Gordon Von Stroh, Jamie Van Leeuwen (Senior Policy Advisor for Gov. John Hickenlooper), and mortgage broker Mike Rosser at the Rocky Mountain Communities's award breakfast at the Cable Center.

As Jamie Van Leeuwen was reading the proclamation from his boss, Gov. John Hickenlooper, declaring Nov. 9 as “Gordon Von Stroh Day,” he stopped, caught his breath, turned to the 250 business leaders and associates gathered to honor – and gently lampoon – Von Stroh, and said: “This is the longest proclamation I’ve ever seen. This is a two-hour proclamation.” But then, when it comes Von Stroh – creator of an apartment statistical data base that is the envy of the nation, a business professor at the University of Denver for the past 45 years, and a fierce advocate for affordable housing – there is a lot to commemorate. Today, Von Stroh was honored by the non-profit Rock Mountain Communities’ at its inaugural awards breakfast, established to “celebrate an individual who has demonstrated outstanding commitment, passion, and wisdom in support of affordable housing.” Although Von Stroh’s passions are many – in addition to teaching he has long volunteered and been a guiding force at the Central City Opera House Association and helped create the Cherokee Ranch and Castle Foundation – many of the people attending the awards breakfast at the Cable Center on the DU campus know him best for the comprehensive apartment survey he has researched and compiled since 1981.

Von Stroh’s reports carry a lot of weight

“Arguably, millions of dollars of capital has come to the Denver area because of Gordon’s studies,” said Mike Zoellner, President and CEO of RedPeak Properties, one of Denver’s largest apartment development and ownership companies. “Denver was not known as a place for institutional money even 10 years ago, but Gordon’s reports have given institutional investors the confidence to invest here,” Zoellner added. The flip-side is that Von Stroh’s reports also have helped Denver from becoming horribly over-built as many other areas, as his reports details such things as average and median rents, vacancies by age, geography and product type, so they track in real-time when supply and demand appear to be out of balance. Also, because Von Stroh’s report is from an academic institution, it has more credibility than other reports, Zoellner said. Eric Tupler, a vice chairman of CBRE Capital Markets, who has placed more than $6 billion in commercial real estate financing, agreed.

“When you compare what Gordon produces, you just don’t find that kind of depth and detail in other cities,” Tupler said. That is exactly right, agreed Doug Andrews, a principal of the Denver office of Apartment Realty Advisors, one of the main sponsors of the event. “What his report provides is not only current market conditions, but historic data,” Andrews said.“There are not many places where you can go back 30 years with the type of comprehensive data that his reports provide.”

Drawing the line at mooning

DU Provost Gregg Kvistad said that Von Stroh’s guiding principle is summed up in four words: “How can I help?” His help was widely sought, he said, which he noted led to countless meetings, and working breakfasts, lunches, dinners, “and did I mention meetings?” But Von Stroh never complained. And his work often remained in the background, as he didn’t seek the spotlight. Few know, for example, that one of his research projects provided the basis for the Scientific and Cultural Facilities District, which provides millions of dollars in funding for a wide variety of non-profits.

One of the few times Kvistad ever saw Von Stroh lose his cool was when an undergraduate at DU decided to drop his trousers and moon all of the students, parents, faculty and friends gathered for a graduation. When Von Stroh went to eject the student from the building, he pleaded his case by saying that his grandmother was in the audience. “You mooned your grandmothers?” responded an incredulous Von Stroh. That vignette provided a seamless segue to the roast part of the event, for Von Stroh, known for his self-deprecating humor. Jeff Hawks, a principal of Apartment Realty Advisors, took the stage wearing a Von Stroh mask, and answered “questions” from people in the audience.

Gordon Von Stroh, aka Jeff Hawks, fields questions from the audience during the roast portion of today's even honoring the long-time DU professor.

Many of them dealt with Von Stroh’s age (he’s 69) and his tightness with a dollar. One question, for example, involved the median rental price of the Cliffs at Mesa Verde. The answer was five bushels of maze and we learned that the Anasazi revered him as an elder statesman.

Several people asked, given their decades of friendship with him, could they get a discount to the Central City Opera. “No,” was always the answer.

And we were told he married a minister not so much to learn to be a better Christian, but because he would not be required to put any money in the collection basket during Sunday services.

One person asked how his statistics showing that the average rent could be trusted, when he put it at $925.50 per month, and it clearly was $925.70. Von Stroh’s research made it clear that 47.856 percent of statistics are irrelevant anyway.

