Go to the mobile version of this Web site.

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

38% of area homes being sold at a loss, according to report

By John Rebchook, Rocky Mountain News (Contact)

Published August 12, 2008 at 7:57 p.m.

Text size  

Rebchook on Real Estate

Click here to read John Rebchook's blog.

Related Links

More More Business

More stories »

Almost 40 percent of the homes sold in the Denver area in the past year ended in June were sold for a loss, according to a national report released Tuesday.

And while the Denver housing market is doing better than the dismal national market by most measures, the 38.4 percent of sellers that sold at a loss in the Denver area is 62 percent higher than the national average of 23.7 percent, according to Seattle-based Zillow.com., which released the report.

"That's just awful," said Lou Barnes of Boulder West Financial Services.

"The gazillion-dollar question is: What does that mean for the rest of the market? There's the bad-apple theory, but I think that is somewhat overstated."

Barnes, and other experts, said there are so many distressed properties being listed for sale in the Denver area that they are driving down home prices for the entire market.

The trend is keeping people who don't have to sell their homes from putting them on the market.

"I can imagine a husband and wife sitting around the breakfast table and one spouse says, 'Do you think we should sell our home?' I can imagine one spouse getting a coffee mug thrown at them," Barnes said.

But other regions are doing worse.

In some parts of California, more than 60 percent of the sellers unloaded their homes for less than their purchase price, according to Zillow.com, which tracks the residential housing market nationwide.

"Actually, Denver is out-performing and is doing better than most of the country," said Dawn Lyon of Zillow.

Zillow first gained a nationwide reputation by estimating values of individual homes but has since started tracking everything from foreclosures to negative equity for homes in markets across the country.

The report says that 32.1 percent of homeowners in the Denver area who bought since 2003 have negative equity, which means they owe more on the house than it is worth.

However, Denver-area homes, which lost an average of 5.3 percent in the second quarter from a year earlier, did far better than the national loss of 9.9 percent.

Zillow also reported that 22 percent of the homes sold in the past year in the Denver area were foreclosures.

That is consistent with a report by Boulder economist Michael Kone of Housingmetrics Inc., who found that 25.2 percent of the homes sold in the metro area from mid-June through July were foreclosures.

Area real estate brokers said they aren't surprised that almost four out of every 10 homes being sold in the Denver area are being sold for a loss.

"I definitely see that out there," said Sarah Hays of Colorado Investment Real Estate Services/Metro Brokers.

She said that sometimes sellers take money to the closing table, but more often, they are short sales, in which the lender accepts less than the mortgage amount.

Jay Sandstrom of Century 21 Advantage Plus estimated that 35 percent to 40 percent of the approximately 26,000 unsold homes on the market are either bank- owned, in some stage of foreclosure, or otherwise distressed.

His general advice to clients is not to sell in today's market if you don't need to.

On the other hand, if you're moving up, buying now may pay off in the future, he said.

"If your house was worth $250,000, and you can sell it only for $225,000, but then you can buy a home for $360,000 that was at $400,000, you come out ahead," Sandstrom said.

Location,location, location

A sample of neighborhood activity during the second quarter.

Neighborhood Median Year-over-year price change

Baker $246,270 -7.4%

Cherry Creek $591,433 0.6%

Five Points $271,713 Unchanged

Highland $288,035 3.5%

Jefferson Park $274,595 2.2%

Montbello $157,939 -8.1%

North Aurora $121,364 -16.9%

Park Hill $266,473 -1.6

Stapleton $388,368 -1.5%

Washington Park $434,934 1.2%

Comments

  • August 13, 2008

    7:44 a.m.

    Suggest removal

    Marshdale writes:

    Just another sign of the aftermath of unregulated lending practices and unregulated capitalism. Thanks Ronnie, George H., Bill, and George W.

  • August 13, 2008

    8:35 a.m.

    Suggest removal

    Darwin writes:

    Gee, if I buy something I can't afford, is someone going to feel sorry for me and bail me out? There are some who always want to blame everyone but themselves. When I make a purchase on a time contract, I know what the terms of the contract entails. Sure, some may have been taken advantage of, but most should have understood the terms or else walked away from the deal. Those of us who are smart enough to understand what we are committing to, now get to pay for those "unfortunate people" to the tune of 300 billion +. Gotta love our politicians - it's election time again. We may not be a nation of whiners yet, but the sound is getting louder.

