The median, or middle, price of a home jumped to $224.800 last month from $197,800 in December 2008. The percentage increase was the largest of at least other metropolitan statistical areas tracked by the NAR. Unlike the S&P/Case-Shiller report that will be released on Tuesday, the NAR report does not include only major markets. It also includes markets such as Pittsburgh and San Antonio, for example.

Sales volume, however, dropped by 10.2 percent in the Denver area.  Only Indianapolis, with a 13.1 percent decline, showed a bigger percentage drop, according to the data released by NAR.

Denver was not on the list, but the information it compiles for the Denver MSA was released to InsideRealEstateNews.com.

“I can give you unpublished data on Denver,” said NAR spokesman Walter Molony. He said the NAR publicly released month-over-month data on various cities depending on the sample size of the MSA and how comfortable NAR felt with the data. The NAR also noted that their data may show different results than local data because of geographic areas and housing types included. An earlier report by independent broker Gary Bauer, based on Metrolist data, showed a slightly smaller percentage increase in the median price of a single-family home sold. Bauer’s report showed the median price of a single-family home closed in December at $221,000, up 13 percent from December 2008.

Molony also cautioned about reading too much into monthly data for any metropolitan area.

“Month-to-month data can be quite volatile,” Molony said. “We prefer quarterly data. We will be releasing quarterly data on Feb. 11. That will be more in-depth and you should find that more valuable.”

When I told Chris Mygatt, president of Coldwell Banker Colorado, about the data, he noted that is a bit of a higher December vs. December 2008 gain, based on local Metrolist figures.

He said the increase last month was due to the mix of homes being sold. For most of 2009, so many distressed properties were being sold that they were driving down the overall average and median prices, he said.

“It is interesting,” Mygatt said about the NAR data. “We know in the last four months we have been seeing some increases in the average price of a sold homes.”

But he said that is a trend that may not last.

“If  you look at the big picture in Denver, we know that banks are sitting on a record number of homes that are not being listed on the market and are not currently being sold,” Mygatt said. “That has resulted in a decreasing inventory and when demand came on strong, we saw prices at the lower-end move up, along with some movement at the upper end.  What I really fear is when and how this  ”shadow market” of unsold homes held by the banks are delivered to the market. If they let them out one at a time, by dribs and drabs, it won’t have much of an impact. But if all of a sudden they drop thousands of homes on the market, we are going to be in trouble. That will cause a big drop in prices.”

Source: National Association of Realtors

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

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Yet, as of today, HUD has 300 homes listed for sale in Colorado. And some of them are not on the open market. Some of the homes are first offered to non-profit groups, as well as teachers and others before investors or owner-occupants can bid on them. Weld has the most foreclosures listed at 41, while Adams and Arapahoe counties each have 38. El Paso County had 37 and Denver 30. A number of counties only had one foreclosure listing, including Archuletta, Chaffee, Huerfano, Kit Carson, Montrose, Otero and Rio Blanco.

And while it has sold 2,542 homes to other buyers so far this year – some of them acquired last year – it appears that HUD must have a backlog of homes that it owns, but they are not actively marketing.

“That is the insanity of it,” said Bobby Burnett, owner of Keller Williams Realty – DTC.  “I don’t think they want to put all of this stuff on the market at once and just saturate it. I think they are just sitting on it. That is my opinion.”

If that is the case, he has mixed feeling about it.

“It’s not a bad thing,” Burnett said. “If you dropped another 2,300 homes on the market at once, it would have a very negative impact on prices and the market. The only bad part of is that the longer the property sits there, it deteriorates more, and hurts the value of that property and the surrounding neighborhood.”

Also, the homes that HUD appears to be sitting on, are part of a “shadow market,” that next year could swamp the market, driving down prices, he warns. Banks, by some estimates, likely own thousands of more homes that they have yet to offer to buyers. (For more on the shadow market, please visit my previous blog on the subject.)

It’s a far cry from the late 1980s, when HUD used to buy thick weekly special sections in the Rocky Mountain News and Denver Post, listing all of its homes for sale, noted Nickolas Terry, a broker with RE/MAX Leader.

During that foreclosure crisis, caused by an exodus of jobs from Colorado when the energy market collapsed and over-building in anticipation of a boom that went bust, HUD became the largest single landlord in the Denver area.  The foreclosure crisis was known as the “death spiral” and in some cases HUD would pay buyers $500 to take houses off its hands.