On a more serious note, Von Stroh was diagnosed with ALS, better-known as Lou Gehrig’s disease last May. Part of the donations from the Rocky Mountain Communities’s event are going to ALS research. Although there is no cure for the disease, Von Stroh noted that “miracles do happen. This is not my last rodeo.” Those gathered responded the only way the could. They gave him a standing ovation.

Contact John Rebchook at JRCHOOK@gmail.com

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An aerial view of the Mile High Greyhound Park in Commerce City

The 65-acre Mile High Greyhound Park in Commerce City, which is being redeveloped and reinvented, will be the site of the next Rocky Mountain Real Estate Challenge, in which 50 students from the University of Colorado and the University of Denver compete against each other for their respective visions to maximize the development of it.

During the past decade, the challenge, sponsored by NAIOP, the Commercial Real Estate Development Association,  has created visionary development ideas for high-profile sites such as the Denver Coliseum, Solterra and most recently 9 Mile Station.

The Mile High Greyhound Park will be the challenges 10th anniversary project.

The challenge  requires students to evaluate and make recommendations for the Greyhound Park’s redevelopment as they compete against one another for scholarships, future employment, and the NAIOP Cup.

Student teams begin a four-month period in December of working with industry professionals and the Urban Renewal Authority  to analyze every aspect of the site. The challenge culminates with a banquet event on May 2, 2012, where students will present their findings to the URA and an audience of over 600 people. Tickets for the event, which will be held at the Hyatt Convention Center, will go on sale in March.

“The redevelopment of the Mile High Greyhound Park provides students with a unique 65-acre infill project full of real-world challenges,” said Richard Morgan, Chairman of the NAIOP organizing committee. “From land-use and transportation, community engagement and financial considerations, we couldn’t have picked a better project to celebrate a decade of the Rocky Mountain Real Estate Challenge. We look forward to working with Commerce City to see this important parcel redeveloped in a timely manner.”

The Mile High Greyhound Park was built in 1946 as a greyhound race track and club, with its inaugural race in 1949. In 1980, the facility underwent significant renovations and dog racing came to a halt in 2008. Purchased by the Urban Renewal Authority in August, the property is located in historic Commerce City and is bound by 64th Avenue to the north, 62nd Avenue to the south, Holly Street to the east and Dahlia Street to the west.

Investing in Commerce City’s future

“One of the city’s goals is to invest in our own future,” said URA Executive Director Jerry Flannery. “The purchase of the dog track was a pivotal moment for Commerce City and one that will define our community for years to come. It’s exciting to know the URA is going to benefit from the wealth of ideas and knowledge generated during the Rocky Mountain Real Estate Challenge – a premier event for the region.”

The property, one of three identified urban renewal areas within the city, was purchased by the URA to help the city achieve its vision of redeveloping the site as a mixed-use development. Its close proximity to major highways and two commuter rail lines, as well as designation as a Colorado Enterprise Zone – which encourages development by offering possible tax credits to businesses that choose to develop there – make it an ideal location for infill development.

A series of community meetings are underway as part of the URA-led planning process. Through these forums, which will last through November, the authority aims to identify community, nonprofit and business goals, needs and challenges for the redevelopment site.  A comprehensive sub-area plan, completed in tandem with the Rocky Mountain Real Estate Challenge, is scheduled to be finalized next summer. Specific meeting details as well as ways to provide input can be found at this link.

Contact John Rebchook at JRCHOOK@gmail.com

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The project, being developed by Urban West Group will include 25,000 square feet of retail space and 100 parking spaces. The project is set to open in early 2013.

There is a growing demand for retail space and parking in the area, said Dave Elowe, of the Urban West Group., a Denver-based developer of multi-family and retail space.

Retail is a prime component of the Shops and Apartment at Observatory Park being built across from DU.

“With construction underway, we’re beginning to see a great deal of interest in the retail space from both local and national restaurants, shops, stores and boutiques who want to explore the opportunity of being located near the University of Denver in a neighborhood with an upper-middle class demographic,” Elowe said.

“Much of the demand for tenant space is coming from restaurants, both national chains and locals. However, we are getting good demand from some other non-food users. We have 25,000 SF of retail space that can be combined or subdivided into almost any configuration.

“We spent a great deal of time listening to and working with the community and the university, and we’re confident that the Shops and Apartments at Observatory Park will be delivering exactly what they asked for.”

He said they are in the early stages of marketing the retail space.

