a huge exodus out of apartments, Hunt and Von Stroh said. For one thing, it is more difficult than ever to qualify for a loan, and some renters are finding that their work history and debt ratios are not strong enough to get the super-low rates they hear about, Hunt notes.

“And then some people look at what their mortgage payments would be and they are just not confident enough to pull the trigger,” Hunt said. “It’s not like a few years ago when everyone was leaving apartments to buy homes. Friends were telling stories about how they have only lived in their home for three months and they’ve already pulled $100,000 out of it. They looked at it like they had made $100,000 on their home. But the truth is, those people aren’t in such good shape today.”

He said many of the people taking advantage of the tax credits accelerated their decision because of them, and would have bought in the next eight to 18 months, without the credits.

Von Stroh said that some people are realizing that home ownership, while positive in many respects, does not have to be the American Dream for everyone.

“People are not participating in this great herd instinct of having to buy a home,” Von Stroh said. “Now, people are looking at the pros and cons of buying a home much more objectively.”

And that is good for apartment owners, because prospective home buyers often make the best tenants, who are willing and capable of paying higher rents, said Ryan McMaken, spokesman for the housing division.

“I have to think that the fundamentals for apartments are looking pretty good, at least in the short-term to the medium-term,” McMaken said.

Economy still weak, despite apartment strength

Von Stroh said that the strength in the apartment marketplace, is not a sign that the overall Denver-area economy is getting back on its feet.

“The apartment market had pretty much been tracking the unemployment rate,” Von Stroh said. “This time, rates fell, pretty substantially, even though unemployment is still fairly high.”

“In spite of the economy, there’s still relatively strong demand for rental housing right now,” said Lauren Brockman, a principal with Orion Real Estate Services. “Unemployment here is comparatively low compared with much of the nation, so people are staying here. And we’re also seeing people come in from out of state, so even with limited job growth, people want to be here, and many of them need apartments.” Reasons for the apartment demand, in addition to people not buying homes in droves, include population growth, and a limit on supply. Rents need to grow another 25 percent before it can justify construction of market-rate units, Hunt said.

Little apartment construction

“We added almost 8,000 new units in 2001 and more than 9,000 in 2002, so that lead to quite a few vacancies as unemployment rose in 2003,” Hunt said. “But we’re facing a much different situation now. Between 2003 and 2009 fewer than 3,000 new units were added each year, so we may be looking at some pretty tight markets in the near future.”

Vacancy rates in the first quarter fell to the lowest point since the third quarter in 2008. Vacancy rates peaked at 13.1 percent during the first and second quarters of 2003, but during the most recent recession, vacancy rates rose to only 9.0 percent during the second quarter of 2009.

For 2010’s first quarter, the highest vacancy rates were found in Arapahoe County where rates fell year-over-year from 9.7 percent to 7.2 percent. Rates were lowest in Douglas County where vacancies fell year-over-year from 7.1 percent to 4.4 percent. Vacancy rates fell in all metro Denver counties form the first quarter of 2009 to the same period this year. 2010’s first quarter vacancy rates by county were Adams, 6.8; Arapahoe, 7.2; Boulder/Broomfield, 5.0; Denver, 6.9; Douglas, 4.4; Jefferson, 5.8.

In general, a vacancy rate of 5 percent is considered the “equilibrium” rate. Rates below 5 percent indicate tight markets. “We only need to absorb a few thousands more units and we’re at 5 or 5.5 percent,” Von Stroh said. “We could get to that point very quickly.”

Average rents across the Denver metro area were largely stable. The overall average rent in the metro Denver area fell to $877.16, down from $881.92 during the first quarter of last year. Rents rose slightly from 2009’s fourth-quarter average rent of $875.39.

“Without job growth, and with renters looking to cut costs, it’s been difficult for owners to raise rents very much” said McMaken, the housing division spokesman. “However, once we see some job growth, demand should spur some significant rent increases.”

“Rental losses for owners from discounts and concessions are up compared to last year,” Brockman said. Concessions include offering tenants free rent for a month in return for signing a lease.

When compared to the first quarter of 2009, Adams County, Douglas County and Jefferson County reported increases in overall average rents, while average rents in Arapahoe and Denver counties fell.

Average rents in the Boulder/Broomfield were essentially unchanged as average rents increased by four dollar to $946.60.

The highest average rent was reported in Douglas County at $1055.12, and the lowest was reported in Arapahoe County at $833.94. Average rents for all counties were: Adams, $874.56; Arapahoe, $841.03; Boulder/Broomfield, $946.60; Denver, $883.87; Douglas, $1055.12; and Jefferson, $833.94.

