B. Scot Smith and DB Wilson to present local forecast at fall conference

Re/Max of Boulder is proud to welcome B. Scot Smith and DB Wilson, who will provide the local real estate forecast at the 2009 Fall Real Estate Conference set for Nov. 19.

B. Scot Smith joined The Colorado Group, Inc. in 1982 and has always been one of the top annual producers in the company. He has been involved in commercial real estate in Boulder for more than 30 years and is a recognized leader and expert in commercial sales and leasing along Colorado’s Front Range. In 1995, Scot became one of only 3 percent of all commercial real estate agents to earn the designation of Certified Commercial Investment Member (CCIM).

DB Wilson, managing broker at RE/MAX of Boulder, Inc., is a graduate of the University of Colorado. Licensed since 1976, Wilson is past president of the Boulder Area Realtor Association; BARA Realtor of the Year, 1994; and Distinguished Realtor of the Year for the Colorado Association of Realtors, 1993, 1994, 1995 and 1997. He also served as manager of IRES (regional MLS for Northern Colorado), 1997-2006; is a past member of the National Association of Realtors’ Professional Standards Forum; past member of CAR Grievance Committee; member of the BARA Grievance Committee 1995 to present, current chairman. Wilson has also served on the Colorado Real Estate Commission task forces on Single Licensing and Designated Brokerage and Technology in Real Estate, and is past Manager of the Year for RE/MAX, Mountain States.

Real estate market continues to crawl along; recovery time still unknown

Cooler weather has brought an end to summer as well as the hope that the increase in home sales the hot season usually brings was just delayed.

For the second month in a row follow a promising June, statistics for home sales and prices in Boulder County were anything but. According to statistics for August, 303 single-family homes sold in July, down from 372 a year ago, and 110 attached homes sold, down from 141 a year ago. Average sales prices dropped in every Boulder community except Broomfield and the mountains, though Broomfield, Erie and Louisville all saw increase in the median sales price of homes sold.

Through the end of July, 3,041 single-family homes sold, compared with 3,889 the previous year, and 1,184 attached homes sold this year, compared with 1,416.

“We’ve seen a slowdown in sales activities over the last couple of years and those trends are continuing,” says Ken Hotard, senior vice president of public affairs for the Boulder Area Realtor Association. “The real estate market is a victim of a trifecta of things: economic weakness, lending difficulties and low consumer confidence. People are not interested in making huge financial decisions at this time unless they have to.

“I was disappointed that we didn’t continue that growth in sales trend that we picked up in June,” he added. “But as you look around, you can certainly explain it. Who’s to say when that’s going to change?”

The market had had good activity and many people are in a position to take advantage of competitive prices and a solid inventory. Buyers are making offers but a larger percentage than usual are not making it to closing for a variety of reasons - those included in the "trifecta" of issues, Hotard says.

Lack of job growth is still an issue, though Colorado is doing better than the nation, but the state legislature now must cut another $240 million from this year's budget with deeper cuts expected in 2010, he says.

“It’s hard to peer into the future and get a good sense of when things are going to turn around,” Hotard says, noting he still thinks the second half of 2010 will have the potential for the economy to stabilize and turn the corner. “Depending on who you talk to, it’s gloom and doom forever, or we’ve already hit bottom and we’re beginning to correct already. I don’t think the picture is that clear on either account. The indicators are confusing at best.

“There’s demand,” Hotard adds. “When the time is right, things are going to move fairly briskly.”

Rent-to-own - where's the equity?

The weakness in the mortgage-credit market has led many would-be sellers to enter into what are known as “rent to own” or “lease-purchase option” agreements. Under such an arrangement, the buyer-seller relationship is restructured as a landlord-tenant relationship with an option for the tenant to buy the property for a fixed price. The tenant typically agrees to pay a deposit and a monthly rental which is greater than the pure rental value of the property. In exchange for this, the tenant is given an option to purchase the property and have a portion of his payments credited to the price.

Although many tout this as a win-win situation for sellers losing patience with a slow market and for buyers with temporary credit issues, a seller/landlord can end up with an expensive and protracted problem if the purchase option is not exercised and the buyer/tenant nevertheless chooses to remain in possession without making any further payments.

