9 Reasons to Buy Investment Property Now

Compliments of Kennen Cohen A §1031 Qualified Intermediary

9 Reasons to Buy Investment Property Now

J. Paul Getty famously said, “Buy when everyone else is selling and hold when everyone else is buying.” Many commercial brokers believe that present market conditions provide an unprecedented buying opportunity to lock in significant real estate investment returns. Despite the opinion of some real estate professionals, however, many investors remain on the fence. While each investor must carefully consider their own financial objectives and risk tolerance before jumping back into the market, we’ve listed a few reasons investors should consider in assessing today’s real estate purchase opportunities:

1031 Exchange Opportunity - Investors with low basis properties may utilize Internal Revenue Code § 1031 to defer tax on the sale of one underperforming asset to acquire one or more discounted replacement properties that may enhance cash flow and provide higher long term investment returns.
Attractive Purchase Prices - Many distressed sellers (and some banks) are selling investment properties at deep discounts and accepting offers that are below current replacement costs. Recent reports indicate that lenders are selling foreclosed properties (often referred to as ‘real estate owned’ or “REO” property) at an average discount of 28% below prices being paid for comparable non-distressed properties in the same market.
Historically Low Financing Costs - The Fed’s stimulus efforts, such as QE2 (“Quantitative Easing 2”), have resulted in historically low interest rates, making the cost of debt service exceptionally attractive. Qualified real estate investors can take advantage of today’s low interest rates to bolster cash flow and lock in better long-term investment returns.
Inflation Hedge - With many economists predicting that inflation will increase at some point in the future, hard assets, like investment real estate, can provide a hedge against the declining value of money in an inflationary environment. Additionally, ownership of leased real estate can provide an investor with increased income as rent rates also tend to rise in inflationary periods.
Yield - Financial institutions are paying very low yields on money market accounts and other conservative investments. In contrast, many investment properties are generating returns in the 7-9% range, providing considerably better yields than many other competing investments.
Less Competition - Foreign ownership of U.S. investment real estate is increasing. Foreign investors see U.S. real estate as a solid investment in a stable economy, and the lower value of the dollar has made U.S. real estate an even more attractive bargain. These two trends will increase demand, which will drive up prices on certain types of investment property. By buying now, investors can stay ahead of the competition.
Desirable Product Classes - Some classes of investment property are experiencing considerably more demand than supply. For example, in the multi-family segment, demand for rentals has increased as foreclosures have mounted and there is little new multi-family construction in the pipeline to meet such increased demand. As a result, multi-family rents are increasing and many experts project this trend to accelerate.
Worst Price Declines are Over - Property values nationally have declined by 30% or more since the market peak in 2006,. Many economists believe we are at an important pivot point where prices will stabilize and begin to increase (albeit at lower appreciation rates than in the past). If investors wait too long, they may find they are facing competing bids and higher prices to close. Buying before demand picks up in the nearly inevitable recovery locks in today’s bargain prices.
Real Estate is Local - Despite national statistics about real estate prices, most investors are aware that real estate is local and supply/demand and investment returns are determined by local market conditions. Many investors are using 1031 exchanges to exchange out of areas that are not projected to perform well and into areas where the local economy is more robust and investment returns are more favorable.
Financial professionals tell their customers it is almost impossible to ‘time the market’ and purchase investments at the very lowest point and later sell these same assets at near market peaks. The concept is fraught with many problems and, as a result, most financial advisors caution customers to not pursue this approach. Despite this advice, investors often wait until it’s too late to purchase and miss opportunities. Don't be left out.

