Has the Worst of the Foreclosure Crisis Passed?

Posted on October 30, 2012 by Mike

 

Cattle Grazing in Blanco Basin Near Pagosa Springs, Colorado

Yes, it has. Since the downturn began in 2007, foreclosure properties have taken their toll on values throughout Southwest Colorado. Many homeowners found themselves in financial trouble, with mortgage loan balances far ahead of their adjusted market value. For some of these “underwater homeowners” there was little to do other than wait things out. For other less fortunate borrowers, their hands were forced when second mortgages became due, or when their adjustable rate first mortgage reset. A number of purchasers acquired their properties using one or more of the creative financing options the banks were offering at the time. In some cases the special mortgage product allowed purchasers to get into homes with no money out of pocket. In others, the initial interest rate was set artificially low, with an upward adjustment set 3-5 years out. Some of these initial rates were as low as 1.9%. Monthly payments were set at 60% or more below the level of normal market rate interest for fixed rate mortgages at the time. When these mortgage rates were reset, many of the borrowers were unable to keep up with the new payment schedules. The monthly payment amounts doubled and tripled for some borrowers. Attempts to refinance again into a fixed rate mortgage were unsuccessful as values had declined to the point that many borrowers no longer had any equity in their homes.

For some time it appeared as though the banks were genuinely trying to work with borrowers to keep as many people in their homes as possible. After a while, it became apparent that the heavily promoted federal programs were doing little if anything to stem the tide of foreclosures. Only a handful of borrowers were assisted by the programs that were so heavily publicized and very few of those resided here in Pagosa Springs or Durango, Colorado.

Fast forward to today. Mortgage interest rates are at historic lows. Qualified borrowers can obtain 30 year fixed rate mortgages below 3.5%.  In some regions of the county, values have increased by 15%-25% above the floor established during the downturn. Within certain price ranges homes have gone up as much as 40% in the Phoenix market. Lenders there are cautious about playing into a re-inflation of the market. Values here in Southwest Colorado have not experienced the increases of Phoenix, but, thankfully we are finally seeing a diminishing influence of the foreclosure and distress sales. The pipeline of new foreclosures has declined and we expect the negative impacts to lessen significantly during the next 12-24 months. Some borrowers that were foreclosed or forced into short sales in 2006-2008 are already re-qualifying for home loans. Where they have repaired their credit and saved up a down payment, lenders have shown a willingness to get them back into home ownership. Rental rates have shifted now making ownership more economical in many regions.

The health of the second home or vacation residence market really depends largely on the level of consumer confidence that exists within the geographic markets buyers are drawn from. Historically, Durango and Pagosa Springs, Colorado have attracted buyers from Arizona, California, New Mexico and Texas. Presently consumer confidence is strongest within the state of Texas. Its residents did not experience the drastic meltdown in residential real estate values that were seen in Arizona and other states. Also, the price of energy has remained relatively strong throughout the recession and that has kept employment figures within Texas fairly strong while other states experienced significant job losses. We have experienced a resurgence of buying interest from residents of Texas during the downturn and I expect it will continue unless energy prices declined considerably. Some would say this is a mixed blessing. We are glad to have Texans buying second homes and other real estate in our area. Their value baseline tends to be less favorable than residents of other states such as California and Arizona where residential values are generally much higher. For our firm, we welcome buyers, from anywhere and we have helped folks from as far away as Australia and Switzerland to become involved in property ownership here. The Texas Buyers coming to Pagosa Springs and Durango can continue to support our market until consumer confidence among folks in Arizona, California and New Mexico improves enough to make them feel comfortable investing in a second home here in the mountains again.

 

Posted in Archuleta County, Colorado Landowners, Housing Recovery, Pagosa Springs | Comments Off on Has the Worst of the Foreclosure Crisis Passed?

3rd Quarter Real Estate Summary

Posted on October 11, 2012 by Mike

 

 

I did a quick review of the Pagosa Springs Area MLS Stats through the 3rd Quarter of 2012. The numbers were not too impressive. When compared to the same period of last year, Total Dollar Sales Closed was off by 13%. Looking more closely at the figures and isolating the Single Family Residence data showed more unimpressive numbers. As compared to the prior years’ first three quarters, the Closed Sales Dollar Volume was down by just under 16%. The total number of units sold were also off, 173, versus 197 for the prior year. As expected, the median and average selling prices were down as well. To some degree these figures reflect the continuing negative impact of foreclosure or distress sales. On the positive side, the inflow of foreclosure properties into the Archuleta County pipeline is lessening and we expect to see a greatly reduced impact on prices as we go into next year.

The figures here at Pagosa Source for the first half of the summer were discouraging as fewer people were in the area looking at property, due in part perhaps to the fire in the Upper Piedra as well as the negative publicity surrounding the terrible fire northwest of Colorado Springs. For the second half of the summer, our numbers here at Pagosa Source turned around significantly as we closed the sale of three or our $1 million + listings within a two week period. We worked hard to achieve those sales and are continuing to be as creative as possible to generate more sales. The number one source of new business for Pagosa Source is referrals from past and present clients and customers, for which we are extremely grateful.

