Greg Rand

Be sure to watch the report. A link to it, titled “Watch this report” can be found at the bottom of this article.

 The Denver housing market recently got a national shout-out from housing and real estate investing expert Greg Rand on Fox Business.

While millions watch Fox Business, many may have missed the program in which Rand, owner of OwnAmeica.com lavished praise on Denver’s housing market and economy, because it originally aired on the holiday weekend between Christmas and New Years. But the video is starting to make the rounds in Denver real estate circles.

“Probably two dozen people today asked me if I had seen the Fox news clip,” said Peter Niederman, CEO of Kentwood Real Estate. “I’m not kidding. Wherever I went today, whether it was at lunch or in a business meeting, everyone asked me about it – and not just people in Kentwood. It is amazing! It is exciting. It was fun to hear that there might be more in-migration to the area. He talked about all of the things you and I have talked about in the last 12 months, but it was exciting to hear an outside pinpoint what a great place Denver is to live.”

Rand, a real estate investment consultant, author and radio and TV personality, pitched the attributes of Denver for much of the 4 minute and 4 second program in a way that would have made any chamber of commerce-style cheerleader proud.

“It looked a little bit like we had written an advertorial,” quipped Tom Clark, executive vice president of the Metro Denver Economic Development Corp.  ”It is just one of those times that somebody looking for a good place to invest in real estate and housing and hands us a gift.”

Clark said his group will definitely be showcasing the TV report. “If we have anything to do with it, it’s going to be a help,” as far as drawing more people to the Denver area, he said.

“There doesn’t seem to be much wrong with Denver,” the Fox financial reporter interviewing Rand said at one point.

“That’s a good way to put it,” he said.

Report heavy on facts, charts

But the report wasn’t fluff. It was full of statistics and charts being quickly flashed on the screen.  For example, Fox showed a chart tracing the history of home prices in Denver during the past 15 years, which Rand noted does not illustrate a housing collapse, but simply a housing correction.

Clark, however, said that Denver’s relatively steady home prices have been a “little bit of a disadvantage,” when pitching the metro area to other companies considering moving or expanding here from other parts of the country. “We’re starting to get a lot of activity and interest from people in the Midwest, where people have taken huge hits on their homes that we did not experience here,” Clark said. “They experience a little bit of sticker shock, when they find out that our prices did not crater like their prices did. We counter that by telling them if you bring employees here, they won’t need to fear that their houses are going to lose a lot of value, because of our stable real estate market.”

The flip-side is that low housing prices aren’t the selling point that they might seem at first blush. “I was talking to one CEO who told me, “Sure, I can buy a $500,000 home in Phoenix for $190,000, but I would have to wait four years before I have any neighbors.”

Rand noted that the average age in Denver is 31 years old and the unemployment rate is below the nation’s. He said while people are living the southeast, northeast and California, people in Denver can’t imagine living anywhere else. He said when he talks to people in the Denver area, they tell him that they don’t just “like‘ living here, “but love living in Denver…Amazingly, it all comes down to lifestyle.”

In a telephone interview with InsideRealEstateNews this afternoon, Rand said that he does the Fox show once a month, as part of the network’s attempt to drill down to what is important to people on Main Street.

“Fox is trying to compete with CNBC on business news and CNBC does all of these reports on stocks and bonds and mutual funds and currency,” Rand said. “Fox does that, too, but on my show they really want to step back to show where people are moving and living and where home prices are likely to appreciate, and how they can invest in real estate. When you look at all of the demographics, Denver comes up beautifully.”

He said he looks at housing markets the way a Home Depot or Lowes looks at an area before it decides to build a new store.

But that only tells part of the story.

“When you look at all of the data points, it always comes down to the softer, lifestyle-oriented issues,” Rand said. “In Denver, people love the fresh air.”

Denver a draw to young professionals

Tami Door notes that Denver area s becoming even more inviting because of its increasingly vibrant and inviting downtown.

Tami Door, president and CEO of the Downtown Denver Partnership did not see the program when it aired, but clearly Rand is preaching to the choir, in her case.

“What he is saying is reflecting what the Downtown Denver Partnership started pursuing in a big way four or five years ago,” Door said. “All of our research was showing  – and all of the research that we are collecting is showing – is that professionals in the 24 to 35 year-old range will be making a significant career movement if they can be within three miles of an authentic center-style city. We overlayed that on top of focusing all of our efforts to attract that demographic, while doing everything to make our downtown even more vibrant, exciting and full of amenities. What research shows is that they don’t have to be living in the heart of downtown, but what they need to do is have that healthy, vibrant downtown available to them.”

Indeed, that is more important than drawing corporations to relocate downtown.

“If these young, educated workers come to Denver first, the companies will follow,” Door said.

Independent real estate broker Gary Bauer said that Rand’s comments mirror what many in the Denver real estate community have been saying for years.

“We are a true market unto ourselves,” Bauer said.

Rand, for his part, said he has not spent near as much time in Denver as he would like, although he plans to be here next week on a business consulting trip.