  • August 13, 2008

    8:35 a.m.

    Suggest removal

    Cowboy63 writes:

    Marshdale - Take responsibility for you own choices. Neither "Ronnie, George, Bill or George" sat at the closing table and held a gun to anyone's head.

    People are falling victim to their own GREED. Howerver, it is unfortunate that Freddie and Fannie are being bailed out - they should take the hit for their own choices as well.

    Own your choices and stop waiting for someone to save you.

  • August 13, 2008

    8:51 a.m.

    Suggest removal

    Fireball writes:

    This article is misleading and helps to perpetuate what we know is a bad market but only makes it worse. "Sold at a loss" does not define what "loss" really means. Does it mean that some moron that has a 125% loan, three mortgages, or huge home equity loan, has to sell their home for less than what they owe? This is the real problem with the market. A true loss is where a responsible property owner has had their home for a few years, has built up some decent equity and then for circumstances beyond their control, such as neighborhood home prices tanking, have to sell at a loss. I truly feel sorry for the latter but not for those morons in my earlier example.

  • August 13, 2008

    8:58 a.m.

    Suggest removal

    Buff4Life writes:

    Mashdale has a point. Some sort of regulation of capitalism is needed unless we want a return of the 1930s. In the 1930s, we needed the SEC and other market controls, today we need to better regulate banks/lending/mortgage practices, or at least require them to better disclose their holdings or require better diversification of larger entities.

    Bear Stearns, Fannie, Freddie, IndyMac, etc., would have fallen if not for gov. intervention. Letting these mortgage companies & investment banks collapse would cause devasting effects in our country not seen in generations and is not an option. Prosecuting the individuals who let this happen is an option, if they broke the law. Creating laws that impose criminal liabilities for larger entities should be looked into so this does not happen again.

    We can either regulate before or clean up the mess later, as we're doing now. I say be proactive and prevent the mess.

    "Those who cannot learn from history are doomed to repeat it." Philosopher George Santayana

  • August 13, 2008

    9:40 a.m.

    Suggest removal

    Diff writes:

    It think that is a poor and sensational head line...
    Loss? As compared to what?
    Sure if you bought your home in the past 3-4 years and sold it this year, you are likely to sell at a loss - I have a hard time to believe that 38% of homes sold in the Denver area, are homes that were so recently bought that the price is actually selling at a loss compared to the purchase price. If you have been in your home 5 years you are probably at least even if not still slightly up.You would sell today for less than you could have a 12 or 24 months ago yes, and if you consider your net after R.E. commissions etc. you might be down somewhat..
    You know ... 90% of all sattistics can be made to support points that are only 20% true - about 75% of the time..
    The really sad part is that 80% of the people will take is as absolute truth without questioning it.. about 95% of the time.
    The other 5% of the time it gets 100% of the poor sheep!

  • August 13, 2008

    9:47 a.m.

    Suggest removal

    730tjc writes:

    Marshdale, you're an idiot. Much of the foreclosure concerns developed after certain groups demanded more lenient lending because they believed lending practices were racist and kept minorities from ownership. Socialist idiots are destroying our country.

  • August 13, 2008

    11:22 a.m.

    Suggest removal

    4gColoNative writes:

    In a sales situation (not lending or taxation), a house is "worth" what someone else is willing to pay for it. Anybody who was persuaded otherwise is deluded. If they paid too much (and it was common knowledge to the wise that new home prices in recent years were irrationally inflated), woe be to them -- but stupidity has its own reward.

    When did a McMansion become an American entitlement?

  • August 13, 2008

    11:48 a.m.

    Suggest removal

    TC writes:

    Yes Diff.
    I sold a house in Denver in May. Made +320% on it. 'course I bought it before half of California moved to Denver.

  • August 13, 2008

    1 p.m.

    Suggest removal

    Jitterbug writes:

    Yes of course, all those irresponsible lenders and buyers. There is always the bad apple...but has anyone considered that a larger portion of the foreclosure problem we have might have something to do with all the jobs that we sent overseas?