The Class-A apartment community will feature many of the same amenities found in some of Denver’s luxury  condo projects, including a pool and spa, outdoor fire pits, barbecue and lounge areas, a fitness center and quality interior finishes including 10 foot ceilings, in-unit washers and dryers, granite countertops, wood floors, ceramic tile, stainless appliances and balconies.  It is the first market rate apartment building being built within a two-mile radius of the University of Denver campus in approximately 30 years.”

Contact John Rebchook at JRCHOOK@gmail.com

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The CU grad students, calling themselves Flatirons Development Group, won the Rocky Mountain Real Estate Challenge with this plan for the Denver Coliseum site.

University of Colorado graduate students, who envisioned a $62.9 million redevelopment of the Denver Coliseum site, won the 8th annual Rocky Mountain Real Estate Challenge.

Students from CU and the University of Denver presented their plans to about 600 real estate leaders at the Marriott City Center on Wednesday night. The judges did not select a winner until after the presentations. CU broke DU’s winning streak of of four consecutive challenges, from 2006 to 2009.

“That’s great, absolutely great,” Byron Koste, the outgoing director of the CU Real Center said, when InsideRealEstateNews told him of CU’s victory. It was the first challenge that Koste missed. “The kids deserve all the credit,” Koste said. “They worked extremely hard on their proposal.”

The plans presented by both teams were well-received. Several people said that they are glad they are not competing against these students for jobs, because they are so sharp, well-educated and poised.

Students win Hick’s praise

“I am so impressed by these kids,” said Denver Mayor John Hickenlooper. “I remember a time, in reckless abandon, I fancied myself a developer. But I’m not fit to carry their tool-belts.”

The City of Denver and RTD, joined NAIOP this year as the sponsor of the program. And more than most challenges, in which a students compete for the best plan for redevelopment, this one could bear fruit, possibly with a bond issue, in the near-future.

“They had some super-ideas,” Hickenlooper said. “I think we are going to see some of them in place, sooner rather than later.”

Hickenlooper said he can only think one one thing to improve the competition.

“Next year, you have to include CSU,” the mayor said, noting that he sat next Joe Blake, Colorado State University’s chancellor, during the event.

CU: Coliseum can be creative center for region

The CU team called themselves the Flatirons Development Group. Under their plan, they would convert the city-owned Coliseum site in the River North Art (RiNo) District into the Denver Center for Creating Arts, or the DCCA.

“The DCCA will provide a home to the creative engines that help spur economic growth and social activity,” the students said in their presentation. “In doing so, the DCCA reinvigorate the northern gateway to downtown Denver and builds a realistic platform for urban renewal in the surrounding neighborhoods.

At the heart of the public-private plan, is the Coliseum building would be retrofitted into three new uses: a “black box” performance space; a 30,000-square-foot multi-purpose hall; and what they call the Collabratorium.

“The Collabratorium, with 76,000 square feet of space, is “not a place for passive observation, but a place to become immersed in the creative process through hands-on exhibits, workshops, lectures, and classes,” according to the CU team. They compared it to the Exploratorium in San Francisco, which focuses on science; the Experience Music Project in Seattle, the history Newseum center in Washington, D.C.

The students also called for turning the northwest corner of the site into a second anchor – the Art Institute of Colorado.

The AIC currently serves 2,500 students in three facilities, with its students housing near Lowry. The Denver Center for Creating Art would consolidate into one high-profile site at the DCCA While the AIC is not actively looking to relocate and consolidate, it’s not a pie-in-the-sky idea, either. AIC is bursting at the seams in all of its buildings and is always evaluating ways to position itself for growth, the students noted. They discussed the idea with AIC real estate executives and incorporated AIC’s “wish list” items into their proposal. The AIC Center would include 150,000 square feet of classroom space, 20,000 square feet of culinary space and 130 residential units. The plan calls for four new buildings with a total of 375,000=square feet. They’ve even named the buildings, based on their use: The Painter, Musician, Sculptor and Chef.

Under the student’s scenario, the City and County of Denver would retain ownership of the Coliseum and its land for the DCCA. Given that the land would saddle a private developer with environmental issues, the city would grant a 99-year land lease for $1 a year on all parcels that can be developed.

Their plan calls for site work starting in 2015 with a phased development to be completed in 2017. They note that if the city issued $24 million in general obligation bonds, that would be near the lower-end of most bond elections, which have generally been approved by voters. They project that overall, investors could expect just under a 20 percent return.

The plan also calls for spiffing up the nearby Globeville Land park with a sculpture garden, art walk, and children’s playground.