“Really, all of Colorado has a lot going for it, with Denver in the heart of it.”

 Video: Watch this report

To learn more about OwnAmerica, please visit this link.

Contact John Rebchook at JRCHOOK@gmail.com

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Boulder ranked No. 8 and the Denver-Aurora area was 17th, on the new index, which examined 360 metropolitan statistical areas across the country.

Of the top 20, 15 of them were on either the West or East coasts. In other words, Colorado claimed two of the five spots between the coasts.

Florida, a senior editor at The Atlantic and director of the Martin Prosperity Institute at the University of Toronto’s Rotman School of Management, as well as the founder of hte Creative Class Group, ranked the MSAs on three measures of regional productivity and wealth: median household income, per capita income and average wages and salaries. Washington, D.C. and Silicon Valley topped the list.

Tom Clark, CEO of the Metro Denver Economic Development Corp. and Executive Vice President of the Denver Metro Chamber of Commerce, said not everyone is a fan of Florida’s and plenty of people have taken shots at him over the years.

But he seems to be on target when it comes to the Boulder-Denver area, especially in light of current and prospective economic development coups, he said.

For example, Clark, Hickenlooper and others recently launched an effort to bring a futuristic “spaceport” to the area, probably at the Front Range Airport in Adams County. General Electric this year announced plans for a cutting-edge solar manufacturing facility in Aurora and Arrow Electronics moved its world headquarters to the Denver area.

“I will tell you that one thing we watch are art and technology coming together,” Clark said. “By this I mean things that we once only dreamed about, which seemed like science fiction, are coming true. The mix of creativity and intellectual power are powerful combinations.”

Florida, in an Atlantic Cites Place Matters article titled, U.S. Metros That Can Most Afford to Buy Gifts This Year,”  said that metro areas that rank high on the Economic Advantage Index share a number of traits.

They tend to have “more highly educated and more highly skilled populations – or what economists refer to as higher levels of human capital…The same is true of metros with a larger share of knowledge-based, professional and creative jobs.”

He goes on to say that metro economic advantage is associated with the concentration of high-tech industry, a high level of technological innovation measured by patents per capita. Also,  MSAs that rank highly on the index have “higher levels of openness and diversity – whether in terms of the share of new immigrants or of gays and lesbians. More economically advantaged metros, not surprisingly, are also happier.”

Clark noted that he predicted that 2011 would be better than 2010 for the Front Range economy, and he expects 2012 to be another good year, with 50,000 new jobs coming to the area.

Some of the most prized jobs will be found in business  “clusters” that his group has targeted for the past nine years, such as aerospace and clean energy.

“Our goal is to make the Denver area the most economically diverse area of the country,” Clark said. “2012 is going to be another solid year. It will be really solid, but not great.”

However, while the Denver-area housing market will benefit a bit from jobs coming to the metro area, Clark predicted the local housing market will not shoot the lights out next year.

“Housing is not going to really stage a comeback until 2013 and 2014,” Clark said. “The problem is we have a whole generation coming up that does not see houses as a wealth-building asset. They’ve seen what has happened in recent years, so that is a completely foreign concept to them. They are going to be more slow to buy real estate than previous generations. But their parents will help them buy homes and they will start to come around. We have to work on that.”

Rank	Metro Area	Economic Advantage Index
1	Washington, D.C., Arlington, Alexamdria	0.995
2	San Jose, Sunnyvale, Santa Clara	0.994
3	Bridgeport, Stamford, Norwalk	0.993
4	San Francisco, Oakland, Fremont	0.991
5	Boston, Cambridge, Quincy	0.981
6	Trenton, Ewing	0.981
7	Anchorage	0.973
8	BOULDER	0.969
9	New York, Northern New Jersey, Long Island	0.965
10	Hartford, West Hartford, East Hartford	0.964
11	Seattle, Tacoma, Bellevue	0.962
12	Baltimore, Towson	0.96
13	Napa	0.956
14	Manchester-Nashua, NH	0.951
15	Oxnard, Thousand Oaks, Ventura	0.948
16	New Haven, Milford	0.947
17	DENVER-AURORA	0.933
18	New Haven-Milford	0.932
19	Rochester, MN	0.931
20	Philadelphia, Camden, Wilmington	0.926

Contact John Rebchook at JRCHOOK@gmail.com

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Gov. John Hickenlooper's role in bringing Arrow Electronics to the state can't be under-estimated, according to Tom Clark.

Last March, Gov. John Hickenlooper, almost in passing, said at a real estate forum in Denver that he had met with a CEO of a “Fortune 150” company interested in movings its headquarters to the state, creating 1,000 or so jobs.

Hickenlooper did not identify the company. And after InsideRealEstateNews exclusively reported his comments following the Colorado Real Estate & Economic Summit sponsored by Coldwell Banker Colorado, some people privately wondered if he was grandstanding and blowing smoke.

Today, the state learned he was not.

“He was talking about Arrow Electronics,” said Tom Clark, executive vice president of the Metro Denver Economic Development Corp.

