Home Explodes! Evidence Suggests Common-Sense a Suspect

A very unfortunate family in Ogden lost their home this weekend. Apparently, the family was heating their home with a propane heater. The unit was leaking. Rather than removing the leaking propane tank to an outdoor area, the family cloistered it away in a part of the house where they would not have to smell it. Whoops!

BEFORE

AFTER

Let this be a reminder to all of us that safety comes first. I am moving my acetylene tanks and cans of paint thinner away from my furnace for now on.
(PHOTOS COURTESY STANDARD EXAMINER AND WFRMLS)

37 Years of Fixed Mortgage Rates

I love reading history. If anything, it helps give me perspective. It opens the mind to things that were and things that might be again. This same fascination with history is probably why I love reading charts and graphs so much. Life, economics, politics, family, the seasons...all things things run in cycles. If you understand the cycle, you can be prepared and thrive in every season.

Today's chart is on interest rates. Specifically, 30 Year Fixed interest rates:


The first thing you might notice is that big Mt. Everest looking feature that dominates the left side of the chart. We will talk about that in a moment. Our most recent history shows how low interest rates have been since 2001. The past eight years have spoiled us with cheap financing for our homes. This has been a period marked by easy credit, voracious consumerism, home equity line extractions, and overall abundant living. Two other important things also have happened during this time that have had less effect on the average person. One being the Iraq war and the other being a ballooned national debt. More recently, the national debt has gone parabolic with recent Treasure and Federal Reserve bailout packages topping 7 Trillion. See Interest Rates: The Last Days of the Lows for more thoughts on that.

Lets talk about that awful Mt. Everest feature for a moment. In the 1960s Lyndon B. Johnson instituted the Great Society. It was a huge entitlement and welfare program begun with the idea to "spread the wealth" and create a comfortable safety net for those falling into(or perpetually living in) poverty. Medicare was part of this program. Also during this time the Vietnam War began in earnest. The government needed to provide hardware, men, and ordinance to fight the war there.

In the early 1970s, inflation began to show up in the US economy. Where did it come from? Well, the money that was printed to pay for government entitlement programs and the war effort started showing up in the form of higher prices and higher wages. A vicious inflationary spiral began. Wage freezes were ordered with little positive effect. The economy entered two recessions as "stagflation" became the order of the day.

In the late 70's, years after we had left Vietnam and almost a decade after the Great Society programs were instituted, Fed Chairman Volker decided to wake the economy from the inflationary nightmare. The Mt. Everest feature on our graph is how he did it. By pushing interest rates so high, people stopped borrowing, money creation slowed to a crawl. The inflation correction took almost SEVEN years to complete. However, the correction laid the foundation for the next 30 years of relative prosperity.

Today we have an expensive foreign war that needs to be paid for. We have HUGE entitlement programs and government sponsored bailouts that we will be paying for in the future. Yet, todays interest rates are the lowest in history. So where do we go from here? My guess is up.

Riverdale City Brings Out Big Guns To Oust Rentals

More from the suburban front on rentals. Riverdale City, flush with tax revenue, is putting its money to work in its effort to eliminate undesirable rental units. I don't usually quote the paper directly but this article is concise enough that I will quote it in it's entirety:

The Redevelopment Agency Board approved up to $15,000 in incentives for owners of multifamily homes to convert them to single-family dwellings.

A zero percent $10,000 loan is now available to owners of multi-family homes to use for removing second entrances or opening up areas to make the home a singlefamily dwelling. The loans will not be due until the sale of the home and a building inspector will make sure renovations are done.

RDA Executive Director Larry Hansen wants to offer the program to everyone regardless of whether they have registered their rental with the city and are paying separate utilities. Hansen said there will be no income guidelines or credit ratings for the loans. He said homes in multi-family zones are of lesser caliber than those in single-family zones and hopes to improve the long-term quality of housing in the city with this program.

A $5,000 loan is also available to those who purchase a multi-family home with the intent to use it as a singlefamily dwelling. The loan will be forgiven if the owner lives in the home for 10 years or more, 50 percent will be due if the owner lives in the home 5 to 10 years and 100 percent due if the owner is there less than five years. Those receiving purchase assistance can also apply for the renovation loan.

“This is a positive way to mitigate issues,” RDA Chairman Bruce Burrows said, “This is a tremendous way to move forward to solve a problem we all recognize.”

Its very apparent from all this news from Riverdale and Clearfield that they want to keep a short leash on landlords. These cities are applying an ounce of prevention to thier laws to mitigate the effects of high non-owner occupancy percentages. Ogden City is applying a pound of cure to undo the effects of rediculous zoning laws from two generations ago.

