Denver Area Housing Market ‘Seems Bottomless’
The Rocky Mountain News looks at the May housing numbers in the Denver area. “The record number of unsold homes in the Denver-area market topped 30,000, and the inventory glut is expected to drive down home prices in an already soft market. That eclipses the record set in April, when 29,045 homes were on the market, and it is almost 21 percent more than the 25,198 homes available in May 2005.”
“The ever-growing number of ‘for sale’ homes competing with one another is being fueled by foreclosures. Blame overbuilding, a loss of high- paying jobs and rising interest rates, experts say. In 2005, 2 percent of all homes in the metro area ended up in foreclosure, the highest rate in 15 years, and that trend has continued this year.”
“‘I’m just floored by these numbers,’ said (broker) Kurt Poole in Highlands Ranch. ‘It’s hard to find anything positive to say about the home sales market.’ Poole noted that he has been saying for the past two years that the market is at the bottom and should start to creep up. ‘But clearly it is not at the bottom yet,’ he said. ‘It seems bottomless.’”
“The huge number of unsold homes is causing a bottleneck in sales and likely will drive down home prices and make homes tougher to sell, (realtor) Steve McGuire warned. ‘It’s really the basic law of supply and demand,’ McGuire said.”
“It now appears that the price of homes in upscale areas such as Cherry Hills Village and Greenwood Village are starting to soften, McGuire said. ‘And there’s no support for the low end of the market,’ McGuire said, which is being hammered by near-record numbers of foreclosures, especially in Adams County and parts of Aurora.”
The Denver Post. “‘The foreclosures are causing things in the lower price ranges to really stop (selling),’ said Steve McGuire. In May, 6,459 homes were put under contract and 5,010 sales were closed. Both of those measures fell from last year.”
“High gas prices also are a factor, said Mike Rinner, a real-estate analyst in Englewood. ‘Supply and demand are more out of whack in neighborhoods that are older and farther from jobs, and in remote areas where commuting times are longer,’ Rinner said.”
“(Broker) Judy Templeman said 2006 ‘is what we call a cleansing year.’”
“(Broker) Judy Templeman said 2006 ‘is what we call a cleansing year.’”
I wonder what she’ll call 2007 and 2008?
High Colonic!
2006: cleansing year
2007: Purging year
2008: Year of the power enema
Sorry, crude, but I couldn’t resist.
Denver, Pheonix, Vegas, So Cal, Miami (and most of Florida), Sacramento, DC, etc. will all be deep in the red by Christmas.
Again, I think the summer could still have one last rally. But by the fall… then again… Look at the stock markets! The dow is down 1.5% so far and that graph is plunging.
Neil
A lot of kids getting knit socks for Christmas.
And a lot of flippers getting coal. Bwa ha ha
sometimes you grouchy bears can actually be pretty darn funny!
what does “bwa ha ha” mean? it that any thing like “mwaha”?
exactamundo. Bwa ha ha is just a regionalized evil laugh.
what does “bwa ha ha” mean?
B.W.A. stands for “bulls with attitude”. We wear it on our black baseball caps.
I thought it was “bears with attitude”.
oops, duh sorry.
And a lump of coal for David Lereah.
OT A list of housing appreciation by metro area was just given to me at work…and the winner is for Q1 2006 is St. George, UT with a massive appreciation rate of 6.88%.
We should all go buy houses in St. George, we will all be rich.
Wait wrong site
Is that an ANNUALIZED 6.88% or up 6.88% over a quarter. Because if it’s the latter, that is pretty darn significant. (almost 30% annualized)
Obviously, it is simply the latest wave of equity locusts
I mean, really, you cannot seriously believe that “everybody wants to live in St. George, Utah”, a place I’d never heard of before until I saw it on the San Diego RE investors web page early this year, and then “suddenly” it was in the top appreciation areas… (along with Coeur d’Alene and Boise, which I also saw on SDCIA.com)
Soon, however, suddenly, with no warning (how could anybody foresee this?) sales will drop off a cliff. It will go from #1 to #200, just like so many other areas have. But this is unforeseeable.
