42 percent of homes in Denver area sold for a loss
By John Rebchook, Rocky Mountain News (Contact)
Published November 12, 2008 at 12:05 a.m.
More than four out of every 10 home sellers in the Denver area during the past year learned the hard way there's no guarantee that a home always rises in value.
Some 42.7 percent of the homes sold in the Denver-Aurora metro area sold for a loss in the third quarter, according to a report by real estate Web site Zillow.com.
That compared with a national average of 30.2 percent, according to the analysis of 163 metropolitan areas by Zillow.
On the other hand, the price of a home sold in the year ending in September 2008 fell by 4.5 percent, compared with a 9.7 percent drop for the entire nation, according to the report.
Other good news: The median amount of equity in homes in the Denver metro area is $38,637, compared with $23,239 five years ago. By contrast, the median amount of equity in homes nationwide is $34,449, down from $70,737 in 2003, according to Zillow.
"It's a tough, tough real estate market in Denver and across the nation," said Peter Niederman, chief operating officer of the Kentwood Co. "The Denver real estate market, right now, is being challenged."
One thing that's been largely overlooked, Niederman said, is with the drop in unsold homes in the Denver area, there is a 51/2-month supply of single-family homes on the market, down from more than an eight-month supply at the beginning of the year.
"I think as the economy further stabilizes, the market is not going to rocket up, there's not going to be an explosion, but we are going to have some pent-up demand from buyers," Niederman said.
A large percentage of homes in the Denver area are being sold for a loss because of the mix of distressed homes on the market, according to experts.
Zillow reported that 21.4 percent of the homes sold in the third quarter were foreclosures. In addition, there are many more short sales, in which the lender agrees to a sale for less than the mortgage amount.
Jack O'Connor, principal of Prestige Real Estate Group, said the numbers don't tell the entire story. He said other markets in hard-hit states such as California, Nevada, Florida and Arizona, are in far worse shape than national reports indicate. That's because national surveys such as Zillow typically have no way of tracking concessions, which are minor in Denver compared to elsewhere.
"I just came back from National Association of Realtors convention in Orlando this weekend, and after talking to brokers and sellers, they are offering concessions worth hundreds of thousands of dollars," O'Connor said.
He said one home was being listed for $449,000 down from $749,000. In addition, the seller was offering to buy down the interest rate, which would shave another 4.3 percent off the selling price, he said.
"That never gets put in the public record," O'Connor said.
In the Denver area, homeowners with the highest risk of losing money today are those who bought from 2004 to 2005, he said.
But if someone bought a home in 2000, the house likely has risen by at least 15 percent to 20 percent, or even more in some areas, he said. So if you didn't borrow all of your equity to make consumer purchases - as he estimates 20 percent of the buyers did - you would have a lot of equity in your home, allowing you to sell it for a profit.
"And some neighborhoods in Denver are easily appreciating 4 percent to 6 percent, especially if they are below $500,000," O'Connor said.
"I think for homes less than $500,000, we are going to see the first legitimate appreciation in 2009 for the first time in five or six years," he said.
He said there is still a glut of homes on the market priced above $1 million, especially in places like Douglas County.
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November 12, 2008
6:57 a.m.
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WarrenJimmyBuffett writes:
"I think for homes less than $500,000, we are going to see the first legitimate appreciation in 2009 for the first time in five or six years," he said."
Yes, homes usually apppreciate during a severe recession/depression. And job growth expands. And people get richer. Jack O'Connor is just trying to get a few people to buy homes, so he can pay his bills.
November 12, 2008
7:14 a.m.
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River_Bolden writes:
The article shys away from one point: Who is going to give buyers the loans to buy these 500k houses?
Banks are holding tight to cash these days (hence the credit crisis), and with an unstable job market, maybe some don't feel too confident to take out such a loan in these times.
Sellers are going to have to lower there prices even further is this real estate market will ever pick up again. Anyone whom tells you othewise, just has a financial interest...
aka Jack O' Conner, obvious he doesn't want to bite the hand that feeds him.
-River
November 12, 2008
7:28 a.m.
Suggest removal
FCZ writes:
Pelosi and Reid will use our tax money to bail out the liar loans.
