Foreclosures And Inventory ‘Fueling The Fire’: Colorado
The Denver Post reports on Colorado. “Prices of existing homes in the Denver and Boulder metro areas fell in the first quarter of 2006, the first time in at least 16 years. At least one expert attributes the decline to basic supply-and- demand imbalances.”
“‘People who are upside down on their mortgages are putting their houses on the market,’ said Mike Rinner, a real estate analyst in Englewood. ‘There are too many homes on the market.’”
“Soft home prices could stretch for several more months as excesses get worked out, especially in the lower end of the market, said Phil Storms, a real estate investor in Denver. ‘I would be worried about a bubble bursting if we had seen the same markets we saw in Florida,’ he said. ‘But we have had some slow markets for quite some time.’”
“If price declines continue, recent buyers who put no or little money down on their homes will find it increasingly difficult to sell them, warns mortgage broker Lou Barnes. Barnes also cited a building boom stretching along the northern Interstate 25 and E-470 corridors that is flooding the market with new homes. Those homes are undercutting the demand for existing homes, putting downward price pressure on older properties.”
“‘We are in worse foreclosure shape than Michigan is,’ Barnes said. The difference is that in Michigan, which is suffering from automotive layoffs, ‘nobody is building a lot of homes.’”
The Rocky Mountain News. “Steve McGuire, an agent who closely tracks the area housing market, said two culprits hurt home values: foreclosures and a record glut of unsold homes clogging the market. ‘I think we’re at the top of the list as far as foreclosures,’ McGuire said. ‘That is playing a big factor as far as home prices. Also, the inventory is going to continue to grow throughout this summer.’”
“He notes that last month there were more than 29,000 unsold homes in the Denver market, a record amount, and ‘now we have to be well over 30,000.’”
“Rising foreclosures and growing inventory are ‘just fueling the fire,’ McGuire said. ‘I expect that they are both going to continue to impact the market into the fall.’”
“Independent real estate broker Gary Bauer said, ‘there are some areas that will be showing negative growth.’ For example, Adams County, plagued by a large number of foreclosures, likely will see a drop in home prices, he said.”
Thanks to the readers who sent in these links.
Is this the first mention of “upside down” in the main stream media? I’m willing to bet a health majority of those upside down, don’t even know they are upside down yet.
I guess that is the end to ‘Colorado Rocky Mountain Highs”
from the ground it’s the tale of two markets. in boulder proper there are high-end condos being constructed/converted at prices approaching $1000/sf. there are high end ($1,000,000+) scrapers being put up all over town. to the east i’ve seen homes that sold for $225,000 in 2003 selling for under $200,000. foreclosures, bankowned and repos are soaring. you can however, still get 100% investor financing with no income verification and ficos as low as 580. yikes.
Your comment is exactly correct. I have spoken to Boulder realtors and certain neighborhoods are selling like hotcakes but other areas are desolate of demand. The downtown loft prices in Boulder are quite ridiculous. Some are right next to the bus station where lots of ragamuffins hang out and smoke. Why on earth would someone pay 1.3 million for a loft next to a bus station? Pollution, noise, transients…. Ah, urban life so seedy and expensive…. I do know that SFH builders are having a hard time finding demand for their speculative construction in a lot of areas of Boulder County and their insurance rates are skyrocketing.
“Phil Storms, a real estate investor in Denver. ‘I would be worried about a bubble bursting if we had seen the same markets we saw in Florida,’ he said. ‘But we have had some slow markets for quite some time.’”
i would say something smart and thought-provoking but that’s not who i am… this guy makes me want to beat him w/ a rubber hose.
And I’d agree if this were purely a housing bubble, and not a credit-bubble and spending binge like the earth has never known, and likely will not soon repeat.
“Prices of existing homes in the Denver and Boulder metro areas fell in the first quarter of 2006, the first time in at least 16 years.”
From my recollection, Denver has been suffering a real estate glut for many years…but prices went down for the first time in 16 years…OMG…this is going to take sooo long. I think the idea of another Japan like scenario is seeming more and more real to me.
Simmsays…pukey foods
http://www.americaninventorspot.com
on the positive side we will be seeing a whole lot more of that “negative growth” inthe housing market and the economy in general.i expect to see an article in my local paper any day now about “growth accellerating!” and in paragraph 13 they will mention that it is negative growth….
“‘People who are upside down on their mortgages are putting their houses on the market,’
How does that work? Do they have money to bring to the closing?
Lots of money or a confirmed short sale provision from the lending institution.
Somebody needs to bring money to the closing. The seller or the bank. I shudder at the most likely possibility; the seller takes out a 2nd on another property to cover the shortfall.
It’s usually the bank, in an agreed short sale. But they will 1099 you the difference.
Ye olde 1099! How many tens of thousands of people will become intimately acquainted with that nasty little form over the next few years?