ADDENDUM

Here are the links to criteria and information on Riverdale's RDA money:

1. Property Consolidation Funds
2. Buyer Assistance Programs

Riverdale City Clamps Down on Density

It seems like the suburbs are lining up to keep their communities in order. Riverdale City just changed its zoning rules to account for a "family" as three people living together. Their previous definition called for four. What this does is clamp down on the number of unrelated people living together as a "family". Imagine four college students shacking up in a single house. They each drive a car and have friends that visit frequently and intermittently. Things get quite busy at this house. Neighbors start to complain.

Ogden City instituted this type of change to its zoning years ago. It has clamped down on "families" of nefarious types living together. A house that I own as a rental has two bedrooms in it. Before I owned it, somebody walled in an entryway and made a "third" bedroom out of it. Three guys who didn't know each other each paid for a room. Occasionally friends of theirs would move in and live there for a while. This was a terrible situation with too many people living in one space. Space that was not intended for that type of use. Now the property is used by a single person and they make use of the home as it was meant to be.

Riverdale's ordinace is probably a reaction to the increased demand for rental properties. Landlords there are likely trying to capitalize from the situation and are therefore cramming people into tight spaces.

This ordinance, will put pressure on rents to increase. NOW is a good time to be a landlord.

Ogden Streetcar Study Coming Soon

Finally, the study to determine what route would be best for the Downtown Ogden-WSU-McKay Dee Hospital route is going to start.

The three possible choices are:

1. 23rd and Wall to Washington to 36th to Harrison to WSU-McKay Dee.
2. 23rd and Wall to Washington to 30th to Harrison to WSU-McKay Dee.
3. 23rd and Wall to Washington to 26th to Harrison to WSU-McKay Dee.

Place your bets on which you think the study group will find the best.

I think 30th Street makes the most sense. The rail has the potential to act as a segretator when going though residential neighborhoods. 30th Street, because it is so wide and so busy, just like Harrison Blvd, already acts as a segragator. The neighborhoods would spare being further segregated as would happen if one of the alternative routes was chosen. 30th Street also has the room to put a street car through. 26th St. might have room and 36th St. definitely does not.

Logistically and economically, this 30th St. choice makes the best sense to me. Lets see what the study group says in 2010 when done with its work.

Clearfield Re-Zoning Big Win for Landlords Not in Clearfield

Clearfield city is again in the news. The city has decided to rezone a large portion of its geography to only allow for single family residences. On top of that, grandfather clauses only allow for units provable prior to 1979.

According to the city's data, almost half of the city is rental property.

This rezone change is huge. Its going to wipe out property value for non-conforming multi-units. It may pose a logistical problem for owners who got financing for multi-unit housing but now have a single family use in the property. Market conditions are such that refinancing to better rates is difficult for landlords already. Add to that the decline in value of the property and now you have a major problem for landlords. Lenders may also have some issues since their collateral is now worth significantly less.

I have several thoughts on this decision by the city:

It is a success for Clearfield city. I have to give them credit for having the guts to institute a zoning policy that will address significant quality of life issues that are coming down the road due to the high percentage of rentals. In general terms, quality of life in a community tends to go down when the percentage of rentals is too high. The logic is that nobody has ownership in the community so nobody cares for it or about it.

On the flip side, this is a defeat and possible disaster for some landlords. Having the use of your property arbitrarily restricted by government is never fun. Some landlords may be put into financial hardship because of this rezoning. It will be interesting to see how many units were created and being used after 1979. I anticipate foreclosures as former landlords walk away from properties that no longer make sense to own. Negative cash flow and negative equity are tough positions to justify. Banks will take ownership, eat the loss in value, and resale the property at a price that makes sense for single-family home use.

This ruling is a big win for owners of legitimate rental property in Weber and Davis county. As tenants vacate the now un-rentable units in Clearfield, they will be seeking housing elsewhere. Clearfield just cut the supply of available rentals. Demand is the same. Look for higher rents because of it.

December Inventory Round Up

Here are some amazing charts. Normally we like to see inventory levels between 4-6 months in a healthy marketplace. Anything over 6 months is a buyers market.

First lets take a look at Davis County:

West Bountiful seems to be the best place to sell a home. It's the only place that isn't a buyers market. Granted, it is a small geographic area and there arn't too many homes for sale there. What is shocking to me is that inventory levels for bread and butter communities like Woods Cross and West Point are over TWO YEARS! This is not good for those communities. I expect these neighborhoods to be shell-shocked with foreclosures as job losses mount for 2009. Keep your eye on buying opportunities there.