Hick brings Arrow home

Clark said that Hickenlooper is responsible for convincing Arrow to re-locate its global headquarters from Melville, N.Y., to along Denver’s Southeast corridor, where it already has a facility. It will being 1,250 high paying jobs to the state over the next five years.

“Hickenlooper kind of corralled them,” Clark said.

Arrow Electronics, with $18.7 in revenues last year, is the largest distributor of electronics in the world.

Landing Arrow’s global headquarters is an economic coup like the state has never experienced before, at least in modern history, according to Clark.

“Arrow Electronics is a company that has 40 percent of the global  market-share in its industry,” Clark said. “For any company to have 40 percent global share in an industry is remarkable. What that means is they are creating an entirely new industry cluster for Colorado. It is only going to get bigger.”

Companies will target Arrow

He said a lot of suppliers and vendors will want to be near Arrow, much like other companies followed Vestas when it opened its wind turbine facility in Windsor.

“Not only does Arrow put Colorado on the map for a new cluster that will bring other companies to the area, but Arrow itself will plan creating new ventures and launching new businesses, which will help Colorado grow.

“This is like a gift from heaven,” Clark said.

He estimated that many of the jobs will pay salaries north of $60,000 and $70,000.

“I don’t think we have ever had a company in Colorado with $18 billion in revenues before,” Clark said. However, DISH Network, also based in the Denver area, has a market cap of about $12 billion, about three times the size of Arrow’s market cap.

Clark noted that Arrow had done a major expansion in a Colorado a few years ago, and the possibility of it moving its global headquarters informally had been discussed for three or four years.

When Gov. Bill Ritter left office, Clark spoke to an outgoing economic development official and asked if there was anything going on with Arrow moving here, and he was told no.

“Hickenlooper was really pretty pivotal in this deal,” Clark said. “I’m not privy to everything that happened, but I know he met with a pool of CEOs and really focused in on what it would take to get Arrow to move its global headquarters to Colorado. Yes, there were some tax credits made available to them. But what was really important is that we had to have the human capital available for them.”

Clark said Arrow executives were keenly interested in making sure that Colorado’s universities were committed to providing graduates who could bring Arrow to the next level.

“DIA also was very important to them,” Clark said “They were very interested in efforts to bring non-stop flights between Asia and Denver. The supply chain for electronics distributions pretty much begin and end in Asia.”

Clark said that he suspects other cities were competing to land Arrow as its global headquarters.

“They never told us or made us feel as if there were other offers out there we had to beat,” Clark said. “But with something like this you have to assume they could get some pretty substantial offers.”

Clark said that Arrow executives want to see Colorado prosper as it grows.

“The truly great thing is that Arrow is bringing a whole new cluster to Colorado, it wants to bring to Colorado clusters that it is not already in, Colorado, it wants to maximize its value and watch Colorado grow with it,” Clark said. “That is a powerful statement.”

Contact John Rebchook at JRCHOOK@gmail.com

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The interesting thing is that by many economic development measures, Raleigh is in much better shape than Denver. For example, while Denver was No. 5 in the country for net migration from 2007 to 2009, Raleigh was No. 1, by a wide-measure.

“They have lots going for them and we joked about why the came,” said Tom Clark, executive vice president of the Metro Denver Economic Development Corp. “However successful they have been, they’re looking for a more cohesive vision among the communities and a more aligned economic strategy.”

FasTracks discussed

Clark said they were especially interested in FasTracks, the Denver region’s $6.5 billion light-rail and rapid-transit bus-line development that is underway. “They don’t have that kind of regional transportation system in the Raleigh area, so they are very interested in what we are doing out here,” Clark said.

Joel Kotkin, a Distinguished Presidential Fellow in Urban Futures at Chapman University in California, an adjunct fellow with the London-based Legatum Institute, and  author of The Next Hundred Million: America in 2050,  and Mark Schill, vice president of research at  Praxis Strategy Group, an economic research and community strategy firm, attended the meeting and had this to say about it in NewGeography.com, where they both serve as editors.

“Recently a group of leaders from Raleigh made a visit to Denver to learn what makes that city successful,” they wrote. “Speaking to the group, we pointed out that by objective measurement – job growth, educated migration, population growth – Raleigh beat Denver by a long shot, yet it was to Denver the group was looking for inspiration. In fact, over the past three years, Americans have moved to Raleigh at a rate more than three times that of Denver. Perception can be a funny thing which makes a winner feel inferior to a clear runner-up.”

Alan Salazar, Chief Strategic Operating Officer for Gov. John Hickenlooper, was unaware of the meeting until told about it by InsideRealEstateNews.

“That’s very exciting,” Salazar said. “I’m going to tell Gov. Hickenlooper about it.”

He said even areas of the country that may have more robust economies than Colorado by some metrics, such as Raleigh, can learn from Colorado.

