Stacy Neir

Before we talk about Shadow Inventory we have to look at what the definition of inventory is. Inventory in real estate terms is the current number of homes that are actively on the market. When we Realtors talk about inventory, we like to express it in the number of months. You determine this by calculating how many homes are selling in a given area vs. how many homes are on the market in that same given area. By doing this it gives us an indication as to the amount of months it will take to sell the existing inventory. For example, if there are 100 homes on the market in a given neighborhood and only 20 are selling per month, it means that we have 5 months supply of inventory. This means that it would take approximately 5 months to sell all of the existing active inventory if no other homes came on the market.

Below is an indication of Months of Inventory and how it impacts price

1-4 months of Inventory means that it is a Sellers Market

5-6 months of Inventory means that this is a Normal Market

7+ months of Inventory means that it is a Buyers Market.

Shadow inventory are the homes that will go in to default or are currently in default and have not yet hit the market.

Standard & Poors did a Shadow Inventory Study and found that in Denver, there is an estimated 29.7 months of inventory that will hit our market in the next 2 years. This means that there will be a lot of people defaulting on their loans. The majority of the reason for a high number of defaulting loans is because many of these loans are the adjustable rate mortgages that are getting ready to "reset" their interest rate. If people's interest rates go up, sometimes that can mean an additional $500 per month thus making their home no longer affordable.

By looking at my numbers above, you will see that 29.7 months of inventory is way off our charts creating a significant declining market in Denver. This is basic economics: prices will go down when there is more supply than demand. In this case, it seems there may be way more supply than demand.

How are we as Sellers going to compete with this Shadow Inventory?

It means we must price our homes to sell NOW before this additional inventory hits the market. We must not only be able to compete, but we must be COMPELLING with our price. There are many ways to make your home compelling but the most important in this market is price. Price your home to a point where it will make buyers nervous that they might lose out on this home to someone else. Right now in Denver, home values are estimated to be where they were in 2004. The market does not care how much you paid for your home in 2006, how much you owe or how much it cost you to finish your basement. Buyers care about how well priced it is in comparison to the other 35 homes they looked at in your price range. Because there is so much inventory currently on the market (and there is certainly more to come) Buyers are no longer looking in just one neighborhood. They are looking for homes all over the Denver area to see what they can get in a certain price point. So not only do you have to be compelling in your neighborhood but you must be compelling across the board.

Obviously this statement is not relevant to very unique homes in very unique neighborhoods. However, it is relevant to the higher end market. In fact, the luxury market is suffering more than the lower end due to the number of delinquencies over $1,000,000. Per First American Core Logic, Inc. the percentage of mortgages over $1,000,000 that are 90 days delinquent is 12% and the percentage of mortgages over $4,000,000 is 14.8%. Homes under $250,000 have a much lower percentage of delinquencies with only 6.3%. What does this mean if you own a home over $1,000,000? It means you have a higher likelihood of competing with a bank sale down the street or bank sales in other high end neighborhoods.

If you look at different ROI (Return on Investment) scenarios and which of those ROI scenarios would have made you the most money from January of 2000 through June of 2010, purchasing a home would have been your most savvy investment. If you had invested in the DOW, your Return on Investment (ROI) would have been -9.9%. If you had invested in the S&P, your ROI would have been -19.1%. The Nasdaq would have been -46.4%. If you had purchased a home in January of 2000 in Denver, your return on investment would be 27.5%. This means if you purchased a home for $400,000 it should be worth about $510,000 in today's market.

Why real estate is such a great investment in 2010!

According to the Case Shiller Price Index, Denver's home prices are about the same as they were in 2004!

Therefore, if you purchased a home today, you would be paying the same as you would have in 2004. The biggest difference is that the cost of that home today is much less than it would have cost you in 2004 due to lower interest rates. For example, if you purchase a home in May of 2004 for $400,000 @ 6.27%, which is where interest rates were during this time, it would cost you $2,468.07 (Principal & Interest). If you purchase that same home today at 4.75% your P&I payment would be $2086.49 thus you would save $381.48 per month! This is a huge savings for most of us. Therefore, the price is the same it just costs less.

Interest rates are at an all time low. This means you get to buy more home for your buck. For example, if you compare interest rates at approximately 4.5% vs. 6.5%, you have approximately $75,000 more purchase power on a $320,000 home thus allowing you to purchase a $400,000 home! In the Denver market, this can be the difference between a 3 bedroom or 4 bedroom home or a home that is located on a great street instead of an "ok" street.

If you are currently in the market to purchase a home in Denver, feel free to call me for a free consultation at 720-280-3004 or check out my website at www.neirteam.com

Stacy Neir of the Neir Team with Kentwood City Properties has been recognized in the September 2010 issue of 5280 Magazine as one of Denver's top real estate agents.