Investment strategy shifts

Hunt, of Apartment Realty Advisors, said that a year ago, when investment demand was weak for apartments, investors were buying them on yield. Now, increasingly, they are looking at them based on replacement cost. Some buyers who purchased a year ago, are now in the position that they could flip them for large profits. “But most of those buyers still think there is a lot of the meat on the bones,” Hunt said. “They think there’s a lot of positive upside. They’re putting long-term debt on the property and see opportunity by adding value by increasing management services.” He said a lot of buyers believe they will be able to raise rental rates by 5 percent in the first year of ownership and 10 percent the following years

The Vacancy and Rent Surveys are a service provided by the Apartment Association of Metro Denver and the Colorado Department of Local Affairs’ Division of Housing to renters and the multi-family housing industry on a quarterly basis. The Colorado Vacancy and Rent Survey reports averages and, as a result, there are often differences in rental and vacancy rates by size, location, age of building, and apartment type. The full Report is available through the Apartment Association of Metro Denver at www.aamdhq.org; and limited information is available online at the Division of Housing Web site, at this link.

Contact John Rebchook at JRCHOOK@gmail.com or 303-945-6865.

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Still, many Realtors contend that doesn’t really capture  what is  happening in the market.

They argue that interest in homes that most people buy – those below $300,000 – is quite robust. And if it were not for the huge drop in values among the most expensive houses, the Denver-area market would be extremely strong.

“I am always afraid when someone reads an article showing an overall gain, or a peak, or a loss in the Denver metro area, they think that is what they are going to find in every neighborhood,” said Corey Wadley, a broker-owner of Denver-based Nostalgic Homes.

He said that reports looking at an overall market do not take into consideration that different market exist at different price points.

“First-time home buyers read it is a buyer’s market, and think the can throw a wet noodle at the wall and it will stick,” Wadley said. “But it is not a buyer’s market in the areas around downtown Denver under the $250,000 price point. People in the trenches can tell you that we are looking at multiple offers at these price points below $300,000 or $250,000. The overall numbers for a metro area do not really tell you much in relationship to homes people are looking to buy right now.”

He said in northwest Denver example, where Nostalgic Homes is headquartered and does two thirds of its business, home prices appreciated last year for those priced $300,000 or below. Developers of luxury spec homes – those without buyers – in northwest Denver had to drop their prices, because of extremely high carrying costs, making the market look weaker than it really was for the majority of buyers, he said.

If you removed the luxury housing market from the statistics, which has seen huge slashes in prices, the rest of the market would look pretty solid, said Jeff Bernard, principal of Bernard Real Estate Analytics and a broker with RE/MAX Alliance.

“I really believe so,” Bernard said. “The luxury housing market is experiencing a pretty amazing crash. I would think that is the only thing that would really be hurting the overall Denver residential real estate market…I don’t want to sound trite, but it really is almost a street-by-street market. There are certain aggregates than you need to look at when we start drilling down into the market. I think the $300,000 and below is a very healthy market. It is a ticking time bomb in the $750,000 to $1 million and beyond market. I would say that is really a black hole out there, although it is a small percentage of the market.”

Economist Patty Silverstein, principal of Development Research Partners, said she has not paid as much attention to the sales in price point like many Realtors have, but she believes that they are probably correct that the luxury housing market is a drag on the overall market.

“The higher-end housing market seems to have more swing to it,” she said

Bernard said the $8,000 tax credit for first-time home buyers helped the overall Denver housing market last year.

“I know that from first-hand experience,” Bernard said. “I helped my daughter buy her first home last year. She was looking in the $210,000 range and we saw the prices increases, as people bid up the prices on those homes.”

He said at the low-end, first-time buyers not only are competing against owner- occupants like themselves, but also against investors who plan to fix them and flip them, or rent them.

Bernard and Wadley said that the extension of the $8,000 tax credit to the end of April, as well as a $6,500 tax credit for some current homeowners, should drive traffic in the first few months of this year. Wadley said he is surprised by how many people who unaware of the tax credits, especially the one for existing homeowners. He said he is encouraging people to start looking now, rather than waiting until February, and risk not getting their home under contract in time to take advantage of the tax credits.

Early signs are promising, Wadley said.

“If we judge it by open house traffic, the interest out there is huge so far this year,” Wadley said.

Contact John Rebchook at JRCHOOK@gmail.com or 303-945-6865.

