Hearthstone is a cohousing community on the site of the former Eltich's Gardens amusent park in northwest Denver.

Would you live in cohousing? Vote at end of this blog.

Charles Durrett’s electric bill last year was a negative $83.

And Durrett lives in California, where electric costs in 2009 were about 35 percent higher than in Colorado.

So how did the utility effectively pay Durrett last year for turning his lights on, using his computer and all of the other things & devices that use electricity?

Durrett lives in a cohousing community, where residents not only share common space such as playgrounds, parks and typically a house where meals are shared from time-to-time with neighbors, but increasingly they are embracing sustainable features.

“Our neighbors got together and we bought solar panels together and we have a very heightened level of insulation,” in their homes, Durrett.

That is only fitting that he lives in a cohousing community, because in many ways he is the father of the movement. Durrett, an architect by training, introduced the word “cohousing” more than 20 years ago, along with his wife, fellow architect Kathryn McCamant. The concept was born in Denmark, but spread to other countries quickly.

Boulder hosting cohousing convention

Both Durrett and McCamant will be keynote speakers at the 10th annual Cohousing Association of the United States conference, which will be held in Boulder. More than 300 people are expected to attend the conference, which includes people from 39 states and five countries. It will feature more than 60 workshops. (For more on the conference, please visit this earlier on cohousing conference coming to Boulder.)

There are currently about 120 cohousing communities across the country, with more than a dozen of them in Colorado. In total, the Colorado communities have more than 400 houses from Lafayette to Durango. At least two, Aria in Denver and Geos in Arvada, are on the drawing board.

Cohousing embracing sustainability like never before

Like every aspect of home building, cohousing has been hammered by the economy, said Jim W. Leach, head of Lafayette-based Wonderland Home Development, a long-time developer and advocate of cohousing and the chairman of this year’s conference.

“We are finding a lot more interest in cohousing,” Leach said. “The cultural changes are being brought on by this major problem with the economy we have had and with the continuing awareness of global problems, related to global warming…And (environmental concerns) are not being helped by having all of that oil being dumped in the Gulf.”

Cohousing out of the closet

He said the original slogan of cohousing was “Creating a better world, one neighborhood at the time,” while at Wonderland, he said their mantra has been that “Community is the secret ingredient in sustainability. Only it’s not so secret anymore. It’s kind out out of the closet.”

Leach said more and more people are realizing that the government and big business – although they have their roles – are not going to create a sea change in the way we tread on the environment. Rather, it is neighborhood communities that can serve as the “building blocks” of getting the country on the path of sustainability, he said.

“Leaders in the sustainability movement are recognizing the importance of local communities in solving the environmental, social and economic challenges facing our planet,” Leach said. “The cohousing movement has learned a lot about community building at the neighborhood level, and it has much to share with the broader sustainability community.”

Small means no economies of scale

Because cohousing communities tend to be small – 20 to 40 units – they do not enjoy the economies of scale advantages of large production builders, Leach said, as well as the common amenities driving up costs. Overall, they are probably 5 percent to 10 percent higher, he said, although he said they are still less expensive to build than separate, custom homes.

“We’re somewhere in the middle,” Leach said. “But of course our cost of ownership is much lower.”

And that will only continue, as cohousing residents and developers increasingly look for ways to become more sustainable, said Durrett, who last year created more electricity in his home than he used.

“These days, impeded by the downturn in the housing market, we are re-thinking how to survive in the market and succeed in the market,” Durrett said. He noted he recently returned from Canada, where he is designing two cohousing communities. “They are smaller, leaner and less-toxic tighter homes that get right to the point.”

Modern cohousing homes are likely to sport solar panels, super-insulation, small boilers that are barely needed, passive solar heating, tighter construction, and energy efficient heat exchangers. But what makes the biggest difference is simply building smaller homes with very efficient designs, he said. Cohousing, with its shared facilities, easily lends itself to smaller homes, he said.

Modular construction goes hand-in-hand with cohousing

Also, increasingly cohousing builders are looking toward modular construction, where much of the home is built in factories and then trucked to the site. “It is definitely the future,” Durrett said. “That is a design development that is improving on a monthly and weekly basis. There are several projects right now that if not totally modular, at least the insulated panels are built in a factory and then erected on the site. That is one of the places for saving costs and an important one.”

Originally based on a collaborative business model where residents and developers shared risk and owners could invest as little as 5 percent up front, over the past two years owners must front as much as 20 percent of the purchase price before groundbreaking.

More rentals may be on horizon

At the same time, construction costs have gone up. Where individual units at the Hearthstone development in the old Elitch’s Gardens property sold from $125,000 to $300,000, a similar development today would sell from $300,000 to $400,000, experts said. That makes affordability an issue that must be dealt with. One possibility is cohousing communities based on a rental model, leaders say.

