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Economist's forecast sees Denver housing turnaround

By John Rebchook, Rocky Mountain News (Contact)

Published January 17, 2008 at 12:05 a.m.

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Yun says metro market in better shape than much of nation.

Yun says metro market in better shape than much of nation.

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The only thing that is holding back the Denver-area housing market is "irrational pessimism" from prospective buyers.

That insight comes from Lawrence Yun, chief economist and senior vice president of real estate for the National Association of Realtors.

Yun, who presented his 2008 real estate forecast to the Jefferson County Association of Realtors in Lakewood on Wednesday, noted afterward that "all markets are local" and that the bleak national market conditions do not represent what is happening in the Denver area.

Yun said unemployment is lower in the Denver market than nationally, while job creation is stronger.

The Denver-area housing market also didn't experience the huge run-up in prices that other markets did. It takes far less of the typical income in the Denver area to buy a house than in such areas as San Diego and Miami, he noted during his presentation.

"And interest rates are basically at their 45-year low," Yun said. "I would say the Denver market is past its bottom and is now in the early stages of recovery.

"The one thing that may be holding back your market is buyer pessimism," Yun said. "I think for your housing market it is irrational pessimism. You have very strong affordability."

He said buyers' gloomy attitude springs from all the attention on the collapse of the subprime market.

"Wall Street made a very bad mistake by being overly exuberant on the profits gained from subprime lending," he said. "But those are mistakes made in the past. It's not related to home buying today or in the future."

He did say, however, that the number of foreclosures, which set a record in the metro area in 2007, will continue to rise this year.

But he still expects overall housing appreciation in the Denver area this year to be 4 percent to 5 percent, while the nation as a whole will be flat.

Previously hot markets, such as California and Florida, will likely see home prices continue to fall this year, he said.

Yun predicts that home prices in the metro area will rise another 5 percent to 7 percent, on average, in 2009.

Yun said that if there is a recession this year, Denver should weather it better than the country as a whole.

"That would really be bad news for a city like Detroit, where they have had seven years of rising unemployment," he said.

"But Denver will be able to escape most of the job losses of a recession because of the highly educated work force and because you've already wrung out the excesses of the dot-com boom," with a huge loss of tech jobs starting in 2001, he said.

Also, a recession would mean further cuts in mortgage rates, which would make Denver housing even more attractive, he said.

Jim Smith, owner of Golden Real Estate, called Yun's talk "fascinating."

The facts speak for themselves," he said.

rebchookj@RockyMountainNews.com or 303-954-5207

Comments

  • January 17, 2008

    10:30 p.m.

    Suggest removal

    jacka writes:

    Hubris hack attempts to pump you up.

    Lawrence Yun, chief economist and senior vice president of real estate for the National Association of Realtors.

    a recession would mean further cuts in mortgage rates, which would make Denver housing even more attractive, he said.

    Jim Smith, owner of Golden Real Estate, called Yun's talk "fascinating."

    The facts speak for themselves," he said.

    Maybe The Onion can run this headline ... Chief economist at BASF says 8-Tracks set for comeback!

  • January 18, 2008

    4:01 p.m.

    Suggest removal

    notsure writes:

    I hope to see future articles on this topic with diverging viewpoints. Yun is employed by the National Association of Realtors and it is his job to make realtors feel optimistic (thus retaining/encouraging NAR membership) and to increase the desire for people to buy homes. Yun, and his predecessor David Lereah, have demonstrated an inability to make accurate forecasts and to anticipate and recognize our national housing downturn.

    This article really reads like a press release from the National Association of Realtors. This article covers a classic Lippmann pseudo-event -- it states that a NAR spokesperson is optimistic on housing. This is news? The only thing that would be newsworthy is if he says the real estate downturn will worsen. Let's work toward bringing in some additional perspectives in future articles on this subject.

  • January 22, 2008

    3:13 p.m.

    Suggest removal

    Diff writes:

    I like the optimistic sound of his report, I only wish I could believe a bit more strongly.
    The housing market will recover but I think it will be at least a year - 18 months before it again begins to move slowly upward. Todays interest rate cut will help some, and the stimulus package from Washington might help to make everyone feel better in the short term and that will have a positive effect too, (but it will not be enough to avoid a downturn, MAYBE a full out recession ... )
    That said in the next 6- 12 month there are going to be investor and first time buyer bargains out there, if you get in for the long term it would be a great time to buy!
    Hang on!

  • January 19, 2009

    2:32 p.m.

    Suggest removal

    CAG5 writes:

    Realtors let the market start to turn!!! Stop trying to do everything on short sales! I went through 3 Realtors before someone would list my property for full list price! It is MOVE IN READY, New paint, washer, dryer, frig, sprinklers front and back, new blinds throughout! All Realtors want are SHORT SALES cause that is the only way THEY are making money right now. Whether the bank gets paid or not the REALTORS do get paid in the negotiations!!! STOP NOW!!! The American Way?? When are we going to stop trying to get ahead on someone elses bad luck? Help your neighbor?? We still have growth in Denver, the hospitals have turned Fitzsimmons, now let the market start selling fair prices again in Aurora!