The legal issue is whether the tenant/buyer has acquired equity in the property. As is often the case with contractual relationships, lease-purchase option agreements work fine if the terms and conditions are met and either the buyer/tenant moves out at the end of his term or exercises his option to purchase the property and closes.

If the occupant of the property instead decides to stop making payments and remain in possession until forced out, the inequity begins to become evident. The buyer/tenant may now argue that things are not as they appear. Looking for any plausible argument, he may assert that the lease is really deferred purchase money financing and that the portion of the rent credited to the purchase price is really mortgage amortization. Adding insult to injury, the buyer/tenant may claim that the security deposit is really the down-payment. The buyer/tenant is clinging to the legal argument that he has acquired equity in the property by virtue of the fact that some of his payments have reduced the balance due under the purchase option.

Under these circumstances, the owner now finds that he has shot himself in the foot twice. He may not avail himself of the streamlined FED residential eviction process applicable to a pure lease and, without a deed of trust, he may not have access to the expeditious public trustee foreclosure process. Much to his surprise, the seller/landlord is cast as a lender with an equitable mortgage securing his right to payment. The only way for him to regain possession of his property is through a full-blown legal foreclosure.

Any seller contemplating such an arrangement should consult an attorney for assistance in negotiating the terms and drafting the documentation in a manner which minimizes the risk of this inequitable result.

Finberg becomes Re/Max counsel after return from sabbatical in Israel

Fresh and refreshed from an 18-month sabbatical in Israel, Matt Finberg is tackling the challenges of reopening his practice in a recession while providing general counsel services in-house at RE/MAX of Boulder.

After moving from Washington, D.C., in 1994, Matt practiced law for 13 years in Boulder before moving to Israel with his wife, Shelly. There they built and operated an art gallery and café and immersed themselves in the culture and people of his heritage.

Operating at the site of the excavation of the Tabernacle in Shiloh, they had the pleasure of hosting tourists from all over the world. “The transition from barrister to barista was easier than I expected. I may have been able to do that the rest of my life, but we missed our children far too much to be that far away from them,” he says, noting the couple has four children, ranging in age from 18 to 28.

Personally, his time in Israel allowed Matt to learn about the culture of his people and homeland, and experience what it was like to “return home,” something for which the Jewish nation has been praying for 2,000 years.

The experience also gave Matt a new appreciation of “the greatness of the United States and the society we have here, the relative high-functionality of its government and economy. Although there really is no place like home, I think it’s good to pursue your dreams wherever they may take you at any age,” he says.

The sabbatical did what it was meant to do, which was to allow Matt to clear his head, refocus on his life’s path and professional objectives, and return to the U.S. and work with a new energy.

“I recommend that everybody take a sabbatical to take a fresh look at life, unencumbered by familiar routines and surroundings; it doesn’t have to be half-way around the world,” he says.

Matt acknowledges that re-entry to life in the States has been a bit bumpier than expected, noting that his job has changed with the difficult economic times. “I’m feeling refreshed, but it’s frustrating for me, as it is for many business people, that it’s taking so long for us to get back on track.”

While practicing in Washington, D.C., in the late 1990s, Matt represented the National Sales Office of the Resolution Trust Corporation, and he sees many similarities between the stagnation in real estate today and that which crippled the savings and loan industry back then.

“The spoils are there and they will go to the swift and the imaginative," he says. "The government cannot accomplish even a fraction of what bold and creative entrepreneurs will achieve when given a free economy (not a handout) in which to operate. It’s the role of attorneys to help clients re-vision their businesses to first protect what they have and then achieve what they dream.”

In addition to real estate law, Matt also handles commercial transactions, business formations, and estate planning. He welcomes outside clients as well as provides general counsel representation to RE/MAX of Boulder.

“I appreciate the challenge of helping clients of face this economic climate,” he says. “It’s much more challenging and perhaps interesting to help create opportunities to pull ourselves up by our bootstraps – to not look to the government for a solution but create to one ourselves.”