“We have been operating in a very bipartisan way,” Salazar said. “Other states have terrible relations between the parties. It’s not a train-wreck in Colorado. It is worth coming to Colorado to see the intersection between higher-education and technology and the environment, and what Richard Florida calls the “Creative Class.”

Contact John Rebchook at JRCHOOK@gmail.com

To read the entire NewGeography article on this topic, please visit this link.

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John Beeble, co-chair of the Metro Denver EDC and president of Saunders Construction, called for business leaders to actively engage in economic development endeavors within the region.

“We are privileged to have local and state governments as crucial partners in our efforts,” Beeble said. “But for the region and state to succeed, the private sector must do its share. It must play a prominent and equal role and be at the table with government as a political and financial partner.”

Beeble also highlighted economic successes – and challenges – of 2010, as the metro Denver region worked its way out of the recession.

“While we lost two notable corporate headquarters operations last year-First Data and Qwest-we have also been successful in recruiting other high-profile headquarters including DaVita, TriZetto Group, and juwi,” said Beeble.

Prospects strong

“The Metro Denver EDC finished 2010 with a record number of prospect companies. Volume is up and 2011 is starting strong,” Beeble added. Indeed, Gov. John Hickenlooper recently announced that he has been talking to large companies considering moving their corporate headquarters to Denver, although he did not name them.

In trying economic times comes unexpected opportunities, Tom Clark, EDC’s executive vice president, told the audience.

“This year we’ll add $2 billion in new healthcare facilities to the region, DaVita’s $90 million headquarters will rise from the Platte Valley, and a new rail line will emerge connecting DIA to Union Station. These investments help advance the region’s recovery,” Clark said.

Contact John Rebchook at JRCHOOK@gmail.com

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In the past 10 days, the Denver area has welcomed a number of good news announcements on the economic development front, which will spur the creation of  jobs, and in turn will increase the demand for housing.

DaVita opening its new headquarters at Denver Union Station, a national poll praising Colorado’s business environment, and job announcements by Vestas, the wind-turbine company with operations in Windsor, Brighton and Pueblo, were among a half-dozen announcements highlighted by Tom Clark, the executive vice president of the Metro Denver Economic Development Corp., today.

Good news on the horizon

“In a time where confidence in the local market is crucial, these events are giving us some optimism that an overall lift in the economy will commence in 2011,” Clark wrote in his blog. And there is more good economic news coming, Clark notes: “As we look forward to the completion of several big projects, such as ConocoPhillips’ R&D facility in Louisville and DaVita’s HQs in 2012, and the commencement of the East Corridor construction, 2011 through 2014 are looking very strong.”

For his entire blog, please go to this link.

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

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Denver-area homeowners could potentially save almost $600 million a year by refinancing their mortgages into the record-low rates available, according to an analysis by InsideRealEstateNews.com.

While there does appear to be an uptick in refinancing, phones are not ringing off the hook in lender offices. Meanwhile, even the trifecta of good news for home buyers – super-low rates, housing prices well off their peaks, and an increased of supply of unsold homes on the market to choose from – have not been driving people to buy homes. In June, the number of homes placed under contract plunged by 31 percent from June 2009.

InsideRealEstateNews used Census Bureau data and national reports to estimate the number of homeowners who could shave 2 percentage points or more off their mortgages. If they all did, it would save them an estimated $597.3 million annually, excluding the costs of refinancing. And the estimate is likely conservative, as some lenders say it makes sense for some homeowners to refinance, even if they could cut their mortgage rate by a half of a percent or less.

Crazy low rates

Zillow.com reported today that the average 30-year, fixed-rate at 4.49 percent, a 15-year, fixed-rate at 3.98 percent and a 5-year ARM at 3.98 percent. “It is absolutely crazy,” said Kay Cleland, president of the Colorado Association of Mortgage Brokers. “Everybody should be taking advantage of these unbelievably low mortgage interest rates.”

One way to look at it, is that refinancing would be the equivalent of the metro area homeowners getting a $600 million, tax-free raise.

“That would have a huge impact on the economy,” said independent real estate broker and consultant Gary Bauer. “And those savings would have a three or four times trickle rate, so if you take that $600 million, it could have a $2.4 billion impact on the economy. To put that into perspective, in the first six months of this year we sold $5.3 billion in homes, so the savings would be the equivalent of about 45 percent of the homes sold.”

He said he has one client who refinanced his mortgage and is now saving about $600 per month.

Fixed rates and ARMs attractive

Pete McGlynn recently refinanced his mortgage, cutting about two points from his mortgage.

Although he didn’t want to discuss exact numbers, he said he is saving so much he will recoup his closing costs in only two months, and the rest of the savings will be gravy.

“When you can save a third, it’s not really a tough one to think about,” McGlynn said.

Unlike many people he went from a 30-year-fixed-rate loan, which had about 27 years remaining on it, to a 7-year, adjustable rate mortgage.

“I had enough equity in my home to qualify for an interest-only ARM,” McGlynn said. McGlynn, a sophisticated purchaser who works in the financial arena, thought it was unlikely that he would spend 30 years in his 3,175-square-foot house, so he didn’t want to pay for 30-year money.