I am truly amazing, and can foresee the unforeseeable.
Foretell, the unforetellable
Forget, the unforgettable
And Forecrap, the unforcrappable.
I bask in my own greatness. Won’t you join me?
Clouseau
I am shocked that there is gambling going on in here.
Excuse me… your winnings, sir.
I think it was annualized, not sure though because it did not say.
Here is the article, I could not tell if it was annualized. It probably was because the NAR was mentioned in the article.
http://moneycentral.msn.com/content/Banking/Homebuyingguide/P85323.asp?GT1=8289
Yes, St. George, Utah! Exactly where my brother-in-law just bought a house a month or so ago. My wife adamantly refused to allow me to warn him not to buy in this bubble. Even if I did there’s no guarantee he would have listened.
It’s just sad to see people close to you making these kinds of ill-advised purchases. But unless you’ve got your night vision “bubble goggles” on, it’s hard to see the forest for the trees I guess.
cleansing year–yeah-like in medieval times, where they’d drain your blood out to rid you of evil spirits! Cured, if it didn’t kill you.
That would be COLON BLOW…
More bottomlessness in Phoenix and Tucson too!
Phoenix inventory up to a new high of 24,826, and Tucson up to 8,400.
http://www.benengebreth.org/housingtracker/
Plenty for buyers to choose from, but this is no time to be buying!
and rog……by the ZIP barometer phoenix is 48,511 and climbing fast
The other night we heard an item on NPR reporting on the coming foreclosure flood in the Denve area. As bad as it was last year,it’s expected to be much worse this year. A good bit of the story focused on scam artists that claim to “help” people in default, but end up robbing people of their houses. Good quote: “A drowning man will grab a snake, thinking it might be a rope.”
That was actually on “The News Hour with Jim Lehrer” (gets rebroadcast on our local NPR station at 11:00 p.m. for some reason.) It seemed to me they softpedaled the problems of loose credit and “creative financing” in favor of painting the foreclosed-upon as victims, but, as Moopheus was saying to me, it’s probably a good thing that info about those scams is getting out in the MSM. This was not a piece about “soft landings”.
Yesterday on NPR the Marketplace Morning Report led off with a quick item noting that the housing bubble is over. In so many words. Cue the fat lady…. stick a fork in it… and any other cliche you care to add. I can’t bring myself to be too gleeful, though. It feels like we’re heading into some scary territory soon.
I can’t bring myself to be too gleeful, though.
You could if you were short HBs or the Dow.
Poor Judy. Ahh the hopes of the blindly optimistic. 2006 will be labled “The Beginning” of the end of of the largest real estate bubble ever. The “cleansing year” is sometime post 2010.
“We never thought we would see 30,000, but here we are,” Bauer said. “We may hit 31,000, but I don’t think we’ll go much beyond that.”
Could someone please ask Mr. Bauer.
Mr. Bauer, Like why won’t numbers go much beyond that? and then some?
Good point SJ! I can’t stand when someone throws out a comment like that and fails to substantiate it with evidence to support it. Mr. Bauer here should really substitute “I don’t think” in his comment with “God I hope”. I really love to mess with the heads of real estate bulls when they throw-up their positive spin by asking them “really? And just what are you basing that on?” Usually their reply is a blank stare.
IMHO “I don’t think” is pretty accurate in this case. He just needs to add the clause “which is why I believe” afterwards.
31K+ is forgone conclusion. Its just the question of how soon.
Sales Volume is decreasing, supply is increasing. Half of peak selling season is over in Denver Metro area.
Most of the marginal buyers/greater fools have already been sucked-in by last few years of cheap money.
Those who are still in market are looking for deep discounts.
