May 5, 2006

‘Logjam Of Homes Increasing’ In Denver

Some housing bubble reports on Denver. “The number of unsold homes on the Denver-area market hit a record 29,045 in April, according to reports released Thursday. Rising foreclosures were the driving force for the skyrocketing inventory, which is 19.2 percent higher than a year ago, experts said.”

“Buyer representatives are telling (realtor) Ed Jalowsky that about half the homes priced under $250,000 are either in foreclosure, are owned outright by a lender or the U.S. Department of Housing and Urban Development, or are selling for less than the amount owed on the mortgage.”

“Jalowsky blames rising payments on adjustable-rate mortgages, which are squeezing home owners.”

“‘The logjam of homes is increasing each month,’ said (realtor) Steve McGuire in Highlands Ranch. ‘It is similar to back in the 1980s when we had a high number of foreclosures. The market was impacted greatly.’ In Denver said he urges potential sellers to be realistic about the price they can get or expect to spend a long time on the market.”

“‘Foreclosures definitely are having an impact,’ said McGuire.”

“Competition from foreclosures will drive down prices in the lower- end market, ultimately causing more homes to end up in foreclosure, Jalowsky said. ‘It is a real shame,’ said. ‘It’s a battlefield out there for homes under $200,000. I just hope the blood flow will slow.’”

“Despite the glut of unsold homes, the median price was $250,000, up from $247,500 in March and $241,687 last year. (broker) Doug Pierce noted two homes in Cherry Hills Village recently came on the market in the high $900,000s, and within a week they were both under contract for full-price cash offers, with others standing in line to buy them.”

“‘Flying in the face of that activity, I have a listing in south Aurora,’ Pierce said. ‘The house is in good shape and has been updated. It was on the market in the $180,000s last summer and it didn’t sell. We now have it at $164,900. We have not even had a showing in 10 days.’”

“Prices are up because of the mix of homes being sold and because the Metrolist data overstates the sale prices to an unknown extent. That’s because it doesn’t adjust the sale prices for seller incentives, such as down payment assistance, according to real estate agents.”

“‘This is the standard time of the year when people start putting their homes on the market, so they can move into a new home by the time the kids go back to school,’ Independent broker Gary Bauer said. Bauer said he expects the number of unsold homes to continue to rise for the rest of the summer.”

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Comment by crispy&cole
2006-05-05 07:18:04

And we thought Phx or SD were the canary in the coal mine.

Comment by passthebubbly
2006-05-05 07:22:52

Woo-hoo! Time to move to Denver and rent while this whole thing plays out.

Comment by greenlander
2006-05-05 07:31:10

$80K Denver houses for everyone!!! Woohoo!

Comment by passthebubbly
2006-05-05 07:33:18

I forget whether it was this blog or another one, but someone wrote that during the last RTC auctions, Denver had $10K condos for everyone. Now *that* is a level at which I might consider buying.

Comment by boulderbo
2006-05-05 12:31:09

aurora, southeast denver, talked a young customer out of buying one last summer for $160K. told her to look up the sales history of the units. she didn’t buy it.

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Comment by Max
2006-05-05 14:01:35

Deep Aurora suburbs have so many homes, that you can take the whole population of China and house it there no problems. Friends tell me the amount of For Sale signs on the front yards is dazzling, it’s like a kaleidoscope.

Comment by Sunsetbeachguy
2006-05-05 09:56:01

I had a friend of a friend that was a decent flipper. He actually fixed fundamental problems with homes.

He started his career in Denver and then moved to Portland, OR.

He left Denver partly because conditions for his business were bad.

He remarked on several occaisons that Portlands market was prime and where Denver’s was 3-5 years ago.

So readers in Portland brace yourself you are behind the canaries in the coal mine.

If your were in a coal mine that would be good news.

In a housing bubble I don’t know if there is any good news.

Comment by foobeca
2006-05-05 12:41:06

SLC is even earlier in the cycle than Portland is. Portland seems to be close to peaking, but SLC is beginning to look like PHX or LV before they shot up in price.

Comment by AZgolfer
2006-05-05 07:28:33

Have a friend in Denver with a house for sale. No takers yet. He does not want to reduce the price. I have been tring to tell him what is going on.

