Housing prices (Denver, Aurora, Boulder: for sale, real estate, foreclosures)

[hello-world]

Can someone explain why the housing market is supposedly so terrible and forecasts have been, for months, for double digit (Greenspan claimed as much as 20%) deflation in prices in the next several months to couple of years, yet Denver - a place with tons of residential construction still apparently going on, low rents versus property values, tons of inventory, various recent "foreclosure epicenters of the nation" circling the city, i.e. all the conventional tell tails of a market in real trouble - is still seeing significant appreciation according to, for example, Trulia - Real Estate, Homes For Sale, Sold Properties, Real Estate Maps ?

Do you suppose it has something to do with general confidence in things?

Thanks.

[tfox]

I think it's very simple, really, just supply and demand. It's just that the Denver neighborhoods that we are talking about are simply a mini-trend that happens to be going in the opposite direction of the national trend downward.

I say MINI-trend because in reality the popular Denver neighborhoods like Highlands and Wash Park don't account for a lot of people in the over scheme of things. We have upwards of 2+ million in the Denver area, 2.5 million if you count Boulder and its surroundings. How many people live in these rapidly appreciating neighborhoods? Certainly no more than 100k, in reality probably closer to 50k are seeing really significant price appreciation. The overall trend of course of course continues to be bleak.

It's simply supply and demand. There's a big demand right now to live in Wash Park or Highlands or <insert name of trendy neighborhood>. The supply is fixed -- there's little to no net increase of housing units. So, price goes up, and it will continue to rise until the neighborhood is just simply out of reach in price of most Americans. At that time, people will flock to the next urban neighborhood, and so on.

This isn't true just in Denver, by the way. Virtually every city with older neighborhoods is seeing an inner-city revival in certain neighborhoods. Even down-in-the-dump rust-belt cities back east are seeing the same trend.

[hello-world]

Originally Posted by tfox

I think it's very simple, really, just supply and demand. It's just that the Denver neighborhoods that we are talking about are simply a mini-trend that happens to be going in the opposite direction of the national trend downward.

I say MINI-trend because in reality the popular Denver neighborhoods like Highlands and Wash Park don't account for a lot of people in the over scheme of things. We have upwards of 2+ million in the Denver area, 2.5 million if you count Boulder and its surroundings. How many people live in these rapidly appreciating neighborhoods? Certainly no more than 100k, in reality probably closer to 50k are seeing really significant price appreciation. The overall trend of course of course continues to be bleak.

It's simply supply and demand. There's a big demand right now to live in Wash Park or Highlands or <insert name of trendy neighborhood>. The supply is fixed -- there's little to no net increase of housing units. So, price goes up, and it will continue to rise until the neighborhood is just simply out of reach in price of most Americans. At that time, people will flock to the next urban neighborhood, and so on.

This isn't true just in Denver, by the way. Virtually every city with older neighborhoods is seeing an inner-city revival in certain neighborhoods. Even down-in-the-dump rust-belt cities back east are seeing the same trend.

i'm seeing that denver - inclusive, not just select neighborhoods - is still appreciating (over last few months), though i am seeing that highlands, for example, is losing lately (not highlands west/potter highlands). at the same time, i'm seeing TONS of new lofts and suburban growth. but i agree there seems a likelihood that there's still enough people moving in from the midwest/CA/FL/TX and internally to "hipper spots" that that could account for some of the gains seen in parts of denver that might be boosting the stats a little. still seems odd to me, though, considering all the construction, all the foreclosures, all the inventory, low rents that cannot cover mortgages (at least if properties bought recently only to then be rented), etc.. i.e., it seems like there's more cheap supply than demand could reasonably cover...so i wonder if it's just sort of confidence-inertia or something. you don't happen to have any links or numbers on this stuff do you?

thanks.

[tfox]

hello-world,

I think RMN did post a graphical map of appreciation rates on their website, that I recall, but I don't have access to that kind of info at my fingertips. Realtors might know.

[McGowdog]

I'm no real estate or economic expert by any means. But I think this is a good question.

I agree that supply and demand is a relevant issue. I also believe that the construction industry and the real estate industry are milking the current trend for all it's worth as far as new growth is concerned, which might in-turn affect current housing prices. With the situation in Iraq, it's got to be putting a damper on everything related to new growth.

It doesn't take an expert to see where extensive growth has occured over the last 5 years; Arizona, Idaho, perhaps Nevada. Colorado hasn't seen quite the windfall of growth that these areas have and perhaps has some room to grow in general.

As far as housing prices in the Denver Metro area, I see promise in the Wash Park and Capitol Hill area based on what I've seen lately. I see over-growth in areas like Aurora, Highlands Ranch, and on into Douglas County based on what I'm seeing. But as tfox mentioned, it would be nice to hear a realtor's perspective.

[dj32]

I am also curious on a realtor's perspective, particularly in teh city neighbhorhoods mentioned above. I've posed this question before and have had little luck. All I can fathom is that the realtors on this forum focus mainly in the suburbs.

[steveindenver]

The Denver Post - Graphic: Interactive foreclosure map

[steveindenver]

The Denver Post - Impact of foreclosures mixed

[jazzlover]

There may be another factor at work here--for most of the last 40-50 years or so, economic trends in Colorado have often tended to lag the national trends by 6-18 months. That has often meant, for example, that Colorado has entered recession quite a while after the rest of the country has entered it. It also has meant that Colorado has frequently lagged the rest of the country in emerging from recession.

Personally, I think the dynamics are going to be real interesting this time around. Historically, recessions have started because of faltering of the "productive" economy (manufacturing, etc.) and spread to the real estate and equity markets. This time, real estate and construction, the economic segment upon which much of the boom of the last 10 years or so has been based, looks to tank and take the rest of the economy down with it. A substantial spike in energy prices or inflation would surely help send it over the cliff, too. This speculative bubble in real estate, though in a different segment, may behave very similarly to the stock market when it crashed in 1929. Both markets at the time immediately leading up to the crash (which we haven't seen in full bloom in real estate just yet) were based on specualtive investment by a large segment of the population based on unsustainable "margin" buying with borrowed money. When the markets began declining, many of those invested in the market got "upside down" and panic selling ensued, which caused a crash.

I will get the flames from those in the "no problem" crowd, but I think Colorado is in a very poor position to whether this kind of "crash," because so much of the state's economy and employment is tied to development and construction. The crash will mean both huge financial losses AND huge employment losses in the state. And because no one wants to believe that could happen, almost no one is preparing for it. That will make it that much worse.

[dj32]

Jazzlover,

You may be right, I don't know firsthand Colorado's 80s real estate bust, however, I don't think we are in for an enormous crash simply because we did not see the obscene run up in prices like CA, NV, AZ, FL. Those markets were bound to crash, they were fueled by investors, flippers, etc... I feel bad for the people who bought at the top but I also feel like even the upper middle class couldn't afford a home in some of those markets, CA in particular. Denver saw an increase, some neighborhoods more than others, but nothing like that. People are saying that DEnver is already rebounding. I get nervous when i see the amount of high end construction in Denver neighborhoods, but i think the luxury market has been relatively stable.

What is more concerning to me than all of that is that the middle class seems hugely impacted by all of this, and that is what I find very sad. Between the offshoring of middle class jobs, fact that this segment of the population seems to be very stagnant in wages,etc.. is very depressing.

hope this post made some sense!