Steve Cramer, principal of Exit One Realty, said from the time HUD acquires the homes until the time it hits the market, is not a speedy process.

Cramer said that HUD gets the title of a home with an FHA-insured mortgage from the lender, after it has been sold at a public trustee auction.  Then, a company called Michaelson, Connor & Boul, (better known as mcb Colorado), which has a contractual relationship with HUD, inspects the property. A FHA appraisal is needed to determine the asking price, and the home is winterized. Then, mcb doles out the homes to 16 designated brokerages (including his) by ZIP Code, he said. The listing broker only receives $100 per home, he said, but the broker who brings a buyer can typically expect to make $1,300 to $1,400 on each home sale, Cramer said.

“From the time HUD takes possession until it is put on the market can sometimes take four to six months.”

Related blogs:

HUD foreclosures drop by 15%

Drop in HUD prices probably a quirk

FHA loans soar

County	HUD foreclosure listings
Adams	38
Arapahoe	38
Boulder	4
Broomfield	2
Denver	30
Douglas	6
Eagle	2
El Paso	37
Elbert	3
Jefferson	18
Kit Carson	2
Mesa	16
Pueblo	25
Rio Blanco	1
Weld	41

.

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Home closings nationally are up 10.1 percent from October and a whopping 23.5 percent from October 2008, according to the National Association of Realtors. By comparison, home closings were down 7.6 percent in the Denver area from a year earlier and were up only 2.9 percent from September.

But I would consider this a bullish sign, if I were either looking to buy a home, sell a home, or if I were in the business of selling homes.

The reason is mathematical.

Everything reverts to the mean. That is, whether you are talking about stocks or housing, things have a way of settling down to whatever is  “normal” for that market, despite short-term spikes up or down.

What I think that is going to mean (no pun intended)  is that home sales are going to pick up in Denver and fall nationally.

And don’t forget, Denver’s economy often is counter-cyclical to the national economy.  That  economic-sword cuts both ways – we’re often down when the nation is up, and vice versa.

Another reason to bet on Denver’s housing market recovery is that it and Colorado have one of the best “balanced energy economies” of traditional and  alternative energy companies in the nation, as Tom Clark, of the Metro Denver Economic Development Corp., points out. The  Denver-area should become a magnet for high-paying jobs in the alternative energy sector,  especially since the Golden-based National Renewable Energy Laboratory, the nation’s premier renewable energy research outfit,  is in our backyard.

Also, mortgage rates remain near their historical lows, if you have the credit and work history to qualify. That mortgage rate window won’t stay open forever.

Still, there are storm clouds dampening Denver’s housing market. A declining workforce even as unemployment rates drop, is not encouraging. The area, and much of the country, is bracing for another wave of foreclosures due to more people losing their jobs. And lenders may have thousands of foreclosed homes waiting in the wings that have not yet been put on the market,  creating a shadow market, as I reported earlier.

Kentwood Co.  broker Tom Cryer says this reminds him of 1989, a prime time in Denver to find bargain-basement-priced homes. He thinks people who don’t buy today, will wish they had by 2012, when he thinks a  Denver-area housing recovery will be well on its way.

I don’t think I would bet against him.

Contact John Rebchook at 303-

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RE/MAX, based in the Denver Tech Center, is working with HEART Financial Services of Northbrook, Ill. to create a pre-foreclosure or short-sale strategy that they hope will make it easier for families to sell their homes and avoid the trauma of a foreclosure.

“It’s unfortunate that the short s\ale process has been so difficult to navigate in this marketplace,” said Dave Liniger, Chairman and Co-Founder of RE/MAX International. “We’ve been working hard to promote streamlined short sales to provide both significant benefits to lenders, and a welcomed opportunity for homeowners to get a fresh start.”

At-risk homeowners who do not qualify for a loan modification will now have a viable alternative, and will not be forced into foreclosure.. Lenders that offer loan modifications to their at-risk borrowers will be invited to participate in this new short sale program.

Trained customer service representatives will provide detailed short sale information to all homeowners who cannot obtain a loan modification or do not wish to retain their property.

If a homeowner believes that a short sale might be appropriate, they are directed to a secure Internet Website where they can obtain more information, and select a real estate agent in their community who has received comprehensive training on the shortsale process. RE/MAX has designed this online database to assist homeowners with short sale information and easy agent referrals, and will use the closing management services Integrated Asset Services of Denver.