Colorado has 9 of Top 500 High Schools Nationwide

Newsweek

These are challenging times for secondary education. Cash-strapped school districts are cutting back; No Child Left Behind mandates test results; parents and students stress unabated. NEWSWEEK, which has been ranking the top public high schools in America for more than a decade, revamped its methodology this year in hopes of highlighting solutions. We enlisted a panel of experts—Wendy Kopp of Teach For America, Tom Vander Ark of Open Education Solutions (formerly executive director for education at the Bill & Melinda Gates Foundation), and Linda Darling-Hammond, Stanford professor of education and founder of the School Redesign Network—to develop a yardstick that fully reflects a school’s success turning out college-ready (and life-ready) students. To this end, each school’s score is comprised of six components: graduation rate (25%), college matriculation rate (25%), AP tests taken per graduate (25%), average SAT/ACT scores (10%), average AP/IB/AICE scores (10%), and AP courses offered (5%).

America's Best High Schools 2011

Rank Out of Top 500

29 Peak to Peak Charter Lafayette, CO
130 The Vanguard School at Cheyenne Mountain Charter Academy Colorado Springs CO
212 Fairview Boulder CO
285 Rampart Colorado Springs CO
304 Monarch Louisville CO
403 Rock Canyon Highlands Ranch CO
419 Lyons Lyons CO
434 Conifer Conifer CO
483 Heritage Littleton CO

Denver ranks high for rents

Denver Business Journal
Date: Friday, June 24, 2011, 8:58am MDT - Last Modified: Friday, June 24, 2011, 11:40am MDT

Metro Denver had the 55th-highest typical apartment rents in 2009 out of 385 U.S. markets, according to a new analysis of U.S. Census Bureau data. Among the 65 largest metro areas, Denver had the 23rd highest rents that year.

The analysis is by G. Scott Thomas in his "On Numbers" blog for The Business Journal, the national online business-news affiliate of the Denver Business Journal.

Median contract rent in 2009 was $778 a month in 2009 in the Denver-Aurora metro area, Thomas reports.

Typical rents in Boulder were higher that year: $933, 22nd highest out of the 385 markets in Thomas' report.

San Jose, Calif., was America’s most expensive market for renters in 2009. The median monthly cost for an apartment there was $1,340. Eighteen U.S. markets had median apartment rents over $1,000.

Thomas reports that rents tend to be highest in California, Hawaii and heavily populated Eastern states such as Connecticut, Massachusetts and New York.

The biggest bargains, on the other hand, are in smaller Southern and Midwestern markets; Lumberton, N.C., had the lowest median rent as of 2009, $352.

Colorado unemployment rate dips to 8.7%; national up to 9.1%

By The Denver Post
Posted: 06/17/2011 08:24:11 AM MDTUpdated: 06/17/2011 08:57:12 AM MDT

Colorado's unemployment rate dropped by one-tenth of a percentage point last month to 8.7 percent, according to a state report issued today.

Nationally the unemployment rate for May inched up to 9.1 percent from 9 percent a month earlier.

Employers in Colorado added 4,200 nonfarm payroll jobs from April to May with government accounting for 900 of them, according to the Colorado Department of Labor and Employment monthly report.

It's the second consecutive month of job gains and the fifth in the last eight months, the report shows.

The largest gains last month were in the construction and trade industries, followed by transportation and utilities. The number of construction jobs, though, is still nearly 9 percent lower than a year ago.

Through May, the unemployment rate is down two-tenths of a percentage point from the 8.9 percent logged in May 2010, the agency reports.

The national unemployment rate in that same time period — May 2010 to May 2011 — dropped from 9.6 percent to 9.1 percent.

Year to date the largest job gains were in education and health services, followed by leisure and hospitality.

Dolores County in the Four Corners region held the highest unemployment rate in the state last month at 15.4 percent, followed by Pitkin County at 13.3 percent.

Denver's unemployment rate rose to 9.2 percent last month from 9.1 percent a month earlier. The unemployment rate for the Denver metropolitan area was 8.3 percent in May, up one-tenth of a percentage point from April.

The largest monthly decrease in the unemployment rate occured in San Juan County, from 15.6 percent in April to 10.3 percent last month.