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In addition to the tax credit up to $8,000 for first-time home buyers, which was currently is set to end at the end of this month, a new plan working its way for Congress would expand the program to include a $6,500 tax credit for those who have lived in their home for at least five years and are buying another home.

President Obama is expected to sign the new legislation on Friday. It was approved by the House today and the Senate on Wednesday.

“That targets the move-up buyer,” said Tom Cryer, a broker with the Kentwood Co.

Independent broker Gary Bauer said the tax credit bills working their way through Congress will help.

“From my perspective, this is going to continue to drive the market, not only for first-time home buyers, but for what I’m calling the move-buyers,” Bauer said. “People who already live in homes will be moving up, down-sizing or going sideways.  Whatever category they fit into, if they feel comfortable enough to sell their home and buy another one, it will be great for the market – and you can do it and get an extra $6,500!”

To qualify for the credits, both the first-time and current owners, would need to sign a purchase agreement by April 30, 2010 and close by June 30.

Through August, about 1.4 million first-time home buyers have taken advantage of the program and about 325,000 of them would not have bought the home without the credit, according to the National Association of Realtors. Critics of the program, however, call it a gift to home buyers, who would have bought a home even without it.

The credit is available for buying principal homes  costing $800,000 or less. It would be phased out for prospective buyers  with annual incomes above $125,000 and for joint filers with incomes above $225,000.

The credit would be extended an additional year, until June 30, 2011, for members of the military serving outside the United States for at least 90 days.

Cryer said the timing is good for the likely extension of the tax credit, when the notion is fresh on the minds of perspective home buyers.

“It keeps it from getting stale,” Cryer said.

He has seen it work first-hand.

“I had a closing yesterday on a property at $204,000 and the buyer was a first-time buyer,” Cryer said. “Definitely, the buyer was pursuing the closing to get it over with before the tax credit expired. But there are always procrastinators. And there are people who just can’t find the home that they want, and they aren’t going to be pressured to buy a home because of the tax credit. I have one client who is committed to find exactly the home she wants, and she will not let the credit influence her decision. ”

Cryer said opening up a tax credit to existing homeowners will help stabilize the move-up market, by attracting more buyers at higher-price points.

“Until we get the move-up buyer back into the market, we’re not going to see a healthy return in all price ranges,” Cryer said.

He said someone who bought a $250,000 home in Denver five years ago, “probably has built up a little bit of equity, and if they are comfortable with their job circumstance, they could take advantage of this program,” he said. “Slowly but surely, we are building the confidence in the market that forms a bottom. I know I keep saying this, but it really feels like we are back where we were in 1989,” when the Denver market was about two years away from clearly being on the rebound.

“People are going to look back at this time and say, “We should have done something when rates were low, prices were low and we had the tax credits.”

Contact John Rebchook at JRCHOOK@gmail.com or 303-945-6865.

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“The conventional thinking was that with the vacancy rate at 9 percent in the second quarter, and with the high unemployment and jobless rates, and the tax credits (for first-time home buyers), that rates would continue to go up,” Gordon Von Stroh, the University of Denver business professor who completed the third-quarter vacancy and rent survey told me this morning. The survey is sponsored by the Apartment Association of Metro Denver, Apartment Realty Advisors, the Colorado Housing and Finance Authority, the Colorado Division of Housing, D.A. Davidson & Co., Orion Real Estate Services, and Pierce-Eislen.

But instead of rising, the vacancy rate fell to 7.4 percent, the largest second-quarter to third-quarter percentage drop in recent memory.

“It was a huge drop,” said Lauren Brockman,  principal of Orion Real Estate Services.

I asked why the $8,000 tax credit, scheduled to expire at the end of November, didn’t drive up the vacancy rates.

“We are seeing some of that,” Brockman told me. “But it’s not as prevalent as you might think. Two or three years ago, nearly everyone who was leaving our apartment units were buying a home. Today it is probably back to normal. People are just not going crazy taking advantage of the credit.”

It appears fairly likely that the tax credit will be extended until the end of April, with additional incentives being added to people who have owned homes for at least five years and are buying new homes.

While Brockman  personally does not think that is a good idea, he said if unless there is a confluence of a vastly improved economy with the credits, they are not going to drive people out of their rental units  into the arms of Realtors. In other words, don’t look for an exodus of renters to homes, at least not in the Denver area.

“Keep in mind that while the tax-credit incentives are out there, consumer confidence is not,” Brockman said. “You can give them all the tax incentives in the world, but if they are not confident they can retain the job they’ve got, they’re not going to buy a home.”