“But what’s the cost of a functional neighborhood?” asked Durrett, noting that parents in a cohousing community typically trade formal “play dates” that require driving, to no structured activities at all. Instead, i children naturally come together and plan their own activities in a safe, convenient place.

And it’s not just the kids, but the adults, too.

Cohousing: Back to the future

“Last night, 34 people spontaneously got together for a bike ride,” Durrett said. “We’re not doing anything new, just making consciously what used to happen naturally. Cohousing gives people an opportunity to live lighter on the planet by living in a neighborhood where many social, recreational and food needs come from on site. There’s no need to go to a restaurant; we all enjoy eating together in the common house.”

Colorado’s climate is especially ideal for many green technologies such as passive solar, photovoltaic panels, and even wind, said Byan Bowen, of Bryan Bowen Architects.

Colorado ideal for cohousing

“Colorado has a perfect climate for solar because of low cooling loads and availability of sun in cold weather,” Bowen said. Some communities can achieve net zero energy performance, producing energy equal to the amount they consume. Many have done an excellent job of sharing connections rather than providing single systems for each unit. “Instead of seven units with one mechanical system each, seven units will share a single large mechanical system.” And Colorado’s new Solar Garden law allows groups of individuals (such as cohousing communities) to collectively own solar arrays and cash in on potential benefits from the state’s net-metering laws and tariffs.

Cohousing communities also produce much of their own food through shared gardening and landscaping — the Silver Sage community in Boulder has a “highly edible” landscape, Bowen said.

Existing neighborhoods are cohousing candidates

It’s not just new communities that can adopt the cohousing model. Some older neighborhoods also lend themselves to cooperative living. “Some cities in older neighborhoods where houses have front porches and proximity can make it work,” said Lisa Poley, president of  cohousing association that is holding the conference in Boulder. “It can be a strategy for revitalizing, reviving and regenerating urban neighborhoods that have gone down hill. It’s not gentrification, it’s revitalization, and it’s another thread of cohousing’s future.”

Samuel Assefa, City of Boulder Senior Urban Designer, pointed to the Washington Village in north Boulder as an example of urban retrofitting. Several historic houses are being preserved in a cohousing environment, and the city encourages both retrofits and new cohousing development to advance the city’s sustainable goals.

“It’s a central theme of our ‘three-legged stool’ of development: environmental, social and economic. Cohousing provides all three simultaneously.”

Community	# Homes	Yr. Completed	City
Nyland	42	1993	Lafayette
Greyrock Commons	30	1997	Fort Collins
Harmony Village	27	1997	Golden
Highline Crossing	40	1997	Littleton
Nomad	11	2000	Boulder
Heartwood	24	2000	Boulder
River Rock Commons	34	2000	Fort Collins
Hearthstone	33	2002	Denver
Casa Verde	34	2004	Colorado Springs
Wild Sage	34	2004	Boulder
Silver Sage Village	16	2008	Boulder
Lyons Valley Village	18	2008	Lyons
Washington Village	33	In Development	Boulder
Boulder Creek Commons		Retrofit	Boulder
Aria	tbd	tbd	Denver
Geos	tbd	tbd	Arvada

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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 public trustee auction at the end of the foreclosure process. In many cases, the bank holding the loan wins the bid and the home becomes known as a REO, or Real Estate Owned property.

Ryan McMaken, spokesman for the housing division, and the author of the report, is not alarmed by the spike in foreclosure sales, which had been declining at the end of 2009, compared to a year earlier.

“What happened is that we had all of those moratoria in the fall of 2008 through January of 2009, which led to lower foreclosure activity,” McMaken said. “I think the big fear was that we would see a big jump in foreclosure activity after they ended, although for the most part that did not happen. We did see a fairly significant jump between June and July of last year, but it was fairly short-lived

“Recent movements in foreclosure sales and filings reflect recent overall trends, as monthly sales totals have moved upward and monthly filings totals have moved downward,” according to the report.The report goes on to say that the “movements in foreclosure sales reflect movement in foreclosure filings, but lag by six to eight months. (If the)  current relationship between filings and sales continues, foreclosure sales will begin to fall again during spring 2010.”

Foreclosures vary hugely by county

Foreclosure activity varied by county. The counties with the largest decreases from January 2009 to January 2010 in filings activity were Douglas County and Denver County, where filings decreased by 26 percent and 17 percent, respectively. The largest increase was in Mesa County where filings increased 159 percent year-over-year.

Foreclosure sales activity increased in all metropolitan counties during January of this year compared to January of 2009. The smallest increase was in Denver County where sales increased 19 percent. The largest increase was found in Mesa County where foreclosure filings increased 337 percent from January 2009 to January 2010. However, measuring changes in foreclosure sales activity since 2008, all counties reported falling foreclosure sales except Boulder and Mesa Counties.

