Please find attached residential market statistics for the 3 MLS areas that cover Douglas and Elbert County.  I created charts showing Sold, Average Home Price, Inventory and Days on Market to try and make some sense out of all this information.
 
Jim’s Commentary – 1st Half of 2007
So what conclusions can we draw from looking at all these real estate stats going back to 2003? 
 
Let’s start with Douglas County West (DCW).  For the first half of 2007 sold residential homes are down compared to 2006 but still remain higher than all previous years.  In my opinion you can’t just rely on the number of sold homes to evaluate the market because the total number of homes in DCW is great now than it was in 2003.  The average home price in DCW is at an all time high of $493,112 and days on market has been steadily declining since this February.  The stat that really catches my eye is the increase in inventory for DCW during the first half of 2007.  We are currently at an all time high of 1,505 homes.
 
Next I’ll cover Douglas Elbert Parker (DEP). Residential sold levels for 2007 are in linethe  with 2004 and 2006.  The average home price has dropped from it’s high in February of this year to $367,100 and is slightly lower than average home price in 2006.  Inventory is below 2006 but higher than all other years on this report current inventory level is at 1,325 homes. Days on market is currently at 96 and is higher that all previous years with a low of 70 days on market in July 2004.
 
Douglas Highlands Ranch Lone Tree (DHL) has seen a strong increase in average home price this year up to $406,740 which is the highest average home price for this area on record.  We are in the middle of the pack in terms of sold residential homes with 2004 and 2006 having more sold homes and 2005 and 2003 with fewer sold homes.  Inventory levels are low with 2005 being the only year with few homes on the market.  The current inventory level for DHL is 695 homes.  Days on market has steadily dropped since the beginning of the year when it was at 99 days to 66 days on the market for June of 2007.
 
Summary:  It is not the best of times; it is not the worst of times.  I know that is really a bad adaptation from a Tale of Two Cities but I think it applies.  We are in a very challenging residential resale market but homes are still selling.  Colorado is a great place to live and the overall economy is doing well.  We have to work out some issues with tighter underwriting guidelines from lenders (especially subprime) and all the bank owned properties but the future looks bright!

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Some of best indicators for determining how the housing market is doing are number of sold closings, inventory levels and days on market.  We’ll take a quick look at resale housing market in Castle Rock Colorado.  For the first half of 2007 the number of sold home was 712.  The price ranges that experience the largest number of sales was 200,000 to 300,000 with 236 closed homes for the first half of 2007.  The average days on market for homes in Castle Rock was 110 days. This is an increase in days on market over 2005, 85 average days on market and 103 average days on market in 2006.  The median sales price reduced to $349,900.  To see complete details on the Castle Rock housing market checkout Castle Rock Real Estate Statistics.  

Click Here for the Detailed Report 

What is the current state of the real estate market?  As I’m writing this article lenders are reporting that   debt and secondary mortgage markets are experiencing “unprecedented disruptions” Credit markets have been tightening further and further for US mortgage lenders as problems in the subprime market spread to other parts of the industry. Not good news for the overall industry but how are we doing at a local level?

Let’s take a look at our local residential resale market in Douglas and Elbert County.

Douglas Highlands Ranch Lone Tree (DHL) posted very strong sales results for July 2007 with 293 sold homes, an increase of 16.4% over July of last year.  Average days on market decreased to 54 and inventory reduced to 652 homes which is a decrease of 14% compared to July 2006.  The absorption rate is 2.4 months indicating a seller market.  DHL is bucking the national trend and showed very strong overall results for July.

Douglas County West (DCW) also posted stronger sales in July 2007 with 217 homes sold an increase of 7.4% over July of 2006.  Year to date sales are slower by 6.2% with 1,149 homes sold year to date compared to 2006 in which 1,220 homes had been sold as of July 2006.  A few concerns for DCW could be an increase in days on market to 113 in July 2007 compared to 107 days on market in July 2006. Inventory increase by 14.4% and 549 new homes came on the market in July 2007 an increase in new homes on the market of 12% compared to July of 2006.  Average sold price reduced by 17% to 440,235.

Douglas Elbert Parker (DEP) posted 207 closed residential homes for July 2007 which is slightly off the mark of 216 homes closed in July of 2006.  Year to date DEP has an increase in closed transaction of 3.6% over 2006 totals.  Other good indicators for the DEP market are a reduction in days on market to 87 days versus 100 days on market in July of 2006.  Inventory levels for July of 2007 reduced to 1,324 a reduction of 4.8%.  Absorption rate fell to 6.4 months.