Comment by hubrispie
2006-05-05 07:32:59

It appears that the real estate market here is getting so bad that the real estate propagandists cannot hide it any longer. It is a pretty amazing figure that perhaps 50% of all homes under $200,000 are in foreclosure or pre-foreclosure. This will creep up more and more into the mid and higher-priced homes soon and then the s**t will hit the fan. My perspective here is that certain homes in certain neighborhoods may still sell if priced right but others like in Aurora or Adams County will just sit on the market. I know some people who have a higher-end home on the market here in Denver for around $650,000 and it has just sat there with no offers since last August. They have come down from about $750,000 but still no offers. I know that the construction loans they took out are killing them right now. They are relatively well-off but you can lose only so much blood. The media here is trying to spin this story and make one think that it is merely the low-end that is slow and it will stay low-end. That is not really true and is almost never true historically because there will be no move-up buyers.

Comment by t-bone
2006-05-05 07:40:25

Your comments are dead-on. There is no such thing as a pop that only affects the low-end. Where do the next tier of homes’ buyers come from if not those who sell their starter home? I guess some in the recent past came from exotic loans, but those are getting tightened up on. Why anyone thinks a mcmansion in Aurora has appreciated 50% in 5 years when developers have churned out 1000s of them in that time is beyond me.

Comment by brianb
2006-05-05 07:42:08

I think they mean 50% of homes under 250K that are “FOR SALE”. Not 50% of all homes. That’d be a great depression like statistic.

Comment by turnoutthelights
2006-05-05 09:04:32

An avalanche starts at the bottom of the slope, and works it way up through the overburden. This housing bubble will sweep all things away, and then complete silence.

Comment by Coloradan
2006-05-05 09:04:43

“It is a pretty amazing figure that perhaps 50% of all homes under $200,000 are in foreclosure or pre-foreclosure.”

“The Rocky Mountain News has this quote, “Ed Jalowsky, principal of Classic Advantage Realty, said 50 percent of the homes priced less than $300,000 in his office are either in foreclosure or facing foreclosure.”

The key phrase is “in his office”. I suspect the Post article is suffering from some misquoting.

From the RMS atricle as well;

Bauer said he expects overall appreciation of about 5 percent this year and sees no chance of a housing bubble.

For one thing, Denver didn’t see the huge housing price gains that other previously hot markets such as Las Vegas, Scottsdale, Ariz., Florida and the East and West coasts saw, so there’s no bubble to burst, he said.

Also, the Denver-area economy is more diversified now than it was in the late ’80s, so the collapse of one industry wouldn’t crush the economy, he said. “

Comment by colorado_renter
2006-05-05 07:41:54

The area where we rent (South West Longmont about 10 miles from Boulder), has tons of houses on market but nothing is selling.
This area has homes from 250K+ all the way upto 900K.
There are 2 home across from where I live on market for about 800K for one year. They are bought by inverstor LLC from builder and put on market rightaway.
Also noticed few people listed homes for 280K’s reduced it to 270-275K and then finally moved off the market.
Also the range of asking prices for almost identical homes (often on the same street) vary too much (example 254K to 300K for 3 or 4BR, 3
Add to that some investors (may be out of state? or from state of denial ?) that are pricing townhome for more than what single family homes would bring in. Who in right mind would ask 290 K for 3 BR townhome when Single Family 3BR is listed for 279K ?
No shortage of new constructions and homes that are never lived in.
Almost looks like those who wanted to buy, bought homes during last 3 or 4 years of flatlined period on low interest rates. So no more buyers left.

Comment by dc bubble
2006-05-05 07:43:18

driving to the airport in Denver its striking to see the number and similarity of townhouse developments one sees. mile after mile of the nearly identical units.

Comment by t-bone
2006-05-05 08:08:01

I live in Denver and know what you mean. I sometimes wonder what future generations will think of when they see our newly-builtarchitecture-when you look at a neighborhood of brick Victorians in downtown, you see that each one of them has a unique design, all with some interesting flourish like a circular turret or a cool archway, and about 1500 sq ft or less. Having a huge house was apparently not as important as having something beautiful and unique, these houses are 90-100 years old and are in good shape. Plus they have an actual yard big enough to have a garden. Then you see these mcneighborhoods, as big as the lot, 3000 sq ft plus and as absolutely generic as you can get. To me it just shows a group of people with no sense of style, wanting to just consume as much as possible and getting their status from having a huge home. The aforementioned Victorians sell for a premium, on sq footage basis, both due to their appearance and their locations where you can actually walk to something. What will the market be for these generic vinyl boxes in 10-15 years when they will appear completely outdated? The types of people who want these homes will always want new construction-I think some houses in Denver will keep their value and gain, but these types are depreciating rapidly. Why would you buy a 1995 McMansion now, if that is your style, when you can get a new one with some free upgrades? These places will be the new ghettos, especially if gas stays high. Finally, the heating bills on these places: a coworker lives in a 3500 sqft box by herself, monthly utility bills this winter over $500 per month-and Excel Energy just applied for a rate hike.