The greatest monthly increase in the rate was in Pitkin County, which went up by 4.5 percent.

Own Your Own Lighthouse-WolfTrap Lighthouse for Sale

Imagine owning a piece of history! Wolf Trap lighthouse and vacant waterfront lot make this a unique waterfront opportunity. The lighthouse needs restoration but has had a new roof installed recently. The waterfront lot offers a launching spot to the lighthouse. Some soil studies have been done for the waterfront lot which may be buildable. Lighthouse is tax exempt and may have other tax credit advantages.

Price: $288,000
Status: For Sale
3 Bedrooms
1,500 sqft
Single-Family Home
Built In 1894
Lot Size: 0.67 acres

Josh McDaniels' home in Greenwood Village for sale

By Penny Parker
The Denver Post
Posted: 06/16/2011 12:45:56 PM MDTUpdated: 06/16/2011 12:49:55 PM MDT

Former Broncos head coach Josh McDaniels will likely take a hit when he sells the Tuscan-style home in Greenwood Village that he bought in May 2009.

McDaniels and his wife, Laura, originally paid just less than $2.5 million for the four-bedroom spec home, but the asking price is now $2.2 million, according to Brian Nelson, the listing agent with Re/Max Masters.

The home was recently appraised at $2.65 million, Nelson said. McDaniels left Colorado after he was fired by the Broncos in 2010. He now works as the offensive coordinator for the St. Louis Rams.

Furniture is not included, but the coach left behind four flat-screen TVs that are part of the package. For more information on the 8,444-square- foot spread in the swanky Preserve neighborhood, call Nelson at 303-915-0377.

Colorado, Denver reap record visits in 2010

By Jason Blevins
The Denver Post
Posted: 06/16/2011 01:00:00 AM MDT

Go ahead, call it a comeback.

Both Colorado and Denver saw record visitation and visitor spending in 2010, marking a full recovery from two years of economic turmoil.

Luring a bigger slice of the country's travelers, Colorado and its capital broke all kinds of records last year. According to a report released Wed nesday by research firm Longwoods International, Colorado welcomed a record 55.1 million visitors in 2010, including a highest-ever 28.9 million overnight visitors who spent $8.8 billion, another record.

Denver, flush with revenue from a 2005 voter-approved lodgers tax that fuels tourism marketing, hosted a record 12.7 million visitors who spent $3 billion, yet another record.

With the state's 26 ski resorts surging past 12 million skier visits for the first time in two seasons, it's safe to assume Colorado has regained its position in the nation's tourism market.

Richard Scharf, president of Visit Denver and chairman of the Colorado Tourism Office board, called the results "really phenomenal."

Colorado Gov. John Hickenlooper set aside $13 million for annual tourism funding for the next two years, keeping the budget close to pre-recession levels. And with other states — such as Washington, Texas and Florida — pulling back on tourism funding, the recent momentum in tourism visitation marks an opportunity to expand Colorado's slowly increasing 2.6 percent share of the country's tourism market, Scharf said.

"They are looking at (tourism marketing) as an expense, not an investment," Scharf said. "We are showing that we are growing our share at the expense of other destinations."

Al White, who spent more than a decade in the Colorado legislature before taking over as director of the Colorado Tourism Office this year, spent almost every day of his legislative tenure championing tourism marketing investment as a jobs creator that stirs rural economies. The latest study proves his point, with Colorado's tourism figures steadily climbing since the state restored funding in 2000. Legislators in 1992 eliminated the tax, and voters in 1993 rejected a new 0.2 percent sales tax to promote Colorado tourism.

"Now, 19 years later, we are at our old high-water mark," White said.

Orrin and Margaret Beckner came to Denver this week from Grand Junction to visit family and tour the city's museums. They once lived in Denver in the mid-1970s, and Orrin admitted: "We never imagined we'd be coming to Denver for a vacation."

