November 28, 2011

Stevens: ‘Boom’ coming; cleanup needed first

BOULDER – Demographic trends mean the future of the real estate industry is bright, provided it can weather a few more years of tough times and repair its reputation with the public and lawmakers, the chief of the Mortgage Bankers Association said.

David H. Stevens, president and chief executive of the Mortgage Bankers Association and a former Obama Administration official, delivered the keynote speech at the daylong Boulder Valley Real Estate Conference & Forecast, presented by the Boulder County Business Report at the Millennium Harvest House Boulder on Nov. 17.

Stevens’ speech alternated between optimism that the “echo boom” generation will cause demand for new homes to spike in a few years and concern that new government regulations will choke the industry.

The echo boom, also known as Generation Y or the Millennials, describes the generation born in the late 1970s and early 1980s. That generation is larger than the baby boomer generation, and surveys say they are just as interested in owning homes as their parents and grandparents.

“People are going to have to live somewhere, unless you’re going to keep letting them live in your basement,” Stevens joked. “Demographics don’t lie. Everybody needs to live somewhere.”

But the industry might change radically before that generation is willing – or able – to buy homes, Stevens said. The federal government and state governments have an unprecedented interest in regulating the real estate industry in response to the housing bubble, foreclosure crisis and fraud in the lending industry.

“Their involvement in our world has never happened to this extent before,” Stevens said.

Provisions in the Dodd-Frank Act or rules from new regulatory agencies could put mortgages out of reach for working and middle class families, which would be a severe blow to the real estate industry.

The MBA is fighting against some of those measures, Stevens said, but the industry also needs to improve its reputation and sense of accountability to persuade lawmakers it can better police itself.

“This resulted from a lot of bad behavior, including in our industry. We created mortgages that never should have happened,” Stevens said.

Meanwhile, historically low interest rates in the ballpark of 4 percent make buying a home more affordable than ever. That rate level cannot last, so real estate agents need to convince prospective buyers to act now.

“We are in the best buying opportunity we have ever seen in the United States,” Stevens said.

Stevens also criticized media figures, in particular Suze Oreman, who are pessimistic or encourage people to walk away from mortgages.

– Michael Davidson

2012 forecast

BOULDER -Rental rates for office and retail space in downtown Boulder are expected to continue to rise while rents in the rest of the area remain stable, according to a forecast presented by Lynda Gibbons, president of Gibbons-White Inc.

Downtown Boulder rates have moved upward as firms try to find nicer office space, Gibbons said. Elsewhere, tenants have been on the move looking for better deals.

Gibbons predicted 2012 will see progress in two areas that have been long-term problem areas for the city. Development on a major apartment and mixed-use project at Boulder Junction should move forward. Meanwhile, a partnership of University Hill area residents and businesses and the city government holds promise for sprucing up The Hill.

“I think it’s really going to gain some steam,” Gibbons said.

Diagonal Plaza likely will remain in its present state, partly because the plaza is split between so many different owners.

“It’s very unlikely a developer is going to be able to make sense of that project without very significant help from the city,” Gibbons said.

Home prices in the city of Boulder remain level, while communities in east Boulder County have seen some fall in prices, said D.B. Wilson, managing broker and Realtor at Re/Max of Boulder.

Some good news is that more homes are being sold as the year continues, and the number of sales in 2011 has caught up with sales in 2010. That’s encouraging in part because the 2010 market was so distorted by the first-time homebuyers credit.

 “There was so much pushed into the first half of last year, it’s been a game of catch up all year,” Wilson said.

– Michael Davidson

Facing financing

BOULDER – Money remains tight for commercial real estate projects, although low interest rates mean refinancing loans on existing projects might be wise, according to finance experts.

The panel featured speakers from the major classes of commercial real estate debt holders: life insurance companies, banks and thrifts, firms that deal with government supported enterprises such as Fannie Mae and commercial mortgage backed securities traded by Wall Street firms.

Money is still out there to finance projects, especially for multifamily residential, but the projects have to be very good, said Michael Cantwell, president of Johnson Capital, a real estate investment firm.

“The fairways are pretty narrow,” Cantwell said, using a golf metaphor likening the lending environment to playing a difficult course.

Developers and commercial real estate owners looking for loans often are finding more success with local lenders, said Mark Job, a branch president of Citywide Banks.

“We feel community banks are becoming the go-to lenders,” Job said.

New tax credits offer a different potential source of financing, but they also remain difficult to obtain, said Keirsten Beck, a partner at the Boulder-based law firm Packard Dierking.

Credits from the federal New Markets Tax Credit program are available for projects that bring jobs and investment into low income or economically distressed areas, Beck said. The $3.5 billion program is getting many applicants, and there is a limited pool of credits available.

Mixed-use developments seem to have the best chance of going through, and developers need to make a convincing case, Beck said.