The good people who have been living within their means and managing their spending / credit cards will be hit with new taxes to bail out the reckless spenders.
November 12, 2008
7:36 a.m.
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ta_rich writes:
"The article shys away from one point: Who is going to give buyers the loans to buy these 500k houses?"
Banks are in business to loan money. True, lending criteria might be more conservative today than it was during the "easy" money days of the past where you merely needed a heartbeat to qualify. But in all reality, if you have good credit and a down payment, you will find a loan. The local banks are even more apt to loan money as they have not been as hard hit by the national mortgage mess - primarily because their underwriting never involved high risk borrowers in the subprime mortgage market. Imagine that, actually lending money to people who could qualify. Sounds like a petty good business plan.
November 12, 2008
7:58 a.m.
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fishoutawater writes:
Some 42.7 percent of the homes sold in the Denver-Aurora metro area sold for a loss in the third quarter, according to a report by real estate Web site Zillow.com.
If its the Denver-Aurora area, then put that in your "headline". We still have a lot of people moving to Colorado and buying property. Lets not give them any reason to think the values are not steady.
Aurora will be the worst hit by values, it was always over priced for being so far from downtown, however It used to be the best place to get more for your money, and will become a better place for "more for your money" in the near future.
Denver has neighborhoods growing in value. Location Location Location!!!!!!!!!!!!!!!!!!!
November 12, 2008
8:04 a.m.
Suggest removal
fishoutawater writes:
FCZ writes: Pelosi and Reid will use our tax money to bail out the liar loans.
Hey FCZ, you do realize the "bailout" is a Republican plan, happening in a Republican Administration, supported by most Republicans and faught by most Democrats (at least for better oversight, remember the exec's..) dont you?
Has the last eight years done for you what you thought it would? Do you feel better off? Do you see prosperity or doubt?
Start voting for yourself, not against!
November 12, 2008
8:17 a.m.
Suggest removal
drrosenrosen writes:
i'm not sure i would rely on data from Zillow.com, as Zillow's data is most always innacurate. Perhaps the better source for this kind information would be local Realtors or title companies.
November 12, 2008
8:21 a.m.
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River_Bolden writes:
"But in all reality, if you have good credit and a down payment, you will find a loan"
thats just it. What fueled the real estate boom (in Denver too, but not as such comapred to CA) was buyers with not so hot credit, no down payments schemes, and first time buyers.
If you remove those people, thats alot of potential buyers whom help increase RE values that are now lost. As far as downpayments, the no down payment era is gone, as now the banks require higher downpayments. I've heard up to even 20%.
with higher required downpayments, you now eliminate the # of potential first time buyers as well, because these people don't have a house to sell to "trade up", so it becomes even harder to raise cash.
How many 28-35 year olds have cash money for a 10-20% downpayment on a 500k house? and of those 28-35 year olds that do have that cash money ready, would they be so willing to buy a house, when they fear it will lose value as soon as they sign the dotted line?
and their jobs could be lost within the year.
What is playing out in the Denver markets is the "plankton" theory.
you eliminate the first time buyers & no money buyers, you eliminate the possibility of the RE markets ever increasing in value.
Its going to get alot worse.
If I was a seller, I would eliminate by 10% just to push it through, if wait till a rebound. you'll be waiting an awfully long time.
-River
November 12, 2008
8:30 a.m.
Suggest removal
River_Bolden writes:
so yes, if you have 100k in cash, and have a damn good credit score, you will get a loan for that 500k house.
Otherwise, wait till sellers lower their asking price even further.
November 12, 2008
8:33 a.m.
Suggest removal
fishoutawater writes:
Location Location Location! Some places just simply become more attractive over time.
River. Dont be so paranoid. Bad credit and no monney are gone. So, now we can start in flating the bubble again. Buy a house, you'll see its the best thing you could ever do. Long term investing has and will always show that real estate wins the biggest yields. Its a basic part of retirement security. I'd be more affraid of the stock market than real estate.
November 12, 2008
8:48 a.m.