“It’s been our experience that many homeowners aren’t even aware that Short Sales are a reasonable alternative to foreclosure,” says Jerry Alt, President and Chief Executive Officer of HEART Financial Services. “Each month we speak with thousands of homeowners who can’t qualify for or don’t want a loan modification. For the most part, when we refer them back to the servicer for a potential short sale, we lose the opportunity to help the borrower while we have them on the phone. Now, we can offer these homeowners some hope and a more efficient process to list and sell their home.”

The number of homeowners who could rely upon a short sale may be in the millions. According to RealtyTrac.com, July, August and September had the highest foreclosure numbers on record and some analysts  say there is a “shadow” inventory of foreclosed properties as high as 7 million, which could start hitting the market in a few months. Earlier, InsideRealEstateNews.com reported that the shadow market could increase the Denver-area supply of unsold homes by 78 percent.

Out of all the applications reviewed for a loan modification, less than 50% are successful. And a high percentage of successful loan modifications eventually re-default.

“We have been talking to numerous industry leaders, legislators and Administration officials trying to draw attention to the Short Sale situation,” says Liniger. “It’s just not possible for the housing market to recover fully until the inventory of foreclosed properties is significantly reduced, and short sales offers one practical way to help do this.”

There are over 11,000 real estate agents in the United States who have received the Certified Distressed Property Expert professional designation. More than  60% of those are affiliated with RE/MAX. In addition, the National Association of REALTORS  also offers a similar Short Sale, Foreclosure and REO (SFR) designation. Agents who have received special Short Sale training like these designations could be selected to participate in this new short sale program.

Short sales can occur when a lender agrees to accept a sales price for a home that is lower than what the homeowner owes on the mortgage. The short sale transaction is more complicated than the average real estate sale and consumers are urged to deal with agents who have specific training in the process.

HEART Financial Services will begin offering the newly developed short sale process to the loan modification applicants of their clients within the next few weeks.

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

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The shadow market in the Denver area is 13,888 homes, according to the Amherst Mortgage Insight report released by Austin-based Amherst Securities Group, which puts the total inventory – including the shadow market – at 31,618 unsold homes, based on data from Trulia.com. The shadow market, as defined by Amherst, are homes that are in or facing foreclosure, but are not yet on the market. Others also include homes that are being rented, often for less than the mortgage amount, because the owners are unable to sell them for a profit, but plan to sell them when they think the market is starting to recover.

“We keep hearing about this shadow market, but this is the first real quantification I have heard of,” said Tom Cryer, a broker with the Kentwood Co. “This report takes the shadow market from being something of an urban myth, to something that really exists. I do not see anything that could dispute it.”

If the shadow market could add almost another 14,000 homes to the Denver-area market, that could slow the recovery of the low-end homes that seem to be stabilizing and even appreciating, Cryer said. In August, there were 24,648 unsold homes on the market in Denver area, 20 percent fewer than a year earlier, according to a separate analysis of Metrolist data by independent broker Gary Bauer.

One way to look at it, is that the shadow market would bring the supply more in line with its historical levels.

Rinner: Inventory low in Denver

“But we have such a low sales rate,” that people are not putting their homes on the market, keeping the inventory low, said Mike Rinner, of the Genesis Group, which tracks housing along the Front Range.

Nationwide, the shadow market is 7 million homes, equating to a 1.35-year of inventory, according to Amherst. “The single largest impediment to a recovery in the housing market are the number of loans that are either in delinquent status or in foreclosure, destined to liquidate,” according to the report. “This creates a huge shadow market,” the report notes.

More bad news could be on the horizon, despite recent positive trends, such as reported in the S&P/Case-Shiller report, which found that most of the 20 statistical areas had shown a month-to-month increase from July to August. The Amherst report analyzed the 20 cities in the S&P/Case-Shiller report, including Denver. It found that only six cities – led by Las Vegas, had a larger shadow market, as a percentage of the total inventory, than Denver. In Vegas, the total shadow market accounts for a 315 percent increase over the number of actual listings.

Shadow market growing

And the shadow market could become an even larger problem. The Amherst report notes that “to the extent that there is more home price depreciation (causing higher volume of defaults), the problem could escalate.”