The county with the highest rate of foreclosure sales was Weld County with a rate of 532 households per foreclosure sale. Adams County was a close second with 535 households per foreclosure sale. The lowest rate was found in Boulder County where there were 1,779 households per foreclosure sale. The largest increase in foreclosure rates since 2009 was found in Mesa County where the foreclosure rate more than tripled year-over-year.

Not out of the wood yet

McMaken, however, said there may be more foreclosures in the pipeline. The Mortgage Bankers Association reports that the number of mortgages in Colorado that were “seriously delinquent” at the end of 2009 rose to 5.87 percent from 3.96 percent during the same period in 2008, more than a 48 percent increase. Seriously delinquent loans are at least 90 days overdue and typically in the early stages of a foreclosure. In 2005, only 1.97 percent of the loans were seriously delinquent, and the percentages have risen every year since them.

“Basically, they went from 4 percent at the end of 2008 to 6 percent at the end of 2009, if you round off the numbers,” McMaken said. “That is a pretty significant one-year increase.” He said he expects that foreclosure sales by public trustees “will slowly ebb downward through the spring. But as far as filings, who knows?”

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

The full report is available on the Division of Housing this link.

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Source: Colorado Division of Housing

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

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The story is an interesting read. For the entire story, please go to this link.

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

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Buyers paid more than $33 million last year for 53 units at the Pinnacle.

The Pinnacle at City Park South last year bucked the trend of super-slow condo sales in the Denver area.

In 2009, buyers paid more than $33 million for units in the Pinnacle, arguably making it the best-selling condo project in the Denver area last year. (Peloton in Boulder actually sold more units, according to an analysis by Hanley Wood Market Intelligence. But the Boulder market is not a direct competitor with the Denver market.)

Since 2007, when sales started at the only high-rise condo project along City Park, buyers have paid about $101 million for 174 units for the two-building community in east Denver.

“Honestly, sales were down some in 2009 for us and everyone else,” said Herb Emmeran, of Chicago-based Equity Marketing, which is in charge of sales and marketing for the only high-rise project along City Park.

“But we probably did better than most,” Emmerman added. “In the good years, which started a few years back, sales were very strong. We continued to sell very well last year. ”

In 2008, 56 units sold for $37 million – only two more than in 2009, but for $4 million more. In other words, the average price of all units sold in 2008 was $660,714, while the average unit sold last year was $611,111.

While overall condo sales in the Denver area fell by 9 percent in 2009 from 2008, according to an analysis of Metrolist data by independent broker Gary Bauer, the Pinnacle’s sales activity was even more remarkable given its price points. In the $600,000 to $699,999 price range, condo closings in the overall metro area fell by 44 percent in 2009 from 2008. And for units priced above $2 million, closed sales volume fell by 80 percent. The Pinnacle has one remaining penthouse unit on the market. The asking price? $2.75 million for 4,646 square feet of unfinished space that spans two stories. The buyer might expect to pump another $1 million or so into finishing it.

Emmerman said the most significant difference between 2009 and previous years was the age of the buyer. “When we started, we had more empty nesters. In the early years, we sold a lot of larger homes in the tower and penthouses in the first tower.”

Last year, 35 percent of the sellers were less than 35-years-old and 46 percent of them had been renters. Empty nesters, many who previously hailed from Park Hill and other nearby neighborhoods, had trouble selling their single-family homes last year, he noted.

Meanwhile, first-time home buyers were invigorated by the $8,000 federal tax credit available to them. ”That helped us maintain our sales pace,” Emmerman said. Still, older home buyers were not totally out of the market. “Sixty five percent of our buyers were over the age of 35.” He said the extension of the first-time home buying tax credit, coupled with the new $6,500 tax credit for some existing owners, also should help sales in the Pinnacle during the first half of the year, before they expire.

While many may think that Pinnacle only has high-end units, condos are available starting at just under $300,000, with other units priced to  $1.2 million.

Since “Day 1,” when the project kicked off about four years ago, the average price of a unit sold has been $370 per square foot, he said. “Our current contracts are averaging about $400 per square foot. We’re not the cheapest out there. But we provide views and a location that no one else can offer.”

And while they have cut the asking prices on some units, they have not slashed them, which has been the case at other projects, he said. He said they are still able to make a profit – not as much as they originally hoped, of course – but at the same time they aren’t destroying the value of the people who bought at the Pinnacle when the overall market was much stronger.

“We wanted to maintain the integrity of the project, while still being profitable,” he said. “We might help some buyers now a little bit more with upgrades.”