Here is Weber County:

Weber County has a lot of small little communities that are incorporated as cities so the list is longer here. There isn't a community in Weber County that is not a buyers market right now. I am surprised here by Riverdale (6 years of inventory) and Farr West (5 years of inventory) being so high in inventory. These cities saw huge developement over the last four years. Most of the developments were large (2800 SQFT+) ramblers with two or three car garages. I guess the people who moved up into these neighborhoods are needing to move down again. Look for more buying opportunity as sellers lose jobs and banks cut prices to move inventory.

Let me again express my shock as these figures. My brain is trying to handle talking about inventory in measures of years instead of months.

Good Landlord Program Spreads to Clearfield

Clearfield city recently announced that it will be instituting a Good Landlord program much like the one in force in Ogden City. Clearfield City now requires all landlords to be licensed and pay a $27 fee per unit annually. If landlords choose to participate in the Good Landlord program, that fee will be reduced to $5.

This is a good move for Clearfield city. Ogden has had a 30% reduction in crime amoung rental units because of heavy participation in the program. Ogden's program was instituted in 2004. Ogden's non-participant fees are much higher than what Clearfield is proposing which probably accounts for the strong participation levels in the city. It will be interesting to see what percentage of landlords choose to participate in the Clearfield area and how that will affect crime statistics there.

Lessons in Owner Finance

I recently closed a transaction that involved owner financing. Given the tumultuous nature of the mortgage market, it is likely that we will see more seller financing soon.

It might be beneficial to give a quick review of how ownership and conventional financing work in order to understand how owner (aka seller financing) works.

Lets review:

CASH PURCHASE TRANSACTION
This is the most strait forward transaction. The black arrows indicate ownership or a participating interest. In this case the buyer paid cash for a home. He then receives title and owns the home. Very straight forward.

FINANCED PURCHASE TRANSACTION
This is the scenario we are most familiar with. Since we don't save enough to buy our homes outright these days, we find a bank willing to give us a loan. In this case, the "Old Mortgage Company" has agreed to give the buyer a loan. The home is collateral for the home and the bank has the right to take possession of the home if the buyer doesn't make monthly principal and interest payments (represented by the green arrow). The bank has an interest in the existing mortgage through an instrument called a Trust Deed. The Trust Deed is what allows them to foreclose on the buyer if there is a default. The Deed is recorded on the title of the property. Therefore we have represented this as black arrows tieing the bank to the mortgage which is tied to the home.

So what happens if a buyer wants to purchase a property and a seller wants to sell a property but no mortgage company can give a loan...even to the highly qualified buyer?

STRAIGHT OWNER FINANCED TRANSACTION
This transaction is a little less familiar but easy to explain. In this case, the seller has paid off the property or owns it out right. This seller may be the original cash buyer from our first chart. Now, the buyer for the property doesn't qualify or doesn't want a conventional mortgage; but, in the seller's eyes, the buyer is a good credit risk. Therefore, the seller agrees to "finance" the transaction. In this case, the buyer might pay a negotiated down payment to the seller and then have the rest of the equity in the home "loaned" to him. The buyer agrees to make monthly payments to an escrow company who in turn makes payments to the seller. The loan amount, interest rate, and payments are all accounted for by the escrow company and the seller now becomes like a bank...making interest. Notice that the seller, like the Old Mortgage company from before, has a Trust Deed on the property and can foreclose if the buyer does not make timely payments. The home is still collateral for the loan from the seller.

Now not everyone has a home that is paid for. In fact, only about a third of American's homes have no mortgage. That leaves a lot of folks out there that may want to sell a property but have an existing mortgage.

How is it possible to sell a home with seller financing if it has an existing mortgage?

ALL-INCLUSIVE OWNER FINANCING TRANSACTION
This is the most complicated form of seller financing but is probably the most necessary in today's marketplace. In this instance, the buyer can't get a loan even though they are a good credit risk. Meanwhile, the seller has an existing mortgage from the Old Mortgage Company that needs to be paid. The All-Inclusive Seller Financing transaction is our work-around to this dilemma. In this scenario, the Old Mortgage company keeps their Trust Deed on the home. They still demand monthly payments. However, the seller creates an All-Inclusive Note and Trust Deed which "wrap" around the existing mortgage. This allows the buyer to have title conveyed to him "subject to" the existing Old Mortgage Company financing. The scenario plays out like this: the buyer makes monthly payments to the escrow company toward the seller's new loan . The escrow company takes that money and makes a payment to the Old Mortgage Company to make sure they are happy. Then, the difference (if there is any) goes to the seller as profit. If the buyer stops making payments, the seller can foreclose through the power of the Trust Deed.