A positive factor at work in the market place is the extremely low mortgage interest rates available to qualified borrowers. Currently, lenders are quoting rates at or slightly below 3.5%. By anyone’s measure, that is extremely cheap money. When interest rates were at 5.5% (still cheap by historical standards) the monthly payment required to service a mortgage of $200,000 was $1,135. At 3.5% interest, the monthly payment amount is $898, a savings of $237. For anyone that does not currently own a home, now is the time to buy. There is a good selection of inventory, with very favorable pricing, compared to where the market was in 2005-2007. Additionally for those that qualify, interest rates the lowest they have ever been. If you are looking at buying, carefully consider several important features. Location: buy where you have well-maintained access and good central water and other utilities. Consider owning within an area that has protective covenants. Historically, values do better with land use protections than without. Also, stay within a reasonable distance from town and the conveniences of shopping and medical services. We have seen a continuing trend for a closer-in preference among Buyers over the last five years. Be very careful buying bank-owned properties and don’t go that direction without using the services of a qualified broker with experience dealing in that type of property. It is a totally different experience than buying from a private party. If you have questions or concerns, give me a call without cost or obligation at 970 264-7000.

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Guest Report from Travis “Buck” Kingman III

Posted on September 29, 2012 by Mike

View From the Pagosaw Saloon

Thoughts on Pagosa’s Reservoir Hill

I was over to the Pagasaw Saloon last night in Pagosa
Springs, Colorado, getting a little hair off the dog that bit me the night
before and come across a some guys that was talkin bout that Reservoir Hill
project there in town. They was sayin how in the old days, that hill was
witness to a lota courtin and in fact, there was the beginins of a lotta  families up there. Seems back then it was a
handy place where a guy could take his girl fer a look at the stars and the
twinkling lights of town. They said under the ether of that view, and with the
help of a little Boon’s Farm Strawberry Hill, or a snort or two of Mad Dog
20/20, an ole boy could sometimes get well beyond first base with his gal. Outa
that, The Hill (that’s what they used to call it) kinda became a place that
stuck in their minds as special, beins what got conceived up there, so that’s
one of the reasons some folks is against changin it.

Anaway-some other fellars in the bar was sayin there’s secret
government plan underway to transfer the alien community from Archuleta Mesa up
there to The Hill and nobody’s supposed to know. That got me thinkin. I seen a
lot of them blacked out SUV’s with no plates on em when I was in town earlier
in the year. And, when I was movin cattle off DeRosset’s place up next to the
top of the Mesa a couple years back, I seen them Black Ops guys on the back of
his ranch and they run me outa there. They said they was patrolling the area in
their Humvees for the Injuns, but they didn’t look like no Injuns. They had
black military gear on and wasn’t none too polite in escorting me outta there. Guys
I know out there twixt the San Juan River and Montezuma sez there’s been some
recent animal mutilations, including a horse that ended up with weird tattoos
and fishing tackle pierced onto its face. They think them alien fellars are
getting stirred up again like they did when that guy tried to develop the
Archuleta Mesa Ranch ten years back.

Apparently there’s a group of folk comin to the Town
Meetings fightin the move by Disneyland to put PagosaWorld up there. Buford,
the one drinker in there with a real bad case of stink breath sez those Disney
folks are determined to get that park built up there and have even brung in
George Lucas, that fellar that done Star Wars to negotiate with the aliens down
there other side of Edith. Supposedly he was joined by some high powered
attorney outa Dallas by the name of Rosey that’s gonna be sure Disney gits what
it wants. He and Lucas is supposed to give them alien beings some jobs at the
park and in his next movie if’n they agree to keep their underground city
inside Archuleta Mesa.

This gal who was sittin two stools down from me heard us
talkin and she offered her two cents worth. She said she been there for 30
years and she seen them aliens more than once, even before she was sent to
detox. Seems she wuz out trappin fer pelts on the Mesa early one winter and
come across a big ole burn hole up in the trees. She said this creepy looking
thing with a big head and no hair on em come up outta that hole and squeeked
sumpin to her in some alien tongue. She got so scared she ran down the other
side of the Mesa and kept running til she got into Dulce. She said the Tribal
police refused to help her and she never went out there again. She said her husband,
Clovis went out there to check things out and never returned. She filed a
missin person report and nobody ever followed up. She’s thinkin if they do move
them aliens to Reservoir Hill, her husband may show up again, though she said
she might not recognize him.

Another gal in there by the name of Faylene sez the real
reason folks is against fixin things up on The Hill is cuz some of them
newcomers got some wacky tobacky plants growin up there. Seems they dropped a
big long extension chord they plugged in to put growin lights in to keep them
pot plants a growin. Faylene sez she seen those people in the Farmers Market and
the Folk Festival sellin their crops and they is the same ones that show up at
the public meetings speakin out against any development on The Hill.

