March 8, 2006

‘Condo Prices Took A Big Hit’ In Colorado

The Rocky Mountain News has this report on Denver. “Home-sale prices in the Denver area took a larger than expected drop in February, prompting some experts to wonder if the upper-end housing market is starting to cool.”

“‘It has been the higher-end market that has been driving up the average and median prices of all homes for the past 18 to 24 months, so if that starts to cool, we might start seeing an adjustment across the board,’ said Steve McGuire. McGuire said the segment of the market that appears to be softest is in homes priced below $300,000.”

“Brian Bartlett said there are pockets of hot areas, such as Washington Park, Bonnie Brae, Hilltop, Crestmoor and Mayfair in Denver. ‘But Arapahoe County is scary,’ Bartlett said. He said that he was listing a home near Smoky Hill Road that the sellers bought for $208,000 in 2004. After 35 showings, they hadn’t received an offer, so they dropped the price to $189,000. ‘Prices are dropping, and buyers have no sense of urgency.’”

“Bauer said McGuire may be correct in saying that sellers of mansions are dropping prices, sending ripples throughout the rest of the market. ‘It is actually a better time to be buying high-end homes than it has been in the past couple of years,’ because sellers are being forced to negotiate more, Bauer said.”

“Condos prices took a big hit. The average price of a condo fell by $16,849 in February from $192,271 in January, almost a 9 percent drop in one month. ‘I was surprised,’ Bauer said. ‘I knew they would be down, but I didn’t think by this much.”

“The average price of a single-family home sold and closed in February fell by $3,808, to $276,746, from $280,554 in January.”

The Denver Post. “The median price for a condominium in Denver has dipped below $150,000 for the first time in two years. The median price for a condo in February was $149,440, compared with $155,000 in January. The median price for a single-family home also dropped to $238,500, compared with $245,000 in January.”

“There are 25,484 homes on the market, up 15.4 percent from the same time last year. The increase suggests people are feeling stress from higher interest rates, causing them to put their houses up for sale, said Tucker Hart Adams, an economist with U.S. Bank in Denver.”

“‘This sounds like it’s a little bit more of a buyer’s market, or maybe the beginning of a buyer’s market,’ she said. ‘I don’t see any sign of a bubble popping, but I think I hear air seeping.’”




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40 Comments »

Comment by Ben Jones
2006-03-08 07:35:20

Thanks to the readers who sent these links in.

Comment by bottomfisherman
2006-03-08 08:56:25

Ben’s blog Alexa rank: 21,797. Great job Ben!

 
 
Comment by flat
2006-03-08 07:36:10

people in CO tell me it’s been going down for years??

Comment by climber
2006-03-08 09:44:31

“going down for years” — sort of. Mostly the market in Denver has been flat or below inflation since the tech bust in 2000. It’s important to remember that “Denver” is a metro area of about 2 million people with about 12 distinct suburbs and hundreds of neighborhoods. There’s a lot going on for individuals and neighborhoods that won’t show up in the aggregates. So far the Denver metro area as a whole has not really dropped - unless it just started this year (2006)

Further a lot of the complaints I’ve heard are people not getting what they thought it was worth and complaining that they sold too “late” or “lost” some of the potential gain. So far I don’t know anyone in the Denver area who sold for less than they paid, but I know that houses that did sell were taking a long time.

Denver has been weak but relatively stable since 2001
(and totally missed out on the last 5 years of coastal mania). If it’s really dropping now that is news.

I live in an area near Denver that tends to lag Denver prices by a year or so. If Denver prices go down then people who live near me but commute 50 miles to work will start moving back to the metro area. So far my area (Fort Collins) has not seen any meaningful declines in price.

 
Comment by Sammy Schadenfruede
2006-03-08 20:06:12

Not so. Here in Colorado Springs it crashed hard in the early 90s, and has gone up slowly but steadily ever since–most noticeably in the past year–thanks to almost half of homebuyers using I/O mortages and other creative financing. Median home prices were up 9% in Feb 06 over Feb 05, but anecdotally, the signs and portends of a slowdown are multiplying. I’ve noticed a visible increase in “For Sale” signs in and around my neighborhood, and the houses are languishing even after reductions.