Matt’s office is in the concierge suite in the RE/MAX of Boulder building, 2425 Canyon Blvd. You can reach Matt by e-mailing matthew@finberglaw.com or by calling (303) 717-3759. To find out more about his practice, visit www.finberglaw.com.

August data for manufacturing, pending home sales bodes well for economy

August brought good news for both the manufacturing and housing industries, which translates into a positive outlook for the general economy, as well.

The Institute for Supply Management announced that the industry’s 18 consecutive months of decline ended in August, when the PMI for manufacturing registered 52.9 percent. That’s 4 percentage points higher than the 48.9 percent reported in July and the highest reading since June 2007, when the index also registered 52.9 percent. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.

August was also the fourth consecutive month of growth for the overall economy, since a PMI higher than 41.2 percent, over a period of time, generally indicates as much. The PMI has been at 42.8 percent or higher since May.

The National Association of Realtors also had encouraging news in August, reporting that the Pending Home Sales Index, a forward-looking indicator based on contracts signed in July, increased 3.2 percent to 97.6 from a reading of 94.6 in June, and is 12.0 percent higher than July 2008 when it was 87.1. The index is at the highest level since June 2007 when it was 100.7 and pending home sale contracts have now risen for a record six straight months.

"Other buyers are taking advantage of low home values before prices turn higher," says Lawrence Yun, NAR chief economist. "Nationally, the typical mortgage payment now takes less than 25 percent of a middle-income family's monthly income to buy a median-priced home, with payment percentages so far in 2009 being the lowest on record dating back to 1970. As long as home buyers stay within their budget, mortgage payments will be very manageable."

The NAR estimates that about 1.8 million to 2 million first-time buyers will take advantage of the $8,000 tax credit this year, with approximately 350,000 additional sales that would not have taken place without the credit. Buyers have little time to act because they must complete the transaction by Nov. 30 to qualify for the credit. Unless extended, contracts signed but not completed by that date will not be eligible, as it is taking approximately two months to complete home sales in the current market.

The Pending Home Sales Index in the West the index jumped 12.1 percent to 112.5 and is 20.0 percent above a year ago. The Northeast index declined 3 percent to 78.8 in July but is 4.7 percent higher than July 2008. In the Midwest the index slipped 2 percent to 88.1 but is 8.1 percent above a year ago. In the South, pending home sales activity rose 3.1 percent to an index of 103.8 in July and is 12.0 percent above July 2008.

Index report promising while governor unveils job-creation strategy to jump start economy

The Goss Institute for Economic Research delivered good and bad news with its recent release of the overall index for the Mountain States region. The leading economic indicator for the three-state area including Colorado, Wyoming and Utah, climbed above growth neutral for July and points to improving economic conditions in the months ahead.

The overall index, or Business Conditions Index, rose sharply to 51.5 from June’s weak 41.4. An index of 50.0 is considered growth neutral with recent readings weak but improving. The July employment index inched higher to a less-than-healthy 43.5 from June’s 40.9.

The region lost jobs at a rate of 5.0 over the past three months and surveys indicate they will continue but at slower pace, says Dr. Ernie Goss, the director of the Goss Institute for Economic Research. Nearly 48 percent of business buyers said they expected more layoffs in 2009.

“On a more positive note, readings over the past several months indicate that the region's leading economic indicator has bottomed out, with the region's Business Conditions Index is likely to continue its upward trend in the months ahead,” Goss says. “I expect the regional negatives to get less negative in the months ahead as the Federal Reserve’s accommodative economic policy, federal deficit spending and a stabilizing housing market have positive impacts.”

As far as the housing market, Goss also had a positive report: “Very low interest rates, both short-term and long-term, a stabilizing housing market and aggressive federal economic policy have clearly lifted the economic outlook of supply managers in the Mountain States Region, while at the same time they have contributed to upward pressures on prices. We have yet to record any restocking of inventories for raw materials and supplies. However, I expect replenishments in the second half of 2009 to help stimulate the regional economy.”

Goss' overall outlook was promising, as well: "Colorado's economy is slowly crawling back to growth neutral according to our survey. The state is not likely to experience any positive growth until the final quarter of 2009," he was reported as saying.

Meanwhile, Colorado Gov. Bill Ritter recently unveiled a statewide job-creation strategy in hopes of quicker and stronger economic recovery.