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WarrenJimmyBuffett writes:
fishoutawater,
I have a nagging suspicion that you don't have a clue about investing or about economics. You just repeat real estate agent mantras whether or not they apply to the question or issue. You will likely lose all your money, if you haven't already.
November 12, 2008
8:48 a.m.
Suggest removal
River_Bolden writes:
"River. Dont be so paranoid"
I'm not. I call it how I see it.
"Bad credit and no monney are gone. So, now we can start in flating the bubble again"
yeah, in the form of major price reductions. Tell that to a seller who is already underwater.
"Buy a house, you'll see its the best thing you could ever do"
again, tell that to the person who bought in summer 05 who now eats oatmeal 3x a day in order to pay mortgage on a house thats lost value.
"Long term investing has and will always show that real estate wins the biggest yields"
you are starting to sound like a cheerleader.
"I'd be more affraid of the stock market than real estate"
I think we can agree on that one ; )
November 12, 2008
9:12 a.m.
Suggest removal
chickenlittle1234 writes:
Several studies have looked into the long-term appreciation rate for real estate. One of these studies looked at 500 years of home values in Amsterdam. Guess what they found? Over the long term, the average appreciation has been the rate of inflation, plus 1%. Right now, there is little if any real appreciation in the Denver area. We're in a deflationary environment right now, and the cost of ownership is still high relative to renting. When the cost of owning falls enough, buyers will return.
November 12, 2008
9:32 a.m.
Suggest removal
Dinty writes:
Someone needs to give this reporter a basic accounting course. Just because a house sells for less than the asking price, doesn't mean it sold for a "loss". The actual vested interest in the property may have been accumulated from many previous properties that were owned by the seller. This is a very simplistic and inaccurate description of the issue.
November 12, 2008
9:33 a.m.
Suggest removal
SheikYurBooty writes:
The next big scam is hinted at here: when there is a difference between the public record and the real deal (due to concessions) then the public record is FALSE INFORMATION. But that's all that's available. It's a disaster waiting to be leveraged.
November 12, 2008
9:43 a.m.
Suggest removal
Dick_Tater writes:
I suppose the headline "Majority of homes sold at a profit!" doesn't get as much attention.
November 12, 2008
9:47 a.m.
Suggest removal
River_Bolden writes:
"I suppose the headline "Majority of homes sold at a profit!" doesn't get as much attention"
I guess you didn't read all those Forbes mag & CNN money headlines during the 2003-2005 RE run up??
November 12, 2008
9:47 a.m.
Suggest removal
bluffan writes:
We bought our house in Boulder in June of '04. It's nothing special, but it's close to downtown and has a standard 8,000 sf lot. Even with the most conservative appraisal, the place would sell for a good 20% more than it did when we bought it.
Maybe Boulder is an outlier, but it seems to me that 'location, location, location' is the most important arbiter of whether homes have appreciated, not when, exactly, they were bought.
Of course, I don't mean to say that someone who purchased a home in Aurora in 2000 did worse than someone who bought in Boulder in 2004.
But within reason, my overall sense is that location is a better predictor of a home's appreciation/depreciation than the date it was purchased.
November 12, 2008
10:24 a.m.
Suggest removal
River_Bolden writes:
bluffan,
what your place "would" sell for vs. reality are 2 different things.
Yes, Boulder will sell better than Aurora by your location argument.
but to think because its Boulder and that its immune from any downturn... may not be the reality.
November 12, 2008
10:59 a.m.
Suggest removal
fishoutawater writes:
WarrenJimmyBuffett - I laugh my but off at assumptive people like you.
If you had any idea of my youth and wealth, you'd know I know exactly what I'm talking about.
Sorry about your need to confuse issues, but are you simply mad because I pointed out Repulican failings?
November 12, 2008
11:14 a.m.
Suggest removal
fishoutawater writes:
River - We all know that some people actually borrowed as much the bank would let them. Meaning, a mortgage based on "gross" income, not after taxes. My first mortgage was at 8.5% 30 yr fixed (not that great) and they wanted to loan me $160K. I wouldn't have been able to eat oatmeal if I borrowed that much. At the time, uneducated to the market even, I decided to spend $110K. It was affordable, I still ate steak once a week, and I made a lot of money after remodeling and selling the place. So, I bet we agree, some people just make bad decisions.
