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December 07, 2009

December 2009 Summit County Real Estate.Net Notices


State Economists Forecast $240 Million Budget Shortfall

Last week, economists for the Legislative Council said its expects another $240 million short fall for the current fiscal year in Colorado's budget. The annual budget is $7 billion, but with very little discretionary spending. There are few areas for the Governor to make cuts, and it is expected jobs will be the next place to find extra cash for the state. In addition to jobs, taking money out of state reserves, and the addition of tax exemptions are some of the few places left to look for money.


Candidates For Vail Council Race Have Begun Submitting Petitions

With just a week left to submit petitions to run for the Vail Town Council, only 4 candidates have done so. Current Council members Mark Gordon (a REALTOR), and Kim Newbury have submitted their petitions for re-election. Kevin Foley and Farrow Hitt have yet to announce whether they are running for re-election, but Indy Race Car driver Buddy Lazier has submitted his petition, as has Scott Proper, who ran for Council unsuccessfully 2 years ago. Proper is VP of Millennium Bank. Another newcomer, Michael Charles, owner of Maximum Comfort Spas has submitted his petition to the town. The petitions are due back by 5 pm. on Friday, October 2nd, with the election on Tuesday, November 4th. Elected Council members will be paid $625 a month. VBR encourages REALTORS® to consider running for the Vail Town Council to ensure protection of private property rights, and prevent unnecessary impact and transfer fees.


A recent conversation:

> Do you know andy good realtors that work the Park County real estate market. I believe
> just from my research that property is cheaper their thanit is in Summity County. I am
> not a millionaire but I would really like to find something that I can afford up in the
> montains whether it is simple little mobile home or condo, or a piece of land that is flat
> enough and easy enough to eventually put aphysical structure on.

You are correct.  Park County is less expensive than Summit County. Lynne Dorn is a Park County expert.



"We will open the book. Its pages are blank. We are going to put words on them ourselves. The book is called Opportunity and its first chapter is New Year's Day." Edith Lovejoy Pierce. And as we begin a New Year, fresh with opportunity - here's what you need to know about the last week of 2009.

The holiday shortened week had some fireworks, and not just those ringing in the New Year. The Treasury Department auctioned a whopping $118 Billion in T-Notes last week, and the added supply helped bring on some volatility in Bonds. And although the financial markets in general have been quite volatile of late anyways, the potential for increased volatility is typically greater during a holiday week. This is because trading volume levels decrease, and with fewer traders and investors pushing transactions, it opens the door for exacerbated market moves, as one large trade can cause prices to rise or fall more sharply.

In fact, volatility was present through a good part of 2009 - not to mention the last decade. As you can see in the chart below, Stocks experienced a roller coaster ride during 2009, hitting Bear market lows in March...only to soar 60% higher since March 9th.




Or so the popular saying goes. And last week, the Fed reiterated once again that their Mortgage Backed Security (MBS) purchase program...the program that has helped keep home loan rates low for much of the last year...will end on March 31, 2010 as previously stated. Here's the lowdown on what this means, and all the latest news impacting home loan rates and the markets.

Last Wednesday during their regularly scheduled meeting of the Federal Open Market Committee, the Federal Reserve kept the Fed Funds Rate unchanged. But history has shown that when the Fed has left rates too low for an extended period of time, there is a price to be paid, via higher inflation. Yet if the accommodation is removed too early, it can derail an already fragile recovery. The Fed continues to walk this tightrope, trying to get it "just right."

Along with this decision, the Fed emphasized and reminded that their MBS purchase program will still end on their already revised deadline date of March 31, 2010. Why is this significant? Let's look at the numbers from last week to get an idea. TheFed purchased $16B in MBS in the latest week bringing the year-to-date total to $1.087T. This means there is $163B left to purchase before March 31, which in turn means the Fed will purchase about $11.5B on average each week through the end of the buying program. This is less than half of what the Fed was buying regularly throughout 2009 and a 1/3 less than what the Fed has been buying in recent weeks.