Study: too few rentals for low-income families

By The Denver Post
Posted: 06/16/2011 12:14:03 PM MDTUpdated: 06/16/2011 12:14:31 PM MDT

Colorado has a shortage of affordable rental housing with nearly twice as many low-income families for the number of units available, a state analysis shows.

And the places where the burden on families is highest — where low-cost housing is least available — are Boulder and the Fort Collins-Loveland area, according to the Division of Housing at the Colorado Department of Local Affairs.

Statewide, families earning less than $15,000 a year have the largest gap with 2.1 households for every unit available, and there are 1.9 households earning less than $20,000 for every unit, the analysis found.

Rent-burdened households are those that pay 30 percent or more of income toward housing. The study found that 47 percent of all renter households paid at least 30 percent of their income for housing; 24 percent of all renters required at least 50 percent of their income to meet housing costs.

Boulder had the highest percentage of renters — 32 percent — paying at least half their income for housing, and 48 percent, also highest, paying at least 35 percent of their income.

The areas with the smallest rent burdens were in Grand Junction and Colorado Springs.

In metro Denver, there were 2.3 households for every unit of affordable rental housing for families making less than $20,000 per year.

Things to Consider When Setting the Price to Sell Your Home

By Move Inc.

Every reasonable owner wants the best possible price and terms for his or her home. Several factors, including market conditions and interest rates, will determine how much you can get for your home. The idea is to get the maximum price and the best terms during the window of time when your home is being marketed.

In other words, home selling is part science, part marketing, part negotiation and part art. Unlike math where 2 + 2 always equals 4, in real estate there is no certain conclusion. All transactions are different, and because of this, you should do as much as possible to prepare your home for sale and engage the REALTOR® you feel is best able to sell your home.
What is your home worth?

All homes have a price, and sometimes more than one. There's the price owners would like to get, the value buyers would like to offer and a point of agreement which can result in a sale.

In considering home values, several factors are important:
The value of your home relates to local sale prices. The same home, located elsewhere, would likely have a different value.

Sale prices are a product of supply and demand. If you live in a community with an expanding job base, a growing population and a limited housing supply, it's likely that prices will rise. Alternatively, it's important to be realistic. If the local community is losing jobs and people are moving out, then you'll likely have a buyer's market.

Owner needs can impact sale values. If owner Smith "must" sell quickly, he will have less leverage in the marketplace. Buyers may think that Smith is willing to trade a quick closing for a lower price -- and they may be right. If Smith has no incentive to sell quickly, he may have more marketplace strength.

Sale prices are not based on what owners "need." When an owner says, "I must sell for $300,000 because I need $100,000 in cash to buy my next home," buyers will quickly ask if $300,000 is a reasonable price for the property. If similar homes in the same community are selling for $250,000, the seller will not be successful.
Sale prices are NOT the whole deal. Which would you rather have: A sale price of $200,000, or a sale price of $205,000 but where you agree to make a "seller contribution" of $5,000 to offset the buyer's closing costs, pay a $2,000 allowance for roof repairs, fund two mortgage points, re-paint the entire house and leave the washer and dryer?

How much is too much?
Because all transactions are unique there is flexibility in the marketplace. The amount of flexibility depends on local conditions.

For example, suppose you're selling a townhouse. Suppose also that there have been five recent sales of the model you own and that sale values have ranged between $200,000 and $210,000. You now have an idea of how your home might be priced. In a strong market perhaps you can ask for $210,000 or a little more. If the market has slowed, $210,000 may be a reasonable asking price, but perhaps more than the final sale price.

Here's another scenario. Imagine that you live in a community of Victorian-style homes, most of which were built in the 1920s. All the homes are different in terms of size, condition, modernization, style and features. In such a neighborhood, an average sale price is just a statistic without much practical meaning. On a single block one home may sell for $400,000 while another is priced at more than $1 million. The average price may be outrageously high for one home and staggeringly low for another.