Finally, another fellar named Cooter chimed in with his
opinion on why some folks is against putting anything up on The Hill. Cooter
sez it’s all about keepin some endangered wildlife species protected. According
to him there a rare kinda miniature skunk that makes its home up there and The
Hill is one of the few places that skunk is reproducing. The animal protection
folks is trying to get The Hill designated as a National Monument to the Rocky
Mountain Dwarf Skunk and they are expecting President Obama to declare it so,
just as he done fer Chimney Rock. Accordin to Cooter that tiny skunk packs a
mighty wallop of stink, unlike any other skunk. He sez the Injuns thowed him
into the Pagosa Hot Springs way back when, and that’s how they got the smell
them springs got. (A former owner of them springs always told me it was the
smell of money.)

After hearin all these stories I realized things ain’t right
in Pagasaw. Maybe after a couple more Jacks and branch water things will look
better. That’s the View from the Pagasaw Saloon-

See ye all next time I’m in town-

Travis “Buck” Kingman III

Posted in Archuleta County, Colorado Landowners, Pagosa Springs, Property Rights, Reservoir Hill, Wal Mart | Tagged | Comments Off on Guest Report from Travis “Buck” Kingman III

Pagosa Springs Business Report 1st Half 2012

Posted on July 7, 2012 by Mike

Head Count Up- Bag Count Down!

We are well into the summer tourist season, past the Memorial Day and July 4th holidays. The first half of 2012 is now in our rear view mirror. The local economy has produced mixed results thus far, with some improvements in sales tax and lodging tax receipts and a slight increase in reported employment figures. In informal discussions with Main Street merchants, several have commented that the head count is up but the bag count is down, indicating that perhaps we are seeing an increase in the number of visitors, but their spending is restrained. Given the choppy and fragile economy, cautious spending behavior should be expected. This is likely to be the case until real growth in non-government employment improves consumer confidence.

Fortunately, some of our visitors and vacation home owners have decided the present real estate buying opportunities are too good to pass up. With savings accounts paying less than 1%, bond market returns generally disappointing and mixed results from the stock market, some investors have chosen to place a portion of their funds in real estate here in Southwest Colorado. In many cases, buyers are acquiring improved properties far below replacement cost, and commercial land and buildings at a fraction of where prices were just a few years back. Some investors are purchasing lender-owned properties, others are purchasing from private parties exiting the market with a substantial penalty rather than waiting for conditions to improve.

The Risk Takers are the first to recognize and capitalize on opportunities before the greater number of investors and consumers confirm the positive momentum of the market. They scoop up properties early while the crowds are still on the sidelines. They require and are rewarded with greater returns on their investments.  More
cautious investors trade greater returns for lower risk, each party establishing the risk-return ratio they are comfortable with. Both are essential to the market, and each complements the other in a recovering economy.

For those with the necessary level of risk tolerance and some discretionary investment cash, there are substantial opportunities for growth and profit within the present real estate market here in Pagosa Springs as well as Durango, South Fork and Creede. If these opportunities interest you, please give me a call or drop me an email.

Pagosa Real Estate Summary

It is interesting to hear the different opinions and feelings of where things are in the local real estate world. Often opinions are based on the local rumor mill and a few isolated and invalid samples from the total market activity. In this report, the facts are presented. The Total Closed Sales Volume for “All Classes” of real estate for the first half of 2012 increased 4.3% over the first half of last year. Closed Sales for the first half of 2012 totaled $41,970,380 as compared to $40,248,597 for the first six months of 2011, an increase of 4.3%. The total number of properties sold was
228 versus 194, an increase of 17.5%.

The Median and Average prices for “All Classes” of real estate have declined when compared to the figures reported for the first half of 2011. The market reported more units sold, and more total dollar volume, but declining prices. The average and median sales prices were down 11.3% and 3.5% respectively. “All Classes” includes single-family detached, multi-family, manufactured homes, building lots, land, ranches, farms commercial, etc. So, for the broad measurement, sales were up, but prices were down.

The current pattern is somewhat expected as the market is clearing out distress properties and bank-owned real estate ahead of firming up values and returning to a more sustainable rate of appreciation, in line with normal supply and demand components. The speculative home building portion of our local real estate market has effectively evaporated during the last four years. The supply side of the housing equation has not increased during the downturn, and this factor will have a more significant and positive impact on pricing when the market enters a stronger recovery phase.

Home Prices, Sales and Inventory Levels

Sales of Single Family Detached Homes are down for the first six months of 2012 as measured to the first half of 2011. This category of real estate comprises approximately 70% of the total dollar volume of real estate transactions within the county, certainly the most significant benchmark to monitor.

Closed Sales totaled $30,028,674 versus $36,190,345 for the first half of last year, a decline of 17%. The number of single family homes sold during the first half of 2012 was 113, as compared to 115 for the first half of 2011. A closer look at the numbers also shows the Average and Median prices for single family homes have declined as compared to the first six months of 2011. During the first half of last year there was one sale that skewed the figures slightly upward. That was a sale reported at $3,125,000. By removing that sale from the total and also removing the highest reported sale for the first half of 2012, the total Closed Sales Volume is still down over 13%.