“The DCCA becomes the creative center for the region – a place brimming with discovery, innovation and collaboration,” the students said during their presentation. “The DCCA becomes the node for creative activity that Denver lacks.”

DU’s plan has merit

The judges also liked DU’s $94 million plan. The DU students created a team called Catalyst Development that called for expanding the Coliseum, adding a conference center, and an 800-parking structure. The center of their plan would be called the Frontier Center, a phased campus of office, flex-tech and lab space. Under their plan, the site would be anchored “Agri-Tech” businesses that would be a hub and incubator for agriculture, bio-science, veterinary and renewable energy companies.

Just as the Academy Awards won’t reveal how close Avatar came to Hurt Locker for Best Picture,  those running the Real Estate Rocky Mountain Real Estate Challenge are keeping mum on the scores of the respective teams.

“We asked and they wouldn’t tell us,” said Bruce O’Donnell, one of the judges. “But I think it was very close.”

The Art Institute of Colorado would be a second anchor for the proposed Denver Center for Creating Art campus on the site of the Denver Coliseum, under the vision shaped by CU graduate students.

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It also is taking longer to find tenants for homes. The number of days on the market for single-family rentals and similar properties increased from 45 days during the fourth quarter of 2008 to 53 days during the fourth quarter of 2009. Detached single-family rentals in particular faced a two-year high of 62 days.

Federal tax credits turning renters into buyers

“There is no one economic factor behind the increase, but some of the people that had been in single-family have purchased homes to take advantage of the tax credit,” said Gordon Von Stroh, Professor of business at the University of Denver, and the report’s author. “But the unemployment rate remains above last year’s rates, and that will tend to keep vacancies up.”

The tax incentives to buyers “is the other element,” causing fewer people to buy homes, but it not as great of force as it was last fall. The big rush is over,” said Robert Alldredge, principal of Jericho Properties. “Last year, when they thought the credits would expire in November, we saw a big rush of people leaving rental homes to buy houses,” he said. “And those were our most-qualified renters. They were sort of the cream of the crop. But we have not seen as much of that this year. It’s just too hard to qualify for a loan. I think a lot of the renters who were qualified to buy, already have taken advantage of the program.”

The  $8,000 tax credit for first-time home buyers, which requires a home to be under contract by April 30, and closed by the end of June, is not attracting buyers to condos and townhomes, for the most part, he said. There also is a $6,500 tax credit available for qualified homeowners, some of whom may want to sell their home and buy a smaller one, as well as move up.

“The tax credit incentive is driving more toward single-family homes and less than condos and townhomes,” Alldredge said. “People want house and if the government going to give you a hand out, some people will take it, if they can qualify for a loan.’

Susan Melton, the broker/owner of Assured Management in Lakewood, agreed with Alldredge.

“A majority of the good tenants who are taking advantage of the tax credit, want to move into a single-family home, and not a condo or a townhome,” she said. “It had a big impact on us at the end of last year, but we have not seen very much activity so far this year. I think the majority of people who qualified for the program have already taken advantage of it.”

Single-family homes rule as rentals

Single-family detached homes also are more attractive to renters, Von Stroh said.

“The overall vacancy rate has run up to 5.5 percent,” Von Stroh said. “But when you start looking specifically at the data, single-family home rental vacancy rates are about the same,” Von Stroh said. “A year ago, single-family home vacancies were at 4.5 percent and now they are at 4.7 percent. But condo rentals were at 4.5 percent and are now at 6.1 percent. And duplexes were at 4.4 percent, and are now at 7.7 percent.”

Melton  said one reason for that is because if a family loses its homes in foreclosure, it wants to remain in a rental house, and not a condo or a townhome. ”If you look at the units with five bedrooms or more, there is a zero vacancy rate,” Melton noted. “One-bedroom units have the highest vacancy rates.”

The metro-wide jump in vacancies in single-family rentals and similar properties was driven by increasing vacancies in Denver County and Arapahoe County where vacancy rates were at 6.8 percent and 5.7 percent respectively. Vacancy rates fell in Adams County and Douglas County. Rates were flat in Jefferson County and in the Boulder/Broomfield area.

Vacancy rates for all counties surveyed were: Adams, 4.1 percent; Arapahoe, 5.7 percent; Boulder/Broomfield, 3.8 percent; Denver, 6.8 percent; Douglas, 3.0 percent; and Jefferson, 4.7 percent.

Rents still rising

In spite of rising vacancy rates, average rents continued to climb.