Making the Transition from Renting to Buying

Here are a few points to consider as you weigh the pros and cons of home ownership.
by Move Inc.

No doubt you've thought of how nice it would be not to write a rent check every month, but have you done the math? Nothing can make you feel more secure than owning your own house, unless buying a home will create financial problems of its own. Here's a discussion of the most important financial costs associated with home buying to stack up against your monthly rent check.

Instead of the standard deduction on your income tax return, most homeowners itemize their deductions, allowing them to deduct the following (and save on taxes): home mortgage interest, property real estate taxes, state income taxes, gifts to charity, medical and dental expenses over 7.5% of your income, personal property taxes, and most moving expenses.

Figure your monthly payments if you were to buy. Compare your monthly rent to a calculation of the following: purchase price and down payment of your home, your annual income (and debt!), property tax rate, home insurance rate, interest rate and length of loan. For best results, contact a home-buying specialist.

Other costs
Expect other costs to homeowning. Along with your monthly mortgage and down payment, there's property tax and homeowners insurance premiums, and fees known as "closing costs." These include everything from a credit check to "points"- interest paid up-front in return for a lower interest rate. Others: title insurance fee, survey charge, attorney/escrow fees, and loan origination. So do your research!

Long-term equity
No discussion of home ownership is complete without considering the long-term benefits of owning. What your house will be worth when you sell depends on the state of your mortgage and the housing market, in particular. Consult with real estate professionals, read up, and do your math to get a realistic sense of your future home value.

Lifestyle and mobility
Mobility is part of renting. Freedom to take the next job or move for a relationship is easy to come by when you rent a home. And when you do move, there's often more choice of specific location, and price, when you seek rental housing. Want an apartment near a park in western Philadelphia? You may find an easier time looking to rent than buy.

Many renters say they love knowing they're not tied down - and don't have to assume financial responsibility for their living space. This is of course a big difference from home ownership: who does the work.

Who does the work
While you don't receive the joys of making a place truly "your own," you do have limited costs in renting. Landlords are responsible for general upkeep and safety, allowing you to focus on the fine points. Homeowning, in contrast, puts you in the driver's seat. You shoulder the expenses and reap the rewards of home improvement - both great and small. Think about whether you want to put in additional time and money.

Choices, choices
Whether you decide to take the step of home ownership is a personal choice with its own ups and downs. Hopefully we've helped dust off the magic ball a bit; what you see in your future is up to you!

Top 15 highest-performing major markets

Top 15 highest-performing major markets
Clear Capital: Latest price data indicate market may be stabilizing
By Inman News
Inman News™

U.S. home prices continue to slide, though at a slower rate than in the winter, according to a report from data and valuation firm Clear Capital, released Thursday.

The firm's Home Data Index fell 2.3 percent on a quarterly basis, compared with a 4.9percent drop in last month's report. Clear Capital considers rolling quarters, which means that it compares data in the last four months to the previous three months. In this case, February through May is compared to November through January.

"The latest market report results through May suggest that home prices are starting to ease back from the heavy declines seen over the winter," said Dr. Alex Villacorta, director of research and analytics at Clear Capital, in a statement.

"We are still far away from the strong demand needed to fully turn things around for the housing market; however, it is clear from the initial spring sales data that prices are softening, suggesting stabilization in the market."

Year-over-year, national prices fell 7.6 percent in May to levels last seen in 2000, the report said.

The Midwest saw the worst declines on both a year-over-year and rolling-quarter basis, declining 10.9 percent and 4.9 percent, respectively.

In the South, prices fell 7.8 percent year-over-year and 1.8 percent quarter-to-quarter. The West fared slightly better, declining 7.5 percent annually and 1.6 percent quarterly.

The Northeast saw the smallest declines, falling 3.3 percent year-over-year and 1 percent quarter-to-quarter.

Bank-owned homes (REOs) accounted for 33.9 percent of overall sales in the last rolling quarter, about flat compared to last month's report.