Closed Sales 1st Half of 2012 & Supply of Homes by Price

$150,000- $250,000- 37 sales, 117 active listings, a
19 month supply.

$250,000- $500,000- 35 sales, 160 active listings, a
27.4 month supply.

$500,000- $750,000- 8 sales, 58 active listings, a
43.5 month supply.

$750,000- $1,000,000- No sales reported for
the first half of 2012 with 31 active listings.

$1,000,000- $1,250,000- 2 sales, 9 active listings,
a 27 month supply.

$1,250,000- $2,000,000- 1 sale, 29 active listings, a
174 month supply.

$2,000,000+ No sales reported for the first
half of 2012 with 15 active listings.

As the above figures show, some price ranges are significantly more over-supplied than others. For homes priced above $1.25 million there is a huge surplus of inventory. Sales in the upper price range often compete with new construction, where a very affluent client will prefer to have a home built to their specific plans on land of their choosing rather than acquire another owner’s dream home, even when the cost differential is quite substantial. They choose this route because they can.

This is still a strong Buyer’s market as the transaction data conclusively shows. We continue to see an increasing number of Buyers from Texas and fewer Buyers from California. The Arizona housing market is improving, as is the employment picture there, so we may see more folks returning to Southwest Colorado from that state in the months ahead.

If you would like additional details on the local real estate market or have questions about anything presented in this report, drop me an email at MikeHeraty@frontier.net, call me at 970 264-7000, or drop by our office- Pagosa Source Real Estate Advisors at 286 Pagosa Street, Pagosa Springs, Colorado.

Note: Data presented was obtained from CREN MLS and internal real estate database records. Home Sales and Inventory figures exclude manufactured homes, condos, townhomes, duplexes and timeshare units. Contact Pagosa Source Real Estate Advisors for additional information.

 

 

Posted in Archuleta County, Colorado Landowners, Housing Recovery, Pagosa Real Estate, Pagosa Springs | Comments Off on Pagosa Springs Business Report 1st Half 2012

WHO OWNS PAGOSA?

Posted on March 6, 2012 by Mike

With the current controversy swirling around Wal-Mart’s plan to build a store here in Pagosa Springs, some of the opinions stated in Letters to the Editor as well as the public forums have centered on “ownership” of Pagosa Springs. Some residents whose families have lived here for several generations claim the area belongs to them. Some of these residents have shared their discomfort with more recent arrivals that they perceive as wanting to change Pagosa to their vision of an ideal small town. Others that have lived here only ten years or so claim their “ownership” is more important than others and that their wisdom regarding what a future Pagosa should look like is more enlightened than anyone else’s view. It has been interesting to observe the various opinions and perspectives. I am sorry to say that much of this has become somewhat divisive, which is not good.

Because I do a lot of research of county records to identify and stay ahead of the changes in our local economy, I thought it would be interesting to look into who really “owns’ Pagosa, at least as far as its real estate is concerned.

Did you know that less than half the property on our tax rolls is owned by “Locals”? According to the County Assessor, there are 18,952 properties here in Archuleta County.   58% of the properties in our county are owned by “non-residents”.  These “non-residents” make up a large percentage of the total property tax revenue collected by Archuleta County to fund the goods and services provided to residents of our community. County records indicate only 8,032 of the properties on the assessor’s rolls are owned by people that reside in Archuleta County. A total of 10,418 or 55% of our county’s properties are owned by residents of the State of Colorado. 264 of the properties are owned by folks living in Durango, with another 107 owned by residents of Denver and 79 properties owned by residents of Colorado Springs.

Texas continues to be a big state for Pagosa Area property owners. As of the start of this year there were 2,100 properties owned by residents of Texas, representing about 11% of the properties in the County. I know from our internal records that 2010 and 2011 saw a large number of Texans acquiring property here for the first time. Their economy has remained relatively strong through the recession and they have not experienced the real estate melt-down following years of high levels of appreciation that impacted so many other states.

Nearly an equal number of properties are owned by residents of California and New Mexico, 1,243 and 1,246 respectively. This ratio has changed from ten years ago when New Mexico had significantly more Archuleta County property owners than California. Arizona residents own 949 properties here in Archuleta County. The breakdown of ownership states after Texas, New Mexico, California and Arizona is pretty spread out, except for the state of Florida. Presently there are 555 properties owned by residents of the State of Florida. Oklahoma is the next concentration of ownership with 336 properties.

As I looked over the ownership records I realized that Pagosa belongs to lots of people from many different places, with various backgrounds, and a variety of different viewpoints. Much like America as a whole, Archuleta County represents a variety of stakeholders, each important and significant in their own way. From my experience, each adds something to our community, and each is entitled to a voice in how we shape our future.

Presently, the political system and voting structure within the state, county and town determine how much of a voice a property owner and/or resident may have on many matters. Still, even those stakeholders that presently do not have a vote do have a voice. There are members of our Town and County leadership and government that are interested in the opinions of those that have made a financial investment in the area though they do not presently have a vote.

