Local lenders quoted in Wall Street Journal article today

John Rebchook — Tue, 15 Sep 2009 21:12:10 +0000

The front page of the Wall Street Journal today had an interesting article on what is happening in mortgage markets.

And even more interesting, the WSJ tapped two local mortgage bankers – Lou Barnes principal of Boulder West Financial Services, and Peter Lansing, president of Universal Lending to tell what is happening in the market.

Universal Lending, of course, is a co-sponsor of InsideRealEstateNews.com. Peter was quoted as saying that more than half of his business is now Federal Housing Administration-insured loans, compared with 10 percent a year ago. I wrote about that at InsideRealEstateNews.com in August.

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

InsideRealEstateNews Exclusive: Homes at 2002 Prices

John Rebchook — Wed, 09 Sep 2009 20:38:37 +0000

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Home prices in the Denver area are where they were seven years ago, based on data released in a report today. I posted my first blog on the August report by independent broker Gary Bauer early this morning.

And if you adjust the current sale prices for inflation, the average price of a single-family home in August actually has fallen by 11.57 percent since August 2001, and the median, or middle, price has dropped by 15.6 percent.

But don’t despair.

If statistics don’t lie, they can certainly not tell the entire truth.

Bauer’s report is based on Metrolist data, which tracks sales information on homes sold by Realtors in the Denver area. At the end of last month, the average price of a single-family home sold and closed was $273,972, actually $830 less than the average sales price of $274,802 in 2002, according to research by InsideRealEstateNews.com.

And the median price of a single-family home sold last year was $227,000, only 1.773 percent more than the median price of $223,045 in 2002.

When adjusted for inflation, long-term homeowners could not be blamed if they feel like they have actually lost money on their castles. In inflation-adjusted dollars, the average price of a home sold in August 2002 actually was almost 12 percent higher than in 2001, and the median price has dropped by 15.6 percent.

But earlier I said don’t despair, and I meant it.

In simplest terms, Metrolist data doesn’t compare apples with apples.

Most of the drop in prices today is not from homes losing value, but because of the mix of homes being sold. That is, far more homes under $250,000 are being sold than homes in the higher price ranges. Uncle Sam is helping to spur the lower-end home sales by offering up to a $8,000 tax-credit to qualified first-time home buyers.

And the upper-end of the market is suffering because it is so difficult for buyers to qualify for jumbo loans.

“That is absolutely correct,” Bauer told me this morning.

Beyond that, for most of the past three decades or so, databases such as Metrolist have suffered from “price drift,” in homes.

That is, as people bought bigger homes and than re-sold them, the average price, especially, would tend to rise.

The median price is not as skewed as much by a few big sales, so statisticians and savvy Realtors believe the median-price reflects the market more accurately.

The S&P/Case-Shiller home price index, by contrast, tries to remove that statistical bias by comparing “matched pairs,” instead of just looking at the random homes being sold each month.

Lou Barnes, principal of Boulder West Financial Services, likes a government report even more, because it uses refinances into its equation. “Garbage in, garbage out,” Barnes once told me about the Case-Shiller report, noting that when only distressed homes are being sold, it makes the overall market look worse than it is.

Despite all of that, the Metrolist data is not without merit. Most Realtors believe that it is helpful in tracking trends.

Below, this table tracks prices of single-family homes sold in each August from 2001 to 2009. I also calculated the inflation-adjusted price of homes sold. This is information you will only find at InsidRealEstateNews.com

Year	Average Price	Median Price	Average inflation adjusted price to 2009 dollars	Median inflation-adjusted prices to 2009 dollars
2001	$264,669	$219,400	$321,834	$266,787
2002	$274,802	$223,045	$328,954	$266,998
2003	$288,542	$238,500	$337,705	$279,137
2004	$299,131	$240,000	$341,017	$273,606
2005	$313,308	$255,000	$345,475	$281,180
2006	$320,092	$252,900	$341,925	$270,150
2007	$329,783	$257,000	$342,522	$266,927
2008	$284,531	$225,000	$284,595	$225,050
2009	$273,972	$227,000	$273,972	$227,000

Source: Gary Bauer, Metrolist, InsideRealEstateNews.com

Inside Real Estate News » Boulder West Financial Services

Local lenders quoted in Wall Street Journal article today

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