"The median price paid for distressed properties has risen over the past three quarters, which is a good sign that the REO market segment is seeing increased activity toward the upper end of this space," Villacorta said.

Seven of the 15 top-performing markets saw quarterly price gains this month, compared with zero in last month's report, the firm said. Prices in the Washington, D.C., metro area saw the biggest increase, rising 4.5 percent, followed by St. Louis (2.2 percent), Pittsburgh (1.6 percent), and New York (1.5 percent). Only Pittsburgh, New York and Washington, D.C., experienced year-over-year gains.

All 15 saw their REO market share decline compared to last month's report.

Source: Clear Capital

Detroit led among the top 15 worst-performing markets, posting a 13.2 percent quarterly decrease, followed by New Orleans (-10.9 percent), Hartford, Conn.(-10.7 percent), and Cleveland (-10.1 percent).

Ten of those markets experienced double-digit year-over-year drops, with Columbus, Ohio, posting the sharpest slide, down 19.2 percent.

Source: Clear Capital

Natural Red Rock Cave Transformed into Spectacular Home

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Utah Home-Natural Red Rock Cave Transformed into Spectacular Home-$575,500.

Property Details

Cave Palace Ranch is a unique home located on 110 acres, rich in history. A natural red rock cave has been transformed into this spectacular home. Gorgeous Master Suite and open floor plan, high ceilings, and over-sized windows allow natural light. All the amenities you are accustomed to. Home has a 12' by 20' bunk house with a 6' loft and front porch, a 50' by 30' metal shop with a 10' ceiling and large sliding doors. Includes a 12' by 20' shed. Multiple well permits and water rights included.

Solar power, well and propane. State of the art solar powered system and inverter. 24deep cycle batteries as well as a backup gas powered generator with 9 gallon gas tank. Deep well pumps fresh, clean water at 125 gallons per minute year around. 1,000gallon propane tank. Parcel is surrounded on 3 sides by State and Federal land. Closest neighbor 3/4 mile away. Abundance of wildlife. Buyer to verify all information.

Beds 3 bed
Baths 2 bath
House Size 4995 sq ft
Lot Size 110.00 Acres
Price $597,500
Price/sqft $120
Property Type Single Family Home
Year Built 2009
Garage 5

By Yahoo Real Estate

Renting on the rise: Loveland-area vacancy rates dropping

By Madeline Novey
The Loveland Reporter-Herald
Posted: 06/07/2011 10:31:20 AM MDTUpdated: 06/07/2011 10:31:30 AM MDT

Though Larimer County home prices have held steady in recent months, reports show still that it's trendy to rent.

Vacancy rates fell 16.6 percent in the first quarter of 2011 in five metropolitan areas including Fort Collins-Loveland, Greeley, Grand Junction, Colorado Springs and Pueblo, according to a report released by the Colorado Division of Housing and conducted by the University of Denver's Gordon E. Von Stroh.

Those areas' figures, plus those reported in metro Denver and 33 other markets, showed an overall decrease in the statewide vacancy rate to 5.5 percent in March 2011, as compared with March 2010's number of 6.6 percent.

In Loveland, the vacancy rate decreased from 5.5 percent in the third quarter of 2010 to 4.1 percent in the first quarter of 2011.

Those in the local renting business said they haven't seen demand this high in years. And the reasons behind that might be surprising.

Get more on this report at The Loveland Reporter-Herald.

10 Best Markets for Real Estate Investors

Data-driven analysis of hundreds of markets reveals opportunities in South, West
By Inman News
Inman News™

Share ThisIn an in-depth, data-driven special report, "10 Best Markets for Real Estate Investors," Inman News analyzed hundreds of housing markets nationwide to develop a list of those that may be best suited for investors.