In my opinion,  “Outsiders” bring a perspective to the residents that can be beneficial. Occasionally the residents of the forest can’t see their trees are diseased or in need of a different forest management plan. “Outsiders” can bring a viewpoint not infected by old history or prejudices that can impair the vision needed to move towards a successful future. Instead of the “Us vs. Them” perspective, it would be more productive to think how we can all work together to address the challenges facing our community.

Check the links below for interesting articles on America’s largest landowner: America’s Largest Landowner

For more information on “ownership” of Archuleta County, or any real estate related matter, give me a call at 970 264-7000, or drop me an email at:

MikeHeraty@frontier.net

Be sure to visit our website at www.pagosasource.com

Posted in Archuleta County, Colorado Landowners, Pagosa Springs, Property Rights, Wal Mart | Tagged , , , | 1 Comment

HORMONES TO DRIVE HOUSING RECOVERY!

Posted on February 29, 2012 by Mike

Those are not my words, but those of the Oracle of Omaha, Warren Buffett, one of the most successful investors in the world. In his annual Letter to Shareholders released at the end of last month he said he had been “dead wrong” a year earlier when he predicted a rebound in U.S. home prices would begin within a year. Still, this year he is again betting the U.S. housing market recovery will get underway for a different reason: hormones.

 

According to Mr. Buffett, young people have stayed at home, moving in with parents and in-laws rather than setting up their own households.  “Housing will come back – you can be sure of that… Every day, we are creating more households than housing units. People may postpone hitching up during uncertain times, but eventually hormones take over,” Buffett wrote in the letter to shareholders in his investment company Berkshire Hathaway. “And while ‘doubling-up’ may be the initial reaction of some during a recession, living with in-laws can quickly lose its allure.”

In an appearance on CNBC on February 27th he added “houses are another attractive investment at current prices.” He went on to say he might buy a couple hundred thousand homes if only he could figure out a way to manage them effectively. He said he isn’t very handy. “Single-family homes are really cheap now too,” Buffett said.

When you look at the holdings within Berkshire Hathaway you will note among the 80 subsidiaries in the portfolio are several companies that are tied directly to the housing market. Among them are Acme Brick, Clayton Homes and Shaw Carpet. In 2006 those companies contributed $1.8 billion of pretax profits to Berkshire while last year their contribution was only $513 million. Buffett certainly has reason to want the housing recovery to gain strength.

Any other words of wisdom from Mr. Buffett?

Further into the interview-

According to the world’s most successful investor, the reason buying a house and taking a low interest rate mortgage makes perfect sense is simple:  “ it’s a leveraged way of owning a very cheap asset now. That’s as attractive an investment as you can make.” 

So, what holds so many Americans back from taking the advice of Mr. Buffett? The same thing that paralyzes so many investors—fear. Overcoming that fear and moving forward against the cautious masses is one of the characteristics that have made Warren Buffett the world’s most successful investor. We can learn much from his history.

If you would like information on any real estate related matter here in Southwest Colorado, please give me a call at 970 264-7000. You can also drop me a line at:  MikeHeraty@frontier.net.

Also, be sure to visit our website at www.pagosasource.com

 

Posted in Berkshire Hathaway, Housing Recovery, Pagosa Real Estate, Warren Buffett | Comments Off on HORMONES TO DRIVE HOUSING RECOVERY!

Alamos, Sonora, Mexico and Pagosa Springs

Posted on February 21, 2012 by Mike

This blog entry will not have much to do with real estate. If you want or need specific real estate data or assistance, drop me an email at MikeHeraty@frontier.net, or call me at 970 264-7000.

ALAMOS, SONORA, MEXICO

I recently returned from a trip to northern Mexico at the edge of the Sierra Madres to the town of Alamos within the State of Sonora. Interestingly, the town is about the same size as Pagosa Springs. It is a Spanish Colonial Mining Town founded in 1681 following the discovery of silver in the area. Because of the great wealth created from nearby silver mines, scores of large colonial Spanish mansions were built in the town. Many were destroyed in the early 1900’s before Americans began to rediscover the area in the 1940’s. A number of the families living in Alamos can trace their heritage back to first settlers that came to work the mines.  Presently there are a number of Americans that maintain homes there for the winter months, and a few that live there all year, though I have found the summer heat to be quite intense. Like Pagosa Springs, Alamos has struggled during the recession to continue to attract tourists that are willing to spend money locally. Unlike Pagosa Springs, they have also had to deal with all the negative press relating to the drug wars that continue to plague many parts of the country. Though there has not been any drug violence in Alamos (it is far enough off the cocaine highway) the number of visitors from the U.S. has declined sharply and the town has seen a significant reduction in U.S. tourist dollars flowing into its coffers. Interestingly, those funds have been replaced, by and large by visitors from within Mexico. Alamos has been the location for the filming of a Novella (Mexican Soap Opera) which has been tremendously successful. They have been in town for the summer months, which historically have been the months most hotels see few visitors. In December of last year they filmed a full feature movie in the area. When it is released later this year into the Mexican market, Alamos expects to see more visitors as the movie includes some interesting history of the area.