The Five Star Real Estate Program did an in-depth research study in Denver in which they surveyed 10,000 - 50,000 recent buyers (all Denver residents who purchased a home over $100,000 within a 12-36 month period), readers of 5280 magazine and 250 mortgage and title companies. In the study, these folks were asked to name and evaluate real estate agents with whom they had a direct/personal experience with and were evaluated based on:

• Customer service
• Integrity
• Market knowledge
• Communication and negotiation skills
• Closing Preparation
• Helping Buyers find the right Home
• Marketing a Home being sold
• Overall Satisfaction

The final list of Five Star Real Estate Agents include less than 7% of the real estate agents in the Denver market.

"This is a huge honor for me to be selected as one of Denver's best realtors. Getting referred by my clients and colleagues is the best compliment I could ever receive. A big THANK YOU to everyone who has supported me over the years!" - Stacy Neir

Stapleton neighborhood market statistics 2009 and 2010, Denver, CO

Stapleton neighborhood market statistics and sales are off to a good start this year! There have been a total of 22 sales in the Stapleton neighborhood per MLS for 2010 with 14 of those being single family homes and 8 of those beings condos/townhome sales. Stapleton neighborhood market statistics show that the average price for 2010 is up, at $444,392 vs. an average sales price of $402,464 for 2009. It’s still early yet to predict what will happen this year, but we believe that the Stapleton neighborhood market has hit the bottom and we are on our way up! Interest rates are still at an all time low. The $8000 first time home buyer tax credit is continuing to stimulate the Stapleton neighborhood market statistics and the Denver market pushing buyers who would otherwise be waiting to enter the market.

The median home price according to the Stapleton neighborhood market statistics did fall from $657,500 in 2009 to $492,153 in 2010 but we believe this is due to the lack of large home sales thus far in the Stapleton neighborhood. The most expensive home sold this year was for $684,305 and there are currently only 6 homes actively listed in MLS above $800,000 in the Stapleton neighborhood. Another factor that we believe will stimulate the Stapleton neighborhood is the loosening of the jumbo loan market, we believe we will see more home sales above this price range as jumbo loans become easier to attain. Unfortunately, in 2009 there were only 10 homes sales over $800,000 out of the 243 sales in the Stapleton neighborhood.

76% of the home sales in Stapleton in 2009 were under $500,000. We are seeing this across the Denver real estate market due to more first time homebuyers taking advantage of the tax credit and FHA loans becoming such a viable option now that 100% financing is no longer available.

There are currently 195 active homes on the market in the Stapleton neighborhood priced between $114,900 for an affordable housing condo to a $1.249 million for the ultra high end home. There is something for everyone in the Stapleton neighborhood which is why I love living there. If you have any questions or would like to know more about Stapleton Real Estate or if you are looking to buy or sell a home in Stapleton, please feel free to call me at 720-280-3004 or check out my website at www.neirteam.com.

The expansion of Central Park Blvd. and Stapleton Light Rail will be great for the Stapleton neighborhood

This summer, construction will commence on three major transportation projects in the Stapleton neighborhood.

One of the projects commencing in August will part of the FasTracks East Corridor Light Rail expansion which will be built along Smith Road. Specifically, the Stapleton Light Rail will be built along Smith Road, just west of Central Park Blvd. (called Central Park Station) and will run to DIA and to Downtown Denver’s Union Station. The service is expected to start by the end of 2016 and could potentially open as soon as early 2015. The first step in the construction process will be to relocate some of the train tracks that run along Smith Road.

The next goal will be to move Stapletons Park n Ride Station currently located on Martin Luther King Boulevard to its new location on Smith Road just west of Central Park Boulevard. Moving Stapletons Park n Ride will allow developers to tear down the old parking structure which is scheduled for demolition in 2011. This Park N Ride service from Stapleton to DIA will be terminated once the Stapleton Light Rail opens. The Stapleton Light Rail ride time from Central Park Station to DIA is expected to be 20 minutes and from Central Park Station to Union Station will be 15 minutes. This is going to be a fabulous addition to the Stapleton neighborhood and the Denver community as a whole as the daily parking rate at DIA continues to rise, traffic to DIA gets worse and the brown cloud continues to get browner. A second and third project will be commencing at almost the same time as the Stapleton Light Rail which is the expansion of Central Park Boulevard from 36th Avenue to I-70 to Northfield.

Park Creek Metropolitan District will be constructing the new project which will also include a new bridge at Sand Creek and Smith Road that will incorporate trail connections to the new Central Park Station and the Sand Creek Greenway.

This is great for all of us bikers and runners in Stapleton who have been waiting for a connection to get to Northfield.

The bridge over Sand Creek and the extension of Central Park Blvd. to Northfield is being funded by Forest City, the master developer for the Stapleton neighborhood, while the overpass, entrance and exit ramps to I-70 will be funded by some stimulus money from Obama. No longer will we Stapletonians have to commute to Northfield or I-70 via Quebec, which often gets bottlenecked at the entrance to the highway. This expansion will make access to and from the highway much easier as well as provide more business to the shops and restaurants at Northfield, which is currently hurting for Tenants due to lack of shoppers and the struggling commercial real estate market. For more information on the Stapleton Neighborhood please visit outr neighborhood page.