Tech companies are laying off. Seagate announced 600 jobs lay-off in Boulder-Longmont area after their merger with Maxtor. Sun Micro will also be laying off in Broomfield area.
The market was not that good to begin with over last 3 or 4 years.
Denver area market is unfolding exactly as per script. Increasing interest rates, reduced supply of buyers and greater fools, shaky economy was bound to cause increased forclosures. Show has just begun. Sit tight and keep watching.
It is funny how the scum Realtors here in Bay Area peddle Denver properties in the newspapers. The “forget” to mention the inventory in Denver/Aurora, and all the foreclosures.
It is the debt payments people have to make that will force them to sell. Slow bleed, month after month of payments will force flippers on the back end to walk away with a huge loss and ruined credit.
“The huge number of unsold homes is causing a bottleneck in sales… ‘It’s really the basic law of supply and demand,’ McGuire said.”
The cause is more likely the lack of understanding by the sellers of supply and demand.
6month and 30y now inverted.
scary…
“High gas prices also are a factor, said Mike Rinner, a real-estate analyst in Englewood. ‘Supply and demand are more out of whack in neighborhoods that are older and farther from jobs, and in remote areas where commuting times are longer,’ Rinner said.”
I predict more of this in other exurbs in other parts of the country. When you have to pay out the nose for gas, the bloom fades from the exurban rose mighty fast. And many of these people who bought in the far-flung fringes were stretching to buy a house in the first place, and the rising interest rates + gas price increases are going to be the last straw pushing them into foreclosure or bankruptcy.
Gas prices are having an impact. It shouldn’t be that way, since the increase in prices looks terrifying, but it ought to be a minor part of your budget. Still… an example:
Friends of mine bought a house well out of DC, a 106 mile round trip work commute. And gas prices are putting pain in their life, though a quick calculation shows that they really are spending no more than about $75/month more on gasoline than when they bought the house.
Maybe if your budget can’t handle an unexpected $75/month, you shouldn’t be buying a house that stretches you that much? And now that he’s being transferred and trying to sell it for months, he won’t say it but is probably thinking now “Gosh, maybe I shouldn’t have bought that house”.
Yet they still hold out hope that they will make money on it, or at least enough to offset the expensive improvements they added, even though other cookie-cutters in their subdivision are going for $60k less! Gooooood luck!
This was their first home, too. Ouch! But they just HAD to get on the property bandwagon, even if it did put them 30+ miles farther out than their pretty affordable rental. I think the conductor is coming around on that bandwagon and asking for the “fare” now!
Maybe if your budget can’t handle an unexpected $75/month, you shouldn’t be buying a house that stretches you that much?
But…but…renting is throwing away money! A house is an INVESTMENT!
It’s foolish to paint oneself into such a tight financial corner in order to buy a house, that an extra $75 a month is financial disaster. That’s just wrong. There’s always emergencies, and there are always price increases. If it isn’t gas, it’s an unexpected tax bill or vet bill or or or - and your budget had best have some kind of wiggle room.
Once again; the response will be for people to accelerate the normal pace of lifestyle remodelling by changing job locations to accommodate housing choice and not the other way round.
What’s happened in Dallas is that businesses are actually moving into to the suburbs and exurbs. They’ are saving money on land, taxes and rent, plus they like having affordable housing nearby to attract young employees. This is a trend that’s been continuing for a decade now, and I wouldn’t be surprised to see the same thing happen in other areas. Downtown/uptown areas will have to compete with suburbs and exurbs for new corporate centers, and that’s going to be difficult with bloated big city budgets and real estate that’s too pricey for the cheap labor these corporations hope to employ.
‘Supply and demand are more out of whack in neighborhoods that are older and farther from jobs, and in remote areas where commuting times are longer,’ Rinner said.”
OH YEAH ! Hear that all you people out in (los bathroom, CA (banos)) who a year ago were tripping over each other to get a piece of the pie. What about all you bay area people buying $700,000 boxes in Greenfield and Salinas? Tsk, tsk……..