Based on Information from Metrolist, Inc. for the period Jan 2002 through present.Note: This representation is based in whole or in part on data supplied by Metrolist, Inc. Metrolist, Inc. does not guarantee nor is in any way resposible for its accuracy.  Data maintained by metrolist, Inc. may not reflect all real estate activity in the market.

All mortgages can be divided into two main
categories: conventional and government
loans.Additionally, each of the various mortgage
programs can be classified as fixed rate
loans, adjustable rate loans, or a combination
of the two.
In this technical bulletin,we’ll discuss
government and conventional loans, including
conforming vs. non-conforming loans. In next
month’s technical bulletin,we’ll talk about the
various types of fixed rate and adjustable rate
loans.
Government vs.
Conventional Loans
About 20% of all home loans in the U.S. are
insured or guaranteed by an agency of the
federal government and are considered
government loans. The remaining 80% of
residential mortgages are referred to as
conventional loans.
GOVERNMENT LOANS
FHA Loans
The Federal Housing Administration (FHA),
which is part of the U.S. Department of
Housing and Urban Development (HUD),was
established in 1934 during the Depression in
order to stimulate the U.S. housing market.
The FHA administers various mortgage loan
programs, although the FHA is not a money
lender; instead it issues federal insurance
against losses to FHA-approved lenders who
make FHA loans. FHA loans have lower down
payment requirements and are easier to
qualify for than most conventional loans.
FHA loans cannot exceed the statutory limit,
which is set for each county. For example,
the legal limit for a one-unit FHA loan in the
Denver metro area is currently $308,370.
VA Loans
Like the FHA, the VA does not lend money
of its own.VA loans are guaranteed by U.S.
Department of Veterans Affairs, which allows
veterans and service persons to obtain home
loans with favorable loan terms (usually
without a down payment), thanks to provisions
in the GI Bill of Rights passed in 1944.
It is easier to qualify for a VA loan than a
conventional loan, and lenders generally limit
the the maximum amount of a VA loan.
VA determines a borrower’s eligibility, and, if a
borrower is qualified,VA will issue a certificate
of eligibility to be used in applying for a VA
loan.VA-guaranteed loans are obtained by making
application to private lending institutions.
RHS Loan Programs
The Rural Housing Service (RHS) of the U.S.
Department of Agriculture guarantees loans
for rural residents with minimal closing costs
and no down payment.The RHS is part of
the USDA’s Rural Development Program,
which came about as part of the Farmers
Home Administration (FmHA) reorganization
in 1995.
Ginnie Mae, which is part of HUD, guarantees
securities backed by pools of mortgage loans
insured by these three federal agencies—
FHA, or VA, or RHS. Securities are sold through
financial institutions that trade government
securities.
State and Local Housing
Programs
In addition to the federal government, many
states, counties, and cities provide low to
moderate housing finance programs, down
payment assistance programs, or programs
tailored specifically for a first time buyer.
These programs are typically more lenient on
the qualification guidelines and often designed
with lower upfront fees.Also, there are often
loan assistance programs offered at the local
or state level such as MCC (Mortgage Credit
Certificate) which allows a tax credit for
part of the interest payment. Most of these
programs are fixed rate mortgages and have
interest rates lower than the current market.
Conforming
Conventional loans may be conforming
or non-conforming (while virtually all government
loans are considered conforming).
Conforming loans have terms and conditions
that follow the guidelines set forth by Fannie
Mae and Freddie Mac.These two stockholderowned
corporations purchase mortgage loans
complying with the guidelines from mortgage
lending institutions, package the mortgages
into securities, then sell the securities to
investors. By doing so, Fannie Mae and Freddie
Mac, like Ginnie Mae, provide a continuous
flow of affordable funds for home financing
that results in the availability of mortgage
credit for Americans.
Fannie Mae and Freddie Mac guidelines
establish the maximum loan amount, borrower
credit and income requirements, down
payment, and suitable properties. Fannie Mae
and Freddie Mac announces new loan limits
every year.
The conforming loan limit in 2007 for a
single-family residence is $417,000. (By
comparison, the single-family loan limit in
2002 was $300,700.) The two-family loan limit
is set at $533,850 in 2007.The 2007 threefamily
and four-family limits are $645,300 and
$801,950, respectively.
Properties with five or more units are considered
commercial properties and are handled
under different rules.
The maximum loan amount is 50 percent
higher in Alaska, Hawaii, and the U.S.Virgin
Islands.
Non-Conforming Loans
Although it may have a negative ring to it,
a non-conforming loan may be the ticket to
homeownership for many with unusual circumstances.
Non-conforming loans are for
buyers whose situations do not “conform”to
strict Fannie Mae/Freddie Mac underwriting
guidelines.
Not long ago, non-conforming loans were considered
riskier than conforming loans and
therefore borrowers were subjected to higher
interest rates and larger down payments.
However, this traditional way of thinking has
changed in many lending circles, and now
many lenders find it more attractive to offer
non-conforming loans. Because jumbo loans
are bought and sold on a much smaller scale,
they still often have a slightly higher interest
rate than conforming, but the spread between
the two varies with the economy.
Jumbo Loans
The most important difference between
conforming and non-conforming loans is
loan limits. First lien mortgages above the
maximum loan amount eligible for purchase
by Fannie Mae and Freddie Mac—currently
$417,000—are known as “jumbo” loans.
Jumbo loans are often subject to an interest
rate pricing premium as well as to some
additional underwriting restrictions. Because
they are larger and more involved, jumbo
loans also are usually governed by stricter
standards than conforming loans. It is not
uncommon for jumbo loans to have unique
income and mortgage insurance requirements.
All types of loans (fixed-rate,ARMs, and
balloon) are available in jumbo loans.
Subprime Loans
Loans that do not conform because they do
not meet the borrower credit requirements
of Fannie Mae and Freddie Mac are called subprime
loans, also known as “B,”“C,” and “D”
paper loans (vs.“A” paper conforming loans).
The good news is that credit specifications
for B/C loans can be more lenient than
other types of financing.This makes them
an attractive choice for borrowers who are
self-employed, have complicated tax returns,
do not wish to disclose or document income,
want to recoup equity from their homestead,
have recently filed for bankruptcy or foreclosure,
or have had late payments on their credit
reports. Subprime loans offer temporary
financing to these applicants until they can
qualify for conforming “A” financing.
The interest rates and programs vary, based
upon many factors of the borrower’s financial
situation and credit history.These loans often
close faster, have reduced or no reserve
requirements, allow for expanded use of loan
proceeds, and provide higher levels of cash
out for debt consolidation.