“Every project has to tell a story. Every project has to be stimulating investment in a low-income area,” Beck said.

Determining what qualifies as an economically distressed area is complicated, and projects in enterprise zones, urban renewal areas or brownfield redevelopments also could qualify.

Parts of Boulder and many areas in the Denver metro area qualify. Among them, perhaps oddly, is the Pearl Street Mall, Beck said.

– Michael Davidson

Customers’ motivation

BOULDER – Potential residential real estate customers still have plenty of reasons to buy or sell – even in the current tough economy, said David Knox, a real estate sales trainer.

But Realtors need to know what is motivating their customers to actually be able to make sales.

Using humorous examples, Knox drew repeated laughter from the estimated 350 people in attendance.

Knox gave sales tips for how to sell homes in the current market.

Want to lose weight? Motivation is the deciding factor, not education, Knox said, before comparing losing weight to assigning a realistic sales price to sell a home in the current market. If customers are motivated, they’ll sell their homes, regardless of what the market prices are, Knox said.

“I don’t care how bad the market is, people are still selling, because they have to sell,” Knox said. “It’s the motivation, not the money.”

Knox made simple but key points, including:

• Listen. “Realtors are so wrapped up in using technology to generate leads that they forget to (listen) to people.”

• Potential homebuyers often have unexpected sources of potential cash for purchases – especially from parents or other family members, Knox said. He also listed equity in a buyer’s current home, savings and investments, cash value of a life insurance policy, extra vehicles and other personal assets as places a potential buyer often finds purchase money.

• Dress up, show up and shut up, he said. Open houses give Realtors a key opportunity to grow their businesses.

• Knox reminded the audience that sales is about taking a risk. In response, you’ll always get one of three things: a reward, the experience and/or the learning, or lesson involved.

“We play games we know we’re not going to win. Why do we play?” Knox asked rhetorically. “If I play golf, it’s a beautiful day, I smoke a cigar,  I meet with my friends. It’s the experience.”

– Beth Potter

High-end inventory

BOULDER – While a panel of Realtors led by Joel Ripmaster, president and managing broker of Colorado Landmark Realtors, did its best to quantify inventory of million-dollar-plus homes on the market in the Boulder Valley, several audience members said those numbers are askew, during the High-End Hopes session of the conference.

Coming up with an accurate inventory of high-end homes for sale in the Boulder Valley is next to impossible because of all the pocket listings Realtors are carrying around.

A pocket listing is a real estate industry term that denotes a property where a broker holds a signed listing agreement (or contract) with the seller, whether that be an exclusive right to sell or exclusive agency agreement or contract, but where it is never advertised nor entered into a multiple-listing system.

Scott Remmert of the Remmert Group of Colorado Landmark Realtors said it’s frustrating to not have more homes to show prospective buyers, while James Simpson, with Fuller Sotheby’s International Realty said it can work in a Realtor’s favor. “A limited inventory creates a high demand, plus it gives you the opportunity to pitch developers on the idea of spec building houses again,” Simpson said.

Ripmaster said despite the real estate slump nationally, Boulder is holding its own and pointed out high-end sales represent only 3.5 percent of the Boulder Valley market. He showed a slide that placed Snowmass with the highest average home sale price in Colorado at $2.9 million, and that Boulder ranked No. 13 in the state and 865 in the country.

“We think we’re hot stuff,” Ripmaster said. “But we’re pretty average.”

Ripmaster said last year there were 72 homes that sold for more than $1 million, pointing out that the local market has held steady from 2001 to 2007, and dropped only slightly in the last few years.

Remmert pointed out that high-end homes are selling for 76 percent of the original asking price.

Panelist John McElveen with Re/Max of Boulder, said the luxury condominium market is facing an inventory shortage as well. “There’s not much new inventory coming on the market,” he said.

Challenges facing the high-end market include the perceived limited inventory and the stagnant national market. Some people who may wish to relocate to the Boulder Valley can’t find a buyer for the home they currently live in.

– Doug Storum

Boulder’s multiple brands

BOULDER –  Boulder has the iconic Flatirons, the University of Colorado, the federal labs, open space and the Pearl Street Mall.

But what, exactly, is the Boulder brand, if there is one?  The Boulder County Business Report asked leaders from around the Boulder Valley to answer that question in a lightning round of PowerPoint presentations.

Here’s what they said:

K.C. Becker, Boulder City Council member – City officials want ideas from the public to figure out what to build as the next piece of the Boulder brand. They want your help in choosing which idea to support – with plans to ask voters to potentially approve a capital bond measure in 2012 to pay to build whatever top idea is chosen. So far, the Boulder City Council has heard ideas to create a permanent farmer’s market, an arts district, a new convention center and a new, permanent events space, among others.