In 2005, summer even, I purchased a home in near Downtown Denver, fixed it and sold it in 2007 for a huge profit (admist the regionally failing market conditions). Never eating oatmeal or freaking out about the next payment. What are you talking about?
Did you make some bad decisions? Sorry about that if you did, but "location location location" has worked very well for me...
November 12, 2008
11:26 a.m.
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can_do writes:
58% of homes sold at a profit; sounds like good news to me.
I would not, however, hang my hat on data from Zillow. Their methodology is flawed, and they should not be your sole source of information.
WarrenJimmyBuffett: it's good to see that crazy coyote hasn't been able to hit you with the Acme anvil, yet. Well, at least you're one step ahead of the rest of us; you know that disaster looms. Can I ask where you got your crystal ball?
It's too bad that positivity isn't as contagious as negativity.
November 12, 2008
11:42 a.m.
Suggest removal
WarrenJimmyBuffett writes:
can_do,
When it is raining, is it negative to tell a bride that it is raining right before her outdoor wedding? Or should you tell her it is sunny, so when she goes outside, it ruins her dress and hair?
Your problem, and I'm guessing it has to be genetic, is that you are incapable of discerning between reality and negativity. Positivity is this economic climate is dangerous. Caution is necessary. The power of positive thinking cannot make you sprout wings and fly when you fall off a cliff.
November 12, 2008
11:43 a.m.
Suggest removal
WarrenJimmyBuffett writes:
fishoutawater,
Come back when you are older and make more sense.
November 12, 2008
11:47 a.m.
Suggest removal
River_Bolden writes:
"What are you talking about?"
talking about the current stats.
"Did you make some bad decisions?"
just because someone calls it the way they see it based on stats, doesn't mean one made a bad decision. Thats an attempted diversion
"location location location" has worked very well for me"
consider yourself lucky, and market timing worked well for you.
not everyone one is as lucky, otherwise housing prices wouldn't be declining and foreclosure rate through the roof.
November 12, 2008
11:52 a.m.
Suggest removal
Dick_Tater writes:
River
Waaaaaahhhhh! I blame every one else for the situtaion I've gotten myself into. I bought into something I should not have. It can't be my fault for taking out a loan I can not afford. It is the housing industry/mortgage bankers/greedy CEO's/Evil monkey in my closet. I guess personal responsibility went out of style many years ago.
While my house has not gone up much in value, I have no problem waiting this market out. Because I planned properly and have real investments to cover me for up to 6 months. I did not buy a house for an investment but rather a place to live. Those who thought they were, were wrong. You took the chance, why should everyone take the fall? For the record, I eat oatmeal most mornings. I prepare my lunches, drive sparingly, keep the heat set in the 50's and make 1.5X my mortgage payment. I bought below my means because that is the smart thing to do. Financing anything is money wasted. People are too focused on what they can make for a payment ( car or house ) and not paying attention to what really matters ( interest rate, amount financed and term of loan ). There are plenty of people who did not buy into this "housing boom" or the need to live an extravagant lifestyle. Your lack of foresight does not make an emergency for me.
November 12, 2008
11:57 a.m.
Suggest removal
fishoutawater writes:
WarrenJimmyBuffett - Thanks for making my point. BTW - if you can't make sense of what I wrote you certainly dont merrit your name. Proof you must be an idiot................
River - Its about making good decisions. Current stats show Colorado is better off than most. It was a question of you, not a statement.
Good day all.
November 12, 2008
11:57 a.m.
Suggest removal
leeroy writes:
Sorry fish, you have your facts WRONG on the bailout issue also, it was exactly the opposite. The first time the bailout was voted on and didn't pass, it was all DEMS voting FOR it and a large number of republicans voting AGAINST it. Definitely not a Republican pushed plan.
November 12, 2008
12:18 p.m.
Suggest removal
fishoutawater writes:
I have to go look at an underpriced "investment" property. I've heard the back and forth about who's to blam for this "bailout" mess. It seems to me that banks are the "real" problem.