All mortgages can be divided into two main
categories: conventional and government loans.
Additionally, each of the various mortgage programs
can further be classified as fixed rate loans,
adjustable rate loans, or a combination of the two.
In last month’s technical bulletin, we discussed the
different types of conventional and government loans.
In this month’s technical bulletin, we’ll talk about
fixed rate vs. adjustable rate loans.
Fixed Rate Mortgages
With fixed rate mortgage (FRM) loans, the interest
rate and monthly payments remain fixed for the
period of the loan. Fixed-rate mortgages are available
for 40, 30, 25, 20, 15, and 10 years. Generally, the
shorter the term of a loan, the lower the interest rate.
The most popular mortgage terms are 30 and 15
years. With the traditional 30-year fixed rate mortgage,
monthly payments are lower than they would be
on a shorter term loan. But if a borrower can afford
higher monthly payments, a 15-year fixed-rate mortgage
allows repayment twice as fast and saves more
than half the total interest costs of a 30-year loan.
The payments on fixed rate fully amortizing loans are
calculated so that at the end of the term the mortgage
loan is paid in full. During the early amortization
period, a large percentage of the monthly payment is
used for paying the interest. As the loan is paid down,
more of the monthly payment is applied to principal.
With bi-weekly mortgage plans, a borrower pays half
of the monthly mortgage payment every two weeks.
Because of the extra principal paid each year, the
loan is repaid in less time. For example, a 30 year
loan can be paid off within 21–23 years.
Adjustable Rate Mortgages
A variable or adjustable rate loan is a loan whose
interest rate, and therefore monthly payments,
fluctuate over the period of the loan. With this type
of mortgage, periodic adjustments based on changes
in a defined index are made to the interest rate. The
index for a particular loan is established at the time
of application.
Well known indexes include the Constant Maturity
Treasury (CMT), Treasury Bill (T-Bill), 12-Month
Treasury Average (MTA), 11th District Cost of Funds
Index (COFI), Cost of Savings Index (COSI), London
Inter Bank Offering Rates (LIBOR), Certificates of
Deposit (CD) Indexes, and Prime Rate.
The new interest rate is determined by adding the
index and the margin. The margin is fixed percentage
points added to the index to compute the interest
rate. The result will then be rounded to the nearest
one-eighth of a percent. For example: If the index is
5.3% and the margin is 2.5%, then the new interest
rate = 5.3% + 2.5% = 7.8%. The nearest to 0.8% is
0.75% = 6/8%. The result will be 7.75%.
The margins remain fixed for the term of the loan
and are not impacted by the financial markets and
movement of interest rates. Lenders use a variety of
margins depending upon the loan program and
adjustment periods.
Most ARMs have interest rate caps to protect
borrowers from enormous increases in monthly payments.
A lifetime cap limits the interest rate increase
over the life of the loan. A periodic or adjustment cap
limits how much the interest rate can rise at one
time.
With most ARMs, the interest rate can adjust every six
months, once a year, or every 3, 5, 7, or 10 years. A
loan with an adjustment period of 6 months is called
a 6-month ARM; a loan with an adjustment period of
1 year is called a 1-year ARM, and so on.
Most ARMs offer an initial lower interest rate than the
fully indexed rate (index plus margin) during the
initial period of the loan, which could be one month
or a year or more. This is known as a teaser rate.
All ARMs are available with 30-year terms and some
with 15-year terms, and adjustable rate mortgages
generally have a lower initial interest rate than fixed
rate loans.
Negatively Amortizing Loans
Some types of ARMs offer payment caps rather
than interest rate caps, which limit the amount the
monthly payment can increase. If a loan has a payment
cap but has no periodic interest rate cap, then
the loan may become negatively amortized: if interest
rates rise to the point that the monthly mortgage payment
does not cover the interest due, any unpaid
interest will get added to the loan balance, so the
loan balance increases. However, the borrower
always has the option to pay the minimum monthly
payment, or the fully amortized amount due.
For example, if a loan has a payment cap of 7.5%
with a payment of $1,000 per month and interest
rates rise, the new payment could go up to, say,
$1,200 per month. But the capped payment is only
$1075. The other $125 would get added to the loan
balance to be paid off over time, unless the borrower
decides to pay that amount now.
The interest rate on negatively amortized loans can
adjust monthly.