So why does this point to higher rates around the corner? When there is lots of supply and diminishing demand, the price of that item will subsequently go down - it's Economics 101. So, when Bond prices start to decrease from the diminishing demand of the Fed's purchases, home loan rates will naturally be likely to increase. Give us a call if you want to see how you can benefit from the current low rate environment...before it becomes too late.



Legislators Hold Town Hall Discussions In Mountain Towns On Health Care Reform, Or Not

Over the past two weeks, the mountain towns have been inundated with visits from our U.S. Senators and Representatives who are busy holding "town hall" discussions on health care reform in Washington. Senator Michael Bennet (D-CO) and Congressman Jared Polis (D-CO), who represents Eagle and Summit Counties, held town halls in the two counties. In the meetings, the legislators outlined the issues, provided their positions, and then spent most of the time answering Q & A. Both legislators noted that there is a strong need for health care reform to deal with runaway health care costs that are seeing double digit annual increases while American income has remained at the same level over the past ten years. There were cheers and jeers at each of the forums, and audiences were divided. One concept seemed to have unanimous support: tort reform for malpractice damages. many physicians attending the town halls spoke about the fact that their own fees were so high to cover malpractice insurance. If malpractice damages were addressed physicians argued they could lower their fees. The "public option" was another contentious point among citizens and the legislators. Both Senator Bennet and Congressman Polis made it clear they are in favor of a public option that would include a a government run health care plan that would compete with private insurance companies.


Structural considerations include retaining the earth on both types of lots, which often necessitates a high concrete wall for the home's foundation.  Downslope lots may require additional concrete work to support the weight of a parking garage and vehicles above the main level.

Drainage is a major consideration for sloped lots and needs to be planned carefully to avoid spring runoff problems.

Landscaping can be managed with terraced grading and natural stone retaining walls.

All of these considerations can vary greatly depending on the particular property involved.  Getting a licensed architect's perspective will make your client's decision easier and will help you close the sale more quickly.

Green Tip of the Month

Last month we talked about Passive Solar Exposure. This month we'll explore another solar related green tip:

Photovoltaics (PV)

You're probably more familiar with this terminology as solar panels.  Mounted onto the roof or integrated into a building's facade, these solar cells convert energy from the sun directly into electricity.  Photovoltaics is the process of light (photons) converted into electricity (voltage), also called the PV effect


New FHA Rules Will Hurt Condo Mortgages, Sales

The FHA is getting ready to implement new rules that could make it even harder to get a mortgage and buy a condo. The new rules were supposed to take effect on October 1st, but the FHA is delaying imposing the policies until November 2, and it may modify some of the policies. The new policies would:

? Only allow 30% of a condo project to have FHA mortgages

? Half of the project?s units must be sold before FHA will ok any mortgages

? Owner must occupy 50 percent of a condo?s units ( was 51 percent)

? Spot approvals are eliminated, and the entire project must meet FHA approval before a borrower can get an FHA insured loan.

The Glenwood Springs Association of REALTORS?, the Steamboat Springs Board of REALTORS?, the Summit Association of REALTORS?, and the Vail Board of REALTORS? have actively voiced mountain resort REALTOR? concerns to the National Association of REALTORS? for nearly a year on condo financing issues. While the crux on condo financing issues had been ?investor hesitation?, NAR argued that it could not tell banks how to loan money. Now that the issue lies with the FHA rules, NAR is actively involved in trying to persuade the FHA to loosen their standards. He said the problem is that FHA?s capital reserves are low. NAR testified on Thursday at a Congressional hearing on capital reserve levels, where this issue was expected to come up. The mountain resort boards are working with NAR and monitoring the issue closely.


Rental Income Properties

I am often asked : "In your opinion, what places in your area would be closest to break even for seasonal rentals? How could I find out typical rental income numbers?"

