Lonnie Glessner

According to Smart Money Magazine November 2008 issue they named Denver one of the 7 most promising cities for a real estate rebound in the near future. I would agree.

In the magazine they quoted the PMI Group's quarterly risk survey which might be the best risk assessment survey in the business and here is what they said,

"According to PMI's ‘risk index,' which estimates the odds of prices falling in a given market, at least 65 percent of the nation's 386 metro areas have less than a 10 percent chance of seeing lower prices two years from now." Denver's risk is under 2%!

I believe there is a lot of pentup demand here in Denver as thousands of people have chosen not to move in the last 3 years because of our slow real estate market and the floodgates will open soon.

To read the story yourself, click below

http://www.smartmoney.com/Personal-Finance/Real-Estate/Now-for-the-Good-News-on-Home-Prices/

The final thing we can do to keep another Mortgage Mess from happening is by getting the money out of politics. As I documented earlier Fannie Mae and Freddie Mac doled out over $200 million to politicians or their favorite causes in hopes of buying votes. And each Dollar bought just enough votes to keep strong and effective reform from taking place at Fannie and Freddie. I am still astounded that reform did not happen after the accounting scandals at Freddie and Fannie in 2003 and 2004 respectively.

Let's take a look at what we did here in Colorado earlier in this decade with two different Amendments to our State Constitution. In 2002 we passed Amendment 27 by a 2-to-1 margin that enacted comprehensive campaign finance reform. Amendment 27 greatly reduced contribution limits by individuals for officials running for state office, banned corporate and union contributions, lowered the contribution limits to PACs (Political Action Committees).

In 2004 we passed Amendment 41 which prohibited elected state and some local officials, appointed state and local officials, and government employees from receiving any money or gifts with a value over $50. This Amendment also prohibited immediate family members from receiving any gifts over $50 in value as well. Third, this Amendment banned lobbyists from giving gifts or meals to elected or appointed officials or to government employees, and this ban applies to their immediate family members as well.

Imagine politicians only receiving super small donations such as $50 from anyone or everyone. This way, money should have much less affect on them and their decisions. Since money corrupts so many of them let's take the money away from them.

If this had been the case for the last 10 years I am 98% sure we would not be facing the biggest financial crisis in nearly 80 years.

But, we need to act now to protect ourselves.

Freddie Mac has announced that they are matching many of the changes that Fannie made earlier this year. Honestly most banks and all the PMI companies were already following Fannie's rules; so, these rules really only additionally apply to banks like U.S. Bank who is a Freddie Mac lender and for borrowers who put more than 20% down on a new home. Here is a summary of the changes--

•· If the buyer's current principal residence is not sold and closed, you MUST count both house payments against the borrowers as they buy and close on their new home. Second, they must have at least 6 months of PITI payment reserves on both properties, unless they have at least 30% equity in their current home. If they have at least 30% equity then they only need 2 months of PITI payment reserves on both properties.

•· If the borrowers are turning their current primary residence into a rental property, you can NOT use rental income from that property UNLESS they have at least 30% equity in that home documented by an appraisal. Plus, the borrowers must have 6 months of PITI payment reserves on both properties.

•· If buying a 2-4 unit investment property you must put 25% down. On a single family home you must put 15% down. Used to be that a duplex was treated like a single family home.

•· To refinance any rental property the max LTV is now 75%.

This week I had a client who pulled his own credit reports and credit scores from all 3 credit bureaus. What alarmed me is that Experian and TransUnion are apparently using a new credit scoring model with consumers that is NOT compatible with traditional credit scores that we as a mortgage company use.

Both Experian and TransUnion are using a new model for scores where the range of scores is 500 to 990; whereas, we use scores that range from 300 to 850.

For this client his credit score with these 2 bureaus were 842 and 852 which is considered a "B" grade in these models. Thus, I don't know what his credit scores are with my model and my model is what is used in our industry.

Thus, I would recommend that borrowers do not PAY any money to Experian and TransUnion for their credit scores with them as these scores are nearly worthless in my opinion.

In October the inventory of unsold homes in Denver plummeted by 20.1% from October 2007 inventory levels. This October there were 23,120 unsold homes available; last October there were nearly 29,000 homes for sale in the Denver metro area.

Somewhat surprisingly the number of homes placed under contract in October was only down 3% from October 2007 levels as 4,504 homes were placed under contract. For all the rotten economic news in September and October I expected that this number would be down by 20% or more. But, people are still buying homes in Denver. Why? Prices have dropped and there are some incredible deals out there.

Speaking of prices, the average price of a single family home is down 13.6% from October 2007 and the median price is down 12%. Why are prices dropping? The majority of the reason is the mix of homes selling. Last year less than 1% of homes in Denver sold for under $100,000. This year homes selling for under $100k make up 15% approximately of all home sales. Plus, on the top end, there are very few homes selling that are priced above $750k. Thus, both the average and median prices have dropped.

Personally, I think there is a lot of pent up demand for people and families wanting to move who have chosen to sit still right now. Second, once these bank owned properties at super low prices, begin to make up a much smaller percentage of our home sales (say under 5%), I believe home prices will rise very quickly here in Denver. Currently the average home price is $250k and I think it will quickly rise back above $300k in the next 3 years.

Baron Rothschild a very wealthy businessman in the early 1800's in London said, "you buy when there's blood in the streets." And the banks are bleeding. Go and take advantage of them. It's your chance.