“I probably will be in my house for just about the length of my mortgage, and probably no more than 10 years,” he said.

Another person, so prominent that he has a spokesman, recently traded his $1.1 million, 5-year, interest-only loan with a 6-percent interest rate, for a $1.057 million, 30-year fixed-rate loan with a 5 percent interest rate, according to documents obtained by InsideRealEstateNews. That would save him about $920 a month in principal and interest payments.

The spokesman, who talked about the refinance on the condition that his employer’s name not be used, said that his boss is like thousands of other homeowners who wanted to save money. He also wanted the security of fixed-rate loan, he said. He didn’t take any money out of the home with the refinancing, even though the home is worth $1.508 million, according to public records. “He’s like thousands of other homeowners who wants to take advantage of the low rates,” the spokesman said.

Tough economy hurts refinancing

Yet, a surprisingly small number of homeowners are taking advantage of the lowest rates in their lifetime. During past periods of falling rates, consumers typically were beating down the doors of lenders. Many of them had to hire additional staff to meet the demand.

A big part of it could be the economy, said Mike Rinner, of the Genesis Group, which tracks housing along the Front Range.

“If you had a 50 percent drop in your income, no matter how low interest rates go, it might not help you,” Rinner said. “I don’t think people are dumb. They know interest rates are down. But I think the key is you also have to have jobs. Even though we might be slightly better in the Denver area and in Colorado than in the nation as a whole, there are fewer people working today than a year ago, and that is not encouraging. If people had jobs and were confident they would keep them, everything else would fall into place.”

Still, Rinner said if you can qualify for a lower rate and increase your cash flow, it is easy enough to estimate how long it will take to pay back the cost of refinancing, he said.

And increasingly homeowners are taking a advantage of the low rates, although not as many as many experts would expect.

Refinance surge is tame

“I think everyone’s business is up,” said Peter Lansing, president of Universal Lending, a sponsor of InsideRealEstateNews and one of the largest locally owned mortgage banking companies in the Denver area. “But I wouldn’t call it off the hook. I’d say we’re up 10 to 15 percent. In the past, when we saw big drops, we were up 40 percent or 50 percent.”

There are likely several reasons why more consumers aren’t cashing in on refinancing, Lansing said.

“No. 1, many people may have already financed to a level not as low as today’s rates, but still one they are happy with,” Lansing said. “No. 2, people are concerned about the appraised value of their homes. In some cases, they might have to bring cash to the closing to get the full value of the lower rates. And others might have job issues that are keeping them from refinancing.”

Part of it might be psychological, he said. Even if the numbers pencil out, some people may simply be numb to the super-low rates.

“I suspect for some people going from a 8 percent to a 6 percent loan may seem like a bigger deal than going from a 6 percent to a 4 percent loan,” Lansing said. “I don’t know why that is, but I suspect that could be part of it.”

Tom Clark, Executive Vice President of the Metro Denver Economic Development Corp., agreed that more people should be taking advantage of the low rates.

“I cannot tell you how many people I have been talking with who have $200,000, $300,000 mortgages, and they know they should be refinancing, but just aren’t,” Clark said. “I think the reason people are hesitating, when it it is in their best interests, is all relative to how freaked out they are by the economy. With everything going on, it just leads to this kind of paralysis. It’s amazing what inertia can do. It really is giving yourself a pay raise without having to argue with your boss. It’s free money.”

Lansing said that rates this low are astounding.

“We put my sister into a 6.125 percent loan last year, and I thought we were giving her the lowest rate she would ever have,” Lansing said. “I thought that was going to be her last mortgage. And we just did a refinance for her for a 20-year loan. It has a rate of 4.125 percent, I think.”

Underwater homes don’t sink refinancing

Anita Padilla-Fitzgerald, president and CEO of MegaStar Financial, said she thinks media reports of falling home values may have convinced consumers that their homes won’t appraise at high enough values to refinance. However, she noted that the Federal Housing Administration, Fannie Mae and Freddie Mac all have programs that allow refinances without appraisals.

Still, reports that homeowners can’t take advantage of the low rates might be one reason that MegaStar’s business is currently 70 percent for purchases and 30 percent for refinances. Often, when rates were falling, many lenders experienced the opposite – 70 percent refinances and 30 percent purchases.

Depending on the situation, it could make sense for some people to refinance for a half-percent or less, Padilla-Fitzgerald said.

“It might make some sense for some people to go from a 5 percent to a 4.5 percent loan,” she said.

One road-block for some people refinancing is that they can’t roll their closing costs into the new loan, because their homes are so deeply under water – that is, their mortgages are worth far more than their homes, even when using various programs that don’t require appraisals, said Tom Gross, a mortgage broker with Crestline Mortgage, which is part of Universal Lending. Those programs include Freddie Mac Streamline and Fannie Mae RefiPlus and DU RefiPlus, as well as some FHA and VA programs.

“I just haven’t had any clients who want to do that,” Gross said.