Also, renters no longer feel they are missing a chance to make a quick buck by buying today, as opposed to waiting, he said.

“The consumer has wised up to the fact that a single-family home while a good investment over a 20-year period, is not something you can buy and flip into a 20 percent profit. That is gone,” Brockman said.

The fact that Congress is contemplating extending the credit is a testament that the home market is still in trouble and needs help, he said.

A turn-around the the economy is the only thing that would convince a huge number of renters to quickly become homeowners, he said.

“It’s hard to tell the impact of an extension of the credits,” Brockman said. “It depends on the dynamics of the market. If we saw the country adding a million jobs each month and that trend continued for four or five months, than it would have a negative impact on apartments. But in the environment we are in – and I personally think that we’re going to have moderate to flat job growth for at least another 36 months, and then moderate wage inflation after that – I do not see the tax credit having a huge impact.”

Also, not all renters can take advantage of the tax credit, noted Terrance Hunt, a broker with Apartment Realty Advisors.

“Underwriting mortgage is much more strict than it was a couple of years ago, when anyone could get a loan,” Hunt said. “Even with the $8,000 tax credit, buyers are typically expected to bring some money to the table. Buyers are scrutinized about their job histories and qualifications more than they have ever been before. It’s not an easy process.  And once you decide to buy a home, it has to appraise out and everything else. It is probably more difficult to buy a home than it has ever been.”

And if even if a  rosy economic scenario comes to pass, it would help the Denver apartment market, which is not overbuilt like a Phoenix or Las Vegas, Brockman  said.

“Since we are not building anything now,  we would then have a shortage of apartments,” he said. “As more people entered the workforce, we would have more renters, as well as more home buyers.”

Contact John Rebchook at JRCHOOK@gmail.com or 303-945-6865.

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The NAR will release its annual consumer study, called the National Association of Realtors Profile of Home Buyer and Sellers, on Nov. 13.

A separate practitioner survey shows that distressed homes accounted for 29 percent of transactions in September.

NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth, said affordability conditions remain historically high.

“Potential first-time buyers can take heart in that affordability conditions this year are the highest on record dating back to 1970, but with the first-time buyer tax credit scheduled to expire at the end of next month, people could hold back from entering the market,” McMillan said.

“Our read is that housing overshot on the downside because homes are selling for less than replacement construction costs in much of the country, and the home price-to-income ratio has fallen below the historical average,” he continued.

Contact John Rebchook at JRCHOOK@gmail.com or 303-945-6865.

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CHFA’s statewide Mortgage Credit Certificate program gives qualifying first time home buyers even greater tax benefits from home ownership than traditionally available.

“CHFA’s Mortgage Credit Certificates will supercharge a first time homebuyer’s federal tax savings by allowing the certificate holder to claim 20 percent of the mortgage interest paid annually, dollar-for-dollar, against their federal tax obligation,” said Karen Harkin, CHFA’s director of home finance.

“The remaining 80 percent of the mortgage interest paid can continue to be used as an itemized deduction, which is typically how all mortgage interest is treated. Because they aren’t paying as much towards taxes, first time home buyers have more money left in their paychecks to put towards their mortgage payment.”

To be eligible for a CHFA Mortgage Credit Certificate you must be a first time home buyer in Colorado and meet the income and purchase price guidelines for the census tract and county where you live. CHFA has a tool on their website, www.chfainfo.com, to help homeowners identify the income and purchase price limits for their area. For example, in targeted Denver Metro Areas, homebuyers with three or more people in their household can earn up to $106,400 annually with a maximum purchase price of $417,000.

Homeowners who refinance out of an adjustable rate mortgage originated after Dec. 31, 2001 and before Jan. 1, 2008, and obtain a long-term fixed rate mortgage are also eligible to apply for a CHFA Mortgage Credit Certificate.

Harkin commented on the program saying, “While select counties have chosen to make Mortgage Credit Certificates available, this is the first time the program has been offered statewide. The combination of low prices, favorable interest rates, the $8,000 federal tax credit, and a Mortgage Credit Certificate make a compelling case for home ownership today.”

To apply for a CHFA Mortgage Credit Certificate, contact one of CHFA’s participating lenders, or inquire about Mortgage Credit Certificates with your local lending institution. To view a complete list of lenders currently authorized to issue CHFA Mortgage Credit Certificates visit www.chfainfo.com. Lenders interested in applying to participate in CHFA’s Mortgage Credit Certificate program should contact CHFA’s Home Finance team at 1.800.877.2432.

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