Lets pretend for a moment the escrow company wasn't involved and the buyer made direct payments to the seller. If the seller stops making payments to the Old Mortgage Company, they will foreclose on the seller and in turn on the new buyer. To avoid this possibility, I absolutely recommend using an escrow company as the best way to keep this arrangement clean and properly accounted for. It's good to trust those whom you make business arrangements with. Its even better to hire an impartial third-party to make sure the trusted parties are doing what they are supposed to.

CONTACT ME if you would like to learn more about how these arrangements work.

Ogden City and School District Working Together

News came out this week that Ogden City and the Ogden City School district have entered into an agreement to work together regarding land development and use within the city. Currently, the School District owns some hodge podge lots and obsolescing schools that it wants to make useful. The city also owns some land that is adjacent to many of the school's parcels. The school district needs land to build schools and the city wants land for more possible in-fill development.

The arrangement they have made will be good for the city. It includes some land swaps and also some colusion on development on other areas.

I think the most interesting part of this arrangement is the land swap proposed.

The above photo is of Dee School and the LDS Church Pioneer Ward building. I will let you guess which building is which. (HINT: The church is not the military looking edifice in the right of the photo.) The Dee lot is expansive and consumes the entire center section of the block. It would be an ideal location for new residential construction. This location is only two blocks from The Junction. The school is steel and reinforced concreste with no walls in the classroom areas. The floorplan is circular in design. Think of the USS Enterprise from Star Trek. That's what it feels like inside the school. Its an architectural atrocity.


Here is a photo of the front of the school. Not much different than the back...or the side...or the other side. Dee has been scheduled to close and then unscheduled to close multiple times in the last couple of years.

The proposed land swap is for city land at 20th Street and Jackson Avenue.


This parcel of land happens to sit adjacent to the school district land that runs along 20th Street down to Monroe. It makes sense for the city to exchange this land with the school district. It is close to the school district headquarters campus and large enough for an elementary school.

Another interesting colusion involves land at 24th and Adams. I am unsure what the possibilities are for this land. The large space is owned by the city and the building just to the north is owned by the district.

It will be interesting to watch and see how this partnership helps make better use of the land that each partner has stewardship over.

Buyers Further Fortify Their Bunkers

Bad economic news has taken timid home buyers and sent them running for cover. Although Utah's economic outlook is not rosy for the next year, anxiety-inducing national economic headlines have gripped buyers and kept them in their current homes or renewing leases. November's sales numbers are simply bad.


As you can see in the chart above, November sales are at par with January of this year. January is traditionally the worst month of the year for sales due to weather. In January we had 3 feet of snow on the ground. In contrast, November was particularly warm and balmy. Nevertheless, November's sales mimic those from January. Ominous.

Our running chart still shows a down trend in sales. Since December and January are softer months for sales, this trend will continue. The question in my mind is how much further can the market contract? Financing barriers started the decline, now job losses and economic woes will weigh on it. If I were to place a bet, I believe the moving trend will flatten out in April or May and stay there for a year or two...or three. Time will tell. Let's watch and see.

Historic Re-Development: Quincy and Fowler Avenues

As a compliment to my previous post Path to Better Neighborhoods, I thought I would shed some light on an interesting project underway.


This fine Arts & Crafts style home is part of the city's effort to rejuvinate the 25th block of Quincy and Fowler Avenues. Both streets boast historic grade cottage victorian homes and bungalows. They are very cute neighborhoods. This home happens to be new construction and imitates the style and character of the homes around it. Several of the existing homes in the neighborhood have already been restored.

This particular home excites me because it has so many of the features of a traditional early 20th century home. I am particularly impressed by the wanescoating, mission style light fixtures, wood casings, and doors. The floorplan is also reminiscent of older homes except with modern usability kept in mind.
This particular home is about 2600 SQFT which included an unfinished basement. There is a master suite, 3 bedrooms, 3 baths. Matching detached garage in the back


There is plenty of space in the back yard.


The kitchen is modern with a mud room leading out to the driveway.


Still plenty of room for two more period new construction homes to be built soon.
The best part about this home is that its for sale for only $189,900...well below the $220,000 you would normally pay for a home of this quality. They city is also offering special financing for this home. If you or anyone you know is interested in quality historic style housing, have them give me a call at 801-390-1480.

The Path to Better Neighboroods

There is a debate out there about how local governments can best improve neglected and aging neighborhoods. In fact, as a member of a steering committee for the East Central Neighborhood community plan, we are discussing this very aspect and what government can do to improve the neighborhoods.

