Financial Crisis And A Buyers Market

You may be thinking that the world is coming to an end with all the financial crisis reports in the national media these last few days. There is certainly a lot going on with all the turmoil.

One thing I see is that there are a large number of homes being sold, especially in east county and the north Denver suburbs. It’s a buyer’s market in many parts of our metro area.

I was talking with some of the staff at Chicago Title in downtown Denver yesterday, and they said that they processed about 30 transactions on Friday. To put that in perspective, that’s an incredibly large number when compared to the average title company’s office which might do a handful on any given day, in a normal market.

This is not a normal market, and I should disclose that this particular title company office handles bank owned property (what you’ll sometimes hear us call REO’s) exclusively.

So, when you hear reports about how many homes are going into foreclosure, you should also want to know how many are getting sold. Roughly 90% of my business in the last quarter has been centered around some piece of the foreclosure side of our industry. That’s not by design, it’s due to demand.

The interesting thing for you I think, is that you tend to only hear on the news that the real estate market is falling apart and everyone is losing their home. It is true that many people have lost their home to foreclosure. This has created two distinct changes in the housing market in the Denver metro area.

The first change is that many former homeowners are now in the market as renters again. An extremely large number of renters became buyers in the late 1990’s and early 2000’s when anyone that could sign their name could get a loan. This created a very depressed rental market for landlords and investors as vacancy rates climbed through the early part of this decade. I saw this all over the Denver metro area, and mostly around some parts of Lafayette and Longmont in the Boulder County area.

During this time, as vacancy rates climbed, rental rates dropped, and some real estate investors were working with negative cash flow as they weren’t able to bring in enough monthly income to cover the carrying costs of their rental properties.

The second change I see happening now, is that since so many people have seen their homes mortgage payments become unaffordable, they are returning to the rental market.

Several key elements are coming to the surface as this paradigm shift occurs in our real estate market.

The rental market is strengthening as the vacancy rate drops and demand increases. Many investors are seeing positive cash flow on their rental properties again. As well, real estate investors are finding that there’s a lot of property for sale at very reasonable prices.

Put this all together and we have a potentially stabilizing situation. Homes are for sale, through short sale opportunities or via REO properties at reasonable prices. Money is still available at record low rates for qualified buyers. There’s a high demand for rental property as so many tenants return to the rental market.

I also see another benefit to the market. First time home buyers are now getting a break again. When you can go into a newer development such as Green Valley Ranch, as an example, or any one of a number of north eastern communities, and buy a bank owned home for substantially less than the price last year (something like $150-$160 vs. $200+) it’s becoming a clear advantage for home buyers and certainly a buyer’s market.

This is one segment of the market, and there are some specific strategies for you if you’re thinking of buying that first home, or an investment property and looking for a deal. Just don’t plan on looking at the City of Boulder. That’s still a unique market that so far hasn’t seen the kind of changes I’ve seen in other local markets.

If you want help with this part of the real estate market, I can help you learn more.

Thanks for reading my blog. I hope you get what you are looking for and if you, or someone you know is thinking of buying or selling real estate, will you let me know? I always welcome the opportunity to assist you and your friends and family. Referrals are 90% of my business.

Zachary Epps, full-time professional Realtor.


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