Go to the mobile version of this Web site.

Login | Contact Us | Site Map | Paid archives | Electronic edition | Subscription Questions | Extras

Bear market for new-home sales

Denver area saw 31% drop in 2007; no '08 relief seen

By John Rebchook, Rocky Mountain News (Contact)

Published April 22, 2008 at 7 p.m.

Text size  
New homes were springing up all along eastern Lafayette in late January, but selling them in today's market might pose a problem.

Photo by Ken Papaleo / The Rocky

New homes were springing up all along eastern Lafayette in late January, but selling them in today's market might pose a problem.

Related Links

More Real Estate

More stories »

The slump in the new-home sales market in the Denver area continues. Experts predict that new-home sales will drop another 10 percent this year, on top of a 31 percent drop in 2007.

A report by the Genesis Group, which tracks real estate along the Front Range, found only 9,698 new homes were sold last year, down from 14,108 in 2006. Sales activity in 2007 was the lowest since 1994, when 9,590 homes were sold. The market peaked in 2000 with 19,432 new-home sales.

"I think the new-home market will be down another 10 percent in 2008 versus 2007," said Jeff Willis of Berkeley Homes. "Fortunately, we're not seeing nearly the drop-offs in Denver (that we're seeing in) a lot of other markets, especially the coastal markets and Florida, Phoenix and Las Vegas."

Still, given economic forces such as ongoing credit market woes and still rising foreclosures, "2008 is going to be pretty sluggish," he said.

The downturn has meant worker layoffs. And carpenters, framers, electricians, plumbers and other construction workers still employed on new-home sites are looking for work elsewhere.

And with fewer consumers taking out loans because of stricter underwriting standards, lack of confidence in the economy and no sense of urgency, hard times are at hand for formerly highly compensated mortgage brokers.

"It is tough," Willis said. "Everyone is scaling down as close to the bone as you can get."

The home building downturn ripples throughout the economy.

"The impact of reduced construction certainly hurts," said economist Patty Silverstein, president of Development Research Properties.

"The most obvious impact is in construction, with fewer workers and builders buying less lumber and building materials from their suppliers. But there is also a multiplier effect beyond that. Basically, consumers are not buying new stuff for their new homes."

A typical new single-family home built across the country creates the equivalent of 3.47 full-time jobs and a payroll of $143,393, according to a 2005 analysis by the National Association of Home Builders.

Genesis reported that 7,082 building permits were issued in the Denver area last year, a 35 percent drop from the 10,952 permits issued in 2006. Using that statistic, the drop of 3,870 in new homes equates to a loss of 13,429 jobs and $554.93 million in wages.

In addition, the presidential election is distracting potential buyers, said Byron Koste, director of the CU Real Estate Center.

"We have this wonderful convergence of bad news on the economic side coinciding with this political phenomena that occurs every four years," Koste said. "That argues for less than robust activity. People sitting on the fence are really hunkering down. . . . I do think we're at the bottom, but we can be bouncing along the bottom for the next six months."

Mark Levine, director of Real Estate and Construction Management at the Burns School of Real Estate at the University of Denver, said he wouldn't argue with people who expect another 5 percent to 10 percent drop in home sales next year.

"Builders have to ask themselves, why are they building homes if no one is buying?"

rebchookj@RockyMountainNews.com or 303-954-5207

An influential economist who long predicted the bursting of the housing market bubble cautioned Tuesday that the slump in the U.S. housing market could cause prices to fall more than they did in the Great Depression, and bailouts would be needed so millions don't lose their homes.

Yale University economist Robert Shiller, pioneer of the widely watched Standard & Poor's/Case-Shiller home price index, said there's a good chance housing prices will fall further than the 30 percent drop in the historic Depression of the 1930s. Home prices nationwide already have dropped 15 percent since their peak in 2006, he said.

"We are in uncharted territory," Shiller said during a speech at the New Haven Lawn Club. "I think there is a scenario that they could be down substantially more."

Comments

  • April 23, 2008

    9:40 a.m.

    Suggest removal

    RainbowWarrior writes:

    Sounds like the smart money will be going to fix up older homes in urban areas if you can buy cheaper than new and reduce your mileage to work. Some tax credits for green improvements like better windows and doors, insulation, heating and cooling systems and some solar panels might be a great stimulas package and improve quality of life all around.

  • April 23, 2008

    11:48 a.m.

    Suggest removal

    CWW writes:

    My thought exactly, BigJake. Why build 13,000 more homes and ruin another open space.

  • April 25, 2008

    1:29 p.m.

    Suggest removal

    WarrenJimmyBuffett writes:

    Removing posts is a questionable tactic. If I were in the homebuilding industry, I'd try to hide reality, too.