The 1099 is one of the reasons I didn’t buy in SoCal this year. My employer will cover loss on sale up to $100K when I am transferred, but that $100K would be reported to the IRS as income. The last thing in the world I want to do is pay taxes on $100K in vanished phantom equity.
So… there it is in black and white for all to read. Homeowners don’t have much equity in their houses. They are financially over extended. Their house values are falling. There is a glut of inventory. And they are selling. And this further drives down prices.
Furthermore, we got news of weak job creation today. The economy is slowing.
Folks, we just felt the first breeze of the huge storm that is going to batter us for the next couple years. Hold on.
But but but, unemployment is down to 4.6%!!! How can that be?!??!?!?! *terminate sarcasm_routine*
Is it like the Butterfly Effect?
Does anyone have insight into the Fort Collins market? Does it track Boulder?
Fort Collins should be pretty close to general Denver market in terms of trends.
Boulder, on the other hand, has strict zoning rules that keeps supply very limited (hence may not accurately reflect things happening in larger Denver market) . Hence median prices of homes in Boulder are close to 500K v/s 250K+ in most of the Denver metro (I think Fort Collins should be in the same ballpark)
boulder tracks california and new york, fort collins tracks denver/colorado market. fairly healthy with csu but builders have overbuilt in the northern corridor.
Fort Collins seems to lag Denver by a year or two, maybe more. When I lived in Denver and prices there were going up 10% or more a year Fort Collins was still pretty affordable. Now Denver has peaked and may be coming down, but Fort Collins is still climbing.
In 2000 fully 1/2 the new FC residents were people moving up from Denver for better schools and cheaper houses, but still working in Denver. I think that gas prices and increasing house prices slowed down the migration, but our schools are still way better and house prices are still lower too. We, like Denver, are surrounded by miles upon miles of empty land (mostly scrub/ grazing land, not enough water to grow anything without irrigation). There is no shortage of land here, only water, even though the Governments own most of the state.
“Prices of existing homes in the Denver and Boulder metro areas fell in the first quarter of 2006, the first time in at least 16 years.”
This makes sense as last major bust was around 1990 (supposedly some homes in Denver metro area sold 40% below peak)
96-2001 when prices rose all around in double digits per year.
After that its slow deflation 1% to 3% loss of sell prices (not asking, as asking prices haven’t declined much) artificially propped up by low interest rate and declining lending standards.
Now that rates are inching up and ARMs will be resetting, we are already seeing forclosures and short sales. We will see how far down it goes.
(One difference I have noticed is over the last 3 or 4 years, homeowners in Denver region, even the most reluctant ones, have accepted no/low appreciation market. So there is less arrogance compared to both coasts. But there is still denial in terms of how low it can go !)
This is something that I never quite understood about the Denver market. While housing was appreciating more or less at the rate of inflation in bubbleland areas in the mid to late 1990’s, Denver was on a tear. When bubbleland went into blow-off mode, Denver seemed to be flat (locals, feel free to disagree with this assesment.) Now Denver is on the downslope and bubbleland is flat/teetering. Is Denver just ahead of the rest of bubbleland by a year or two, or does it truly march to its own drummer and if so, why?
Here’s a hint, and it’s just the tip of the iceberg.
No surprise that the major media never picked up on it because it’s a very politically sensitive topic (hope this link works).
http://denver.bizjournals.com/denver/stories/2006/03/06/story3.html?page=1
Have the Rob Black show on in the background (Financial advice show in Bay area). His quote was “the housing boom is over, the housing boom is over, the housing boom is over”. And compared it to the tech stocks in 2000. More media confirmation.
nedd to leave ca,
I’ve listened to Rob over the years and for the most part he usually makes sense. He was tech heavy going into to 2000 and tech seems to be what he knows best. I haven’t tracked the returns on his funds. How has Rob been doing? Just curious.
Black just took a question, “should I take a 2nd out on my home to buy a rental”. His answer, ’stupid question of the day’ - don’t do it. But he said “no bubble, it will be OK” - me thinks that will be wrong in Bay area.
A few months, my ass. This story shores up a basic tenet of my bearishness. The weak (Denver) get weaker and it lasts years, not months. Denver’s having YOY price declines for the first time in 16 years is the first shoe to drop in what will ultimately be something resembling Imelda Marcos’ closet. This won’t be over until they’re giving away properties in places like LA and SF but that will be at the end of the down cycle, unfortunately.
Denver, CO
Homes on MLS: 29676
Median Asking Price: $269,500.00
Total Asking Price (all homes): $8,184,036,404.00
Census(2000) Median Price: $177,453.70
A commercial on the Rob Black show - “I’m Erik Estrada, … buy this POS property in Anderson Island in WA”.
need to leave ca,
You sure? Last I heard our “CHP’s” friend was hawking resort property in Arkansas?
I thought Erik Estrada died. No, wait, that was his career. Never mind.
“Soft home prices could stretch for several more months as excesses get worked out”
Sure. Several months of soft prices? Keep dreaming.
now some informercial about some dude JGBanks pimping probate properties for enormous profits.