When the project, developed by Opus Northwest, first kicked off about four years ago on the site of the former Mercy Hospital, Emmerman said they weren’t sure how well it would be accepted.

“But it has never been an issue of being accepting it; everyone immediately loved it,” Emmerman said. “It’s been a great asset to the neighborhood. Everyone loves that you can just shoot up 17th and it is easy to get to downtown. It’s also an easy drive to I-70.

That’s exactly right, said Debbra Fagan, a broker with Fuller Sotheby’s International Realty. Fagan and her business partner, fellow Fuller broker Wendy Handler, have sold a number of units at the Pinnacle.

“Our clients who have moved into the Pinnacle just love it,” Fagan said. “They think it has a Manhattan-type view. It’s like living over Central Park. And you have everything downtown, all of the 17th Avenue restaurants, and all the new developments along Colfax, including the new Tattered Cover, which is just around the corner. And, of course, everyone loves having the park right there.”

She said most of the buyers at the Pinnacle also checked out some condo developments in downtown, as well as in nearby LoHi, because a number of those projects also offer fantastic views. She said few of her buyers at the Pinnacle looked at suburban projects, such as the Landmark. Typically, buyers at the Landmark are moving from big homes in Cherry Hills or Greenwood Village, and want to stay in that area.

But Dee Chirafisi, co-owner of Kentwood City Properties, said some clients have wanted to see everything out there, in the downtown area or along the southeast suburban corridor. In fact, she has found that very few of her buyers at the Pinnacle seriously considered more low-rise buildings in and around downtown.

“It’s a lifestyle change,” Chirafisi explained. “A lot of high-rise buyers want to see all of the high-rises and decide whether they want to be more urban or more suburban.  They want the lock-and-leave lifestyle, and all the amenities, such as the pool and workout rooms. And with light rail, people who buy at places like the Landmark can quickly and easily get downtown.”

That said, she said no one she has put into the Pinnacle has regretted it.

“It’s a great building,” Chirafisi said. “It’s very well constructed and has a developer with a great reputation behind it. People love the location, especially now with all of the great things happening along Colfax. And those views are just unbelievable and one-of-a-kind.”

Hanley Wood Market Intelligence ranked top condo closings last year by a variety of measures, at the request of InsideRealEstateNews.com. It gathered information from developers and public records.

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The good news is that completed foreclosure sales in Colorado during 2009 fell 4 percent from 2008’s totals, and have fallen 18 percent since 2007, shows a state report released today. However, foreclosure filings were up 18 percent in 2009 from 2008, rising to a record 46,394.

According to the  report released  by the Department of Local Affairs’ Division of Housing, there were 20,437 completed foreclosures in the state during 2009, falling from 2008’s total of 21,306. In 2007, completed foreclosures reached 25,056.

While completed foreclosures fell, new foreclosure filings, which begin the foreclosure process for borrowers, rose from 39,333 in 2008.

Foreclosure alternatives rising

However, since 2007, in spite of increasing totals in new foreclosure filings, the total proportion of filings that ended in a solution other than foreclosure increased by 51 percent. In 2007, 37 percent of foreclosure filings ended in a result other than foreclosure such as short sale, loan modification, refinance or other solution. By 2009, this total had increased to 56 percent. The result has been fewer completed foreclosures even as new foreclosure filings have increased.

The falling totals in completed foreclosures were driven by significant declines in foreclosure activity in the Denver metro area. In Denver County, foreclosures fell 28 percent, and they fell 20 percent and 16 percent in Adams and Arapahoe Counties respectively. The only county in the Denver area to report increases in completed foreclosures during 2009 was Boulder County where they increased 6 percent.

“We’re cautiously optimistic that we won’t be seeing the sorts of increases in foreclosures that we saw during 2006 and 2007,” said Pat Coyle, a spokesperson with the Colorado Division of Housing. “Colorado’s Foreclosure Hotline and its network of housing counseling agencies have helped over 16,000 households avoid foreclosure since 2006, and we see that reflected in these numbers.”

As completed foreclosures fell quickly in the Denver area, foreclosure activity in other areas of the state increased. Completed foreclosures increased 11 percent in El Paso County and 4 percent in Weld County. Among metropolitan counties, Mesa County reported the largest increase with completed foreclosures growing 223 percent year-over-year to a total of 359.

Totals reported are county-wide totals, and individual neighborhoods may still be experiencing increases and decreases in foreclosure activity that are quite different from what is seen at the county level.

The report noted that while foreclosures were limited to Colorado’s Front Range in earlier years, Colorado’s smaller and more rural counties have become increasingly affected by foreclosures. Teller County, Park County, Morgan County, and Fremont County all reported increases of 30 percent or more in completed foreclosures. On the Western Slope, completed foreclosure totals in Mesa County and nearby counties such as Delta, Montrose, Moffat and Rio Blanco Counties have all increased since 2008.