That a lot of homes on the market! I wonder when prices may begin to trend down for the Denver area? Is there a showdown between buyers and sellers?
I noticed today that the median home price in Boise (where I live) is down for 2 straight weeks- I hope this is a trend.
Also, compared to other big cities from both coasts as well as Chicago, Houston etc., Denver area population is not that high.
Entire state of Colorado, population is around 3 and half to 4 mil.
Denver metro must be around 1 mil.
(Compare that to Bay Area: 4 or 5 million, Houston: 3 million, Atlanta: 3 million)
This puts 30K number in perspective
denver is colorado, approximately 2.7 million, front range accounts for 90% of the entire state. i still have not seen noticable cutback in lender activity, see below the stupid emails i get every day. what i can fathom is that the people the are trying to book loans have no concern that they’ll be underwater in six months. i guess that’s why we have the foreclosure problem here in the first place. there is no accountability for the bad loans made, they’re being handled by some loss mitigation team in new jersey.
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forclosure scams.
Wow check out this article from businessweek….
Title: Will Bernanke Tank Housing??
http://www.businessweek.com/bwdaily/dnflash/jun2006/nf2006068_4156_db016.htm
Good comments too.
“Bernanke is not inheriting the best of situations,” said Paul Volcker, the grizzly voice of orthodoxy and another ex-Fed chief.
“How would you like to be responsible for an economy that’s dependent upon $700bn (£400bn) of foreign money every year? I don’t know what I would do about it, but he’s going to have to do something about it sooner or later,” Mr Volcker said….
Fellow governor Donald Kohn hammered home the Fed’s hawkish strategy in blunter language during a speech in Frankfurt. “If real estate prices begin to erode, homeowners should not expect to see all of the gains of recent years preserved by monetary policy actions,” he said.
In other words, no mercy now, and no bail-out later, regardless of warnings by financier George Soros that Fed tightening could combine with sliding house prices to cause recession in 2007. …”
March 23, 2006
No mercy now, no bail-out later
Telegraph
http://tinyurl.com/ra6rx
Short term pain = “chance” for long term gain. Else, no chance.
The RE bubble is an economic cancer that MUST be excised in order for the host economy to survive.
“The RE bubble is an economic cancer that MUST be excised in order for the host economy to survive.”
So true, so true. Why should teh FED bow down to a bunch o’ screaming crybabies whose bottle has been temporarily taken away at the expense of the entire economy?
He sees it. We see it. Good medicine always tastes bad.
It is interesting that the median price in the Denver area was up slightly. It was mentioned in the articles, but none of the experts even commented on it. That statistic is pretty meaningless when the slide really begins.
ben, you have a tremendous inmigration of californina and east coast buyers with plenty of money. they are buying high end homes, especially in boulder and the metro west area. i had a good friend sell a 1800 s.f. “rat shack” on the hill in boulder this week, selling price- $830,000.
Hey boulderbo- What’s your opinion for the time scale of price rationalization in boulder?
directly in line with the collapse of the east and west coast bubble markets, although there is a serious concentration of people here that would probably do much better in a rising interest rate market (trust funders or trustafarians as we call them). we have been called 12 square miles surrounded by reality, so i don’t anticipate a collapse by any means. i live in the hills west and the three homes being built and six that have sold around me, the demographic is all the same- late 50’s, coastal transplant, semi-retired, consultant, first priority is high speed internet and new york times delivery.
Thanks. IMO, trustifarians or not, the crazy financing of the past few years is bound to push comps down.
I also have been hearing from realtor friends that most of the high end new condos in LoDo (downtown Denver) are being bought by transferees from NYC and the west coast, and by rich parents for the kids (can’t have them living in anything substandard ya know…)
$400-$500/sq ft for most of this stuff…which is really expensive for Denver. I just wonder how they’ll do when/if they want to sell in a year or 2.