Right now the “conventional wisdom” is that houses will keep going up, but at a recent barbeque, more than a few of my neighbors (after more than a few beers) voiced their worries about rising mortage rates (yes, they were I/O borrowers). The homebuilders all seem to be offering significant incentives as well.

As far as Denver, it has seen a HUGE influx of Hispanics, and a corresponding increase in White flight from the older, working-class suburbs. It is also experiencing a major increase in foreclosures, mostly at the low (sub-$300K) end. That does not bode well for the long-term real estate market. Here in Colorado Springs, at least, we continue to see a steady stream of California equity nomads that somewhat offset last Fall’s influx of Katrina evacuees. Of course, we’re still in a 7-year drought. The last one of this magnitude lasted 50 years and led to the depopulation of the Front Range area, so the discounts here might be steeper than expected :-(

 
 
Comment by nhz
2006-03-08 07:38:13

‘It is actually a better time to be buying high-end homes than it has been in the past couple of years,’

sure … prices are still higher in most places than 1 or 2 years ago, and now you have a good chance of price depreciation unlike last year ;-)

of course, it is always a better time for buyers :)

 
Comment by LIWaiting
2006-03-08 07:40:00

“‘This sounds like it’s a little bit more of a buyer’s market, or maybe the beginning of a buyer’s market,’ she said. ‘I don’t see any sign of a bubble popping, but I think I hear air seeping.’”

What else would these people consider to be a “sign of a bubble popping”, a 50% overnight crash in sale prices. I thought everyone agrees prices are sticky on the way down. To me this national rediculous rise in inventory is exactly a sign of a bubble popping.

Comment by bottomfisherman
2006-03-08 07:48:51

Let’s see… -9%/mo annualized is -108%/yr. Nope, no sign of a bubble popping here. ;-)

Comment by cereal
2006-03-08 07:52:03

yozah !! yup, the days of “single digit appreciation” have finally arrived.

Comment by ca renter
2006-03-08 08:09:09

LOL! :)

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Comment by bottomfisherman
2006-03-08 08:44:13

So much for the RE pundits who said the “froth” was confined to the coastal areas. LOL

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Comment by nhz
2006-03-08 08:25:03

To me this national rediculous rise in inventory is exactly a sign of a bubble popping

I don’t think this is generally true, certainly not if you look over a timespan of some months. Some EU markets have seen vastly increased for sale inventory, while average salesprices kept increasing for some years and sales numbers declined (although maybe not as much as in the US).

Comment by LIWaiting
2006-03-08 08:43:16

While maybe not generally true, inventory is up on Long Island, (where I live) nearly 80% YTD, so I think it specifcally true from where I look out my window.

 
 
Comment by Inspired
2006-03-08 16:55:22

Yeah she hears the air seeping?…In any good “obelisk pyramid” scheme one needs MORE and MORE fresh blood to enter the market. When new blood can’t be found, the “air” starts seeping out of prices because the smart investors begin to leave the poole. Just the same as at the beginning, when other smart invetors buy the bottom. That “Hissing” sound she hears are her smart investors, hanging up the phone on her latest & greatest “price reduced” deal!

 
 
Comment by Salinasron
2006-03-08 07:44:32

I heard the pundits saying 6 months ago that you’ll know when the bubble bursts by watching condo sales. They said that condo sales when the market turns will be the first to fall and that overall depreciation in price by traditional standards will be much greater than the single family home. Sounds like the flood gates have opened.

 
Comment by mad_tiger
2006-03-08 07:51:49

“I knew prices would be down, but I didn’t think by this much.”

We’re going to be hearing that line A LOT over the next five years.

 
Comment by crispy&cole
2006-03-08 07:51:50

52 Week lows today on SPF and HOV!

Comment by bottomfisherman
2006-03-08 08:51:32

CFC down 13.7% from its June peak.

Those big insider sales are starting to hurt.

 
 
Comment by lato1394
2006-03-08 07:53:31

‘It is actually a better time to be buying high-end homes than it has been in the past couple of years,’

So lets recap here, prices are declining and have been showing a declining trend now… Jan-Feb price dropped significantly… So this guy is telling us now is a good time to buy?
Of course he is… Because he’s probably in the same boat with all the other realtors, mortgage brokers and other real estate industry folks trying to unload investment properties before inventories climb even higher and prices continue their slide.