Morgan Rogers, civic forum director, Community Foundation Serving Boulder County – The Community Foundation is calling on you to give back to your community. Mentor a child. Invest in other ways to support work force development. Boulder residents are known nationally as the smartest in America, the healthiest, the happiest, the foodiest, the greenest and the fittest, among other things. But we can’t rest on our laurels. If we do, we’ll see our quality of life go down.

Julie Herman, executive director, Boulder Green Building Guild – We need to focus on creating sustainable solutions. Our green building brand is protected by enhancing the best of Boulder Valley with policies and practices. (Green building is generally seen as building practices that save energy and use recycled or renewable resources.) Sustainability in the Boulder Green Building Guild world means focusing on the triple bottom line to promote green building in the economic, environmental and social realms.

John Cody, president/ chief executive/Longmont Area Economic Council – Boulder Valley’s work force is the most important piece of its brand, from an economic perspective. We need to focus on building the quality of our work force. Our quality of life counts in attracting and retaining the educated work force. Smart people are attracted here.

George Gerstle, 36 Commuting Solutions – A coalition of businesses and communities working together to improve transportation along the U.S. 36 corridor has some new plans. First, a new managed lane for buses and carpool cars will be extended from its current end near the intersection of Pecos Street and U.S. 36 to the main Broomfield exit on U.S. 36. The 36 Commuting Solutions coalition has been involved with putting together $305 million to pay to extend those lanes, with completion expected in three or four years. The coalition also is working on completing a bike path along the corridor and on building more pedestrian connections to bus stops along the corridor.

Lynda Gibbons, founder/president, Gibbons-White Inc. – Fresh blood is needed in the commercial real estate buildings in the Boulder Valley, but let’s build on what we have. Wide open vistas that face Boulder’s striking natural features to the west are important to emphasize, as are the city’s historic buildings. European-style plazas can be a focus, along with things like bicycle share programs, electric car share programs and bicycle storage areas near businesses.

Jen Jones, managing director, Sterling-Rice Group – Great cities and great brands are ones that inspire us. New York City is about success, fame and fortune. San Francisco’s tagline is Only in San Francisco, which focuses on its industry, its technology and its culture. We have the outdoors and we’re foodies. What more can we do to be on the cutting edge of environmental concerns here? If we’re the happiest, how to we bring that to the children that we want to take care of here, or focus on arts and culture?

Boulder is more than the Flatirons and the (CU) Buffaloes. Our symbols include Pearl Street, our farm-to-table restaurants, our bike paths and our (CU) Center for Innovation and Creativity. New York is the Big Apple, San Francisco has Apple – what is Boulder’s apple?

Barry Siff, health/sports entrepreneur – Boulder is known as a sports mecca, so let’s lobby to get the finish stage of the 2012 U.S. Pro Cycling Challenge bike race here next year. This year, the inaugural year of the seven-day bike race, it brought an estimated $80 million or so to the Colorado economy. A picture postcard of Colorado was broadcast live across the world. We have the support of the city council and the city manager’s office to lobby to get a race stage here next year. We have more than 100 recreational and sports companies in Boulder now, and while we haven’t put together a formal group yet, Active Boulder will be the place to look to get involved.

Arron Mansika, director, Naturally Boulder – Yes, we are a foodie town and our natural foods industry is alive and well. Our mission is to solidify Boulder as an industry leader with both education and events. We now have 2,000 subscribers, including 450 paying members and 65 sponsoring members. Companies such as Rudi’s Organic Bakery, Silk Soymilk, Horizon Organic Dairy, Cocolove and Celestial Seasonings all started here. We’re now looking at new companies looking to grow. We’re also focusing on a campaign to get genetically modified organisms not to be grown on publicly owned open space. It’s a timely issue, and a decision is expected in the next two weeks.

Clif Harald, executive director, Boulder Economic Council – We have a significant diversity in industries such as aerospace, biotechnology, clean technology, software, Internet and information technology and our university and federal labs, and they require technical talent. These industries are the competitive advantage we have a place to live and a place to work.

Talent sourcing and recruitment is important for industry job growth. We sell the Boulder job brand, and we recruit top talent from across the country. We are relatively or comparatively well-off, we have good quality of life and economic diversification, and that gives us incredible strength on the global scale. But we also have challenges – a shallow talent pool in the region and some degree of challenge in national awareness and in encouraging people to relocate here.

– Beth Potter

BOULDER – Demographic trends mean the future of the real estate industry is bright, provided it can weather a few more years of tough times and repair its reputation with the public and lawmakers, the chief of the Mortgage Bankers Association said.

David H. Stevens, president and chief executive of the Mortgage Bankers Association and a former Obama Administration official, delivered the keynote speech at the daylong Boulder Valley Real Estate Conference & Forecast, presented by the Boulder County Business Report at the Millennium Harvest House Boulder on Nov. 17.

Stevens’ speech alternated between optimism that the “echo boom” generation will cause…

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