The average rent for single-family and similar properties rose to $1016.77 during 2009’s fourth quarter, rising from 2008’s fourth quarter rate of $995.24. 2009’s fourth quarter’s average rent is the highest average rent yet recorded for the fourth quarter.

“The fact that average rents continue to rise shows that renter demand for these properties remains relatively high in spite of a soft overall rental market and poor job growth,” said Ryan McMaken, a spokesperson for the Colorado Division of housing. “Owners can afford to raise rents a little since many people still prefer the roominess of a single-family home to an apartment, but today, fewer people view buying a single-family home as the fail-safe purchase that they once did.”

Average rents for all counties were: Adams, $1024.79; Arapahoe, $995.23; Boulder/Broomfield, $1631.30; Denver, $952.27; Douglas, $1372.91; and Jefferson, $974.90.

It’s the mix

But Melton isn’t seeing rental rates rising.

“If you look over the last 10 years, the overall rental rates have not increased that much,” she said. “Part of the reason rates are up has to do with newer, bigger units entering the rental market from people who either can’t sell their houses or want to wait until they can get a better price. These homes are not only bigger, but have less wear and tear than a home that has been in the rental pool for the past 20 years, so they get a higher price. But overall, I would say rents are flat.”

The Colorado Statewide Vacancy and Rent Study is released each quarter by the Colorado Division of Housing. The report is available online at the this link.

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

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Video Link: FHA Commissioner David Stevens Hopeful on Housing Recovery

David Stevens, Commissioner of the  Federal Housing Administration and Assistant Secretary for HUD, told about 200 lenders and other housing officials in Denver that the current  real estate environment is very similar to what it was like in 1934,  when the FHA was born to help Americans get home loans during the Great Depression.

Stevens, a University of Colorado graduate, who is considered the first FHA commissioner with real-life mortgage lending experience, noted that “private capital has evaporated today,” just like it did during the Great Depression.

“It’s A Wonderful Life” is not so wonderful,” Stevens said, alluding to the 1946 Jimmy Stewart movie about a local mortgage lender, whose community depended on him for their home loans.

“You may not like everything I do,” he told the crowd at one point during the Town Hall-style meeting, largely underwritten by American Southwest Mortgage Corp. The meeting also included industry panels, where a number of people called for loosening tight underwriting limits, saying that things such as stated-income loans are not inherently evil, and must be returned to the market to allow qualified, higher-income people to get loans for homes.

Hard data key

But Stevens assured the group that everything he does is not based on whimsy, but is the product of the analysis of thousands of  points of data. He noted he has hired five Phd’s to analyze economic and housing data and run computer-simulation models on various scenarios. He said steps he is taking, as well as those by the Obama Administration, are helping to get the housing market back on track.

For example, he announced last month that new borrowers would need a minimum FICO score of 580 to qualify for FHA’s 3.5 percent down payment program. Those with lower scores need to pony up  at least 10 percent. But before settling on 580, he ran the impact of raising it to 620, but he said that would have knocked too many people out of the market. And he said some industry executives wanted him to raise the down payment to 5 percent or even 10 percent, but he rejected those changes as too severe.

Core FHA market not the rich

“But the purpose of FHA is not so some business executive can buy a $729,000 home in Vail with only 3 percent down,” he said. “Our primary job is to help the under-served buyer in Atlanta, Georgia, or Detroit, Michigan, or New Orleans, Louisiana,” and other communities nationwide.

During this crisis, he said, the government has become too big of a player in the mortgage markets, which has been necessary until the private market returns. Indeed, he received his biggest applause when he said that not everyone should be a homeowner.

“It is a sick system,” Stevens said. “There is no private-market demand. It’s all being picked up by the government…There is no demand for mortgage money on the private side.  Private capital is opportunistic -it goes where it can make money.” He predicted that will change. He said several initiatives by the Obama administration to make the housing market healthy and vibrant again, are showing signs of momentum.

Stevens also announced last month that the FHA is raising  the mortgage insurance premium to 2.25 percent from 1.75 percent, to shore up FHA’s reserves, but first considered other alternatives, but decided that 50 basis point was enough to boost FHA’s reserves. Some feared that would knock too many people out of the market, while others thought it should be raised more. But he said the agency’s comprehensive analysis assured them that was the optimal number and it will assure that FHA will meets its statutory required reserve numbers.

Shadow inventory may be myth

What may surprise some observers, is that following his keynote presentation, he said the data does not support the widely held notion that there is a huge “shadow inventory” of homes of foreclosed home being held by banks that it has not yet been put on the market. “We have heard that, too, but we have found no evidence that it the case,” after reviewing data from the FHA and Freddie Mac and Fannie Mae loan portfolios.