 
Comment by Arwen U.
2006-03-08 08:02:14

“Hovnanian Enterprises Celebrates Five Years on the New York Stock Exchange By Ringing the Closing Bell”

‘At the Death-knell twice three tolls are given before, and three tolls after the knell for a man; twice two tolls before, and two after for a woman, in both cases on the tenor bell.’

 
Comment by bacon
2006-03-08 08:07:20

“There are 25,484 homes on the market, up 15.4 percent from the same time last year.”

that doesn’t sound high for Denver, it sounds astronomical. am i mistaken?

hmmm, mile high inventory, 2 hours from A basin, NRO and CIA moving their domestic ops to Denver… KMA DC!

 
Comment by The Economist
2006-03-08 08:07:30

St. Louis Fed Pres. says there is no bubble:

http://tinyurl.com/n4xsh

Comment by ca renter
2006-03-08 08:13:37

Wow. Talk about head in sand. Of course, he really knows better. Just can’t scare the sheeple.

 
Comment by lato1394
2006-03-08 08:18:38

He’s probably right, no housing bubble in St Louis or much of his region, its not a real hotbed for speculators.

Comment by Notorious D.A.P.
2006-03-08 08:39:35

How do we define “National Bubble”? Is it geographically or is it by population? Geographically speaking, it probably isn’t a national bubble. The middle part ofthe country (other than a few areas) hasn’t seen the appreciation. I am originally from Indiana and most are oblivious to the RE bubble becasue homes are properly valued. Population wise, since most live near the coasts, it very well could be a national bubble.

 
Comment by shel
2006-03-08 09:01:39

Poole’s statements were such vague garbage…for a regional fed head to make especially.
Here’s a link showing a bubbly graph for at least one city in Missouri, Kansas City.
http://www.enaghbeg.com/Housing_crash/kansascity.html
That “housing bubble resource center” site has a nice list which includes some bubbly cities normally thought of as outside the crazyzone. I don’t see why the powersthatbe demure so mightily on the idea of any sort of nationwide trend in pricing beyond fundamentals. I *get* that realestate is local blah blah, but they don’t have a problem apparently with other sorts of national stats right? Consumer sentiment…why isn’t that very “local” only? Savings rates? Maybe the savings rates for people in troy ny are better than in los angeles ca? I guess we gotta trust our friendly neighborhood realestate agent to tell us about local conditions; they’re the “experts” :-)

 
 
 
Comment by The Economist
2006-03-08 08:29:21

The increase suggests people are feeling stress from higher interest rates, causing them to put their houses up for sale, said Tucker Hart Adams, an economist with U.S. Bank in Denver.”

As Dick Vitale would say:

“You aint seen nothin baby!”
“Its absolutely wacky baby!”

 
Comment by stockmonkey2000
2006-03-08 08:36:12

25,484 homes does sound astronomical for Denver. Ive been tracking Salt Lake City (Salt Lake County) there are currently 2,519 listings. Inventory in Salt Lake City is actually down over 40% since last June. In June it was 3841 when I started tracking. Denver has about 2.4 million in the metro area vs 1.2 million for Salt Lake metro.

 
Comment by dcbubble
2006-03-08 08:43:55

Everytime i drive from denver (LoDo) to the airport, I am amazed by the number of cookie-cutter condos and houses along the highway. the development extends for miles and miles. to my mind, the fact that prices are falling in Denver, Las Vegas etc only shows how overbuilt those markets are.

http://www.dcbubble.blogspot.com

Comment by lato1394
2006-03-08 08:55:27

The worst part about the cookie cutter condos and homes is the fact that if investors and speculators are dumping them you end up with 5,8,10 or more of the same model home for sale in the same developement. So then the buyer if they desire can pit sellers against each other in a reversal of the bidding wars seen this summer.
I don’t know about Denver, here in Florida there are cookie cutter developements that contain thousands of track homes.

 
 
Comment by lato1394
2006-03-08 08:50:12

This is a great quote. I just came in off CNN.com and has more to do with the stock markets but it fits nicely.