The full report -- available at no charge at www.inman.com/reports/10-markets-invest/ -- took into account economic, housing and demographic data from sources including median sales price data from CoreLogic, loan data from Lender Processing Services, foreclosure sales and discounts statistics from Realty Trac, InvestorScores from SmartZip, walkability scores from Walk Score, and population and unemployment data from the U.S. Census Bureau and the Bureau of Labor Statistics.

The data analyzed suggested that the 10 best markets for investors are: Indianapolis-Carmel, Ind.; Winchester, Va.-W.Va.; Gainesville, Fla.; Tucson, Ariz.; Tallahassee, Fla.; Hagerstown-Martinsburg, Md.-W.Va.; Salt Lake City; Richmond, Va.; Gainesville, Ga.; and Winston-Salem, N.C.

Seven out of the 10 markets are in the South, two are in the West, and one is in the Midwest. None of the markets are in the Northeast.

The results of the analysis reflect population growth and improving employment. In the past decade, the South has seen the biggest jump in population -- up 14.3 percent to about 114 million people -- and the West saw 13.8 percent population growth, to nearly 72 million.

Four of the top 10 markets are state capitals and at least three others benefit from proximity to either a state capital or the national capital.

Despite recent job growth, unemployment is still high across the country, and in many markets foreclosures have turned homeowners into renters. Affordability is at a record high, but as home prices continue to fall in many markets, some buyers are staying on the sidelines waiting for the market to bottom.

Investors accounted for 21 percent of transactions in the first three months of 2011, and 33 percent of transactions during that period involved cash buyers -- the highest share since NAR began tracking that statistic at the end of 2008.

By contrast, first-time homebuyers have accounted for an average 32 percent of purchases for the past two quarters, which is the lowest share since fourth-quarter 2008.

Distressed property sales including foreclosures and short sales accounted for 40 percent of existing-home sales in March, NAR said, and investors bought 54 percent of those properties, according to economic research firm Capital Economics.

Only 39 percent of investors used a mortgage to finance their purchase in 2010, compared with 80 percent of primary-home buyers, according to NAR's 2011 Investment and Vacation Home Buyers Survey.

The survey showed that the biggest proportion of investors bought their property through a real estate agent (44 percent). Another 20 percent bought directly from an owner they knew, and 17 percent bought through a foreclosure or trustee sale.

The most popular reason cited by investors for buying an investment property was to rent it out, followed by "to diversify investments/good investment opportunity."

The median length of time investors planned to own their purchase was 10 years. More than half of investor buyers (52 percent) said it was at least "somewhat likely" that they would buy another vacation or investment property in the next two years.

Investors tended to be more confident about the housing market than primary homebuyers: 77 percent of investors said "now is a good time to purchase real estate," compared with 68 percent of primary-home buyers.

Mortgage Insurance Cancellation: The Myths and Realities

By Brien McMahon

RISMedia, June 3, 2011—When it comes to private mortgage insurance (MI), there are several myths that exist that make buyers reluctant to consider a conventional loan with MI as an option when purchasing a home. One of the more common misconceptions is that cancelling MI is a difficult—not to mention time-consuming—process.

The irony is that the majority of buyers don’t harbor those same beliefs or reservations about an FHA insured loan when, in reality, FHA coverage may be less easily cancelled, or take longer to cancel, than MI.

HPA Makes Cancellation Clearer
When it went into effect as a new federal law, the Homeowners Protection Act (HPA) of 1998—which applies to both FHA and MI insured loans—required lenders and servicers to provide disclosures regarding MI for residential loans obtained on or after July 29, 1999. Prior to this, consumers were responsible for requesting MI cancellation if they met two factors: one, their loan balance was paid down to 80 percent of the property; and two, they had a good payment history.

While many lenders obliged consumer requests to drop MI coverage, consumers had sole responsibility for keeping track of their loan balance.

The HPA established three different times when a lender or servicer must notify consumers of their rights.