This would seem simple enough, but as the following will show, it is not:

When you say "seasonal rentals", do mean leasing to an occupant for several months (a winter or summer season) at a time? If so, then it will depend on the price range but typically the lower price per square foot properties do the best and being on the bus route is a plus as well. Baldy Mountain Townhome is one example of such a property and there are many others all throughout Summit County. Once I know a little more about what you have in mind, I will be able to offer some suggestions.

In the meantime, classifieds will give you a good idea of what owners lease their properties for.

If tourist rentals are what you have in mind, then Beaver Run is always a good place to start. This is a large resort with condos of many different sizes. It is also one of the best rental properties in all of Summit County and they put out rental averages for the various property types every year.

Beaver Run is kind of in the middle of the price spectrum of properties of this type. A more expensive version of this would be Main Street Station, a less expensive one would be The Village at Breckenridge/Liftside. And there are more and less expensive versions of these as well.


Government Affairs Alert:

U.S. Senate Voting Tonight To Extend And EXPAND $8,000 Homebuyer Tax Credit!!

The United States Senate is expected to vote, later today, on a bill to extend Unemployment Insurance benefits. This bill will contain the Dodd - Lieberman - Isakson Amendment to Extend and Expand the $8,000 First Time Homebuyer Tax Credit.

The Extended and Expanded Tax Credit will contain the following provisions:

Amount: $8,000

Eligibility:ALL HOME BUYERS (Step-up buyers will have to have lived in their current home for SEVEN* years to be eligible)

Income Limits: $125,000 for single filers/$225,000 for joint filers

Time Frame: December 1, 2009 to April 30, 2010 plus 60 Day extension if binding contract is in place by April 30, 2010

*The 7 year ownership requirement is designed to lower the "score" or cost of the tax credit. This is still open to change. The Congressional Budget Office is going to "score" the cost of 3 year and 5 year requirements. We are continuing to push for step-up buyers to be required be in their current home for three year period.

NAR will be monitoring the progress and any potential changes to the bill. NAR will send out a notice when the legislation is voted on tonight--regardless of how late into the night or early into the morning the debate continues.



And even those who have been feeling grumpy about the weak labor market found something to smile about last Friday. The official Jobs Report for November was released - and the improving numbers were a big surprise to the markets.

According to the Labor Department, only 11,000 jobs were lost in November, despite expectations of 125,000 jobs lost. As you can see from the chart below, this marks the least number of jobs lost in nearly two years - since December 2007. Adding to the favorable news, the Unemployment Rate improved to 10.0%, when expectations were for it to remain at the 10.2% level.

While the news was good for the economy and helped Stocks improve sharply, it wasn't so favorable for Bonds...and as a result, home loan rates moved slightly higher on the news, continuing their worsening trend for the week overall.


In other news, based on early numbers, 195 Million shoppers hit the stores and websites on Black Friday, which was up from last year's 172 Million. Cyber Monday - the online equivalent of Black Friday - also showed an increase in web shoppers, up by 6% from last year. It appears that the shopping traffic was up, but the dollars-per-shopper may be down a bit. This might be indicative of not only consumers being conservative...but also the fact that with all the deep sales taking place to incent buyers, fewer dollars may be spent to get the very same merchandise as a year ago.



Harry S. Truman. Very true words indeed - and last week brought some market action when Fed Chairman Ben Bernanke discussed the recession, commenting that our economic recovery still faces "formidable headwinds."  The current recession we have been in has been the longest in nearly half a century.

And because negative economic comments or news causes money to flow out of Stocks and into Bonds, Bernanke's words helped Bonds and home loan rates to improve early last week...but these improvements were short lived.

Bond prices and home loan rates responded poorly to the Treasury auctions of last week, as the Treasury instruments being auctioned off are in direct competition with Mortgage Backed Securities...and the continual record amounts of supply hitting the market requires record amounts of buying to take place as well. And remember - the Federal Reserve is winding down their Mortgage Backed Security purchasing program, so as they stretch out and ration their remaining purchases through the first quarter of next year, the reduced amount of their buying just adds to the problem.