“This is how sucker rallies draw people in. Once the most naive and least informed buy in, who else is left to drive prices higher?”

Especially that last line… once the least informed buy in, who else is left to buy. Since most entry level buyers have long been priced out of many markets, investors and speculators are leaving who is left to buy?

Comment by Betamax
2006-03-08 09:57:06

good quote, thanks!

 
 
Comment by Tom
2006-03-08 09:02:05

Check this out. It is very accurate.

Do Americans plan for the long haul?

Empty bank accounts, high spending suggest no
By Manav Tanneeru
CNN

Tuesday, February 21, 2006; Posted: 12:25 p.m. EST (17:25 GMT)

Americans managed to spend more than they earned in 2005, figures show.

Manage Alerts | What Is This? (CNN) — The national savings rate for Americans is at its lowest point since the Great Depression, yet 78 million Americans will retire in the next 20 years.

These statistics cast doubt on the ability of Americans to plan for the long term and whether Americans consider long-term planning important, experts say.

The savings rate in 2005 was at minus 0.5 percent, according to a report released by the Commerce Department in January. The rate has been negative for seven consecutive months, according to David Wyss, an economist with Standard and Poor’s.

“The decline in savings has been going on for about 15 years, but we’ve now attained the ultimate [with] the whole country managing to spend more money than we earn,” Wyss said. “Last year was one of three times that the savings rate was negative.”

The rate was also negative in 1932 and 1933, when Americans were dealing with the repercussions of the Great Depression.

There are some flaws in the way savings are measured, critics say, pointing to the fact that it does not take in to account capital gains, such as a home or a stock portfolio that increased in value.

“[But] this is a long-term trend with a measure we’ve used consistently throughout the years, and to say that it’s a negative number for the first time in the lives of baby boomers and even beyond that, to the lives of seniors, is somewhat alarming,” said Peter Rodriguez, an economist at the University of Virginia.

There are several reasons for the decline in savings, experts say. Americans may be feeling richer than they actually are because of a booming housing market and rising stock and asset prices. Meanwhile, low interest and mortgage rates have made it much easier to borrow and extend credit.

The other reason is more generational. The demographic groups that now drive American society are more willing to take risks and are more comfortable with high spending relative to the generations that came of age during the Great Depression and World War II, Rodriguez said.

“Particularly, the baby boom generation has grown up on mostly terrific economic times in historical context and compared to economic histories of other nations in the world except for a period in the late ’70s that was full of malaise,” he said. “It’s been a really nice era of booms much larger than busts, and there is always this sense that good times are around the corner.”

In a way, American prosperity has bred an optimism that makes people less inclined to save, believing that the prosperity will never end, Rodriguez said.

Finding the ‘enthusiasm to save’
George Kinder and Susan Galvan — founders of the Kinder Institute of Life Planning, a California-based firm that trains financial planners — believe the decline in savings, and by extension, a lack of long-term planning in American society, is symptomatic of a broader insecurity.

“You have to look at what the source of the problem is,” Kinder said. “Why save if there is nothing to save for? What is it that people should be saving for? Traditionally, we’ve been saving for retirement and that sort of thing, but those are just buzzwords, they don’t mean much to people.

“As a consequence, many Americans are skeptical that they are being sold something by financial advisers.”

The key is finding the “enthusiasm to save” by focusing on deeper and more meaningful life goals, Kinder said.

“We found that most people do not even talk about their most profoundly important goals, even with their spouses, because they can’t see how they would be able to implement them or they’re afraid of having them ridiculed, dismissed or discouraged. They keep them kind of buried inside,” Galvan said.

The institute’s planners try to unlock those answers, Galvan said, by asking their clients three questions:

– If money was no longer an obstacle, what would they do with their life?

– If a doctor informs them that they have a terminal illness and have only five to 10 years left to live, what would they do within that time?

– If the doctor then informs them, they only have 24 hours left to live, what would they regret? What did they miss in life?

Whatever the reason, the lack of savings and long-term planning is troubling at a time when so many Americans will soon retire, Wyss said. Some 78 million Americans will enter retirement during the next 20 years, according to the U.S. Census Bureau.