Economy foreclosure driving force

“These changes in the geography of foreclosures shows that the problem has moved beyond overbuilding and adjustable rate mortgages, said Stephanie Riggi, manager of the Colorado Foreclosure Hotline call center. “We’re seeing unemployment and falling wages as much more of a driving factor behind foreclosures, and it’s not just the Front Range that’s affected.”

Completed foreclosures are opened foreclosures that have proceeded to foreclosure sale at auction. Filings denote the beginning of the foreclosure process, and once a foreclosure is filed, the borrower has approximately four months to work with the lender to avoid a completed foreclosure. It is during this period that borrowers work with lenders and housing counselors to work out loan modifications, short sales, or other ways of curing the foreclosure. According to the report, since the second quarter of 2009, the number of foreclosures cured in Colorado has increased 50 percent.

The full report is available on the Division of Housing at this link.

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

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“That is the proverbial drop in the ocean,” said Byron Koste, director of the Colorado Real Estate Center at the University of Colorado in Boulder. “That will have no impact at all. The only impact it has is that 1,000 families are better off.”

The latest report from the  federal government shows that as of the end of December, there were 11,170 homeowners in “active trials,”  for loan modifications. The trial modifications are required before the loan can be made permanent. Colorado ranked No. 19 in the nation for the number of active trials and permanent loan modifications. The 1,072 permanent loan modifications represents 8.8 percent of the trials, which is slightly better than the 8.4 percent ratio nationally. Nationwide, at the end of December there were 787,221 trial modifications and 66,465 permanent modifications. The goal of the program is to provide 3 to 4 million homeowners with lower mortgage payments through 2012.

Banks have no incentives to modify loans

Koste said he is surprised that there were even 1,072 permanent loan modifications in the state. Even though a focal point of the Obama Administration’s year-old $75 billion war on foreclosure is modifying loans to keep people in their homes, banks have no incentive to play along, Koste said.

“There is no bank in a hurry to write down a loan,” Koste said.

For example, if a bank writes down a loan so the borrower saves $700 a month for two years, the bank needs to write off $16,800 – 24 times $700. Arguably, the bank is not taking a loss – it’s just making less interest on the loan.

It actually typically hurts a bank less to let the home go into foreclosure, and become what is known as a REO, or Real-Estate Owned, Koste said. “Banks have a formula where a certain percentage of their loans can be REOs,” Koste said. “But write-downs go straight to earnings.”

Even though bank foreclosure are expensive, most banks would rather put off the cost to the future, than take an immediate hit to the bottom line, he said.

Koste said banks need incentives to make loan modifications.

“We need to spread the pain, and spread the gain,” Koste said. “The pain is to the banks, and the gain is to the homeowner. There’s a disconnect. Things are misaligned. It’s a mess.”

He said everywhere he goes, he hears horror stories from homeowners who try to work with banks to modify their loans.

“Extend and pretend is alive and well,” Koste said. “When people talk to their banks, their conversations just  seem to disappear into the ether. Sometimes, months later, someone will respond. Everyone is dragging their feet. For the people who process the loans payments, this is new to them and they are not even sure what the rules are. They don’t know what their bosses, the people who actually invested in the loan, will or will not accept or what they can offer.” Another complication can be in the loan had been folded into a financial instrument such as a mortgage-backed security. Modifying individual loans in the security can reduce the monthly cash stream to investors.

Modification activity poised to rise

But a surge in permanent loan modifications may be coming in the next few months, said Shannon Peer, director of Housing Counseling at the non-profit Brothers Redevelopment Inc. in Edgewater.

“The big wave of temporary modifications did not start until June, July and August of last year,” Peer said. “What I have heard from several loan servicers is the end of three-month trial periods they were not ready to provide permanent loan modifications, because of the sheer volume.”

He said a lot of modifications were only made permanent last December and January.

“I expect more permanent loan modifications will be offered,” Peer said. “It will be interesting to see what happens over the next couple of months.”

He said some of the frustrations with distressed borrowers is that the loan servicer requires them to fax the same information more than once. And some homeowners mistakenly think that loan servicers will call them to remind them of what documents they need to provide at a future date. But he said they should not expect any follow-up calls and should be responsible for providing all the necessary information by deadlines.

“Because these companies are such large entities, something we have noticed is a communications break down between the borrower and the servicer,” Peer said.  ”One of the things our counselors are educating the homeowner about is regarding providing all the necessary documents. We don’t want our homeowner clients to be denied because they did not provide the proper documentation at time. Our counselors, at the first meeting, tell the homeowners to bring documentation – including pay stubs and bank statements – which helps. It does take a lot of persistence on the part of the homeowner.