Privatized profits = Socialized losses
The largest surplus turned into the largest deficit. Thanks BUSH!
We should all be upset regardless of where we stand in it all.
One things for sure, there's great opportunities amidst this grey cloud.
Be smart!
November 12, 2008
12:30 p.m.
Suggest removal
fishoutawater writes:
leeroy - WASHINGTON - In a stunning turnabout, the Bush administration Wednesday abandoned the original centerpiece of its $700 billion effort to rescue the financial system and said it will not use the money to purchase troubled bank assets.
Whos in charge of this thing? Who approves it? Who decides where the money comes and goes?
I forgot, McCain stopped his campaign to help solve this mess, and was sent packing by his fellow Republicans because he was clueless.
November 12, 2008
12:41 p.m.
Suggest removal
can_do writes:
WarrenJimmyBuffett
Smart people rent tents for outdoor weddings, since nobody can predict the weather.
Additionally, my genetic composition would lead me to wear a parachute when walking off a cliff.
Your uncanny propensity to revert to insults in defense your positions make me question whether you have a tent, or parachute, to rely on. Sounds like you may be one free-fallin', wet bride; have fun honeymooning.
Also, one word of warning: steadfast, negative views of "reality" (and ignoring all positive aspects of life) can lead to deep depression and even suicide.
I choose a healthy balance of caution and optimism, and for some reason, I don't feel the need to resort to juvenile insults and scare tactics to express my opinion. Go figure.
November 12, 2008
1:11 p.m.
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leeroy writes:
"Sep 26, 2008 ... House Republicans refused to support the Henry Paulson/Chris Dodd compromise bailout plan yesterday afternoon, even after the New York Times..."
I'm telling you fish, look it up, this was a democratic majority House and Senate passed bill, The republicans in both largely refused to back this thing. But you probably don't want to hear that so therefore have convinced yourself it isn't true.
November 12, 2008
1:52 p.m.
Suggest removal
WarrenJimmyBuffett writes:
"I choose a healthy balance of caution and optimism, and for some reason, I don't feel the need to resort to juvenile insults and scare tactics to express my opinion. Go figure."
Everyone is welcome to express their opinion. However, opinions not based on reality are worthless. Alas, can-do, your opinion is worthless.
If you take the time to understand how macro and micro economic trends and indicators affect future outcomes, you could develop a worthwhile opinion. Right now you just repeat mantras and worthless babble.
November 12, 2008
7:44 p.m.
Suggest removal
diggtbks writes:
Big deal.
The Front Range housing market has been overinflated for at least 18 years.
If the house you bought cost $75,000 in 1980 and then cost $300,000 in 2002, and you bought it, you are a fool.
November 12, 2008
7:52 p.m.
Suggest removal
gardog writes:
fishoutswater - you are mistaken. Barbey Frank and Chris Dodd were key player sin fighting enahnced, not more but better, oversight.
Paulson was reacting to something he had few facts on. His buddies haven't been 100% forthcoming with facts (big surprise) and probably don't know the facts themselves. Essentially, he's clueless and culpable himself.
Both parties are to blame for letting it happen or helping it happen.
The push starting back with Carter (aka O'Bama's first administration) started us down the slippery slope of housing for everyone. Turning the American Dream into a daytime soap opera where reality takes a breather. Clinton and Bush helped push us over the edge by allowing Frank, Dodd and others to push Banks to make poor loan decisions to "help the inner city and poorer American's reach the American Dream".
Don't fret though. Most American's don't understand it any better than you. Just ask Paulson.
November 13, 2008
5:19 a.m.
Suggest removal
River_Bolden writes:
"Waaaaaahhhhh! I blame every one else for the situtaion I've gotten myself into. I bought into something I should not have."
silly arguement my friend. You are making assumptions about me which are totally wrong and off base, and have nothing to back it up.
Perhaps, try to make a stronger arguement rather than trying to think of ways to make fun of people.
I just call it as I see it, never said I was 100% spot on in my assesment.
Next....
November 13, 2008
8:15 a.m.
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jay writes:
don't buy in the burbs.
November 13, 2008
10:11 a.m.
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Dick_Tater writes:
...And you're doing the same River.
Next...