Instead, he said there is more demand for REOs (real estate owned) properties held by banks than the supply of foreclosed homes is growing. Indeed, he said one concern in some markets is that owner-occupants are being crowded out of the market by investors armed with letters of credits. He said he would rather encourage owner-occupant buyers than investors looking to flip properties.

He did say that there are concerns that homeowners who are delinquent on their mortgage payments may become part of the “shadow inventory” of foreclosed homes yet to hit the market. And in some areas, especially Florida, where it can take a year or more to work is way through the foreclousre process, there may be many more foreclosed homes ready to hit the market.

Mortgage brokers not “whipping boys”

During his talk, one audience member asked Stevens if mortgage brokers have become the “whipping boy,” for the nation’s housing crisis.

Stevens assured him that the head of every imaginable real estate organization, including banks, mortgage bankers, appraisers, Realtors, new home builders and appraisers, all have complained to him that they are the “whipping boys” that have been unfairly singled out.

But he said that following the years of things such as no-doc loans, improper underwriting, and other things that led to the housing bubble’s collapse, “you guys are perceived to be the centerpiece of the collapse.” Not that there isn’t plenty of blame to go around. He said he recently met with a group of Chinese bankers, and “they don’t know if they can trust us. They have no faith in us. And guess who they blame? They blame all of us.”

Steven has been heralded of having more real-life experience in the mortgage industry than any other FHA Commissioner, said he and the Obama Administration are making headway in dealing with a wide variety of problems, from record foreclosures to issues of trust. For example, he said there more than a million people nationally, who are in the process of receiving permanent loan modifications. So far, in Colorado, fewer than 2,000 people have received permanent loan modifications. (Please go to this link for a separate blog on permanent loan modifications.)

Stevens bought first home in Denver with a FHA loan

Stevens, who bought his first home in Denver almost 25 years ago with a FHA-insured loan, said he would not have been able to do so at the time, despite having a good job and great credit history, without the FHA, because it only required a 3 percent down payment, and he did not have the money for a larger down payment.

Today, he is re-making the industry and is taking heat from all sides. Before being named FHA Commissioner,  he was  president and COO of the Long & Foster Companies, which includes Long & Foster Real Estate and its affiliated businesses, including mortgage, title, insurance and home service connections. “If you don’t know Long & Foster, it is a monstrous-sized company,” DU’s Levine said.

When Stevens was first approached by the Obama administration, he assumed they wanted to pick his brain about what he saw with as the shortcomings in the system. He noted that he has always been a Democrat in a largely Republican industry, but wasn’t happy with what was happening on the housing front.

“It was like there were no grown-ups in the room,” during the days of easy credit, he said. “People were buying homes with no skin the game with Option ARMS and slapping on a HELOC (lined of credit) on it. People were betting on homes as an investment, vs a place for shelter.”

Stevens background is vast

Stevens’ background also includes serving as Executive Vice President, National Wholesale Manager at Wells Fargo Home Mortgage’s wholesale channel; Vice President of single family business at Freddie Mac; and, a 16-year tenure at the World Savings Bank, where he began his career. He is also the founding executive sponsor of the Women’s’ Mortgage Industry Network and while at Freddie Mac, he coordinated the first Latino joint venture initiative with Freddie Mac and Latino mortgage industry leaders.

Veteran mortgage official Michael Rosser said that Stevens hit all the right notes during his wide-ranging speech.

“He was right on the money,” said Rosser, who served on a state foreclosure task force and is managing director of Aurora-based  Mortgage Investment Co.

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

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The  U.S. Department of the Treasury and the  Department of Housing and Urban Development  today released January data for the Obama Administration’s Home Affordable Modification Program (HAMP), which showed that a total of 1,797 homeowners in Colorado so far have received permanent loan modifications. Colorado ranked No. 20 in the nation for the number of permanent loan modifications, which the government hopes will keep homeowners out of foreclosure.

Huge percentage jump

The January figures marks almost  a 68 percent jump from the 1,072 permanent loan modifications that had been made in Colorado by  the end of December.On a national basis, 116,297 permanent loan modifications have made made, nearly doubling the December tally, according to the government. In total, almost 1.3 million offers have been made for trial plan offers, which are required before the loans can be made permanent. In Colorado, there have been 11,708 trial modifications.