Ritter says the Jobs Cabinet, established in 2008, will help create a highly skilled and educated workforce and improve the competitiveness of Colorado business. It is comprised of top business, economic development, education and work-force development experts, along with several members of the Governor’s cabinet.

The report, titled “Economic Competitiveness through Collaboration, Talent Development and Innovation,” offered five major recommendations:

• Collaboration: Strengthen, expand and align existing — but isolated — local education, economic development and work-force training programs to better meet the needs of the work-force.

• Engagement: Do a better job talking to and engaging employers in the job-training process so that education, economic development and work-force-training providers have a better sense of what businesses need.

• Marketing: Aggressively promote work-force development programs so Colorado businesses can use those programs instead of spending money on more expensive in-house training programs.

• Information: Develop a coordinated Web site that provides business with easy access to local work-force resources and information.

• Leadership: Provide senior executive leadership from the Governor’s office to spearhead implementation of these recommendations, measure progress and make adjustments as necessary.

“Government alone cannot fix this economy or create more private-sector jobs,” the governor said in unveiling the strategy. “But we can do our part. We can create a better business-friendly environment. We can strengthen relationships and break down silos. And we can do a better job asking businesses ‘what can we do for you?’ rather than sticking to business as usual.”

What recession?! The rich enjoy their luxury suites despite economic woes

Apparently not everyone is equal during a recession – or at least in how they are able to escape the gloom and doom that accompanies it.

According to an annual survey by Financial News’ sister publication, Wealth Bulletin, not only are the rich and famous still spending time in the world’s most luxurious and expensive hotels, but they are paying more – sometimes twice as much – to do it. For instance, guests staying in the Royal Penthouse Suite of the President Wilson Hotel in Geneva, Switzerland are paying $65,000 for the four-bedroom, six-bathroom penthouse – twice as much as last year – making it the most expensive hotel room of 2009.

The hotel's management blames the increase on "buoyant demand" from government officials and U.N. diplomats, according to an article in The Wall Street Journal.
Compared with the Royal Penthouse Suite’s price, the $35,000 a night to stay in the the Ty Warner Penthouse at the Four Seasons Hotel in New York appears affordable … almost. Its price increased a modest $1,000 from last year’s, considering prices for the most luxurious hotel suites have risen by an average 10 percent this year.

Herbert Ypma, founder of the Hip Hotels brand, told The Wall Street Journal that high-end hotels are benefitting from their clientele taking more time off than usual and, therefore, spending more time in their luxurious suites. "Money was never the issue – time was,” Ypma says.

Hoteliers attributed the increased demand to government officials, including President Barack Obama and his entourage, filling in the gap left by business travelers. Obama, for instance, took over the entire Ritz-Carlton Hotel in Moscow for three nights in June. The President Wilson Hotel representative says high-level government officials are fuelling demand for its hugely expensive Royal Penthouse Suite.

Vivian Deuschl, spokeswoman for Ritz-Carlton Hotels, told The Wall Street Journal that demand is also coming from wealthy leisure travelers who are “are taking one big vacation, but pulling out all the stops.”

The 10 most expensive hotel suites in the world, according to Wealth Bulletin's survey for 2009, are:

1. The Royal Penthouse Suite, President Wilson Hotel, Geneva – $65,000 per night

2. Ty Warner Penthouse, Four Seasons Hotel, New York – $35,000 per night

3. The Presidential Suite, Hotel Cala di Volpe, Costa Smeralda, Sardinia – $34,000
per night

4. Villa La Cupola Suite, Westin Excelsior, Rome – $31,000 per night

5. The Presidential Suite, Ritz-Carlton Tokyo – $25,000 per night

6. The Bridge Suite, The Atlantis, Bahamas – $22,000 per night

7. The Imperial Suite, Park Hyatt Vendôme, Paris – $20,000 per night

8. Royal Suite, Burj Al Arab, Dubai – $19,600 per night

9. Royal Armleder Suite, Le Richemond, Geneva – $18,900 per night

10. The Ritz-Carlton Suite, The Ritz-Carlton, Moscow – $16,500 per night