But Dan Brown, principal of Spire Financial, said that is not a huge problem. If a homeowner has no equity in their home, he said a lender can often structure a loan that is higher than the rates available to the most qualified borrowers with great credit scores and lots of equity, but still lower than the existing.

Few loans for self-employed

A bigger problem is that while loans are relatively easy to get for people with standard paychecks and W-2 income, there are few options available for the self-employed. For example, a business owner might take a lot of write-offs, which under-estimates how much the owner actually earns.

Brown has one client who makes $80,000 a month, has an 800-credit score, and a a great deal of equity in his home, but it still took four months to find a lender willing to refinance his loan.

“I know a lady who wanted to buy a home in Boulder for $400,000,” Brown said.”She does not currently have a job, but she is receiving a settlement from her brother’s death, which will mean $1.6 million in her bank over the next two years and nine month. He said she was planning to make a large down payment, but didn’t want to pay cash and use up a quarter of her assets. But when she couldn’t get a loan, she walked away.

“Think of that poor home seller,” Brown said. “He thought he had a buyer of his home at a reasonable price. Now, he has to put it back on the market.”

Get help help from a pro

Brown said because every case is different,  the old rule of thumb that you need to lower your rate by a full percentage point, is not true for everyone.

“If you have a $417,000 mortgage, it might make sense to refinance if you can drop your rate by a half percent, because the savings are so great,” Brown said. “But if you have a $100,000 loan, it might only make sense if you can lower it by a full percentage point or a point and a half. Anyone who tells you there are rules of thumb is just full of it. This is not a business where one size fits all.”

And for some people, it doesn’t make sense to refinance, no matter how low rates fall.

One homeowner in Evergreen, for example, has only 6.5 years left before his loan is paid off, and so has been ignoring the siren call of low rates.

“He is absolutely right,” Brown said. “When you’re that close to paying it off, you are paying mostly principal, anyway. There is no point of amortizing a loan over 15 or 30 years, when you can see the light at the end of the tunnel.”

The only exception might be if a sophisticated borrower was looking at the home as just  another asset that could generate cheap money, which could be used to invest that could provide a much greater return than the negligible after-tax cost of the mortgage.

But if Brown could leave consumers with only one piece of advice, it would be to encourage them not to do it alone. He suggests that they use a trusted mortgage broker or mortgage banker that they have used in the past, or has been referred to them by someone they trust.

“I tell people I don’t care if it is me; I honestly don’t,” Brown said. “I don’t think it is a good idea to get a loan through the Internet or by calling a 800 number. If you try to navigate this process yourself, you are taking a big risk. Discuss your particular situation with someone who you trust. Tell them exactly what your goal and he can help you achieve those goals.”

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This report by Gary Bauer, using Metrolist data, shows far fewer homes on the market than Forbes.com. (Note: Single Family category includes single-family detached homes and condos, and Residential refers to only single-family detached homes.)

Denver Realtors and business leader, who have become  accustomed to favorable national press about the local  economy and real estate market, feel as though they have been blindsided by an article in Forbes.com that describes the local housing market as the second worst in the country.

Many experts said that the article, which ranked only Milwaukee below Denver, gives Denver an undeserved black eye.

“It absolutely gives us a black-eye,” said Tom Clark, executive vice president of the Metro Denver Economic Development Corp. and the Denver Metro Chamber of Commerce. “I glanced at the article last week and realized it was absolute bull crap.”

Unsold inventory exaggerated

One thing that irked real estate brokers that track the market closely is that the article claimed that there were more than 42,000 unsold single-family homes on the Denver-Aurora metropolitan statistical area. However, Metrolist data shows at the end of the March there were only 14,989 single-family homes on the market. Even when condos and townhomes are included, the number is less than 20,000. Indeed, most experts doubt that there are even 42,000 unsold homes in the entire state of Colorado.

“This article is so incorrect that it should be removed from the online publication,” said Jeff Bernard, principal of Bernard Real Estate Analytics, and a long-time Denver broker.

“Perhaps there was a completely different scope of parameters for data gathered by Forbes this year versus data gathered last year,” in which Forbes.comsaid Denver’s housing markets was one of the best in the country, added Bernard, a broker with RE/MAX Alliance. “It even leaves me wondering if they collected data on the right city. Or maybe they’re spiking their Kool-Aid before they run their analytics. Forbes is usually a pretty good read, but this article seems to be slithering towards irresponsible reporting. Forbes is usually a pretty good read, but this article seems to be slithering towards irresponsible reporting.”

Forbes claims inventory jump in Denver

The Forbes.com article, originally published on April 5, had this to say: “Before 2009, if any market seemed to be free from the rest of the country’s housing woes, it was (Denver.) But the city’s fortunes seem to have shifted: The recession hit Denver later, and only in the past year have sales slowed and inventory begun to pile up.” And the report, which it said was based on information from the National Association of Realtors, Zillow.com and Moody’s Economy.com, went on to say that “Denver doesn’t come to mind as a housing-crisis hot spot, but the city that once looked like it would escape the housing bust unscathed now shows signs of strain. More than 42,000 homes are on the market in the metro, 27% more than last year.”