Modification a lifeline for one homeowner

Michael Gunstanson was extremely persistent with his lender, and his hard work and determination paid off. He was one of the lucky ones who received a permanent loan modification.

“It was a godsend,” said Gunstanson.

His new permanent loan from JP Morgan Chase dropped his interest rate to 2.25 percent from 5.75 percent. That cut his monthly payment to about $950 from about $1,700.  In the sixth year of the loan, which will be amortized over 40 years, the rate will rise to 4.5 percent, where it will stay for the next 34 years, unless he pays it off sooner. He also will need to make a $30,000 lump sum payment when he pays off the loan.

The monthly savings is more than $600 payment on their 2005 Dodge Durango.

“So for us, it’s like losing a second car payment,” said Gunstanson. “Not only can we afford to stay in our home now, but if I get a high-paying job out of state, we could rent our home.” He said homes in his Lakewood neighborhood are renting between $1,400 and $1,600 a month.

The loan modification sounds like a good one, both for the homeowner and the lender, said Jeff Bernard, principal of Bernard Real Estate Analytics.

“A real key point is that now he can rent it,” Bernard said. “Whether he rents it or owns it, he will still retain significant cash deductions.”

Bernard said it sounds like the lender will recoup much of the money it lent at the back-end of the loan. And it may very well take all of the appreciation, when the home is finally sold, with the $30,000 payment, he said.

Indeed, one of the concerns for banks, the Obama Administration, and society, is the number of people who have had their loan modified, and still do not make payments based on the lower amounts. “I seem to recall one estimate was that 42 percent of the people who had their loans modified, still didn’t make their payments,” Bernard said. In some cases, it was because the payments were still not low enough, and other types it was because the home was so under water – that is, the mortgage is worth more than the home – they believed doesn’t make economic sense to throw good money after bad. Bernard said some people may even try to buy another home at today’s discounted prices, and let their current home go back to the lender. He said in many of those cases, the homes are expensive and are held in one spouse’s name.

“There is a lot of game-ship going on right now, and I think some homeowners are looking for ways to game the system,” which they think has treated them unfairly, Bernard said. He said some people feel like they are throwing their money away for at least the next five years, by continuing to make mortgage payments on their homes, so they choose to walk away, even if they can afford the payments.

“I do think loan modifications can be a great thing for a certain portion of the population,” Bernard said. “But what I think what we have learned is that for a certain portion of the population, they just should not own a house. A few years ago, we believed it was the American Dream and everyone should own their own home. But I think a large percentage of the population is better off renting.”

Another homeowner considers “strategic default”

One homeowner who lost a well-paying job about a year ago, is seriously thinking about renting a two-bedroom apartment for $600 a month, and returning his home just south of Washington Park on two lots to his lender in a “strategic default.” His home is underwater – that is, his mortgage his worth far more than his home.

He currently is working two jobs for about $3,550 a month, and his interest-only mortgage payment on his $384,000 loan is about $2,130.

“Obviously, the math does not add up,” said the homeowner, who asked that his name not be used.  Efforts to modify the loan with the lender have been fruitless, and just last Friday he talked to a counselor for the Obama administration’s Hope for Homeowners program, who was not optimistic he would be able to get his loan modified.

A few years ago, he could have sold his home for $500,000 to an infill developer that would have scraped his bungalow. He said he has had one nibble from a developer that indicated he might be willing to shell out $389,000, but the prospects do not look good because of the glut of expensive homes on the market.

He said his lender, U.S. Bank, said it might consider a short sale, in which it accepts less than the mortgage amount, but it would expect him to pay the difference.

“Uh, hello… If I’m going to screw my credit, I figured I might as well just walk away owing the whole amount and paying nothing,” he said. “But, to be honest with you, if the developer doesn’t come through, I really think my best option is a “strategic default.”

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

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When the owners discover a problem with a leaky window, the Morgans  are more than willing to fix it.

Much to their surprise, chagrin and dismay, a lawyer named Steve Sanderson – enemy No. 1 for honest home builders – sinks his claws into the homeowners,  convincing them that fixing the problem is not the goal – taking the builder and its insurance companies for everything it can, is far more lucrative . The insurance companies are no better than Sanderson, and the Morgans fear they may throw them under the bus at anytime by the companies, if they think it will contain costs and reduce their risk of treble damages under RICO statutes.

While the story may seem all too real to builders who have faced losing everything over a minor construction problem, this is the plot that frames a first-time novel by long-time Boulder home builder Michael Ruddy.Conflicts with Interest, a fast read despite its 333 pages, also includes subplots that touch on art, sailing, drug dealing, illegal aliens, and (PG-rated) sex. The book was published by Boulder-based Rodeo Publishing.