At loan closing, lenders must disclose:
• The right to request MI cancellation and the date on which the request can be made
• The requirement that MI be automatically terminated and the date on which this will occur
• Any exemptions to the right to cancellation or automatic termination
• A written initial amortization schedule for fixed-rate loans only

Each year, loan servicers must send borrowers a written statement that discloses:
• The right to cancel or terminate MI
• An address and telephone number to contact the loan servicer for determining when MI may be cancelled

When MI coverage is cancelled or terminated, lenders must send a notification to borrowers stating:
• MI has been terminated, and the borrower no longer has MI coverage
• No further MI premiums are due

Termination of Coverage
Under the terms of the HPA, mortgage lenders or servicers must automatically cancel borrower-paid MI coverage when the mortgage has amortized to 78 percent of the original property value, with all unearned premiums returned to the borrower within 45 days of the cancellation or termination date. This provision also requires that the borrower be current on mortgage payments required by the terms of the loan, and if the loan is delinquent on the date of automatic termination, a lender must terminate the coverage as soon as the loan becomes current.

Cancellation of Coverage
Also under the HPA, a homeowner has the right to request MI cancellation when the mortgage balance reaches 80 percent of the original property value. All payments must be current, meaning a homeowner must not be 30 days late on a mortgage payment within one year of their request, or 60 days late within two years.

However, a borrower can only initiate a cancellation request for FHA based on their prepayment of the loan, and even then, it can only be requested beginning five years after the loan origination date.

With MI, homeowners can request cancellation based on prepayment of the loan, as well as an appraisal. Despite falling property values, it’s possible for homeowners to gain enough equity in their home to request cancellation in less than five years based on a home appraisal.

Why This Matters to Agents
By understanding these rules and what they mean for homeowners, real estate agents can educate their buyers to help them better evaluate allof their home financing options based on facts rather than myths.

This is even more important considering the FHA’s recent price increase, which has reduced buyers’ purchasing power and increased monthly mortgage payments.

Brien McMahon is chief franchise officer of Radian Guaranty Inc. More information may be found at www.radian.biz.

Denver-area unemployment declines to 8.3 percent

Posted: 06/01/2011 12:46:09 PM MDTUpdated: 06/01/2011 01:06:09 PM MDT

Unemployment in the Denver metropolitan area continued to decline in April, dipping to 8.3 percent, according to data released today by the U.S. Bureau of Labor Statistics.

The unemployment figures for the Denver-Aurora-Broomfield area have steadily decreased from January's 9.9 percent.

The unemployment rate in February was 9.7 percent and March was 9.3 percent.

Nationally, the unemployment rate for April was 8.7 percent.

Both the 8.3 percent for the Denver area and the 8.7 percent nationally were not seasonally adjusted.

Total nonfarm employment in the Denver-Aurora-Broomfield area stood at 1,191,100 in April, up 5,300 jobs over the year, or 0.4 percent.

Nationally, nonfarm employment rose 1.1 percent from one year ago.

In March, there were 1,184,600 people employed in nonfarm jobs in the Denver metro area. In February, there were 1,175,800 people in the Denver metro area employed in nonfarm jobs.

On a non-seasonally adjusted basis, three of 10 industry supersectors in the Denver-Aurora-Broomfield area added 2,500 or more jobs from April 2010 to April 2011.

The biggest gains were in professional and business services, which added 5,700 jobs, and education and health services, which added 3,800.

Trade, transportation and utilities also added 2,500 jobs over the year.

The local rate of job growth in education and health services - 2.7 percent - outpaced the national rate of 2.2 percent for that sector.

In contrast, the national rate of job growth in professional and business services of 3.2 percent exceeded the local rate of 2.8 percent.

Three of the 10 industry supersectors shed more than 1,000 jobs over the year. Mining, logging and construction reported the largest employment loss of 5,400 jobs, followed by information which lost 2,200 jobs and financial activities, down 1,300 jobs.