The advantages of negatively amortized loans, also
known as deferred interest loans, are that they allow
borrowers to control cash flow (because the payment
is relatively stable), take advantage of low interest
rates relative to the market at any given time, and pay
back the money borrowed today at a depreciated
value years from now (because of natural inflation).
Combined (Hybrid) Loans
Hybrid loans, a combination of fixed and ARM loans,
come in different varieties:
Fixed-period ARMs
With fixed-period ARMs homeowners can enjoy from
three to ten years of fixed payments before the initial
interest rate changes. At the end of the fixed period,
the interest rate will adjust annually. Fixed-period
ARMs—30/3/1, 30/5/1, 30/7/1 and 30/10/1—are
generally tied to the one-year Treasury securities
index. ARMs with an initial fixed period, in addition
to lifetime and adjustment caps, usually also have a
first adjustment cap. It limits the interest rate paid the
first time the rate is adjusted. First adjustment caps
vary with the type of loan program.
The advantage of these loans is that the interest rate
is lower than for a 30-year fixed (the lender is not
locked in for as long, so their risk is lower and they
can charge less) but there is still the benefit of a fixed
rate for a period of time.
Two-Step Mortgage
Two-step mortgages have a fixed rate for a certain
time, most often 5 or 7 years, and then the interest
rate changes to a current market rate.
Two-step mortgages can be convertible or nonconvertible.
With a convertible two-step mortgage, also
known as a 5/25 or a 7/23, the interest rate for the
initial five or seven years is fixed. The loan then converts
to a fixed-rate mortgage (at a different interest
rate) for the remaining 25 or 23 years, respectively.
A non-convertible two-step mortgage means that the
5/25 or 7/23 has a fixed interest rate for the first five
or seven years, then converts into an ARM that adjusts
annually for the remaining 25 or 23 years of the loan.
Convertible ARMs
Some ARMs come with an option to convert them to
a fixed-rate mortgage at designated times (usually
during the first five years on the adjustment date), if
interest rates start to rise. The new rate is established
at the current market rate for fixed-rate mortgages.
The conversion is typically done for a nominal fee
and requires almost no paperwork. The disadvantage
is that the conversion interest rate is typically a little
higher than the market rate at that time.
The other kind of convertible mortgage is a fixed
rate loan with a rate reduction option. If rates have
dropped since the time of closing, this type of mortgage
allows the borrower, under some prescribed
conditions and for a small conversion fee, to adjust
the mortgage to the going market rate.
Graduated Payment Mortgages
(GPMs)
Graduated payment mortgages have payments that
start low and gradually increase at predetermined
times. A lower initial payment allows a borrower
to qualify for a larger loan amount. The monthly
payments will eventually be higher in order to catch
up from the lower payments. In fact, the loan will
be negatively amortizing during the early years of
the loan, then the principal will be paid off at an
accelerated pace through the later years.
Lenders offer different GPM payment plans, which
vary in the rate of payment increases and the number
of years over which the payments will increase.
The greater the rate of increase or the longer the
period of increase, the lower the mortgage payments
in the early years.
Buydown Mortgage
A temporary buydown is the type of loan with an initially
discounted interest rate which gradually
increases to an agreed-upon fixed rate usually within
one to three years. An initially discounted rate allows
you to qualify for more house with the same income
and gives you the advantage of lower initial monthly
payments for the first years of the loan when extra
money may be needed for furnishings or home
improvements. To reduce your monthly payments
during the first few years of a mortgage you make an
initial lump sum payment to the lender. If you do not
have the cash to pay for the buydown, the lender can
pay this fee if you agree on a little higher interest
rate.
A very popular buydown is the 2-1 buydown. 3-2-1
and 1-0 buydowns are also available, though less
common. The compressed buydown works the same
way, but with the interest rate changing every six
months instead of yearly.
The lower rate may apply for the full duration of the
loan or for just the first few years. A buydown results
in lower payments and may be used to qualify a
borrower who would otherwise not qualify .
With a variety of different loan programs available, it
is important to choose the type of loan that will best
suit your needs.