There are two approaches, I will call them direct intervention and indirect.

With direct intervention, taxpayer money is used to buy, control, and/or renovate property so that it no longer is a burden on the neighborhood aesthetics and property value. Ogden City participates in direct intervention with the Home Sweet Ogden program. This is basically a HUD sponsored program facilitated through grant money from the federal level. I happen to sit on the advisory committee overseeing this grant. The city has also been involved in other direct intervention projects like the recent post on 2601 Jefferson Ave. The city has certainly taken an assertive approach in cleaning up some very awkward properties that perhaps would have been unfeasible to the private sector. The changes being made to these properties are so dramatic that their value and use will be perpetuated for generations.

The indirect approach is one that I support the most strongly. Although it includes zoning and regulations on development, it also includes a very important focus on infrastructure such as sidewalks, curbs, gutters, and streets. This focus is what we think of when we think of the traditional responsibilities of city government. It is the window dressing for the neighborhoods. However, the city needs to know that before investing in these upgrades, that a neighborhood is willing to add-to or protect and maintain this investment in the infrastructure and neighborhood.

Fortunately for our neighborhood, we have reached that point. Crews began work yesterday on removing old sidewalk and pouring new.


This summer, new curb, gutter, and approaches will be poured. I am glad this is finally happening. My contacts in the city have told me this has been on the docket for almost 2 years.

Finally, I am a big believer in infrastructure improvements because I believe they spur further growth and development in a neighborhood. The Jefferson and Eccles Historic Districts all had new street infrastructure installed. Shortly after that, hoards of buyers shopped the neighborhoods looking for homes to fix up or move into. Demand for property in those areas (and therefore property values) jumped once the infrastructure was done. I believe that the public investment in infrastructure precedes the desired private investment in properties. I have the data and charts to support this idea. City efforts to improve our streetscapes will only bring good things to our neighborhoods.

Midtown Clinic Expansion Means Demolition

Midtown Clinic is growing its parking space. I wrote about this in the previous Midtown Expansion post back in August. It looks like they finally got around to the demolition. Architecturally, I like this home that demolished, however, it was a triplex that had been scabbed together. There was a second home in the backyard as well. Very weird. According to neighbors that have been there forever, the original owner lived in the front house until they decided to retire so they built a home in the backyard for themselves and rented out the front home. I guess that worked well until the guy died a long time ago. Then the property fell into the hands of a slumlord. The rest is history...

BEFORE

AFTER

Interest Rates: The Last Days of the Lows

You have heard the advertisements for the last several years: "Refinance NOW while rates are at historic lows!". Surely, being buffeted with these ads for several years has made us quite comfortable with how low rates are. In fact, I used to ask myself, how can they go any higher? Times are so good, I can't foresee any reason interest rates would increase.

Well, I am a little wiser than I was then. All markets ebb and flow. If low rates are ebb, we are due for some major flow in interest rates.

Lets see what Mr. Nouriel Roubini has to say about it this week:

Desperate times and desperate economic news require desperate policy actions ... The Treasury will be issuing in the next two years about $2 trillion of additional debt ... These policies – however partially necessary – will eventually leads to much higher real interest rates on the public debt and weaken the US dollar once this tsunami of implicit and explicit public liabilities and monetary debt driven by rising twin fiscal and current account deficits will hit a world where the global supply of savings is shrinking – as most countries moves to fiscal deficits thus reducing global savings – and foreign investors start to ponder the long term sustainability of the US domestic and external liabilities.

Mr. Roubini is a highly competent economist and happened to call the subprime mortgage crisis well before it hit the market. In laymen terms he is saying that interest rates MUST increase due to the fact that no one will want to lend money to the U.S. unless the rate of return becomes attractive enough. All these bailout programs instituted by our government are creating inflation problems for us in the future.If you print money to pay for bills you can't afford otherwise, you create inflation. If you don't stop printing money when you have inflation, you get more inflation...and then hyperinflation. Think Weimar Republic. Think $20 for a gallon of milk. Gasoline at $14 a gallon. That is what inflation gets you. It also makes investments in financial insturments (like mortgage debt) very unattractive unless interest rates and rates of return are keeping up with inflation.

I don't know what degree of inflation is coming. The Federal Reserve has pledged bailout funds in an amount over half of the entire economic output of the U.S last year - $7 TRILLION. That kind of infusion into the money base will affect prices. It has to.

So what does this mean to you and real estate?