Rinner, of the Genesis Group, a local company that tracks housing along the Front Range, said the report “makes a strong case that the other shoe (of foreclosures and depressed pricing) is waiting to drop. ” However, he added you always wonder how good the research is of “experts from looking from afar.”

Still, the report attempts to quantify the shadow market, which is valuable for predicting the direction of the market.

“Probably the most interesting thing to come out of it, is that we do have an excess supply that isn’t frequently recognized,” Rinner said. But he said there is a saving grace, which may help to mitigate the blow of the shadow market.

“We do have a pent-up demand,” of buyers who want to take advantage of low-interest rates and low home prices, he said. Even though unemployment is high by historical standards, 93 percent of the people in the Denver metro area still have jobs, he said. The main thing that keeps people from taking advantage of the housing market is concerns about their jobs, he said. “Over time, as that starts to go away and people feel more comfortable, and unemployment starts to fall or stabilize, people will start entering the market again,” Rinner said. “The excess supply will get used up.”

On the other hand, as the Denver-area population ages, that older demographic is not as likely to move as quickly as younger buyers do, who are forming and growing families, he said. However, as builders construct greener, more sustainable homes, and owners retrofit homes with green features, that could increase the demand, he said.

Amherst, in its report, said that more needs to be done to lessen the impact of the shadow market.

“We believe that the housing overhang is the single large issue inhibiting a housing recovery,” according to the report. “We are concerned that, in light of this overhang, the housing market , stabilization is temporary based on seasonal factors, and prices can deteriorate further. We believe a more permanent stabilization must await some resolution of the shadow inventory.”

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

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Ed Jalowsky, owner of Hottest Homes Realty, said he is certain that a shadow market is looming.

“I think so,” Jalowsky told me.  “Here is why. First of all, a lot of the financial and social economic indicators have not stemmed the flow of the hemorrhaging of job losses. Earlier this year, the unemployment rate was 7 percent and now it is hitting 10 percent. It already is 12 percent in California. And if California goes down the drain, so does the rest of the country. We don’t have any real economic news that things are getting better.”

And banks are loathe to complete the foreclosure process, because they figure that Uncle Sam might ultimately pay them 50 cents on the dollar for their loans, while they’ll only get 30 cents on the dollar in the open market.

“But Denver may be a bit counter-cyclical,” Jalowksy said. “We have been down this road longer than the rest of the country. We were way ahead of the curve for the downturn, and should be way ahead of the curve for the recovery.”

Lydia Lin, owner of One Realty Inc.,  said she has had several clients who wanted to put their homes on the market, but when she researched their neighborhoods to see what they could realistically expect to get, they decided not to sell them.

“No one wants to bring $20,000 to the closing table,” Lin said.

But a few clients have thrown in the towel, because they realize that it may be several years before they can expect a rebound. One client who moved to Washington, D.C., is getting set to put his house in Mayfair on the market. At one point, another Realtor told him he could get $730,000 to $750,000, but Lin said it probably will hit the market around $590,000. Unfortunately, he spent a lot of money renovating a house and didn’t spend his money wisely. It would have been less expensive, and a better investment, to scrape the house an add a basement, she said.

On the other hand, she plans to soon list a home near Sloan’s Lake for about $259,000, and she thinks it is possible bids will come in higher than that. The home has been appraised at $270,000.

“You can’t find anything from Federal to Sheridan for less than $275,000,” Lin said. “And I’ve seen some bungalows near Lowell (Boulevard) and 32nd Avenue sell for $400 per square foot. It’s all about supply and demand.”

Jack O’Connor, a owner of RE/MAX Professionals, said he doesn’t think there is a shadow market of foreclosed homes in the Denver area.

“A bank would have no reason to “hoard” homes priced in the $100,000 range, because they could put it on the market and probably immediately sell it for more than the asking price,” he said. “And for the expensive foreclosures, the banks are doing everything to work with the homeowners, because they are so difficult to sell.”

O’Connor said that what is perceived as banks keeping homes off the market is actually a case of under-staffed lenders just learning how to handle the record number of  mortgages delinquent or in default. At th4e same time, more states have adopted rules and laws that are protecting consumers, “which elongates the front-end of the foreclosure process,” O’Connor said.

The so-called shadow market is not going to darken Denver’s real estate prospects, he said.

“The Denver market should continue to rise for the next 24 to 36 months. Denver is easily well beyond the bottom.”

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

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