Earlier, when I blogged that there had been 1,072 loan made through December, Shannon Peer, the director of counseling at the non-profit Brothers Redevelopment in Edgewater, predicted that the numbers would grow quickly, as servicers and lenders geared up to better handle the large number of homeowners with distressed properties that are seeking help. Servicers typically collect the monthly interest and principal payments on mortgages, but in most cases are not the investors in the mortgage securities.

The exponential increase in people being helped likely will continue, he said.

Counselor saw it coming

“This is what I anticipated happening,” Peer said. “The numbers should continue to grow. It will help. The numbers are moving in the right direction.”

He said he recently met with Bank of America officials, and they are “putting in place steps,” to have servicers send documents using computers, rather than faxes, which should largely mitigate the lost documents that so often delay the process. A frequent complaint of homeowners is that loan packaged and documents they send to their lenders are lost, delaying and sometimes scuttling, any hope of locking in a low mortgage rate and longer amortization terms that would allow them to keep their homes.

But the numbers are still too low in Colorado to make a real dent in the foreclosure crisis, said Byron Koste, director of the Colorado Real Estate Center at the University of Colorado Boulder.

Numbers still too low

“It’s easy to have high percentage increases when you start with low numbers,” Koste said. “You have to be careful not to mislead people. I am glad that the number of people being helped is going up, but it is still not nearly enough.”

Koste noted that Kiernan Conway, of the Federal Reserve Board in Atlanta, who will be the keynote speaker at a Colorado Real Estate Center-sponsored conference in downtown on March 2, noted that at least 10 percent of the troubled loans must be modified to make a difference. In a recent speech, Conway pointed out that despite loan modifications, the number of foreclosures continue to rise.

Koste said probably around 1 percent of the troubled loans in Colorado and across the nation have been modified.

“Nationally, if instead of 100,000 we had 700,000, it would start to do some real good,” Koste said. “But what we really need is 20 percent or 30 percent of the loans being modified. If we could do 20 percent a year, we could work our way out in five years. But that’s not going to happen. Loan modifications are not the answer.”

Banks lack incentives

For one thing, banks have disincentives, but few incentives, to modify loans. Koste noted that in 1933 Congress adopted the Home Owners’ Loan Act, which awarded $770 million to the thrift industry to help deal with borrowers who could not repay their loans. He said that worked much better than many people anticipated. It wasn’t until the de-regulation of the thrift regulation in the 1980s, which led to irresponsible lending by savings and loans, that led to demise of much of the once mighty S&L industry. Colorado was one of the hardest states hit by the S&L debacle, as it included the former Silverado Savings and Loan, which ended up costing taxpayers more than $1 billion.

“I don’t know if something like that is the answer, but I do know that we can’t just keep putting Band-Aides on the problem – it’s too deep for that,” Koste said.

He said that creating more high-paying jobs will help a great deal, but he said higher interest rates also are needed.

“I know it is heresy to say that,” Koste said. “You and I like low interest rates. But that is not the solution.” Indeed, unrealistically low mortgage rates were  a large part of the problem that created the housing bubble that created the first nationwide housing collapse in the U.S. since the Great Depression, he said.

Risk-reward ratio out of whack

“Basically, we had unreasonably low interest rates, where people were being promised unreasonably high returns, based on what we thought was the underlying value of the asset,” Koste said. “That is just not sustainable.”

But he said the cost of the money has to correlate with the expected return.

“We made it very easy for everyone to get a loan to buy a house, which we thought just would keep appreciating,” Koste said. “But what we teach here and what we know to be true, is that the cost of the money needs to reflect the cost of the expected return. If you want basically zero-percent money, go live in Japan. They’ve had money at basically zero now,” and has one of the worst economies, as measured by investment returns, in the world.

Levine: More questions than answers

Mark Lee Levine, director of the Burns School of Real Estate and Construction Management, Daniels College of Business, University of Denver, said there are many unanswered questions.

“It’s not enough to just know the statistics as far as the number of workouts, but what do they mean by loan modifcations? Are they reducing the principal in addition to the interest rate? Are they demanding more collateral? The number of years of amortization? What is the size of the loans being modified?”

Also, Levine said that he hopes banks are doing their due diligence to make sure the homeowners receiving modifications will not lose their homes even after they get better terms

“In broad terms, people tend to face foreclosure either because they have lost their jobs and do no longer have the required income, or some outside event, such as a large medical expense occurred,” Levine said. “If a person doesn’t have a job that pays enough to cover even the lower mortgage, why bother spend all the time and effort modifying it, if the home is likely to go into foreclosure anyway. But there may be some people whose spouse still works or their job prospect brightens, or they no longer have the expense of a one-time occurrence, who can be helped.”

