After three very challenging years in real estate, our Reality Check writer recently sat down with Chris Mygatt, Coldwell Banker Resi-dential Brokerage’s President and Chief Operating Officer, to discuss the current real estate market, challenges facing the industry and what we may expect in 2010. As you will find, the interview was honest, insightful and provided our readers with a credible stance on the state of the housing market.

Reality Check: This summer we saw some real surges in the market but it seems that momentum has slowed in recent weeks. Why do you think this happened and is this a sign that we should be concerned?

Chris Mygatt: “This market is a very curious one. One day we can have a really good, strong day, and the next, we’re scratching our heads and feeling challenged. What I can tell you for certain is that due to our nation’s financial meltdown in October 2008, our market really didn’t get a kick start this year until much later in the season. The market was almost in hibernation mode for much of the first half of 2009. Just to give you an idea, in a typical year, the traditional busy selling season begins in the spring (March or April) and tends to peak around May or June. This year, however, the market all but came to a screeching halt well into the late spring. Because we were so close to the October financial crisis, we didn’t see sales pick up until midsum-mer. Historically there is seasonality to real estate activity and then there is reaction to the financial markets. Generally you can follow seasonality trends and then overlap the financial markets. Once you put the two together you can almost predict where sales activity will be. But this year is different because our spring selling season didn’t hit until July. Essentially our ‘spring activity’ came in July and August this year. So what that means is it is really hard to compare this sum-mer’s selling season to any other because, in all actuality, what we saw was a spring like summer.”

Reality Check: So how is the fall market shaping up to your expecta-tions?

Chris Mygatt: “We’re very fortunate to have the micro markets that we have. If the pace of sales is down in any market, it typically has less to do with demand and more to do with challenges relating to bank-owned inventory being released. Regardless of the market and the challenges we have faced, people still want to call Colorado home, which puts us all in a very good position. Thus far, the fall is looking relatively modest. Certain days in September and October pending sales were up. Open escrows were looking positive. But then, on

other days, the market seemed to have slipped a bit. It’s really touch and go right now. What I would say is that much of our market is be-ing driven right now by consumer confidence. With the improvement we are seeing on Wall Street and the economic improvements we are seeing on a global scale, things seem to be moving in the right direc-tion, which makes prospective home buyers feel more confident about their future and the home they may choose to buy.”

Reality Check: There has been a lot of talk about the impending expira-tion of the $8,000 first-time home buyer tax credit. What do you think will happen if the $8,000 credit simply expires and the government chooses not to extend or increase the credit?

Chris Mygatt: “It’s tough to say. I am concerned that if we do not have the $8,000 first-time home buyer credit it will severely limit our first-time buyer activity in the entry-level and distressed-properties market. What this will mean is investors will become the main player. In the entry level arena right now, what we have is a healthy competi-tion between first-time buyers and investors. First-time buyers typi-cally buy for lifestyle, emotion and sentiment. Investors, on the other hand, typically buy based on the potential of yielding a profit. When you eliminate one of the key players, it changes the dynamic of the market. If we are left largely with investors it could mean lower prices as the investors are limited on what they can spend in order to yield that return. The fact is, nothing has done more in the past year to jumpstart our housing market than the $8,000 first-time home buyer credit. Realogy and NRT (Coldwell Banker Residential Brokerage’s parent company) support expanding the tax credit from first-time

Colorado Real Estate Outlook: An Interview with Coldwell Banker Residential Brokerage’s President

RealityCheck

buyers to all home buyers, increasing the maximum amount of the tax credit from $8,000 to $15,000, eliminating the existing income caps for eligibility purposes, and extending this home buyer tax credit for one year from the date of enactment. I truly believe that stimulat-ing demand for housing—particularly in the repeat-buyer market—is the most effective way for Congress to lead the U.S. economy into a recovery and back on the path of growth.”

Reality Check: On September 30 the Washington Post reported in its “Foreclosure Rate Rises 17 Percent” article that the number of homes lost to foreclosures in the U.S. rose about 17 percent in the second quarter of this year despite the launch of an extensive government program aimed at helping borrowers save their home. Do you have concerns that foreclosures are on the rise or was that an expected jump?

Chris Mygatt: “Let me start by noting that the data reported was for the second quarter of 2009 which was prior to some of the strong changes we’ve seen nationally and globally. It was also prior to that ‘spring-like’ summer we had in July and August. Much of this is a reflection on the negative trends influenced by weakness in economic conditions, including high unemployment and declining home prices in many of the nation’s weak housing markets. On a positive note, locally in Colorado, the default notices are actually declining. It seems an increasing number of people are taking advantage of the assistance available to them. If any of our readers require help, I encourage them to talk to their local Realtor for guidance or support, or these two nonprofit websites: hud.gov/foreclosure or makinghomeaffordable.gov.”

Reality Check: Is it your opinion that we are out of the woods in terms of foreclosures?

Chris Mygatt: “I would caution that we probably aren’t out of the woods as it relates to foreclosures. With unemployment figures still frighteningly high, there are still quite a few homeowners out there who are struggling with their payments. And now there is a great deal of evidence that the problems are not just in the entry level arena; we are seeing foreclosures in the mid-level and luxury market, too. We are anticipating a large wave of foreclosures coming our way over the next several months if the banks decide that the foreclosure route is the more cost effective approach. Once we start to move through those properties, we should begin to see a better, more solid ground-ing for the real estate market.”

Reality Check: Many economists are predicting a W shaped recovery. Do you agree with that theory and do you feel it will be the same for real estate?

Chris Mygatt: “For real estate, it feels like more of a long ‘L’ shaped recovery. We’ve got our larger metropolitan areas in a much more controlled supply. The fact is, we live in one of the most desirable regions in the world. Certainly we’ve taken our fair share of hits over the last three years, but our region’s desirability, economic vitality, cul-ture, weather and overall market conditions make it a desirable place to live. We’re generally a healthy economy. This, I believe will help drive our long, slow, modest recovery.”

Reality Check: What do you believe is the outlook for Colorado real estate? What do you foresee happening to the market in 2010?

Chris Mygatt: “For starters, I am encouraged by the progress we are making in the real estate market. We’re beginning to see more days of progress than days of back sliding. We’re watching sales activity and consumer sentiment. If we track prices in the Colorado market, they are all over the board. One big sale can throw off the average price far too much. But as we track sales activity, we are seeing more encouraging signs. My best guess for our market is that we can expect sales to moderate to a more sustainable pace and we will probably see a modest rise in housing prices in 2010. Will it be the double digit appreciation we saw in the earlier part of the decade? Probably not. But this new normal is much more sustainable and a much healthier foundation to build upon. It makes me excited about the future and gives us all hope for a relatively modest and productive 2010.”

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RealityCheckColorado Real Estate Outlook: An Interview with Coldwell Banker Residential Brokerage’s President