“A lot of us are approaching retirement and a lot of us are approaching it with much too little saved up,” Wyss said. “They’re either going to depend on Social Security, which is hardly a good bet given the state of the federal government’s finances, or they’re going to be taking early retirement at the age of 75.”

 
Comment by shel
2006-03-08 09:57:02

that reminds me that I was hoping to catch some discussion on what effects the baby-boomers can be expected to have, and what effect has anticipating the baby-boomers retirement perhaps already had on housing bubble issues.
For instance, condo prices took a big hit in CO. People have pointed out that typically falling condo prices are a sort of leading indicator on a general market decline, right? Does any of this change with the babyboomer retirements looming? Isn’t the thinking that they will want to move out of threestory colonials with big lawns and want to have condos? Will they keep all those second-homes as they age enough to make travel less appealing? Are they going to sell sell sell and cash out equity to spend on assisted living facility fees when they start hitting 75 in a dozen years or so, or will they all be so healthy that they won’t need those til 90?
It’s just fascinating really…
it’ll be interesting to see the possible effects of the non-saving but very ‘wealthy’ boomers on their echo-kids too. will our society say ’sorry’ to all the boomer-era have-nots and struggling masses and curtail or eliminate social security programs while allowing the have-lots boomers to pass their assets on to their heirs?

Comment by lato1394
2006-03-08 11:04:07

Shel- knowing my parents and their freinds I really don’t think baby-boomers are looking to carry second homes and vacations property. I think most baby-boomers who are loading up on property are looking for quick gaines to help pad their retirement funds, not extra expenses of owning second and third homes. Think about it, you just retired and you are collecting limited funds from social security, pension or 401K. You have medical bills and other expenses to cover… Do you want a second home thats going to be a cost to you or would you want to unload that home and cash out just like you would your 401K?

Remember a few years ago this was the generation who we all feared had little saved and dwindling pensions and skyrocketing health care would do them in when they retired?

My bet on the future of baby-boomers
1- They sell off much of the real estate they are holding to build up cash for retirement
2- They opt for smaller single family homes and town homes in smaller quieter towns in the south east that are affordable & offer much to do rather than expensive condos in Miami or other hot markets.
3- Perhaps an even more shocking theory? We see massive self contained retirement communities spring up all over Mexico just south of the border with the egar Mexican government welcoming out retirees (and their saved us dollars) with cheap health care, affordable prescription drugs, and other ways they can stretch their dollars farther in a warm climate.

Comment by shel
2006-03-08 20:52:13

there was a piece they aired repeatedly on cnn this weekend about people retiring to mexico actually!
they showed this woman who worked as a *realtor* in alabama or somewhere who (after cashing out on all her props, likely) who moved to some little town there and loves it. she lives like a really important person, I think might have been her term, with “staff”, and she gets invited to all her staff members’ family baptisms and so on. it was a little nauseating really. She said how all the US retirees down there are a little community so helpful with each other and starting from the same place, without their previous life ’stations’ as it were, and so it felt more pleasant. I can lots of that happening too! As long as servants are available that is…if having ’staff’ got too expensive it wouldn’t appeal, however much nicer it might be to meet people who are less prone to ‘airs’ blown in each other’s faces.
I believe she said she maintains a ‘place’ back in the US, to flee to presumably if the natives got restless with her.
cheers!

 
 
 
Comment by John Law
2006-03-08 09:57:39

what does a $150,000 denver condo look like?

Comment by boulderbo
2006-03-08 11:26:05

like an $800,000 unit in san diego

 
 
Comment by Bad Shift
2006-03-08 20:51:38

Climber: My research into the Fort Collins area supports your assersion. No price drops there, yet. I’ve been tracking sales there for a few months. (Thinking of moving to that area from Bay Area–don’t worry I’m not cashing out, but just starting out!)

 
Comment by need 2 leave ca
2006-03-09 12:39:08

I am also just starting up in ABQ and didn’t cash out of the BA. Wish I did, then would have more money. At least I have a substantial amount saved, and no debt. Most baby boomers are also going to be FBers and have huge mortgages in their ‘golden’ years. No sympathy for anyone of them that F’d up by greed and consumption instead of savings.

 
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