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Tough year in store for housing market

Study predicts Denver area could improve in 2008

John Rebchook, Rocky Mountain News

Published February 27, 2007 at midnight

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Call it unlucky No. 7, as in the number of consecutive years Denver's real estate market has been struggling.

The challenges for 2006 were the same: record foreclosures and a 39 percent increase in unsold new homes languishing on the market.

"Metropolitan Denver's housing market is hurting," according to a 62-page 2006 housing review released by the Genesis Group, which tracks the region's real estate market.

And 2007?

"This will be another tough year," Genesis Group's Mike Rinner said Monday.

But fast-forward to 2008 and there might be some relief.

The Denver-area housing market, which was among the strongest in the country from 1991 until 2001, floundered after the Sept. 11 terrorist attacks and the subsequent "tech wreck."

While many of the country's housing markets soared in recent years, housing prices in the Denver area for the most part remained flat and a record number of houses were taken over by lenders.

The report notes that in the fourth-quarter, 4.1 percent of the homes in Adams County were in foreclosure, the same percentage in 1988, when the number of foreclosures previously peaked.

More than 19,000 foreclosures, a record in total numbers, were filed in the Denver area last year. But the overall percentage of homes in foreclosure is 2.6 percent, compared with the peak of 3.8 percent in 1988. However, on a percentage basis, 2006 was still the worst year since 1989, when 3.2 percent of the metro area's homes were in foreclosure, according to Genesis.

The market from 2008 until 2010 should fare much better, based on projected employment and population growth, coupled with modest new construction.

As with much of the country, aging baby boomers in the Denver area will help the upper-end, move-up market.

For example, the metro area is expected to see its population grow by about 220,000 from 2005 through 2010 to 2.85 million people.

The biggest increase from home buyers will occur in households with incomes of more than $100,000.

"But what I think will give us an advantage over a lot of other cities in the country is that not only do we have the aging baby boomers, but we also attract a highly educated work force," Rinner said.

Home-building consultant Jeff Whiton said young educated buyers have more choices than ever.

"A lot of little niches are being created," Whiton said. "There are downtown condos and suburban townhomes.

"There will continue to be lot of transit-oriented housing choices."

Roger Reinhardt, executive vice president of the Home Builders Association of Metro Denver, said that while this will be another "flatline" year for builders, Denver is in much better shape than cities in California, Arizona, Florida and Nevada. In those states, prices are cooling quickly after unprecedented price run-ups.

"This will not be a good year for the home-building business in Denver, but ultimately it will be good for the economy," Reinhardt said. "When roughly one out of four new home sales doesn't close, you quickly build up an inventory.

"We're going to have to work through our problems. There is no quick fix. Economic cycles are what they are."

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