And as with any item, when there is lots of supply and diminishing demand - Economics 101 tells us that the price of that item will subsequently go down. So as Bond prices go down, home loan rates go up - and last week saw home loan rates increase by at least .125% across the board.

Rate Review

In Freddie Mac Primary Mortgage Mkt Survey (for the week ending December 11th) in which the 30-yr fixed-rate mortgage (FRM) avg. 4.81%.  The 30 yr has not been this low since the week ending April 30, 2009 when it avg 5.47%

The 15-year FRM this week avg 4.32%. A year ago at this time, the 15-year FRM avg 5.20%.

The five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) avg 4.26%. A year ago, the 5-year ARM avg 5.82%.

The one-year Treasury-indexed ARM avg 4.24%. At this time last year, the 1-year ARM avg 5.09%.


Rate Review

In Freddie Mac Primary Mortgage Mkt Survey (for the week ending November 27) in which the 30-yr fixed-rate mortgage (FRM) avg. 4.83%.  The 30 yr has not been this low since the week ending April 30, 2009 when it avg 4.78%

The 15-year FRM this week avg 4.29%. A year ago at this time, the 15-year FRM avg 5.74%.

The five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) avg 4.18%. A year ago, the 5-year ARM avg 5.86%.

The one-year Treasury-indexed ARM avg 4.35%. At this time last year, the 1-year ARM avg 5.18%.

John Fielder is coming to the Silverthorne Pavilion...

...for a book sale, book signing and slide show presentation of his new book, "Ranches of Colorado" on November 24, to benefit Continental Divide Land Trust. Please join us! See below for advance ordering information and all the details.

Save the Date: Saturday, February 6, 2010, Friends of Open Space Party!

John Fielder's "Ranches of Colorado" Presentation, Book Sale and Signing

John Fielder, Colorado's premier nature photographer and a Summit County resident, spent two years travelling the state to capture images of Colorado ranches from mountains to plains to create his new book: "Ranches of Colorado". With this book, John hopes to raise awareness to help preserve Colorado's vanishing ranching lifestyle and the private ranch lands that help protect scenic views, wildlife habitat, wetlands, and other natural qualities. Many of the ranches featured in the book are protected by conservation easements, but many are not.

John's presentation includes over 200 images from the book, accompanied by the music of American composer Aaron Copland. John will also share excerpts from the book written by the late James Meadow, former Rocky Mountain News columnist, along with John's own stories of the hearty ranchers and historic ranches that he visited on his photographic journey.

Book Sale and Signing,Plan your Holiday Gift Giving: A wide variety of John's books and calendars will be on sale with a generous percentage of the proceeds benefiting Continental Divide Land Trust. John will be available before and after the show to sign and dedicate books, which make great holiday gifts.

Special Orders Welcome: Only books and calendars sold at this event will benefit CDLT. We are glad to take special orders in advance for those who are unable to attend but would like a book or calendar signed and dedicated by John. Please contact us to make special arrangements.

Where & When: The presentation takes place on Tuesday, November 24 at the Silverthorne Pavilion. Doors open and the book sale starts at 6:30 p.m. The show begins at 7:00 p.m. The Silverthorne Pavilion is located at 400 Blue River Parkway (aka Highway 9) in Silverthorne, behind Cutthroat Anglers.


FHA Releases Condominium Approval Process

FHA recently released Mortgagee Letter (ML) 2009-46 A: Temporary Guidance for Condominium Policy and ML 2009-46 B: Condominium Approval Processes for Single Family Housing. The temporary guidance 1) increases FHA concentration requirements to 50 percent, 2) requires 50 percent of units in a project to be owner-occupied but vacant and REO property are not considered in the calculation of the owner-occupancy percentage, 3) reduces the pre-sale requirement to 30 percent, 4) all projects in Florida are required to be reviewed under the HUD Review and Approval Process (HRAP), and 5) Spot Loans are extended through February 1, 2010. The temporary guidance is effective for all FHA case numbers assigned on or after December 7, 2009 through December 31, 2010, except for the Spot Loan Approval Process.

