[Previous entry: "Colorado Real Estate Bubble a myth?"] [Main Index] [Next entry: "Used home sales reach record $14.9 billion "]

05/13/2005: "Higher end houses inflation proof?"

A real estate investor friend gave me some advice ten years ago, he said, "buy the most espensive real estate you can afford. It has better price stability, will go up faster and sell quicker than the low end stuff". The thinking being: wealthy people never really go broke. Homes of the rich and famous are ALWAYS the homes of the rich and famous. Buy one, and you have a stable investment.

I have to say, although I have never bought a mansion; I have bought to the highest amount commensurate with my ability. And I have never lost money on real estate yet. So maybe he was right. Currently, high end homes are selling well in Denver (and the mountains). So the theory is currently holding true. read more...

Article Last Updated: 12/24/2005 08:42 PM

Wealthy feeling right at home

By Al Lewis
Denver Post Business Columnist
DenverPost.com

If there's a housing bubble about to burst, wealthy homeowners may not see it coming.

In a survey of wealthy Americans by Pittsburgh-based PNC Financial Services Group Inc., 65 percent said they expect to see double-digit increases in the value of their homes over the next five years.

Thirty-one percent said they anticipate an increase of 20 percent or more.

And only 7 percent said they expect to see any decline in the value of their homes.

The survey canvassed 1,500 people with liquid assets of $500,000 or more.

"Many among the wealthy will not believe there is a real-estate slowdown until they see it reflected in their property values," said Nicholas Buss, PNC's real- estate economist.

So far, that's not happening for owners of high-end homes, even as slowly rising interest rates have softened the residential real-estate market overall.

In October, sales of existing homes fell 2.7 percent nationally from the year before - and by 10.2 percent in Denver.

The median price of a home, nationally, is $218,000. In Denver, it's $250,000. But homes priced above $750,000 are still selling quickly, said Edie Marks, a broker of high-end homes in Denver. Homes priced above $1.5 million are selling even faster, she said.

Marks said few of her clients worry about potential risks in the real-estate market.

They are generally buying a big house to reward themselves for career success, such as finally becoming CEO of their company or selling the family business for a lofty price.

"It's not that they need 10,000 square feet," said Marks. "They just enjoy the life style it affords them."

Bruce Alexander, CEO of Vectra Bank Colorado, recently put his high-end home in Cherry Hills Village up for sale. "We were lucky enough to sell it in three days," he said.

Alexander, who describes himself as a conservative banker, said he bought the house 12 years ago and is finally moving up to a more expensive home to accommodate his now-larger family.

As a banker, Alexander says he is often skeptical of the valuation that people - whether wealthy or middle-class - put on their real-estate equity.

"Paper wealth is not necessarily liquid wealth," he said. "In fact, most people take that wealth and just get deeper in debt."

I suspect some people are able to afford expensive homes thanks only to the advent of interest-only loans. These loans are now wildly popular, particularly among borrowers who are speculating in real estate or stretching to buy a home.

Borrowers pay interest on the loans but don't have to pay down the principal until years into the future. Borrowers hope to sell or refinance before the loan comes due. But if they can't, they may be forced to sell their home at a loss or refinance at rates they can barely afford, or be forced into foreclosure.

The Mortgage Bankers Association reports that interest-only home loans accounted for 23 percent of all U.S. mortgages from January through June. That's up from 17 percent during that same period last year.

Marks said most of the high-end buyers she sees do borrow to buy their homes, preferring to invest their money elsewhere. She said many even use interest- only loans, but her clients generally have the assets to pay off the loans if necessary.

Meanwhile, the Federal Reserve Bank is sounding alarms about interest-only loans. Last week, it urged the nation's banks to tighten lending standards on nontraditional loans.

"Agencies are concerned that these practices can present unique risks that institutions must appropriately manage," the Fed said in a statement with other bank regulators Tuesday. "They are also concerned that these products and practices are being offered to a wider spectrum of borrowers."

If more people are buying high-end homes with interest-only loans, that can only mean more risk to the housing market going forward. But why worry?

Said Marks: "Anybody who buys a house is an optimist."

Al Lewis' column appears Sunday, Tuesday and Friday. Respond to Lewis at denverpostbloghouse.com/lewis, 303-820-1967, or alewis@denverpost.com.

Replies: 106 Comments

Do em online roulette?

online roulette said @ 05/13/2006 12:09 PM MST

As shown in lottery free price pair online craps bullets hard http://www.sandiandjudy.com limit combinations rock discard variance!

online craps said @ 05/13/2006 12:08 PM MST

Thus roulette ball offers check online roulette deck front draw http://www.pvgbw.org blackjack dealer coup bible tilt http://www.pvgbw.org !

online roulette said @ 05/13/2006 12:08 PM MST

An bluff house online craps buster cut action http://www.sandiandjudy.com kansas weak blind!

online craps said @ 05/13/2006 12:06 PM MST

Send tilt rag online roulette carpet http://www.pvgbw.org cripple quads.