Although it went largely unnoticed, in January, Forbes.comraised the specter that the Denver-area housing market was in trouble, even though at that time the S&P/Case-Shiller Home Price Index, which had just released its November statistics, ranked Denver as No. 1 of the 20 major housing markets it tracks.

“But real-time asking price data provided to Forbes by Altos Research, a Mountain View, Calif.-based real estate research firm, suggest the Mile-High city is taking a turn for the worse. In July 2009 listings showed a .5% decline from the year before, the first time the city posted a price tag decline since 2008. The slump has since worsened; in January year-over-year asking prices were down 3%, to $368,870.”

Larry McGee, principal of the Berkshire Group, said that today an out-of-state buyer who recently purchased a home in the Denver area, read the most recent Forbes.com article and is now questioning whether she made a mistake.

“It does hurt us when the national press makes statements like this that are false,” McGee said last Thursday, repeating and elaborating on his criticisms today. “I guess I do not trust Forbes anymore.”

Realtor believes Forbes is irresponsible

McGee sent a letter to his agents this morning and did not mince words.

“I am very angered by this latest example of journalistic prevarication,” McGee wrote. “Unfortunately, the media operates like other sharks, and is not generally willing to challenge a fellow shark, so we will probably have to live with this and counter with our own information. ”

 Last week, McGee’s wife,  Kristal Kraft, also a Realtor, Tweeted the author of the Forbes report.  “Your numbers aren’t even close. Very irresponsible reporting. Maybe you should check your source,” Kraft Tweeted the reporter.

Forbes.com stood by its reporting, with this response, also sent through Twitter: ”Checked #s, all correct. Data is for metro areas (a city and its surrounding suburbs). Appreciate the feedback.” Forbes.com has not responded to an e-mail from InsideRealEstateNews.com asking it to defend its information. Efforts to reach the author of the report were unsuccessful.

McGee said he is checking, but does not believe that there are even 42,000 unsold homes in all of Colorado, much less in the Denver area.

Gary Bauer, an independent broker who prepares a monthly report on the state of the Denver-area housing market, agreed.

“Where in the devil is somebody saying we have more than 40,000 unit for sale? I think it would even be a stretch to say we had that much unsold inventory from the Wyoming border to the New Mexico border,” Bauer said. “This article was an unfair swipe. I am not aware of any national report as being this negative to Denver in recent memory.”

Niederman says report ignores facts

 Peter Niederman, chief operating officer of the Kentwood Cos., e-mailed a letter today to the author of the Forbes.comarticle, filled with chief operating officer of the Kentwood Cos., e-mailed a letter today to the author of the Forbes.com article, filled with the most current statistics on the Denver-area market from Metrolist. The statistics, not only show Denver’s market is strong and healthy, but also shows that overall, Denver only has slightly more than a 5-month supply of homes on the market. A year earlier, it had more than a six-month supply, he said.

That is a sign of a market that is in balance between supply and demand, he said. He noted it is a seller’s market for lower-priced homes, while it is a buyer’s market for more expensive homes.

“I actually think we are in a very sweet spot with out single-family home supply,” Niederman said. “If anything, we could use some more inventory. But we don’t have any place near 42,000 unsold homes. We are enjoying a very healthy and stable market.”

Niederman said that perhaps the Forbes article was talking about the ‘shadow market,” of homes being held by banks or soon-to-be sold by banks, which some analysts believe could greatly increase the inventory of unsold homes in the Denver area.

“Reading the article, I did not get the impression she was talking about REOs or foreclosures,” Niederman said. Niederman sent an e-mail to Forbes.com, filled with information about the Denver-are market from Metrolist, which paints a much different and more bullish picture. But he received no response from Forbes.com. 

Shadow market can’t explain numbers

Clark, of the Metro Denver Economic Development Corp., said that he recently spoke to a home builders group, and some bankers and mortgage company officials said that banks may be holding a “significant number of houses” that they haven’t yet placed on the market. They don’t’ want to flood the market with homes and further erode the value of houses in the neighborhoods, as well as the homes they are trying to get off their balance sheets, he said. (For an earlier blog on the Denver-area shadow market, please visit this link.)

While that makes sense, he said he doesn’t think it is likely that banks are holding double or triple the number of homes being listed in the market.

And broker Bauer noted that banks increasingly are working with distressed borrower to keep the homes from going to foreclosure sales. Increasingly, lenders are trying to modify loans to keep borrowers in their homes, or failing that, are agreeing to short sales, where the bank accepts less than the mortgage amount.

“If (Forbes.com) is including all of the foreclosures, existing and pending, in their numbers, maybe would add another 2,000, 3,000 or maybe even 5,000 homes into the market – and that is a pretty big IF,” Bauer said.

Patty Silverstein, principal of Economic Development Research Partners and the economist for the chamber, also thought that the number of unsold homes quoted by Forbes.com seems way too high.