But for the rest of us, here in the real world, I have been doing lots of looking online for 2 bedroom condos east of downtown. What I am seeing is that people are asking what they paid for units in 2001. NO APPRECIATION WHATSOEVER in 5 years. And that’s the asking price! They’ll get less, and have to pay the realtor. LOTS of owners under water here. And even at those prices the cost of renting vs cost of buying is still way way out of wack.
Prices need to come down, substantially.
Same thing in the mountains immediately west of Denver.
Prices aren’t increasing at the rate that they were a few years ago, but there are few foreclosures and not as much inventory as you can find east of I-25.
The worst concentrations of foreclosures and high inventory levels are in Adams, Weld and Arapahoe counties. Many are new construction wherein the buyer got into it with little or nothing down with ARM’s. From what I’m seeing and hearing, some of the builders are finally realizing that they can’t sell more new homes when such a huge portion of the ones that they’ve already built are either for sale, rented out or in foreclosure.
What is rarely discussed and the general public doesn’t even begin to see is that the mortgage and appraisal fraud in this state is horrible, and little of it ever makes the news.
Ah the equity locusts, the bane of Seattle as well….keeping the median price looking good with sale of high end homes.
Yup:
1) Everyone from the neophyte real estate agent to PhD economists likes to say the housing market is driven by “supply and demand” as if this were a profound observation.
2) Even bulls concede that supply is increasing, in some areas dramatically.
3) Nearly all bulls concede that demand is not increasing at the same rate supply is.
1 + 2 + 3 = declining prices. For those who don’t think prices are or will soon decline “supply and demand” is just a soothing palliative. If you think prices will continue to go up then you do not believe the real estate market is driven by “supply and demand.”
Keep in mind the NAR game about second homes, and the new economy where baby boomers are going to own 2 or 3 homes. That’s how they explained away the inventory last spring. Funny they don’t talk about that much anymore.
Ben,
Thought you might be interested–looks like the Fed regulators really are going to get tough on exotic mortgage loans, according to this speech on 6/7/06 by OCC Chief of Staff John Walsh. New guidance due out later this summer, and it sounds promising:
http://www.occ.gov/ftp/release/2006-68a.pdf
“The Office of the Comptroller of the Currency’s Chief of Staff John G. Walsh spoke today to members of the National Housing Advisory Council about proposed interagency guidance related to nontraditional mortgages. During the speech, Mr. Walsh highlighted the economic conditions behind the need for the guidance and how it promotes a safe and sound banking system while protecting consumers against the dangers of negative-amortization and escalating payments.”
This is important to keep tracking.
They are going to cull exotic mortgages…slowly.
No government or institution moves quickly. Slowly is best for all of us.
Picture a junkie, going cold turkey alone versus entering a methadone clinic.
Saw this ad today.
https://www.quickenloans.com/loan_programs/smart-choice.html
I might have to consider dropping Quicken’s software and going to some other platform.
For some small segment of the home buying population, the guidance may eliminate some options that were probably neither sound nor realistic in the first place. It may eliminate the possibility of a more expensive house that would likely prove unaffordable over time or it may point toward a more modest house in a more modest neighborhood. In some cases, it may encourage buyers to temporarily defer their purchase plans while more cash is being accumulated toward a down payment. As i’ve already said, the proposed guidance is predicated on a belief that we do no one any favors – not the buyer, not the lender, and not the community in which the home is situated – to underwrite the purchase of a home that an individual buyer cannot afford in the long run.
If the borrower cannot qualify for a loan based on the fully amortized repayment schedule, there’s an excellent chance that the borrower would be unable to make those payments when the introductory period came to an end.
Hurray! This is a very level-headed explanation of why exotic mortgages are toxic and why stricter lending requirements are going to implemented. It also directly answers the charge that restrictions will make homeownership more difficult. I only wish more people would state that exotic mortgages have made housing FAR less affordable for many of this blog’s readers who are responsible borrowers.