Ruddy, who has built more than 400 homes in Douglas, Jefferson and Boulder counties during the past 40 years – priced from about $300,000 to more than $1 million – answered a wide-range of questions from InsideRealEstateNews.com.

Boulder builder Michael Ruddy has built more than 400 homes in the Denver area during the past 40 years. Conflicts With Interest is his first novel.

Michael Ruddy Snapshot

Age: 59

Hometown: Aurora, Illinois.

Education: Degree in engineering administration from the University of Denver.

Family: Five children and wife, Mary––dog and horses.

Last Book Read: The Road by Cormac McCarthy.

Last Movie Seen: The Hangover. Where did they get the chicken in Vegas?

Last Stock Purchased: None

First Job: Surveyor for a pipeline company.

Worst Job: Building sewage treatment plants in the Chicago area.

Favorite Quote: “You can’t meet every train” ––Unknown

Questions and Answers:

InsideRealEstateNews: Michael, what prompted you to write this book?

Ruddy: To satisfy an industry need: To tell a story that informs builders and consumers about what is transpiring in the homebuilding field and legal system: To address the reality of Defect Litigation and associated costs affecting the purchase of a home.

IRN: How long did it take you to write it?

Ruddy: I wrote Conflicts with Interest in the evenings, usually between seven and eleven (no pun intended), over a time span of three years.

IRN: Your book illustrates the plight of a father-and-son home-building team, who are willing to fix a leaky window in a house they built. Instead, when an unscrupulous lawyer gets involved, it evolves – or devolves – into a nightmarish situation that could involve more than a half of a million settlement and threaten the very existence of the home builder. It seems very realistic in the book. Is this a real fear for builders?

Ruddy: Thanks, John, for the compliment. My goal was to make the fiction read as real as the defect litigation threat is. All too many builders have faced the situation––some deservedly––some not. But it is definitely a topic that needs to be addressed on every front, from construction to insurance and litigation. Consumers also need to understand why their homes cost so much and how the inefficiencies of the system and the collision of conflicted interests impact their affordability.

IRN: Because the slightest building error can have such catastrophic results, why would anyone want to build homes?

Ruddy: Great question in today’s environment––surely not for profit. Most builders suffer from a defective gene of reason, known as builder’s disease (as long as someone will lend money, they will build, regardless). Others love the challenge of construction and marketing and would argue that if the home is constructed properly they are meeting a need in the marketplace, while at the same time reducing risk. Many builders are asking the same tough question today, John. But, the builder, by nature, is optimistic––sure that this situation is temporary. How long is temporary?

IRN: Are homeowner’s seduced by the chance of winning the “lawsuit lottery” to go forward with groundless lawsuits, rather than have the builder fix problems?

Ruddy: I would hope that the situation imagined in the book is a rare case. Unfortunately, there are going to be situations that are driven by greed. And, may even start out genuine, then deteriorate once the numbers start flying. CWI exposes those potentialities.

IRN: Do we need legal, legislative and or insurance reforms to curtail this kind of activity? If so, what can be done?

Ruddy: Yes, I would like to say, and no, I would answer. There is, as the book points out, a constant wrangling among the interested parties––in the interest of consumer protection, no less. However, these battles seem to be more like a chess game of maneuvers for the interested parties: further enhancing strategic positions. No, we don’t need more of the same. We need meaningful steps in the direction of tort reform and award caps. And, we need improvement in the construction process as well––better built homes.

IRN: If we made losers in legal battles pay the other side’s legal bills, would that have a chilling effect on plaintiffs bringing forward justified lawsuits?

Ruddy: I believe, this would be a great start for the country in all respects––loser pays. I don’t see a way around the special interests. At the least it would eliminate the “Because you can,” adding justifiable risk to the complaining party. There would still be complications, though, that would need refinement in the court system. Again, summoning forth, the interested parties.

IRN: What does it take, both in money and time, to make a house “lawsuit proof?” And are most consumers, especially in these tough economic times, willing to pay extra to make sure their homes don’t have leaks, mold or other problems?

Ruddy: It takes, most notably, extraordinary design, better products and on-site supervision assuring the proper execution. I think that some consumers at the higher end, who have owned a home previously, would pay for the difference. However, I doubt the consumer would be able to pay the premium at the affordable end of the spectrum. That’s the big problem going forward. The low-cost-producer will claim that buyer. So, the consumer needs to understand the risk.

IRN: In Conflicts with Interest, the builders are the ones wearing the white hats. But there are cases in real life in which the builder can be the villain. What can a homeowner who has dealt with a shady builder take away from your book?

Ruddy: Besides a clear understanding of relationships and the process, as Hal Victor (a character in the book) would say, “Sue the bastard.”