    For many years I worked with young first time home buyers with dual incomes and between the two of them they could afford a home on a good loan without being overextended. But for the past few years...guess what. Less and less young first time home buyers, because we have no decent jobs for them.

    Statistics are like a bikini, what it reveals is interesting, but what it covers up is vital.

    With all do respect to the new experts in the Real Estate industry like Zillow and the like. I just checked our best source of local statistics, Denver MLS. The median price of condo/townhomes and single family homes continues to increase since January 2008. The median price of a single family home lost $800 in July to a June high of the year of $230,000, but the trend since January continues to move upwards…significantly.

    The sky may be falling but the Denver housing market is doing quite well, especially when considering that a large percentage of sales are bank owned which is dragging down the average and medium price. What’s that thing about buy low and sell high?

    One other thing a $250,000 home that sold for $225,000 isn't a $250,000 house it's a $225,000 house. Yes some buyers paid to much, new builds in particular, but even more got caught up in the "no cost" refi and second mortgage boom of a few years ago, where the value of a home was to often determined by the homeowners Fico score.

    Selling and buying now can be lucrative, more to choose from, realistic sellers are willing to negotiate. You might not sell at “your” price, but the move up home you buy will be “discounted” as well. Not to mention low interest rates…they’ve gotta go up at some point.

    If you want to come out on the right side of housing and mortgages stick with long term professionals. Those who know what they’re doing and who can represent your interests, especially good Buyer Agents. Then consider your home a long term investment, instead of a credit card account.

  • August 13, 2008

    2:03 p.m.

    Suggest removal

    fishoutawater writes:

    Way to go Rocky! Round it up to 40%. Any better way to tittle this headline? How about a positive spin about real estate once in a while? Most of these houses are investor swallowed and lucky to get the price they are. Distressed is most likely an understatement. Vote repulican if you'd like the same results for another 4 years!!!!!!!!!!!!!!!!

  • August 13, 2008

    2:23 p.m.

    Suggest removal

    Marshdale writes:

    Gee, all the name calling really upsets me. boo hoo hoo.

    True people should have some responsibility for what they sign. However, preditory lending should not be allowed. Just because a lender can get away with it does not make it right. Not everyone can read a HUD sheet. Give me a break. I suppose it is dishonorable in your book to be an honest trusworthy business man/woman. Whatever it takes to make a buck huh?

    730tjc and Cowboy63
    I bet you guys are big mean scary lenders huh? Are you upset that lenders have now tightened their standards and you can't loan money to just anyone and make a commission, or you can't get a loan yourself? Boo hoo hoo, Wahhhhhh!

  • August 13, 2008

    2:36 p.m.

    Suggest removal

    fishoutawater writes:

    Marshdale, never mind those people. I used to be a scared replublican and these guys are too. I see the light regarding differences between corporate agendas and morality. Bush ran on morals, but proved to be against the very christian morals he ran on. Any of these people are the type to cut you off in your car, but not in front of you in the grocery line. Look at McCains adds; scary, full of fear of the unknown, offensive towards his own past agenda even and full of lies. Keep voting repulican people, if you're scared! Why people vote against their own wishes never seems to amaze me..

  • August 13, 2008

    3:08 p.m.

    Suggest removal

    Marshdale writes:

    Baloney 730jtc;

    Colorado does not regulate individual mortgage lenders. We are one of only two states I believe that does not. Preditors flocked here for the easy pickins. That's what the problem is. Quit blaming minorities for all your troubles. If preditory conservative wackadoodles had their way, every state would be like Colorado. And yes deregulation did have a lot to do with it. Remember Silverado? That was a direct result of deregulation in banking and a few scam artists like McCain, and Niel Bush.

  • August 13, 2008

    4:47 p.m.

    Suggest removal

    4gColoNative writes:

    Re: If you want to come out on the right side of housing and mortgages stick with long term professionals. Those who know what they’re doing and who can represent your interests, especially good Buyer Agents.

    Agreed ... furthermore, if a home buyer isn't willing to put in the time to do their own location research, they better get a BA with local knowledge.

    About a mile from where I grew up in Denver, there is a crack house neighborhood where homes were being sold for unbelieveable prices considering the area ... ~ $100k homes (that bad!) going for ~ $210k. They must have been viewed on some sleepy Sunday morning or bought on the basis of a flattering photo.