The residents, business owners and town employees and leaders work hard to keep their city clean, safe and friendly. They do a good job of promoting Alamos with a series of events scheduled throughout the year. While I was there last month the 28th Annual Festival Alfonso Ortiz Tirado was underway. This is a music and art festival named after a famous opera singer and doctor that was born in Alamos in 1893.

This year performers came from Puerto Rico, Brazil, Cuba, Costa Rica and other Central and South American countries. The following link will take you to the Festival Program Guide- get ready to polish up on your Spanish:  Alamos Festival         The event was attended by loads of Mexican nationals, many from within the region, but many from as far away at Mexico City and Oaxaca. About a third of those attending the festival were foreigners, from Central America, Europe, South America and Gringos like myself from the U.S.  Everything was very well organized, events began and ended on schedule and provided everyone with a fabulous variety of musical performances. Thursday evening the group Puerto Rican Power played for the crowd and had everyone on their feet dancing the salsa:  Friday evening the group Opera Prima Rock performed a two hour tribute to the music of Queen. I was amazed how popular their music was and how many members of the audience knew all the lyrics. The group had everyone on their feet for the encore “We Are the Champions”.

 

OPERA PRIMA ROCK 

Saturday evening the Italian Tenor Alessandro Safina performed. In 2007 he recorded a duet with British Soprano Sarah Brightman for her Symphony album and joined her on her Symphony World Tour for 2008 and 2009. His vocals and his orchestra were fabulous. Following his performance,  Callejoneada con la Estudiantina Dr. Alfonso Ortiz Tirado completed the music celebration with all of the musical artists dressed in 17th century Spanish costumes, parading through the streets and alleys of Alamos playing traditional songs and telling stories. This went on until the wee hours of the morning. In all, the experience was wonderful.

Anyway, what I found most interesting is how well attended the Festival was. You had to travel 30 miles west of Alamos to the city of Navajoa to find lodging if you had not made a reservation at least two months earlier. The Festival has been sponsored and coordinated by a group of stakeholders including the Town of Alamos and surrounding communities, the State of Sonora the National Institute of Fine Arts, with commercial financial support from Coca Cola, Corona, and Telmex. This is a festival I would highly recommend to any music and culture lover. The people are warm and friendly, lodging is great within Alamos if you plan ahead. My two favorite lodging facilities in Alamos happen to be owned by Americans: Hacienda de los Santos and Hotel Colonial.

 Hacienda de los Santos, one of three pools.

 Both of these hotels are exceptional. Within HDLS is the Poncho Villa Cantina, where Poncho Villa stood after entering the town. If you are a Tequilla drinker, you will find over 500 different bottles of the spirit within the bar. If you can’t find one you like, you’d better think about changing drinks!

 

 

 Pancho Villa Tequilla Bar at Hacienda de los Santos

Hotel Colonial, Alamos. Janet Anderson, Proprietor.

The restaurants in Alamos are very good and very economical.  I love the food at Hacienda and Las Palmeras is a great spot for lunch or a casual dinner. Terisita’s Panaderia y Bistro is my favorite for a cappuccino and breakfast pastry, a great place to start the day and check email with their WiFi connection.

 Outside Seating at Terisita’s Panaderia Y Bistro

 

You can reach the town of Alamos by driving a little over one hour south from Ciudad Obregon, where you can catch a flight from Phoenix on Aero Mexico with a connection in Hermosillo. Alternatively, if you don’t mind a longer and much more economical journey, you can take a first class luxury bus with on board video sets and Wi-Fi from Phoenix or Tucson. While in town I did check out the local real estate scene. Not much had changed from my previous visit in June of last year. A few properties are moving, but very slowly and at prices well below the peak of 2007. Few Americans are buying and many more are trying to sell. Very few Sellers have shown a willingness to greatly reduce their asking prices. Instead, they seem determined to remain patient, a concept that seems more abundant within Mexico.  The decline in buying interest from Americans has, to some extent been partially offset by a renewed interest from Mexican nationals.  It was also interesting to see the increase in Canadians in Alamos.  Alamos Gold of Toronto, Canada owns a huge gold mining and milling operation just west of Alamos which is targeting production in excess of 150,000 ounces of gold for the year, generating gross revenues of over $200 million. Perhaps this investment in the area will create more visitors to Alamos from our northern neighbor. I initiated a discussion with a resident American of creating a Sister City relationship with Pagosa Springs. The Town of Alamos currently has a Sister City relationship with an Arizona community, but nothing with any Colorado towns. It might be a mutually beneficial relationship, given the similarities of the towns. If you think you would enjoy the wonderfully interesting culture of Old Mexico, I highly recommend you consider a visit to Alamos, and I would suggest visiting during the Festival Alfonso Ortiz Tirado in January. Be sure to book your trip early in order to obtain good local lodging.

Quite Street in Alamos at 6:30 a.m.A Quiet Street Scene in Alamos at 6:30 a.m. the day after the end of The Festival.

 

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PAGOSA SPRINGS AND ALBUQUERQUE–“What Up With That?”

Posted on February 20, 2012 by Mike

Is the Albuquerque Real Estate Market Important to Pagosa Springs?