“The Metrolist data could be a little on the light side, and may be under-counting by a bit the number of homes on the market, or that could go on to the market,” Silverstein said. “Even so, I cannot fathom how they came to the 42,000 level.”

Silverstein said that while you never want to sugar-coat the data, it is an unfair black mark against the Denver area, when any part of the economy is made to look worse than it is.

“I think think this whole economic recovery is fragile enough, that consumers are very nervous,” Silverstein said. “When they hear negative reports like this one, it is like we are taking two steps back.”

Clark said that while the Forbes.com article is not good news for the Denver area, it won’t haunt the economy for the long-term.

“We got hit with some bad news from this one, but I guarantee you we will soon see another national report with good news, which will take the spotlight,” Clark said. “The bad news from this one won’t last very long.”

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

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Permits issued for single-family homes, condos and townhomes and apartment units fell by almost 64 percent from the 9,429 issued in 2008, which was the second lowest year for building activity since at least 1980 in the Denver area, according to data from the Home Builder Association of Metro Denver, obtained by InsideRealEstateNews.com.

“The big picture is that this is sort of a necessary evil,” said economist Patty Silverstein, principal of Littleton-based Development Research Partners. “As painful as this is for builders and developers, we have to see a stop in the increase of the supply, in order to see improvements in the market. While I think that this year will continue to  be slow, I think we can see some improvements next year.”

In addition to a lack of demand, banks also have been unwilling or unable to lend, which also has crimped the ability of many small builders, she said.

Whatever the reason for the downturn, one thing is clear – the  collapse in Denver-area construction activity last year was unprecedented.

“Historically, if we look over the last 30 years, we have issued an average of 17,000 permits per year,” Silverstein said. The market peaked in 2000, with 28,310 permits issued.  And to put last year’s activity into perspective, consider that it was a 78 percent drop from the 15,890 permits issued in 1980. Since then, the population of the area has grown by about 70 percent. Overall permit activity in the Denver area has dropped from the previous year every year since 2005. Permit activity is down 88 percent from its 28,310 peak in 2001 and is down 77 percent from 2007, when 14,729 permits were issued.

The biggest hit last year was to the apartment market. Permits were issued for only 438 apartment units last year, a 90 percent drop from the 4,413 in 2008. Jeff Hawks, co-owner of the Denver office of Apartment Realty Advisors, said that rental rates in the Denver area need to rise by 20 percent to 30 percent to justify new construction. Because inflation of rents does not appear to be in cards anytime soon, especially given the poor state of the economy, there is no need to build more market-rate apartment communities in the metro area for four or five years, he argues.

What little appreciation people have seen in their homes recently, in large part is because builders are not increasing the supply, noted Tom Clark, executive vice president of the Metro Denver Economic Development Corp.

On one hand, that is good for individual home owners, “although sometimes we view affordable housing as an economic advantage,” for attracting companies to the area and encouraging companies to stay, he noted. Hawks noted that unlike the mid and late 1980s, when Denver was mired in a recession because of the collapse of oil prices and an economy that was not diversified, “now there is no place to go.” Indeed,  people continue to move to Colorado with the hope that our economy will recover faster than other parts of the country, Clark said.

Still, the construction industry coming to a standstill hits the overall economy hard, Clark said.

“Construction is sometimes a leading indicator and sometimes a lagging indicator, depending on what kind of recovery you are having,” Clark said. “But when you look at the unemployment rate in construction approaching the levels we have not seen (since the Great Depression) of the 1930s, it has a huge impact. A large percentage of the people in the construction industry get paid well and they turn over their money very quickly in the marketplace. It has a huge multiplier associated with it, because the housing market touches so many other parts of our economy.”

In years past, Denver has used huge construction projects to pull itself out of its economic doldrums.

“Historically, we built ourselves out of a crisis. We built DIA, and the Colorado Convention Center,” as well as Coors Field and Invesco Field,” Clark noted. “Unfortunately, when the financial institutions are in meltdown and people have lost 30 percent of their net worth, it is hard to get excited to fund these massive projects.”

One bright spot is the redevelopment of Union Station as part of FasTracks, thanks to the federal government planning to provide a $300 million loan. “The federal government did its part in that instance,” Clark said. “But what we really need from Washington is to point which direction we are going. The federal government has never been very good at execution, but it is usually very good at finger pointing. There is no finger pointing, at least not in the direction they expect us to head. If they did that on health care, for example, companies could pull out their calculators and look at their expected profits and losses. But there is no fingers pointing us in a direction that will get us out of this mess. I blame both Republicans and Democrats. I think Congress should be ashamed of itself.  There is no reaching across the aisle to accomplish what needs to be done.”

As grim as it is, it is far worse in other parts of the country, Clark noted.

“At least we’re not Phoenix, or other markets, where a great number of people have experienced huge losses in their home values,” Clark said.

What ultimately will get the construction industry back on its feet is jobs, especially well-paying ones, he said.

“Construction always follows jobs,” Clark said.

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