Metro housing market gets D-minus

But analyst sees bottom this year, then a rebound

By John Rebchook, Rocky Mountain News (Contact)

Published May 20, 2008 at 7 p.m.

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Mike Rinner, an economist with the Genesis Group that has tracked Denver real estate for nearly 20 years, gives the metro-area housing market a D-minus.

"There is no sugarcoating it," said Rinner, an executive with the group that also tracks the Front Range housing market.

"The only reason it doesn't get an 'F' is that we feel it will rebound pretty nicely after this," he said Tuesday. "Before, we thought it would just decline to these low levels and just go splat."

He made his assessment at the Landmark Theatre in Greenwood Village before 150 real estate and business leaders.

Rinner also is optimistic that the Denver area's unemployment rate is still low, with some job growth, and the area is seeing in-migration from other states.

His report:

* Showed that there were only 1,676 new-home sales in the first quarter, a 44 percent drop from the 2,986 in the first quarter of 2007.

* Found only 9,598 new-home sales in 2007, a 31 percent drop from the 14,011 in 2006. Last year's sales volume was the lowest since 9,590 new homes were sold in 1994.

* Showed traffic at new-home sales sites along the Front Range at the lowest level since the early 1990s.

* Found the foreclosure rate in 2007 at 3.6 percent, approaching the 3.8 percent record set in 1989.

And while foreclosures are at a record level in sheer numbers, it also likely will set a record on a percentage basis later this year, as adjustable-rate mortgages reset and more people enter the foreclosure process.

The local housing market will hit bottom this year and then start to rebound, Rinner said. There are some positive signs nationally that loans will be easier to get and the worst of the mortgage financial crisis may be over, he added.

"But that is still a big unknown," Rinner cautioned. Persistent national problems could delay Denver's recovery, he said.

Increasingly, a number of builders and marketing executives are saying that reports and articles showcasing negative data are slowing the recovery. Instead, they argue, the headlines should emphasize that now is a good time to buy.

"That is all very true, and I don't disagree with that at all," Rinner said. "But the facts are that we are going to see a whole lot less building of new homes this year than we saw last year. That means that the homes built should be sold pretty readily. I think people are grateful to have honesty."

Larry Stark, principal of National Valuation Consultants, also said the U.S. market is in much worse shape than Denver.

Private Mortgage Insurance data shows that Denver has a risk rating of five - the least amount of risk - a score it shares with 26 other metropolitan areas, including Seattle, Chicago, Houston and Dallas, he said.

"We work all over North America. . . . And until you have been to some of these places, you don't really know how bleak they are," Stark said. "We have an office in Florida, and it is going to be three years before it even starts to see a turnaround, and in the real estate industry, three years is an eternity."

He said the reason Denver is doing so well compared with other markets is that it never saw the huge run-up in prices.

"We were a little envious when we saw the 25 percent appreciation in other markets, but now, with what we are seeing, we feel a little better," he said.

rebchookj@RockyMountainNews.com or 303-954-5207

• May 21, 2008

  10:18 a.m.

  Suggest removal

  BrokerBill writes:

  To: PajamaPulitzer
  Sounds like you are a disciple of NAR's Lawrence Yun! I just did a 2007/2008 year-to-date comparison Jan 01-May 20 for single family residential existing sales for metrolist Denver county only DSE/DSW/DNE/DNW. This did not include condominiums/townhomes.
  2007/2008 gross sales volume: - $940.5M/$771.3M - DOWN 18%
  2007/2008 no. of sales: - 3067/2882 - DOWN 6%
  2007/2008 median price: - $229k/$189k - DOWN 17.5%

• May 22, 2008

  10:08 a.m.

  Suggest removal

  coloradorin writes:

  So Sasquatch, do you believe that as long as a market is operating efficiently it deserves an A? My D- grade was actually for the NEW housing market where companies are closing, lenders and equity partners are losing large amounts of their investments, thousands of people are losing their jobs and the number and dollar volume of homes sold in 2008 are on track to be 1/3 of the levels reached just three years ago in 2005. And 2005 was just a mild recovery year from the declines of 2001 through 2003 when we lost 5% of our job base here in metro Denver.

  I'm a firm believer in the value of the process of creative destruction that is inherent in the best economic system the world has devised - free market capitalism. But in no way can I characterize the current new housing market as healthy.

  I learned a lot about myself and a stronger person today after struggling through some health issues a few years ago. But I would have graded my health a C- or D+ when I was suffering.

  Mike Rinner

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