Good question. Yes, actually, the Albuquerque economy is important to Pagosa Springs for several reasons. Historically, a large number of second home owners came to our area from Albuquerque. Today we still have a good number from Albuquerque and the Santa Fe area. Albuquerque is our closest neighbor of any real size and it has weathered the current recession relatively well. It continues to benefit from defense spending with several military installations as well as the large number of folks employed at Sandia Labs. Also, on the West Side of Albuquerque, Intel has had a major presence with several expansions and increases in employment.

So, our neighbor to the south is important to us and we benefit when their economy is doing well. I recently received a report on their real estate market from a broker I work with there. The numbers are encouraging. Though the average selling price for single family homes is down slightly, the number of transactions is up and the total dollar volume is up. Closings are up over 13% from the prior year. Also, the amount of inventory on the market in Albuquerque has declined by nearly 22% over last year. The Absorption Rate now indicates that Albuquerque has a 7 month supply, down from a 10 month supply in July of last year. These figures confirm their real estate market is improving and that will be good for Pagosa Springs. If our community, through the Town Tourism Committee, the Chamber of Commerce, the Downtown Merchants Association, Board of Realtors and Builders Association, can come up with a creative and effective marketing campaign, perhaps we can attract more affluent visitors from Albuquerque.

For many years the timeshare operators pulled visitors up from New Mexico with free golf, dinners and balloon rides in exchange for sitting though a sales presentation. Perhaps we can attract more Albuquerque visitors by communicating the unique qualities and experiences Pagosa Springs has to offer. I have confidence in the marketing creativity members of our community can come up with.

For information on real estate in the Pagosa Springs or Durango area, be sure to visit our web site- www.pagosasource.com. Also, if you would like to discuss your real estate concerns or goals, please give me a call at 970 264-7000, or, drop me an email at: MikeHeraty@frontier.net

Thanks,

Mike

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First Glimpse at 2012 and Some Insights On Bank-Owned Properties

Posted on January 22, 2012 by Mike

Initial results recorded in our local MLS indicate we are ahead of last year in the first three week of the New Year. Total closed sales volume for the first three weeks was $3,570,000 as compared to $1,928,700 for the first three weeks of 2011. There were 13 closings for 2012 compared to 9 closings for the first 21 days of last year. The initial closings for 2012 included one sale at $1,350,000 with the highest dollar sale recorded in early 2011 of $454,500. Even adjusting for the effect of the high dollar closing, the figures clearly indicate we are starting 2012 with better results than the beginning of last year.

As discussed in my earlier article on the Year End Real Estate Results posted January 2nd, challenges remain in our local economy that will continue to impact our ability to experience any sort of sustained economic recovery. Still, the early results would indicate we are off to a start that confirms a slowly improving set of real estate market statistics.

Recently I met with representatives of two of our regional banks to discuss the values and marketing of land inventory they have acquired through foreclosure. During the boom years of 2002-2007, the market absorbed land inventory of all types at a fast pace while prices appreciated beyond all expectations. It seemed back then that an investor or developer could acquire land at the then market price, wait a short period of time and resell it at a substantial profit. For the developer, by getting zoning and entitlements for future development, value could be increased exponentially.  It was within this environment that local and regional banks began to provide financing to both land developers and investors here in SW Colorado. Appraisals confirmed values by the number of Comparable Sales that were closing and by discounting the projected future cash flows that the developers projected within their business plan. Back then it was rare for a lender to require a Feasibility Study to validate the assumptions made by the borrower-developer regarding projected selling prices, market share and absorption rates. In many cases the lenders knew they could package the loans with others into collaterized mortgage ‘ (“CMO’s”) and pass the future risk on to other investors. In some cases the lenders retained a small percentage of the loan as well as the loan servicing. Additionally, they often participated the loan among other banks, and sometimes those sales or participations had buy-back provisions. In other cases the regional banks simply held the debt as portfolio loans and accepted all the risk. So long as all went well- no worries. Of course as we all have the clear vision now provided by looking in the rear view mirror, things began to unravel in the real estate world, and all did not go well.

Land inventory is presently the most over-supplied real estate category within our market. Commercial land is at the top of the list because the demand has dropped so significantly that there are few sales actually closing. This makes valuing commercial land very difficult. My objective in valuing a property for an owner is different than an appraiser. For my Sellers, typically the objective is to move the property at the best possible price, within an acceptable timeframe. In addition to reviewing the historical data, I look more closely at the current and projected future market conditions to estimate the ratio of supply and demand. It is important to know many similar properties have sold in the prior 6-12 months, as well as how many are presently on the market. I further review the properties for sale to determine how many are lender-owned, or likely to become lender-owned. Our local MLS will not provide all the details needed to properly assess current market value. A close look at the data within the County Recorder’s Office, discussions with local lenders and a review of our in-house foreclosure database provides the details which help more clearly define the market forces.