Comment by climber
2006-05-05 08:45:58

I wish they’d use more vinyl, at least it doesn’t rot. Most Colroado construction that isn’t brick is water soluable pressboard. My wife thinks I’m nuts, but when we looked at hoses that even had pressboard shingles on the roof I told her I wasn’t about to purachase a maintenance nightmare. It is a dry climate out here, but the construction takes that into account. Newer houses here don’t hold up well over time in spite of the favoable weather.

Comment by dba
2006-05-05 09:10:45

i have family that lives close to Fort Collins. What is up with those walls and not making them look nice? i live in NYC and I spent $5000 on just wall work when I bought a 1bedroom apartment here. Why don’t the builders sand down the walls?

I saw a few homes there and it’s all different quality. Some will fall apart and others are made OK. I personally live in a 50 year old building that I think is built better than most new constructions I’ve seen. And this includes Toll Brothers.

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2006-05-05 08:01:14

Another 300 employees canned and lender filing for bankruptcy. This is in Seattle.

Comment by crispy&cole
2006-05-05 08:18:46

Good info. This is playing out the same was as 1994 or so. I can remeber auditing one of this companies the day they filed for BK.

Comment by crispy&cole
2006-05-05 08:19:10


Comment by crispy&cole
2006-05-05 08:28:16

Per the article ” we did all this marketing” - LOL. I had nothing to do with you or your shitty marketing. It was the FED keeping rates WAY to LOW for WAY to LONG. You were simply in the right place at the right time!

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2006-05-05 09:37:54

“It also offered debt-consolidation services, credit education and reverse mortgages to seniors. It actively solicited loan officers, soon amassing a stable of young up-and-comers who earned six-figure salaries.

About 95 percent of the firm’s business consisted of refinances, Kidd said, a market segment particularly hard hit by the recent rise in mortgage-interest rates.”

No more 6 figures salary for those 300 folks.
No one will refi on a rising interest rate environment. Furthermore, rising interest rate would dampen folks wanting to upgrade.

Comment by t-bone
2006-05-05 08:42:25

Best part of this story:

The company’s terminated employees received no severance, Kidd said. He expects many to form another mortgage company.
“I would expect it to look very much like Merit did,” he said.

I wish them the best.

Comment by crispy&cole
2006-05-05 08:43:47

I wonder what he means by “look very much like Merit did” - The BK part?!?!?!?

Comment by t-bone
2006-05-05 08:51:15

You know, it seems that a large number of these mortgage chop shops seem to be associated with ex-jocks. Of the 4 mbs I know , 3 were college athletes. Is there a link? I am friends with one of these guys, but it gets pretty annoying to talk about any RE issues. Sometimes I think the bubble was exacerbated by the “feedback loops” of so many people going into the RE/MB industries. These giys sit around the office all day talking about property they are considering, all their jock buddies tell them “Oh, go for it man! That developement is gonna SKY rocket!” Mutual reinforcement-it is strange what you can be led to believe when your peer group is all on the same wavelength, more and more absurd ideas become the norm. Extreme examples of this are cults or extremist political/terrorist orgs. This might sound like a long shot comparison, but I think the dynamic is similar. Someone posted that 40% of new jobs created are related to RE-so more and more people are exposed to these types of environments…..

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Comment by motorcityjim
2006-05-05 13:59:10

New word for RE cheerleaders/true believers: RE-tards.

Comment by mrincomestream
2006-05-05 10:50:01

No what it means is they had some form of corporate treason on top of the money problems.

It happens all the time in those types of companies. Everybody wants to be the chief.

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Comment by The Economist
2006-05-05 08:07:39

I think they mean 50% of homes under 250K that are “FOR SALE”. Not 50% of all homes. That’d be a great depression like statistic.

Yes, but there are 29k homes for sale…How many of these do you think are under 250k?

Comment by Walt
2006-05-05 08:15:57

According to out of 8205 sfh in Denver for sale 4836 are under 250k.

Comment by t-bone
2006-05-05 08:25:40

I already posted this on another thread, but now on-topic:

This kid is such a poster child-in the lending business himself, he is going to end up as underwater as his clients.

Comment by foobeca
2006-05-05 12:49:26

“Hollermeier represents Generation Y, the group born between 1979 and 1984 that is now coming of age and buying homes. Demographers estimate about 65.3 million people fall into that age group, and they’re changing the way moderately priced homes are sold.”