IRN: Often, I have found that builders, especially those with engineering backgrounds, such as yourself, tend to be ‘left-brain” people who are very mathematical and logical. Yet, you can quote Papa Hemingway in everyday conversation, and T.R. Morgan, the hero-builder of your book, is a big fan of art, such as Monet. Do you consider yourself the logical builder, or more of the creative type?

Ruddy: In the building process, you need your entire brain––whatever you’ve got––left, center or right. For me, it changes from day to day. Logic and common sense is paramount. The creative juices can be purchased from your favorite architect.

IRN: As far as your fiction, do you have any other plans for future books? Would you like to do for builders what John Grisham did for lawyers?

Ruddy: Yes, I am working on one now. As far as your second question, simply, I would like to promote improvement in the building process, regardless of what “The Great One” did for lawyers.

To order Conflicts with Interest, please go to this link.

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

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One out of every 36 households in the Denver area received some kind of foreclosure notice last year, according to RealtyTrac’s Year-End 2009 Metropolitan Foreclosure Market Report released today. That compares to one out of 45 households nationally.

While foreclosures across the U.S. were up 21.2 percent from, they were down about 12 percent in the Denver area, according to RealyTrac.

The Greeley area was ranked No. 29, with one out of 24 households receiving a foreclosure notice, up 6.5 percent from 2008. Colorado Springs was No. 50, with one of 39 households in foreclosure, an 11 percent increase from 2008. Fort Collins-Loveland was No. 70, with one out of 50 households in foreclosure, 19.7% higher than in 2008, and Boulder was ranked 115th, with one out 77 households in foreclosure, a 28 percent jump  from 2008.

Ryan McMaken, of the Colorado Division of Housing, who plans to release his own statewide-foreclosure report next Thursday, today said the RealtyTrac numbers seem to capture what is happening in Colorado. However, he said because of RealtyTrac’s methodology of combining all foreclosure actions and treating them as one number, its data will differ for his. McMaken tracks  initial filings and public trustee sales, separately, for example, while RealtyTrac combines them, along with REOs, which are homes taken back by banks.

“In much of  Colorado – especially in the Denver area – foreclosure activity peaked a couple of years ago, while now other parts of the country foreclosure rates are growing,” McMaken said. “The general trend of their report seems accurate. Of course, our reports will differ as far as actual numbers.”

Nationwide, the report shows that cities in four Sun Belt states accounted for all top 20 foreclosure rates in 2009 among metro areas with a population of 200,000 or more, but foreclosure activity showed signs of spreading into previously insulated areas asunemployment became more of a driving factor.

California accounted for nine of the top 20 metro foreclosure rates, followed by Florida with eight, Nevada with two and Arizona with one. The highest-ranked metro area outside of those four states was in Boise City-Nampa, Idaho, which ranked No. 24 with 4.66 percent of its housing units receiving at least one foreclosure notice in 2009.

“While it was expected that cities from states with the highest levels of foreclosure activity would top the charts, there is evidence that we’re entering a new wave of foreclosures, driven more by unemployment and economic hardship than what we’ve seen over the past few years,” said James J. Saccacio, chief executive officer of RealtyTrac. “Areas like Provo, Utah,Fayetteville, Ark., Portland, Ore., and Rockford, Ill., all posted foreclosure rates above the U.S. average in 2009. And markets like Honolulu, Minneapolis and Seattle saw foreclosure activity increase at more than twice the national pace over the past 12 months — although all three of those markets still had 2009 foreclosure rates that were at or below the U.S. average.”

Las Vegas posted the nation’s highest metro foreclosure rate for the year, with more than 12 percent of its housing units receiving a foreclosure notice in 2009 — more than five times the national average. Las Vegas reported a quarter-over-quarter decline in foreclosure activity in the fourth quarter — as did all the other metro areas with foreclosure rates ranking among the top 10 for 2009.

With 11.87 percent of its housing units receiving a foreclosure notice in 2009, Cape Coral-Fort Myers, Fla., documented the second highest metro foreclosure rate. Other Florida cities in the top 10 were Orlando-Kissimmee at No. 7 (8.17 percent), Port St. Lucie at No. 9 (7.58percent), and Miami-Fort Lauderdale-Pompano Beach at No. 10 (7.16 percent).Merced, Calif., registered the nation’s third highest metro foreclosure rate, with more than 10 percent of its housing units receiving a foreclosure notice in 2009. Other California cities in the top 10 were Riverside-San Bernardino-Ontario at No. 4 (8.80 percent), Stockton at No. 5 (8.62 percent), and Modesto at No. 6 (8.53 percent).

The Phoenix-Mesa-Scottsdale metro area in Arizona documented the nation’s eighth highest metro foreclosure rate in 2009, with more than 8 percent of its housing units receiving a foreclosure notice during the year.

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

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