OT
Here just outside of Vancouver Canada a friend just sold her house. They lowered their price, by a few thousand dollars thinking their asking price was a bit too crazy. Low and behold, two people show up and get in to a bidding war on their lawn and bid up the price to above their lowered asking price by 2 thousand dollars. The woman who started the bidding war used to live on the street and wanted in right away! Ouch! Can’t wait till this madness is over….
From what I gather, the folks in the Pacific Northwest (or should I say Pacific Southwest) are the last with their heads in the housing bubble cloud. I guess it is all the California cash outs moving up there, but would think it would slow down the same as other bubble refugee places like Phoenix. Everyone wants to live there, apparently. That is why I left.
I’ve lived in Denver since 1978 and, as a previous poster noted, Denver RE cycles are frequently out of synch with the rest of the country. We seem to get hooked to one industry sector here, mining/oil in the late 70s, tech in the late 90s, that fall out of bed and there goes the RE market. This time I think it is more just too many people taking on too much debt with unconventional mortgages. Now rates are adjusting up and people can’t make the new payment. Prices haven’t risen here since about 2001 for many types of real estate (although not all), and therefore selling isn’t an option to get out of trouble.
2 years ago I sold my house and decided to rent. After being an owner for 30+years my friends couldn’t figure out WHY I would go back to renting! As I explained prices are just too high when compared to the cost of renting a similar property their eyes just glazed over. Jeesh…real estate doesn’t actually ever go DOWN in price, does it? That was a very typical response..I could tell many of them thought I was nuts.
But, the apartment I’m renting on Denver’s Cheesman Park for $1050 would go for about $300k if it were a condo. A $300k condo means around $2500/month with all the taxes, HOAs and other costs. One of those amounts needs to change. Until it does, $1050/month seems like a bargain to me. I’m expecting significantly lower prices over the next several years. We’ll see.
DINor - our Chips friend hawks properties for whomever pays his fees (probably clearing gambling debts?). I have seen him in CA, AR, TN, now WA. Funny thing is, all of the backgrounds look exactly the same. I think it was filmed once, and just dub in a new name.
This was the first time I heard Rob Black - just was background. He did say he knew tech stocks best.
I saw Erik Estrada once on television hawking property in Angel Fire, NM, which is on my short list of possible retirement places. I still haven’t decided whether it was reassuring (overpriced; builders need to dump land and prices will come down) or alarming (massive and cheesy developments loom).
Yeah, good point. With a D-List celebrity like Estrada selling RE does that make the property A) Hot because of his celebrity status or B) A dump because of his celebrity status? Maybe folks out in the boonies hadn’t heard that CHiPs was cancelled yet?
I am a new poster here but have been lurking for quite a while. My wife and I own a house in the trees in Ridgway. Our tenant (a finish carpenter) says things are fine in southwestern Colorado. He says he has lots of work and pays the rent on time. I see the carnage in the Denver/Boulder area. My question is how intertwined are these markets? Am I comparing apples to oranges here?
The Southwest Colorado market is quite different from Denver/Boulder. Most places in Denver and eastern Boulder County are slow now. I was in Ouray last year about his time and I remember the housing market seemed to be a bit perky with retirees moving in and homes being built. In Denver, things were slow.
I would say that ridgeway is just a leveraged play on the continued ascent of house prices in telluride proper. The fact that your tenant is a finish carpenter (presumably working in telluride) says it all.
Tiny test:
http://tinyurl.com/packb
We’re not yet seeing a slowdown in the foreclosure figures; in fact, we’re seeing higher numbers. Where’s this going to take us? We could be in for a long haul.
My wife and I were visting denver last weekend. We decided to look at homes and found this great home. Ya right. This shows how out of touch some people are with reality.
http://www.recolorado.com/Search/propertyDetail.asp?mls_number=346008
The next door neighbor bought the home in November 2005 for $248,000. All that has been done to the house is a fresh coat of paint on the inside. They then relisted it less than a 3 months later for 100,000 more than they bought it for. This sounds exactly like people in Cali or Florida. There are so many people trying to make a quick buck on real estate that when the prices crash many are going to be hurt.
I really wonder about the Michigan “not building new homes” comment. Not *buying* new homes, maybe, but I’ve seen a considerable increase in the ads for new homes developments all over my area of MI (Ann Arbor). Not just constant buzz and planning board meetings over new condos in the downtown (something like 3-5 times the number of units being added in the next couple years as had been created during the previous *decade*…sounds just like bubbly downtowns everywhere to me!), but also townhome communities in outlying areas, condos built near the mall here, SFH subdivisions sprouting in *all* the surrounding townships, plus infill developments everywhere there’s an acre or three to play with. Maybe they’re not building in downtown Detroit (though I recall seeing some story about a grant to build ‘affordable’ housing there recently..and I think it was for purchasing not for rentals), but I don’t see an end to the building here in MI either, despite the economy. It’s bizarre.