Clearly this is the OCC’s very polite and politic way of saying the bankers’ arguments are self-serving bullshit. More people will be able to buy and KEEP their homes if reasonable lending standards are adhered to.
Exactly. Those last two sentences very aptly explain why the exotic mortgages are often suicide loans, and why they do not help anyone - the buyer, lender, or community. And, peterbob, in addition to the responsible borrowers on this site, it has made some of us delay (for how many years remains to be seen) borrowing to buy a house. I have already delayed two years because I would not buy into a bubble using suicide loans, and I know that I’ll need to wait at least another year or two, which really sucks, because I’m looking forward to buying my first home but I have to wait for this mess to clear up first. Hopefully, this guidance will be implemented and the liquidity will start to evaporate, thereby increasing the speed to clean this up so that the rest of us can go about buying a home (at a reasonable price and on reasonable terms) to live in and enjoy. For me, personally, this process can’t go fast enough. In the meantime, I’ll simply keep waiting and watching.
I’m in the same boat Waiting, and I couldn’t agree with you more.
Here in Los Angeles, I’m aware of some recent immigrants buying homes with Suicide loans because it was cheaper than paying rent. These are people earning around $10 an hour buying $500K homes. When this all falls apart, it’s going to be a MESS!!
Remember in the distant past when the amount you could borrow was (GASP!) tied to what you could actually afford…it seems so long ago in a galaxy far, far away…
I remember what Moopheus and I had to go through to buy our house in 1994 - just about everything short of anal probes. If we hadn’t stumbled upon the bubble blogs last winter we might not have been aware that neg-am mortgages and cash-out refis exist, simply because it wouldn’t have occurred to us that banks would make such loans available to the average schmoe trying to buy a house. Such things simply defy all common sense, IMHO.
Last week I had fun explaining neg-ams and cash-outs to a co-worker. He’s in the same position we were in - just seeing prices go up and up and despairing of ever being able to own a home. His reaction to the concept of “creative financing” was disbelief. If only more people had reacted that way…
But clearly it is not at the bottom yet,’ he said. ‘It seems bottomless.’”
Obviously, like most of the nitwits who have piled into the real estate sales scrum over the last 4 years, little Kurt wasn’t around for the S&L bust in ‘90/’91.
If he was, he’d be strappin’ on his parachute as this bust will be 10X worse.
The BS with FNMA and their portfolio backed by fruadulant and incompetant appraisals has the potential to take the entire system down.
Noah said 6000 B.C. ‘is what we call a cleansing year.’”
Anybody buying a home for $700,000 in a toilet deserves to lose their A$$. The entire central valley in CA has the sweet aroma of that fine bovine fecal matter that it makes me sick when I am even just passing through some of those scummy towns. The Toilet is so far from SJ or SF that nobody in their right mind would even think of commuting that.
‘Supply and demand are more out of whack in neighborhoods that are older and farther from jobs, and in remote areas where commuting times are longer,’ Rinner said.”
OH YEAH ! Hear that all you people out in (los bathroom, CA (banos)) who a year ago were tripping over each other to get a piece of the pie. What about all you bay area people buying $700,000 boxes in Greenfield and Salinas?
Don’t forget Patterson. What’s up with that place? In the middle of nowhere and houses seemed to spring up overnight like flowers after a spring rain.
Who in their right mind would overpay to live in a place like that? I can’t wait to watch future documentaries about this period in time.
At what point in history have so many people participated in this type of herd mentality? Nazi Germany maybe?
“We never thought we would see 30,000, but here we are,” Bauer said. “We may hit 31,000, but I don’t think we’ll go much beyond that.”
Bad news. According to the Denver MLS today they have….drum roll please….
34,779 properties in the MLS.
Ouch!
My sister moved from CA to Denver in 2001. She hated her 6 months there because she says she was treated poorly by the locals. She claims they hated her because she was from CA and that Californians ruined their housing market. Homes were no longer affordable.