First, if you have an ARM or any kind of adjustable rate, and you have the ability to refinance right now, DO IT! Don't wait till next year. Do it this week. Why this week? The Fed just purchased $600 billion in agency (read: Fannie Mea/Freddie Mac) debt which has temporarily pushed the the risk for that debt lower and therefore interest rates on mortgage debt have plummeted in the last few days. Once the market adjusts pricing to compensate for future inflation expectations, these low rates of today will be gone for a generation.

You may be asking yourself "Why refinance my ARM when I want to sell my property in a year or two?". Let me answer this for you. First, you need to plan on the buyer getting an interest rate in the future. If the rate is too high, he can't buy your property. You end up being stuck with the home AND a major payment increase when your ARM resets. It will take a couple years worth of rent increases to catch up to that reset payment in a high interest rate environment. Second, if the rate is too high for potential buyers, you may be forced to use seller financing to sell the property. You can't do that if you have a wild and volatile ARM underlying as the foundation for the transaction. Seller financing works best with fixed interest rate mortgages underlying.

These reasons should be enough. Put your financing foundation on a rock of stability.

If you need a competent mortgage professional. I will gladly refer you to someone I work with.

2009 Economic Predictions From State Economist

Looks like 2009 will be the doozer we have been predicting. It will be a great year to buy real estate. Look for lots of REO, HUD, and Short Sale property due to significant job losses.

Click HERE to listen this short but informative podcast from the chief economist for the Department of Workforce Services.

Der Hypothekenmarkt Ist Verrückt!!

This is absolutely hilarious if you have been following the national housing market.

Picture of the Day - Collision Course with Wackiness

I found this home while driving around town. The creativity of some folks never ceases to amaze me. However, some things should never be done to a house. This is one of them.

Not quite a home, not quite a strip mall.

Property Reserve Inc. Makes Massive Investment In Downtown Ogden

Property Reserve Inc., the real estate arm of the Church of Jesus Christ of Latter-Day Saints, continues to invest heavily in the Ogden area. PRI is working on a new apartment complex just north of the temple site. This project complements a similar large complex completed in 1998 just to the west of the temple site.

In talking with industry insiders, the complex will have 210 or so units. They are reported to be 2 bedroom 2 bath and will rent for around $750/mo. This project will be top-end and have superior quality tenants. It will be another step in the right direction for stoking the downtown economy.


As a final note, I do find the architecture of this project rather eclectic. The roof lines are from the Frank Lloyd Wright Prairie School motif but the windows and bay windows are more Queen Ann Victorian in design. It's a rather wacky design combo in my opinion. I am sure I am only one who cares. Maybe we can call this new idea Prairie Queen architecture.

The Junction - Exciting Re-Development Continues...

Great things are going on in downtown Ogden.


Today I went down to take some photos of what is being finished. Just walking around down there had a very cool "Town Square" type of feel to it. Soon, retail stores and new residents will be moving in. Its going to be a great mixed use development.

Its reminds me in someways of the town center in Southlake, TX which is a Dallas-Ft. Worth suburb. Check out Southlake's Town Square and make the comparison for yourself. I visited there last year and was completely impressed. I am excited to see our own downtown follow a workable mixed use economic model.


The Sonora Grill and Iggy's are open and doing well. I spoke to the owner of Sonora Grill a couple week ago and he indicated that they have seen a steady increase in business since opening. It happens to be one of my favorite places to eat. Great atmosphere and great food.


The idea of mixed use is to combine several elements of a community (residential, shopping, entertainment) into one centralized location. In the above photo you can see retail space on the main floor and lofts for living on the upper two floors. People have been complaining about not having enough places to shop in downtown for quite some time. That will all change very soon.


Above is the Larry Miller Megaplex, the Solomon Center, and the Earnshaw Condominium building.
The Junction is almost 80% completed. There are a couple parcels left to develop like the big patch of dirt in the right of the above photo. However, due to the economic and financing issues facing new construction, those parcels will probably take a few years to be built out.

Ogden will be well prepared for the next uptick in the economic cycle when it happens. With attractive new office space, amenities close by, and affordability, we should see a spike in economic growth once we get through the national economic funk we are entering.

$35,000 - Victorian Gem Giveaway!

Many of you have inquired about purchasing this beautiful home. See below to learn more about how to purchase this fantastic historic gem.


Here are the requirements:



Pre-Purchase Phase

· Buyer inspects the property. Contact Jeremy Peterson at 801-390-1480

· Buyer submits application to Ogden City. Deadline is Monday, December 1, 2008.

· Ogden City screens applications and conducts a drawing on Tuesday, December 2, 2008.

· Buyer has ten days after notification to provide verification to Ogden City of ability to provide cash, in-kind, or financing of at least $235,000.