Are you ready for this?  I think we are showing small signs that the residential resale market in Douglas and Elbert County is improving and on track for a small recovery in 2008.  We have had plenty of negative news in that last month regarding liquidity in the mortgage market and increased foreclosures but I’m optimistic going forward.  Have we hit the bottom and are slowing starting to bounce back? 

Are you interested in more details on where exactly that what price range sales took place last month in Douglas and Elbert County?  Just email me back and I’ll send out the detail report first part of next week
Jim’s Commentary – August 2007
All three MLS areas posted an increase in sold single family homes with Douglas Elbert Parker (DEP) leading the way, an increase of 12.4% over Aug of 2006. Douglas Highlands Ranch Lone Tree (DHL) up 4.3% and Douglas County West (DCW) 2.9% comparing August closing in 2006 and 2007.
Douglas County West (DCW) is still down in overall closed homes year date by 4.8%.  Average days on market averaged 118 a decrease of 8.5% while active listing increased to 1,451 an increase of 9.6% over this time last year.  Active listings decreased in August when comparing last month’s totals, July 2007 1,505 listings.
Douglas Elbert Parker (DEP) has closed 4.8% more homes year to date compared with 2006.  Active, new listing and absorption rate all decrease in DEP compared to August 2006. Absorption rate for last month was 5.9 months indicating a neutral market between buyers and sellers.
Douglas Highlands Ranch Lone Tree (DHL) ended the month with 258 closings an increase of 4.3% over August 2006.  Year to date DHL is down only 2 transactions. Active, new listing and absorption rate also decrease in DHL compared to August 2006.

Let’s start by discussing the overall market conditions in the greater Denver Metro Area.  September closing where down 9.6% residential and 11% condo compared to last year at this time. Residential active listings are about the same at 23,202 active listings in September of 2007.  Condo listings are down 12.9% versus this time last year totaling 7,308.  Year to date residential closing are down only .3% and condo closing are down 1.2% year to date.  The bottom line is Denver is doing much better that the rest of the country and we will have a quicker recovery.

Douglas County West (DCW) posted 8 more closings in Sept 07 than in Sept 06.  Year to date DCW is down 3.8% in residential closings.  Keep your eye on avg days on market, inventory and new listings because they all showed an increase last month.

Douglas Elbert Parker (DEP) posted 11 more closing in Sept 07 than in Sept 06.  Year to date DEP is up 5% in residential closings. Keep your eye on avg days on market, inventory and new listings because all but active listings increase last month.

Douglas Highlands Ranch Lone Tree (DHL) posted 19 few closing in Sept 07 than in Setp 06.  Year to date DHL is down 1.2% in residential closings.  Active lisings and new lisings both decrease last month.

We are doing a blog class on Nov 9th at Castle Rock.