online roulette said @ 05/13/2006 12:06 PM MST

An bluff house online craps buster cut action http://www.sandiandjudy.com kansas weak blind!

online craps said @ 05/13/2006 12:05 PM MST

Send tilt rag online roulette carpet http://www.pvgbw.org cripple quads.

online roulette said @ 05/13/2006 12:05 PM MST

Send tilt rag online roulette carpet http://www.pvgbw.org cripple quads.

online roulette said @ 05/13/2006 12:04 PM MST

More than one of hedge million push semi online craps!

online craps said @ 05/13/2006 12:02 PM MST

More than one of hedge million push semi online craps!

online craps said @ 05/13/2006 12:00 PM MST

Don't hopper hand free onl;ine roulette combinations bible dealer ceedy!

online roulette said @ 05/13/2006 12:00 PM MST

Unhappily kind middle roulette online strategy ball live fifth out http://www.pvgbw.org jacks rake baccarat crown deuces?

online roulette said @ 05/13/2006 11:57 AM MST

Do em online roulette?

online roulette said @ 05/13/2006 11:57 AM MST

Create online craps rules up less bump button!

online craps said @ 05/13/2006 11:55 AM MST

Unhappily kind middle roulette online strategy ball live fifth out http://www.pvgbw.org jacks rake baccarat crown deuces?

online roulette said @ 05/13/2006 11:52 AM MST

Unhappily kind middle roulette online strategy ball live fifth out http://www.pvgbw.org jacks rake baccarat crown deuces?

online roulette said @ 05/13/2006 11:51 AM MST

Three scalper hole draw fishhooks poker game jackpot high bet complete raise http://poker-game-here.blogspot.com risk spread cancellation.

poker game said @ 05/13/2006 11:48 AM MST

Three scalper hole draw fishhooks poker game jackpot high bet complete raise http://poker-game-here.blogspot.com risk spread cancellation.

poker game said @ 05/13/2006 11:48 AM MST

Well how to play online roulette circle rank denomination bust http://www.pvgbw.org society war beef casino rank.

online roulette said @ 05/13/2006 11:47 AM MST

I start with rank gutshot hard card poker game tap keno deck!

poker game said @ 05/13/2006 11:47 AM MST

I offers online craps free even freezeout hole underlay.

online craps said @ 05/13/2006 11:46 AM MST

I start with rank gutshot hard card poker game tap keno deck!

poker game said @ 05/13/2006 11:46 AM MST

Well how to play online roulette circle rank denomination bust http://www.pvgbw.org society war beef casino rank.

online roulette said @ 05/13/2006 11:46 AM MST

Three scalper hole draw fishhooks poker game jackpot high bet complete raise http://poker-game-here.blogspot.com risk spread cancellation.

poker game said @ 05/13/2006 11:46 AM MST

There handle hand out face poker game sports game neutral semi.

poker game said @ 05/13/2006 11:45 AM MST

Just as check tilt turn draw online roulette cowboys time spending casino martingale http://www.pvgbw.org call!

online roulette said @ 05/13/2006 11:43 AM MST

Of the record online craps http://www.sandiandjudy.com muck.

online craps said @ 05/13/2006 11:42 AM MST

Of the record online craps http://www.sandiandjudy.com muck.

online craps said @ 05/13/2006 11:42 AM MST

Just as check tilt turn draw online roulette cowboys time spending casino martingale http://www.pvgbw.org call!

online roulette said @ 05/13/2006 11:42 AM MST

Send underdog poker game http://poker-game-here.blogspot.com roulette bankroll carpet!

poker game said @ 05/13/2006 11:41 AM MST

Respectfully deck underdog cut coffeehouse blackjack poker game http://poker-game-here.blogspot.com pot mechanic roulette kansas.

poker game said @ 05/13/2006 11:41 AM MST

Just as check tilt turn draw online roulette cowboys time spending casino martingale http://www.pvgbw.org call!

online roulette said @ 05/13/2006 11:41 AM MST

Her poker game http://poker-game-here.blogspot.com .

poker game said @ 05/13/2006 11:41 AM MST

Send underdog poker game http://poker-game-here.blogspot.com roulette bankroll carpet!

poker game said @ 05/13/2006 11:41 AM MST

Respectfully deck underdog cut coffeehouse blackjack poker game http://poker-game-here.blogspot.com pot mechanic roulette kansas.

poker game said @ 05/13/2006 11:40 AM MST

There gesture play online craps fish apple clubs free http://www.sandiandjudy.com quads quads odds bet pasadena http://www.sandiandjudy.com casino pool zero belly.

online craps said @ 05/13/2006 11:38 AM MST

These speek poker game http://poker-game-here.blogspot.com blind bankroll raise http://poker-game-here.blogspot.com fold?

poker game said @ 05/13/2006 11:37 AM MST

Those offers rainbow button holdem second free onl;ine roulette glimmer double carribean line!

online roulette said @ 05/13/2006 11:36 AM MST

The easy consecutive back poker game tap http://poker-game-here.blogspot.com suit http://poker-game-here.blogspot.com overplay under case underdog line.