There is NOT 65.3 million people who were born from 1979-1984.

Comment by dave
2006-05-05 08:59:01

In the coming Big Bust, maybe these McMansions will become boarding houses like the Great Depression. Maybe that was the plan all along–affordable housing for Bush’s 20 million “guest workers”.

Comment by t-bone
2006-05-05 09:02:58

Denver tried to pass on ordinance saying that no more than like 8 unrelated people could occupy the same rental-it was blasted in the press as being racist. How long until the house next door to your dream mcmansion gets divided up into 10 300 sq ft compartments and rented to 40 “cousins”

Comment by t-bone
2006-05-05 09:09:03

Neighbor: Honey, There seem to be an unusual number of cars parked over at Jenny and Jamie’s place-wonder if the are having a barbecue? Or an HOA meeting I didn’t hear about? Think I’ll call over and see “Wassup?”

“Hello. Juan, Roberto, Jesus, Carlos, Carlos, Marco, Heri, Luis, Silvo, Rico, Pablo, Pablo, Ramon and Enrique are not here right now. Please leave a message. If you are calling about the ad, come on over, rent is $60 per month, just find an empty room.

2006-05-05 09:42:59

this is so hilarious. it’s happening in LA area but with immigrants from China. lol. It’s always jammed pack on Valley blvd from Monterey Park to the East. And they all drive like they were still in China, no respect for others and pedestrians.

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Comment by t-bone
2006-05-05 10:15:49

By the way, I’m sorry if my post sounded racist. I did not mean that, only trying to point out the irony of people moving to the mcburbs to escape their urban nightmare vision of “The City” suddenly crapping as the city comes to them like they wouldn’t believe.

Comment by foobeca
2006-05-05 12:51:48

In provo, UT there’s a city ordinance that says that no more than 3 unrelated people can live in a house. Pretty stupid of a law for a college town with the biggest private university in the country.

Comment by flat
2006-05-05 09:42:26

housin an urbin debelopment- taxpayers rise up

Comment by rallymonkey
2006-05-05 09:45:09

“I just hope the blood flow will slow.’”

Blood on the streets in the town of Denver

Comment by Larry Littlefield
2006-05-05 10:05:46

(Having a huge house was apparently not as important as having something beautiful and unique, these houses are 90-100 years old and are in good shape.)

It’s a cycle. The homes your refer to are probably not Victorians (which were huge) but “arts and crafts” bungalows, which were a reaction to the big but cheap mass production of the early industrial age. They also matched smaller families and the declining availability of cheap domestic help. I live in an arts-and-crafts inspired one-family rowhouse, also about 1,500 square feet plus a finished basement, build in 1915 that is much smaller than the brownstones and Victorians built 20 years earlier in adjacent neighborhoods.

I expect this will happen again. Housing size will not go on a forever linear slope any more than housing prices. I expect we will NOT see new houses the size of hotels, and private vehicles the size of buses, 20 years from now.

Comment by t-bone
2006-05-05 10:10:25

Interesting. Possibly energy prices will be the impetus this time. I know the types of houses you are referring to-this describes it perfectly.

But, the coming crash may create a new class of cheap domestic help (former re agents, MBs) so who knows?

The huge Victorians were as monstrous as the McMansions, but at least each seems to be unique, and obviously of solid construction (e.g. Park Hill neighborhood)

Comment by jbunniii
2006-05-05 12:24:15

1500 sq. feet sounds freaking *huge* to me - at least twice as large as my apartment. Why anyone would need more than that (unless they had half a dozen kids or tenants) is utterly beyond me.

Comment by foobeca
2006-05-05 12:54:16

1000 sqft is pretty much the minimum for a family and 1500 sqft is comfortable. Anything larger than 2000 sqft is overkill.

Comment by Larry Littlefield
2006-05-05 10:07:26

(In the coming Big Bust, maybe these McMansions will become boarding houses like the Great Depression. Maybe that was the plan all along–affordable housing for Bush’s 20 million “guest workers”. )

Or maybe they’ll just be divided into 2-4 apartments so the young and old can find a place to live in the suburbs. Interesting political and zoning issue.

Comment by need 2 leave ca
2006-05-05 15:55:20

Denver McMansions for all.

Comment by Pismobear
2006-05-05 20:33:35

I’m glad ‘they’ had their march last week and that some businesses closed. It showed me where ‘NOT’ to shop, and gave me a hint of where to tell the INS to go looking for the ILLEGAL aliens later. heheheheheheheheh

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