Without a sufficient number of sales closed during the prior 6-12 month period, one has to look further back in time. For our area, this still doesn’t provide much useful data, even going back another 12 months. Ultimately when end-user demand has nearly evaporated from the current market, the value of land drops to that level needed to attract purely speculative investors. These “Bottom Feeders” are the brave souls that will wade back into the swamp before it has been drained and all the alligators have exited. These are the risk takers that analyze the market carefully and decide to step in ahead the point in time the investing public sees a solid real estate recovery trend. In return for bearing a very high level of risk, they require a very high potential rate of return. They will only buy at the price they feel minimizes further downside risk. They typically diversify their investments knowing some will do really well, but some will not. In the technology world, these risk takers are known as Venture Capitalists. The name is probably equally appropriate for the high risk, early phase real estate investors.

For the banks that now own an increasing share of the vacant commercial land within our area, they have some difficult choices. In order to liquidate these assets they will likely be forced to accept considerably below what the property was last appraised at. In some instances they will have to sell below what they have written the value down to. If they choose to hold the asset waiting for the market to improve, they must bear the cost of property taxes and P.O.A. dues and be comfortable with the possibility of more downside risk. Further complicating the decision are the requirements of the bank examiners as well as their auditing firm. Taking a loss further impairs their capital and reduces their lending capacity.

Though in today’s economy a bank’s cost of capital is extremely low (think how low a rate your savings account earns today) banks do not want their lending constrained. They need to be able to make good loans when the demand is present. In order to do so, they have to maintain a certain “capital ratio” or net-worth level that is mandated by the banking regulators. When they sustain loan losses in excess of the reserves they have set aside, their capital is reduced and they must either raise capital by selling stock or other assets they have unrealized gains in, or, reluctantly, they must reduce their lending activities and reduce their total assets.

At times it is difficult to understand the decisions banks make regarding the sale of their real estate. Unlike private investors, they have auditors, banking regulators as well as shareholders to answer to. In today’s challenging economy, with financial regulations changing continuously, they have their work cut out for them. Like all of us, our regional banks want things to improve sooner rather than later.

You will find a number of interesting articles discussing the tough choices facing many of our regional banks within this magazine:

http://www.mortgageservicingnews.com/    If you would like information on any property in Southwest Coloroado, be sure to check our website: http://www.pagosasource.com/

 

 

 

 

 

 

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THANKFULLY WE HAVE GOOD SNOW AT WOLF CREEK SKI AREA

Posted on January 12, 2012 by Mike

 

Though our Wolf Creek Ski Area has the best snow in Colorado, (or nearly anywhere in the Rockies) we do need some fresh powder. The Ski Area is doing a good job grooming the runs, but without some additional snow in the next 7-10 days, it may start to get a little thin and hard packed. For those of us that live here, this year’s snow has been a bit of a disappointment, except for the great conditions during the months of October and November. Normally our base would be another 12-36 inches deep by this time in January. Wolf Creek Ski Area saw it earliest opening day this year due to some great storms that dumped an abundance of snow and temperatures that stay low up on the mountain. While I was there last weekend I spoke to several skiers that were experiencing Wolf Creek for the first time. They usually skied in Summit County, at Keystone, Breckenridge or Copper Mountain. When they looked at the snow depth up there, they decided our area was the place to ski. I met skiers from Minneapolis, Omaha, Kansas City and Orange County, California. All were impressed with our Ski Area and high praises for the mountain grooming and the good food in the Main Lodge. Hopefully those visitors will tell others and we will see more new skiers later this year and beyond. On Sunday it was College Day and Wolf Creek Ski Area had a mountain full of college students taking advantage of good skiing conditions and cheap lift tickets. Everyone seemed to be enjoying their friends and the sunny day on the slopes. This week things have quieted down a bit with a few visitors still in town on semester break and extended Christmas vacations. The restaurant owners I have spoken to seemed pleased with the volume of business they did during the Christmas holidays. As the normal seasonal business cycles work here in Pagosa Springs, everyone now has to hunker down and wait for the influx of tourists and visitors during Spring Break. The early indications are that we should see numbers improved from last year. Much depends on our weather and the snow conditions at other resort areas in the Rockies. This is historically a slow time for real estate in SW Colorado. We typically get few Buyers during ski season. Some will look during the winter and return in the early summer to get serious about owning property here. We have seen some Buyer traffic, mostly focused on the best buys available within the available inventory. We have not seem many further price reductions this winter as normally Sellers settle to wait out the winter, hoping for better selling conditions in the spring and summer. So far, the number of new foreclosure filings looks to be improving. We will wait until the end of this month to see if the backlog we have been hearing rumors about materializes. If not, it may well be that we are in fact past the worst of the market correction and the likelihood of further price erosion may be very limited.  I recently viewed a chart of each of the 50 states which categorized them as to how many homes have negative equity. Colorado looked pretty good, especially when compared to AZ, CA, FL and NV. You can click the link below to the article: http://www.kcmblog.com/2012/01/06/negative-equity-state-by-state/  If you would like to view all of the properties available within our area, be sure to visit our website: www.pagosasource.com   If you have questions or comments, drop me a line by email: MikeHeraty@frontier.net  or give me a call at 970 264-7000. Thanks for taking the time to read this.  Mike

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