Denver mortgage and housing activity will keep cooling through at least 2008 as Colorado’s softening real estate market continues to slow, according to various reports.
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In the Denver housing market, the slowly widening gap between home sellers’ asking prices and what homes actually sell for, coupled with an overall decline in home prices, means some sellers aren’t getting the return they want - or need - to get out of debt.
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Colorado mortgage foreclosures continued to batter the Front Range housing market in the first quarter, dashing hopes that stronger job growth would hold back rising delinquencies, according to the Denver Post.
It’s a buyer’s market in Aurora as foreclosures in 2007 are outpacing the number of residents who lost their homes in 2006, local Colorado real estate experts say.
Home buyers looking for a hard and fast definition of affordable housing in the Denver housing market - or anywhere else - won’t find one. Read the rest of this entry »
For Colorado mortgage holders facing the threat of home foreclosure, there is a place to call for help and hope.
Home prices fell nearly 2 percent last month in Colorado Springs housing market and the Pikes Peak region, the first decline in a little more than three years.
Sales also were down sharply last month. Supplies of homes on the market, meanwhile, were way up.
“That’s why we’re lagging downward,” Benjamin Day, manager of ERA Shields Real Estate’s northern Colorado Springs office, said of prices. “There’s just too many options out there.”
Industry experts were unsure whether the price drop is the start of a trend or a onemonth blip.
The median Colorado home price of residences sold in March fell to $208,000, a 1.9 percent drop from $212,000 in the same month last year, according to figures released Thursday by the Pikes Peak Association of Realtors.
It was the first year-overyear decline since median prices dipped 0.2 percent in January 2004.
Last month, the supply of homes for sale swelled to nearly 5,700, a 26.1 percent increase over March 2006 and the first time March listings have topped 5,000, according to Realtors Association figures that go back to late 1995. March home sales fell to less than 900 from the same time last year, a 14.1 percent decline.
Falling prices and sales and rising inventories aren’t the only bad news for the area’s housing industry; new-home construction during the first quarter of 2007 is down nearly 45 percent compared with the same time last year, as developers awaiting demand for mortgage loans to return.
But a one-month drop in prices doesn’t indicate a downward spiral, some real estate experts and one local economist said.
“I’d be very leery of drawing a dramatic conclusion on month-to-month changes in median prices,” said Springs economist Dave Bamberger. “I’d wait several months to get a better fix on what the trend is.”
Some home sales completed in March reflect contracts and prices that were negotiated a few months ago, when weather was bad and sales were particularly slow, said Kevin Patterson of the Patterson Group, a Springs real estate firm.
“I don’t think the sky is falling,” he said. “I think the year started slowly and with the 30-to 60-day cycle between contract writing and closing, we’re still seeing the effects of January and February.”
The market’s strengths and weaknesses vary neighborhood to neighborhood, said Day of ERA Shields Real Estate.
For instance, the Tri-Lakes communities of Monument, Palmer Lake and Woodmoor — where many people live in large homes in scenic areas and drive to jobs in the Springs — are among the hardest-hit.
In March, Tri-Lakes homes typically sold for slightly less than sellers’ asking prices, Day said. So far this year, homes listed for sale in the area have spent an average 110.7 days on the market, he said. Colorado mortgage activity is expected to pick up as the weather warms.
Based on the pace of sales up to this point, and with the number of homes for sale in the area, Day estimated that there’s a whopping 10.6-month supply of homes for sale in the Tri-Lakes area.
But Briargate, the sprawling suburban subdivision on the Springs’ north side, is in better
shape.
Briargate homes sold in March for slightly more than sellers’ asking prices, Day said. So far this year, Briargate homes have sat on the market an average 90 days. And while it will take 10.6 months to exhaust the Tri-Lakes’ supply of homes, Briargate’s supply is a little less than six months’ worth.
“Where a person lives matters,” Day said. “The dirt that your house occupies is really critical.”
Home prices might remain flat for several months before rising later in the year, when sales activity typically picks up, Day said.
“I’m not optimistic we’ll be seeing that before June, and we may not see it through much of the year,” Day said of price hikes. “There’s just so much to sell through.”