In any case, something needs to be done, both for homeowners and on the commercial real estate side, he said. “I just came back from a think tank discussion on that topic,” Levine said. “If something isn’t available, a lot of commercial real estate owners are just going to mail their keys back to the lenders and say, “Now it’s your problem.” The same is true for homeowners.”

Still, overall, the government is pleased with the growth of HAMP.

“With nearly one million homeowners paying less each month and the number of permanent modifications steadily rising, HAMP is doing the job it was designed to do,” said Phyllis Caldwell, Chief of Treasury’s Homeownership Preservation Office, said in a statement.”Struggling families are receiving payment relief and the housing market is showing signs of stabilization.”

Mortgage modifications are one piece of the Obama Administration’s broader housing market stabilization plan. Other efforts include support for lower mortgage rates and access to credit, state and local housing agency initiatives, tax credits for homebuyers, neighborhood stabilization and community development programs, and support for mortgage refinancing. One year since President Obama announced the Homeownership Affordability and Stability Plan, more than 4 million homeowners have refinanced their mortgages to more affordable levels, interest rates are at record lows, home prices and home sales are rising again and the economy is growing, the government said.

Obama Administration remains hopeful

“As the number of permanent modifications grows, HUD will continue to work with our Administration partners and utilize our broad network of housing counseling agencies to increase those numbers still further,  said William Apgar, HUD’s senior advisor for mortgage finance.

HAMP is the most ambitious government program of its kind – reaching far more homeowners than any previous program has ever attempted. Less than a year after its launch, the program is providing significant relief to struggling families, according to the govenment.More than 940,000 homeowners currently have reduced monthly mortgage payments with a median savings of more than $500. That is an aggregate savings of more than $2.2 billion.

With nearly 1.3 million trial modifications offered already, the program is on pace to meet its overall program goal of providing 3 to 4million homeowners the opportunity to stay in their homes, according to government projections.

John Rebchook can be reached at JRCHOOK@gmail.com or 303-945-6865.

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Among large metropolitan areas, Fort Collins and Loveland reported the lowest vacancy rates at 6.3 percent and 6.6 percent, respectively.  All other metro areas measured in the survey reported vacancy rates above 7 percent. In Pueblo, rates rose from 7.2 percent to 12.2 percent year over year, while they rose from 3.1 percent to 13.2 percent in Grand Junction during the same period.

Third quarter vacancies in the metro Denver area, measured in a separate survey last month, were at 7.7 percent.

Vacancy rates in all metropolitan areas were Colorado Springs, 8.7 percent; Ft. Collins/Loveland, 6.3 percent; Grand Junction, 13.2 percent; Greeley, 7.4 percent; Pueblo, 12.2 percent.

Economies differ

“Grand Junction is certainly the area that really attracts attention in this report, and it highlights just how diverse the local economies in Colorado are,” said Gordon Von Stroh, professor of business at the University of Denver, and the report’s author. “In Grand Junction, vacancies have basically tripled, but they’re down in Colorado Springs, and they’re up by about 70 percent in Pueblo. Employment and housing supply are really making a difference in different regions of the state right now.”

In general, a vacancy rate of 5 percent is considered to be the “equilibrium rate.”

Rents mixed

Average rent levels were also mixed across the state. As expected, average rents fell in Grand Junction in response to rising vacancies year over year, but remained flat in Colorado Springs in spite of falling vacancies. The biggest increase was seen in the Ft. Collins/Loveland region where average rents increased by over 40 dollars from the fourth quarter of 2008 to the fourth quarter of 2009.

Average rents in the Ft. Collins/Loveland area rose year over year from $809.81 to $854.10, and fell from $666.22 to $633.46 in Grand Junction during the same period. In spite of a rising vacancy rate, average rents rose in Pueblo from $518.26 to $541.44 year-over-year.

Average rents in all metropolitan areas measured were Colorado Springs, $711.66, Ft. Collins/Loveland, $854.10; Grand Junction, $633.46; Greeley, $636.86; Pueblo, $541.44.

The Vacancy and Rent Surveys are a service provided by the Colorado Division of Housing to renters and the multi-family housing industry on a quarterly basis. The Colorado Vacancy and Rent Survey reports averages and, as a result, there are often differences in rental and vacancy rates by size, location, age of building, and apartment type. The report is available online at this link.

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.

Builder constructs novel

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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