· Buyer’s architect or approved designer prepares preliminary work specifications.

· Buyer’s contractor prepares cost estimate. Buyer may not act as their own general, unless the buyer is a licensed general contractor.

· Buyer obtains an after-rehab property appraisal.

· Buyer and Ogden City will negotiate a deadline for submittal of preliminary plans and estimates.

Purchase Agreement Phase

· Buyer and Ogden City negotiate final rehabilitation work plan.

· Builder prepares final specifications and cost estimate.

· Buyer provides Ogden City verification of ability to obtain financing package.

· Buyer and Ogden City enter into purchase contract. Purchase price will be $35,000. Of that amount, $15,000 will be paid to Ogden City at closing, and $20,000 will be carried back by Ogden City as a second mortgage with monthly payments over 10 years with 3% annual interest rate.

Construction Phase

· Buyer closes purchase of home.

· Buyer closes construction loan.

· Buyer obtains approval of work by Ogden Landmarks Commission.

· Buyer enters into construction contract. Buyer may not act as their own general, unless the buyer is a licensed general contractor.

· Builder completes the rehabilitation contract.

Owner-Occupancy Phase

· Buyer closes permanent, long-term financing.

· Buyer completes rehab work plan items not required for occupancy, according to the negotiated construction schedule.


Contact me with inquiries. 801-390-1480

Riverdale Gloom

General Growth Properties, the owner of the Newgate Mall in Riverdale and numerous other malls in Utah, has announced today that it may be teetering on the edge of bankruptcy. It is near defaulting on substantial loans. In another stroke of bad luck, Mervyns, one of the Newgate Mall's anchors, announced it is closing all stores. Circuit City also declared bankruptcy this week.

This is substantial news for our area. Many retail jobs will be lost. I am unsure at the moment what a bankruptcy would do to operations at the mall. I imagine existing tenants would continue to pay rents even if a bank assumed control of the property. However, services may be negetively impacted and those tenants may not want to do business with a bank that isn't an expert at running a mall.

It looks like shoppers will soon have a few less options to choose from in Riverdale.

More Businesses Coming to Ogden

Redevelopment in Ogden continues.

The Standard Examiner is reporting that the city council, in its RDA role, is contemplating assisting in the redevelopment of the new commercial areas at 12th St. and Wall Ave. This area was housing originally and the homes and miscellaneous buildings have since been torn down. The plan is to put a grocery store and accompanying retail stores. I imagine it will be something like the center at Albertson's at 20th and Harrison Blvd but much much better. The location at 12th St. is much more conducive to shopping.

It was also reported today that a 3rd indoor rock climbing facility will be coming to Ogden. The facility will be located in the AmeriCan Building that also houses DiVinci High School and Solomon Ski Headquarters.

This is great news. Despite the general economic slow down, the basic demand for goods and services is still enough to spur redevelopment. This is interesting because as more businesses move to Ogden, more demand for services is created. Therefore, more businesses move to Ogden to provide their services...and round and round we go.

October Sales Data

October was another rough month for sales. Inventories are creeping up and sales volume continues to slow down. The market is definitely in the buyer's camp right now.

Here is our 13 year chart:


The black line is our 12 month moving average. We are still in the midst of sales contraction. My thoughts are that we are now overshooting on the low side of what would be the normal market equilibrium for sales volume on an annualized basis. With winter coming there won't be much improvement with these numbers until springtime. The downward trend of the moving average means there is tremoundous competitive pressure on Realtors in the workforce.

Here is our 3 year chart:


Each consecutive year has seen a decrease in sales volume. I thought that we had hit equilibrium but it looks like we are in store for more contraction in the marketplace. I called the board to find out how many Realtors there were in our area. They indicated rolls of 2276. Fees were due October 31st. I will find out at the end of this month how many are left. My hunch is that there will be a lot less Realtors out there. The last time the marketplace saw this kind of sales volume there were only 1100 Realtors on the board. Wow! The purge is coming.

Picture of the Day

Here is a picture of my daughter Hannah in front of someone's front porch. It looks like they ran out of closet, attic, basement, shed and garage space for their storage. Its a good thing they put tarps on it so you don't really notice its there.

Back In Action

The elections are over...whew! In the race for District 9 of the Utah House of Representatives, my opponent defeated me 56% to 44%. As is always the case in a representative republic system of government, the voters get what they deserve.

I look forward to the future and the opportunities ahead.


Lets talk about Real Estate.

More posts to come.....