Still, plenty of people are looking to buy, and fixed-rate mortgages in the neighborhood of 6 percent remain affordable for many people, Patterson said.
But with many homes for sale, buyers are taking time to make sure they don’t miss a good deal, Patterson said. In the past, some home buyers looked at 10 to 20 homes before making an offer; now, some are sifting through 30 or 40 homes, he said.
Homes that are competitively priced, in good condition and attractively displayed to buyers when they walk in the door will draw a crowd and offers, Patterson added.
“If they see a good value,” he said, “they rally toward it. I’ve seen some homes sell in a week.”
SOURCE: The Colorado Springs Gazette
Uh-oh.
One out of three mortgages made during the past three years with “teaser” interest rates below 4 percent are expected to go into foreclosure due to rising payments, according to a study Tuesday from FirstAmerican CoreLogic.
Overall, CoreLogic estimates rising mortgage payments from adjustable-rate mortgages (ARMs) will trigger 1.1 million foreclosures representing $326 billion in loans. The loss to lenders and investors after they sell the foreclosed properties: $112 billion.
“This does not break or dominate the market,” said Chris Cagan, the study’s author. “It is part of the market. But there is that slice that is exposed.”
The study doesn’t break out state numbers, but it points to another wave of foreclosures this year and next for the Colorado housing market, which reported more than 28,000 foreclosures last year.
Zachary Urban, director of housing counseling with Brothers Redevelopment in Denver, estimates that about 40 percent of Colorado home loans made in the state during the past three years were subprime, adjustable-rate or otherwise “exotic.”
Urban, who oversees the Colorado Foreclosure Prevention Hotline, 1-877-601-4673, said more calls are coming in from people desperate because their mortgage payments are rising beyond what they can afford.
“We are seeing a lot more people in that position who are current but they are caught by the rate adjustment,” Urban said. “They are slammed.”
Weak home-price appreciation along much of the Front Range has left many homeowners without enough equity to refinance home loans; or sell with enough of a cushion to cover selling costs and the loan.
How bad will it get? CoreLogic estimates that about 32 percent of teaser-rate loans, or 460,996, will be foreclosed; 12 percent of adjustable-rate subprime loans, or 385,524; and 7 percent of market-rate adjustable rate loans, or 264,184 loans.
The study assumes Colorado housing prices stay flat with December 2006 levels. Each 1 percent drop in the value of homes will result in another 70,000 loans falling into foreclosure. Conversely, each 1 percent rise in home values will keep 70,000 loans from foreclosure.
Aurora resident Kevin Bell suffered payment shock just a month after refinancing into an option ARM loan with a low teaser rate in March 2006. Like the majority of option-ARM borrowers, he is taking the minimum-payment option most months, adding principal back to his mortgage.
Bell said he is trying to get other debts paid off so he can mortgage refinance. But time is running out - either a refinancing or a day of reckoning will come next year.
CoreLogic, based in Santa Ana, Calif., looked at 26 million mortgages, focusing on 8.37 million adjustable-rate mortgages worth $2.2 trillion.
SOURCE: The Denver Post
Glenn Puller and Cindy Ingram are on their way to federal prisons for mortgage fraud.
At a sentencing hearing last week, Puller received one year and Ingram received two years in prison for their separate roles as straw buyers in a massive Colorado mortgage fraud scheme in Aurora.
“I apologize to the lenders,” Ingram told the court. Puller said the same.
But what that even necessary? Lenders make money lending, even when borrowers never pay it back.
The industry runs on loan volume, not loan quality. A mortgage company sells the loans it makes to Wall Street investment banks, which sell them to investors. This is why Puller and Ingram were able to get loans to acquire multiple homes at inflated selling prices of around $600,000 apiece.
Puller and Ingram are among seven defendants accused of taking $2.1 million out of 17 phony home sales, mostly in the Villas at Cherry Creek, a gated community bordering Cherry Creek State Park.