The guidance in ML 2009-46 B is effective for all case numbers on or after December 7, 2009 and replaces ML 2009-19, which was the initial guidance for condominium projects insured in FHA's 203(b) Singe Family Program. The new rules outline specific condominium project requirements for FHA approval. Projects may be approved through HRAP or by the lender through the Direct Endorsement Lender Review and Approval Process (DELRAP). FHA will continue to maintain a list of approved projects. The site condominium and manufactured housing condominium project changes were implemented on June 12, 2009.

On July 31, 2009, NAR President Charles McMillan sent a letter to FHA Commissioner David Stevens recommending enhancements to the new condominium rule. Mr. McMillan also discussed NAR's recommendations at a meeting with the Commissioner on September 8, 2009. NAR is calling for: 1) a reduction in the owner-occupancy requirement, 2) eliminating or increasing the FHA concentration limit, 3) reducing the pre-sale requirement, and 4) clarification of the reserve study requirement.

NAR Letter to FHA on New Condominium Rule Enhancements
Mortgagee Letter 2009-46 A: Temporary Guidance for Condominium Policy
Mortgagee Letter 2009-46 B: Condominium Approval Process for Single Family Housing


Steamboat 700 Moves Ahead After Initial Approval

The annexation of the Steamboat 700 project, which would create more than 2,000 homes and 380,000 sq ft of commercial space on 487 acres just west of Steamboat, came closer to a reality at last week?s city council meeting. The vote to approve the project was 4-3 in a highly debated, highly attended discussion. The debate centered on the drain water needs could have on the City of Steamboat, whether the right affordable housing components are in place, and whether affordable housing could really be built as the developer indicates. Traffic into Steamboat on highway 40 is a very big concern by citizens and council members. Many citizens are calling for the final approval of the project to go to the citizens of Steamboat as a ballot question. Others argued that the citizens aren?t fully educated on the issue and could not make an educated opinion. Currently, the annexation is expected to go to the City Council for final approval on Tuesday, October 13th.


In other news, Retail Sales for September fell by 1.5% - and while the numbers were better than expected, they are still dismal at best. In addition, the flood of pre-holiday sales and layaway options that are already hitting - remember, it's still mid-October - also suggests a lack of pricing power for retailers. Stock earnings season continued with some mixed news: There were reasonably strong earnings reports from Intel and JPMorgan Chase, while there were weaker than expected reports from Johnson & Johnson, General Electric and IBM. Bank of America also posted its first loss for the year.

After all the week's heat and pressure, Bonds and home loan rates ended the week slightly worse than where they began.


Rate Review

In Freddie Mac Primary Mortgage Mkt Survey (for the week ending October 16) in which the 30-yr fixed-rate mortgage (FRM) avg. 4.92%. Last year at this time, the 30-year FRM avg 6.46%.

The 15-year FRM this week avg 4.37%. A year ago at this time, the 15-year FRM avg 6.14%.

The five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) avg 4.38%. A year ago, the 5-year ARM avg 6.14%.

The one-year Treasury-indexed ARM avg 4.60%.  At this time last year, the 1-year ARM avg 5.16%.


Forecast for the Week

This coming week is loaded with high-impact economic reports. On Monday, we'll get a glimpse of consumer's pre-holiday spending patterns when the Retail Sales report is released. You may have seen that many retailers have started the sales and specials early this year, as well as reintroducing the "layaway" option for purchases - all designed to help keep this holiday season from being dismal for retailers.

Inflation news is also on tap this week, as the Producer Price Index is set for release on Tuesday, with the Consumer Price Index following on Wednesday. Also on Wednesday, we'll get a look at the health of the new construction sector of the housing industry with reports on Housing Starts and Building Permits.

Thursday, we could see some volatility in the markets when the Treasury Department announces next week's auctions, which will include offerings of 2-year, 5-year, and 7-year Notes. Remember, these auctions will likely continue to cause volatility, as the Federal Reserve has ended their buying program for Treasuries, and as we discussed, has also now started to scale back their purchases of Mortgage Backed Securities (MBS). As the Fed ramps down and ultimately ends their support of the MBS market at the end of March, watch for home loan rates to rise.

Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result. As you can see in the chart below, Bond prices hit a two-month low on October 26th - which had caused home loan rates to worsen - but Bond prices have since been pushed higher by continued Fed buying and some weak economic data.

The Mortgage Market View...

5 Secrets to a Job Interview

Earlier this month, the Labor Department reported that 190,000 jobs were lost in October and that the Unemployment Rate has risen to 10.2%. It's always important to be prepared anytime you go on a job interview, but in today's competitive market it is more important than ever. In this week's special Video View, check out a video from www ( dot) Kiplinger (dot) com called "5 Secrets to a Job Interview."


Avon Short Term Rentals Getting Final Vote Tuesday Night

Tomorrow night, the Avon Town Council expects to have its final vote on whether to allow short term rentals in the Town of Avon. Two weeks ago, the Council approved short term rentals in all areas of Avon. Since that meeting, town staff has determined that the Wildridge PUD cannot be included in the ordinance because its PUD already has amendments that do not allow short term rentals. The homeonwers in Wildridge may approach the Council for changes to their PUD. In addition, the Town Attorney has determined that an overlay district cannot be applied to any PUD, even if the PUD already allows for short term rentals. This includes Canyon Run, Eaglebend, Stonebridge, and Wildridge PUD's. The process to aplly for an amendment to these PUD's is restrictive, but is still possible. The Vail Board OF REALTORS? continues to support passage of the ordinance to allow short term rentals, and will advise the Council of their support for amendments to the PUD's for the excluded subdivisions.



Barbra Streisand obviously wasn't singing about Bond prices or interest rates in her 1980's song. But those lyrics were fitting last week when the Federal Reserve stepped in with more buying of Mortgage Backed Securities (MBS), helping Bond prices recover from news of a weak Treasury Auction. Overall, home loan rates bounced around last week and ended the week very slightly improved.

But that said, we can't "push our luck" and think the Fed will continue to step in and help support home loan rates...we have to remember that the Fed is actually winding down exactly this type of buying support.

As you can see from the chart below, the Federal Reserve's purchases of MBS peaked at an average of $25 Billion per week back in May - and they are getting closer every day to being done spending their allotment of $1.25 Trillion. Since they announced that their remaining purchases would be rationed out until the end of March 2010 - but that they wouldn't be making any additional purchases beyond the original commitment - the average purchases per week have been moving lower, down to $14 Billion per week so far in November.

Why is this important?

Because home loan rates are based on MBS - so when the Fed agreed to be a big buyer, it helped provide a market and helped keep MBS prices high and home loan rates low. So as the Fed's program wraps up and eventually stops, home loan rates are quite likely to be on the rise. So while rates are still very good, they may not be for long. Let's be sure to talk if you haven't yet explored how the current rate environment might benefit you or someone you know.

More employment news arrived, and it is interesting to hear the media and other experts proclaim it to be "all good news". Initial (or First Time) Jobless Claims came in at the lowest reading in 10 months and Continuing Unemployment Claims also fell lower as well - and at first blush, this seems to be very good news. But looking closer, we see that the lower Continuing Claims number was probably the result of unemployment benefits expiring before people could find work - rather than people dropping off of benefits because they found a job. Now that unemployment benefits have been extended by new legislation, we should get a more accurate look at how many people are actually unemployed.

Our peak year for residential real estate sales was 2006 and we we did about 2500 transactions. I expect about 625 this year and there are currently about 2100 residential listings.

Our peak year for lvacant and sales was 2005 with about 440 transactions. I expect about 60 this year and there are currently about 450 land listings.

Average sales price is difficult to use here because a few high end sales can really skew the data, especially when not much is selling. But prices have not come down as much as one might expect given the above because rental income was still pretty good in 2008. This is believed to be the result of pre-bookings several months out and this is not expected to be the case this year and in 2010.