Perils of Landlording: Pyromaniac Tenants

My clients just barely closed on a fantastic bargain triplex along the River Project. There had been some problems with house fires recently as supposed vagrants began to find shelter in a group of homes across the street set for demolition. Well, it turns out that it wasn’t transients responsible…its my client’s brand new tenant! By the way...it’s a second-degree felony to start a home on fire. Looks like its time to start marketing for a new tenant. Here is a link to the news article and video the tenant talking to news crews before her arrest.

http://www.ksl.com/?nid=148&sid=4582059

Cleaning Up Ogden: Jefferson Historic District Demolition

Great before and after photos. This beautiful Victorian home has been a five-plex since 1905. Its a former listing of mine. The city recently purchased the home from my clients in an effort to prepare it to become a single family home and return it to owner occupancy after over a century of being a rental property. One of the issues at hand was the awful home next door. It was a "cat lady" house with filth galore. You could smell the home from the street. Definitely a case for the Health Department. This property also came landscaped with 100 year old Siberian elms as a special bonus. The city purchased this awful property as well.

BEFORE

AFTER

Awe...doesn't that look better. Now there is room for a garage or yard for the victorian home.

My wife and I actually looked at purchasing this home back in 2004 but decided it was way to big of a project for us at the time since it would have been our first. I would feel comfortable taking it on now.

NOTE: This home is now for sale for only $35,000! This is not a typo. This is a great opportunity to restore an Ogden treasure. If you are interested in this home give me a call and I will walk you through the hoops.

Here is a montage of the interior and neighborhood.

A Brief Reprieve

Due to some personal business that is very pressing at the moment, I will be away from the blog for the next several weeks. There are lots of topics to cover and information to share when I get back. Plan on drinking from the fire hose when I return after November 4th.

Kudos!

August Sales Anomoly

Sales volume for August was surprisingly low. Normally July is the slow month for the summer as folks are on vacation and busy with family reunions. Most folks want to get their kids in school and usually will purchase a home in August in a frenzy. This year was different. Unfortunately, I don't know how to account for it. Fannie Mae and Freddie Mac were in their last days during August but nobody knew they were going into convservatoriship until this month.

It will be curious to see how September's sales turn out on the whole. Interestingly, my personal business is up despite all this. I can attribute it to prospecting, perseverance, and providing professional service.

Here is the chart:

Economic Insanity

The jury is still out and several more shoes need to drop regarding the U.S. Government Bailout of Wall Street. Congress may or may not pass Treasury Secretary Paulson's plan. The markets may or may not like it. We will have to wait and see.

Regardless of the outcome, our economy is experiencing and will continue to experience convulsions as it goes through withdrawal symptoms. In this case, the opiate was mortgage backed securities that were founded on nothing more than sham loans.

As far as housing goes, the fundamentals tell us that if this bailout passes, interest rates in the future (not immediate future but maybe a year or so out) will go up. Inflation will increase. House prices will go up but fewer people will be able to buy with a bank mortgage because interest rates will be too high. Think 1978-1982. Seller financing will abound.

If this bailout doesn't pass (and I hope that it doesn't), you will see a large number of firms disappear due to poor decision making. The economy will slow as it always does when it is clearing the excesses out of the system. House prices in Utah will stay intact mostly. Home prices abroad will continue to decline for a few more years. This fact is almost unthinkable to folks in charge of our government (particularly in an election year) and therefore they feel compelled to do something about it. Unfortunately, doing so only moves the losses from those responsible (the banks) to those who are not (you and I- the taxpayers).

Condo Conversion in Roy? Whoa?!

There was an interesting article in the Standard today about a condo conversion going on in Roy. This caught my attention because usually you see condo conversions in a seller's market. We are definitely in a buyer's market right now. Also, in order to make the conversion, the owners are spending significant funds on capital improvements. They are adding covered porches, landscaping, ect. That is a major investment in a soft marketplace.

I wanted to see what the condo market was like in Roy so I ran the numbers on the MLS. Here is a photo of what the place looks like now versus the MLS photo of a complete project.


You have got to love the computer generated renditions complete with white puffy clouds.

So here is how the numbers shakeout. Comparable sales in Roy are between $75 and $110 per square foot. The ones for $75 are average in condition. The ones for $110 are brand new and architecturally appealing. With a list price of $124,900 for 875 Square Feet the condo conversions are for sale at $142 per square foot!! They must have gold-plated toilet seats in there.

I sense some disappointment coming soon to the investors in this project. It sounds like the expectations may be a lot higher than what reality will afford. These units will likely sell for around $90/sqft due to the awkward nature of it being an older floorplan with a new facade.

I wish these guys luck with the conversion but my gut check tells me they are not going to make any money doing it.