The scheme began with Ronald Fontenot and Torrence James, who met in federal prison and became Colorado mortgage brokers once released. Puller and Ingram were among their dupes paid to pose as buyers and sign bogus documents.
Among the lenders they defrauded was New Century Financial, whose stock has been in a free fall. As the Irvine, Calif.-based company cranked out loans across the country, its stock hit $66 a share in December 2004. On Friday, New Century’s stock closed at $3.21. The previous Friday, New Century disclosed that federal prosecutors and securities regulators were investigating accounting errors and stock sales at the company.
Mortgage lenders still prosper
Last year, lenders made $600 billion in subprime mortgages, comprising 20 percent of all mortgages made. More than half of these loans have adjustable mortgage rates. That means borrowers with shoddy credit histories have increasingly received loans whose monthly payments are steadily rising with interest rates.
This is why foreclosures are on the rise in Colorado and across the nation.
“The market deals with this in a very merciless way,” said Guy Cecala, publisher of Inside Mortgage Finance, noting the plunging stocks of subprime lenders. “New Century is going to be put out of business. … Investors are talking with their feet.”
The founders, who sold millions worth of their stock, do not seem punished to me. Meanwhile, the real losers are shareholders who didn’t sell their stock, and homeowners, whose home values rise and fall in a mortgage market with lax underwriting standards.
Former federal prosecutor Anthony Accetta, now a Denver-based fraud investigator, has helped shut down several mortgage companies for fraud over the years.
“The guys at the top know exactly what’s going on,” Accetta said of his experience. “They want the lending standards reduced so they can make as many loans and collect as many fees as they can. … They are the ultimate beneficiaries of the crime. And the crime is making false statements to get a mortgage loan.”
Another subprime market leader, Countrywide Financial, recently reported that 19 percent of its bad credit home loans were more than 30 days delinquent. That’s nearly one out of five going bad. The company also said it made $41 billion worth of subprime mortgages last year and $46 billion in 2005.
Before news of Countrywide’s widening subprime delinquencies broke, its CEO, Angelo Mozilo, sold $140 million in stock over the past 14 months, The Wall Street Journal reported last week. Mozilo, who co-founded the company 38 years ago, defended a 19 percent delinquency rate.
“That means 81 percent of these subprime borrowers are making their payments on time,” he told the Journal. “That 81 percent never would have had the opportunity to own a home.”
Countrywide also was among lenders Puller and Ingram apologized to in court.
Al Lewis’ column appears Sundays, Tuesdays and Fridays in The Denver Post.
Foreclosures in Colorado soared 31 percent last year and have more than doubled since 2003, depressing Front Range home values, a new survey from the Colorado Division of Housing says.
“‘One foreclosure begets another foreclosure. You have to ride that wave out and try to do what you can to minimize the damage to neighborhoods,” said Zach Urban, director of housing counseling with Brothers Redevelopment in the Denver housing market.
There were 28,435 foreclosures recorded last year in the 43 out of 64 counties where the division obtained counts.
“Unless new home buyers move to the state in unexpected numbers, the areas hardest hit by foreclosures will probably suffer home-price declines before recovering within 18 months to two years,” said Kathi Williams, director of the division.
About half of the homes that entered foreclosure in the state last year were lost in public trustee sales. About a third of the defaulted Colorado mortgages started were withdrawn. Sandy Hume, Boulder County public trustee, estimates that many homeowners who withdraw their foreclosures still end up selling against their wishes.
“‘Those withdrawals don’t mean that someone gets to stay in their house,” Hume said.
“‘A lot of people who are in problem situations are not subprime borrowers. They are borrowers who weren’t ready for a 2 percent hit on their [home loan rate],” said Michael Thomas, managing partner with Hyperion Capital Group in Aurora.
Thornton homeowner Paul Hernandez blames officials too eager to win new housetops at any cost, even if means destroying the home equity of their current residents.
“If you allow too much building, you are going to hurt the existing citizens of your community. It doesn’t take a lot of brains to figure that out,” he said.
Still, builders are expected to add 14,000 homes this year in the metro area, despite an eight-month supply of existing homes available for sale and more than 19,000 foreclosures last year.