The economy, as sobering as it is, occasionally has its humorous moments.
Take yesterday’s Institute of Real Estate Management Economic Forecast breakfast, for example. The event’s several hundred attendees were treated to overviews from three residential, commercial and multifamily real estate experts along with perspective from Land Title Guaranty’s Sara Martin and Colorado Springs Economic Development Corp.’s Mike Kazmierski.
In spite of the presenters’ unanimous conclusion that the area and the nation may be in for a prolonged recovery – anywhere from two to four years – there were light moments.
As he reviewed 2009’s worst-in-15-years $55 million sales volume, broker Doug Carter took the opportunity to gibe ReMax Advantage managing broker Bruce Betts and the room’s many residential brokers.
“All you Realtors out there – would you stop telling our apartment dwellers that there’s never been a better time to buy?” he said, adding that the city’s current 7.4 percent apartment vacancy rate was the best it’s been since 2000. “For 2010 we expect the investment market to be slow. Average rents in the city haven’t gone up or down by more than $12 during the past six years. Fortunately, we’ve seen the return of more troops – but next October they’ll be leaving again. The market remains actually pretty stable — there just won’t be as much ‘drama’ as there’s been in the past two years.”
Betts, on the other hand, took the opportunity to emphasize that his company had enjoyed its best year ever during 2009 – due in part to some of those apartment dwellers taking advantage of the First Time Home Buyer Credit in a buyer’s market with low interest rates.
“Help, I’ve fallen and I can’t get up,” he said as his Power Point presentation began. “Oh, I must have pressed the wrong button – that was my forecast for 1988 or 1989 when we were looking at another tough market with double-digit interest rates and only 4 percent of homes on the market sold.”
Most descriptive of the local industry’s conditions were his comparisons between the boom times of 2006 when the average single family home selling price in the Pikes Peak region was $260,000 - and 2009’s $217,600 average sales price – a 16.5 percent decrease.
And while contracts on homes priced $250,000 or under were flying to the closing table during 2009, any home on the market for $400,000 or even $300,000 faced a far more arduous path.
“The high-end (home priced from $500,000 and up) is terrible. Those prices are already off 15 to 20 percent from their highs a few years ago – and they’ll go down even more this year,” he said, adding that jumbo loan sales represented just 3.4 percent of all sales last year.
His best case 2010 outlook: 8,500 closed residential sales; continued brisk sales for homes in the $250,000 or under category; 2,000 completed foreclosures with most properties becoming bank-owned; tougher mortgage rates and higher interest rates.
Betts did attempt to deliver a crystal ball reading for exactly when the market would revert to good health.
“A recovery in 2010? Unlikely. 2011? We don’t think so. 2012? Nope, it’s an election year and real estate typically doesn’t do as well then. 2013? We may begin to see improvement. 2014? We’ll be on the road to a more solid recovery by then for a few years anyway. We’re in pretty good shape compared to places like California, Nevada, Florida or Detroit where they’ve lost so many jobs. There are still potential pitfalls – and if the country suffers, we suffer. That said, I’m still cautiously optimistic about 2010,” he said.
Sara Martin, Land Title Guaranty Company account representative with more than 30 years of experience in the local market, was perhaps the most enlightening – and sobering – speaker of the morning.
Her industry sees, first hand, the short sales and foreclosure nitty-gritty, the grinding negotiation process that frustrates realtors and creates seller anxiety. Most have to work through months, and sometimes more than a year, to come to terms with first and second mortgage holders.
Warning the audience that some of the government’s recent Real Estate Settlement Procedures Act of 1974 updates might bring on a yawn or two, she deftly outlined how lenders will now be asked to provide unchanging “good faith estimates” that correspond to HUD-1 closing statements to any applicant meeting minimum requirements.
While a few eyes glazed over during her overview, most realtors were paying rapt attention. The new requirement, while designed to protect borrowers from unscrupulous lenders who change terms or fees at the closing table, will make the steps in preparation for closing more time-sensitive and a bit more complicated, she said.
Martin’s focus on commercial debt and on the growing number of commercial real estate properties likely to face foreclosure – Deutsche Bank has predicted that 56.8 percent of current commercial loans don’t qualify to refinance – was hardly a laughing matter.
In fact, the number of “under water” loans expected to mature during 2010 will be double last year’s total – up from 16 percent in 2009 to 36 percent in 2011. Even more sobering: the upward trend continues at least through 2013, according to industry analysts.
Martin did recommend that owners and lenders interested in the Federal Deposit Insurance Corp.’s latest guidelines on navigating a commercial workout go to http://www.fdic.gov/new/news/financial/2009/fil09061a1.pdf
Her biggest laugh came at the end when she asked, “So who’s at the closing table in 2010?” Her answer: The government!
The morning wouldn’t have been complete without an update and pep session by Colorado Springs Economic Development Corp. president Mike Kazmierski.
Following his overview of the city’s ongoing need for new primary jobs, he heralded a number of likely new companies looking to relocate in the Pikes Peak region. With a successful 2009 in the rearview mirror, the city could add another 600 to 800 jobs in coming months, based on current prospect feedback, he said.
And not to be outdone in the humor department, he ended with a light touch: his final slide featured a wide-eyed tiger-striped kitten, hanging, for dear life, to a tree branch.