Earlier today, I blogged about how national existing home sales surged in October, but fizzled by comparison in the Denver area.
Home closings nationally are up 10.1 percent from October and a whopping 23.5 percent from October 2008, according to the National Association of Realtors. By comparison, home closings were down 7.6 percent in the Denver area from a year earlier and were up only 2.9 percent from September.
But I would consider this a bullish sign, if I were either looking to buy a home, sell a home, or if I were in the business of selling homes.
The reason is mathematical.
Everything reverts to the mean. That is, whether you are talking about stocks or housing, things have a way of settling down to whatever is “normal” for that market, despite short-term spikes up or down.
What I think that is going to mean (no pun intended) is that home sales are going to pick up in Denver and fall nationally.
And don’t forget, Denver’s economy often is counter-cyclical to the national economy. That economic-sword cuts both ways – we’re often down when the nation is up, and vice versa.
Another reason to bet on Denver’s housing market recovery is that it and Colorado have one of the best “balanced energy economies” of traditional and alternative energy companies in the nation, as Tom Clark, of the Metro Denver Economic Development Corp., points out. The Denver-area should become a magnet for high-paying jobs in the alternative energy sector, especially since the Golden-based National Renewable Energy Laboratory, the nation’s premier renewable energy research outfit, is in our backyard.
Also, mortgage rates remain near their historical lows, if you have the credit and work history to qualify. That mortgage rate window won’t stay open forever.
Still, there are storm clouds dampening Denver’s housing market. A declining workforce even as unemployment rates drop, is not encouraging. The area, and much of the country, is bracing for another wave of foreclosures due to more people losing their jobs. And lenders may have thousands of foreclosed homes waiting in the wings that have not yet been put on the market, creating a shadow market, as I reported earlier.
Kentwood Co. broker Tom Cryer says this reminds him of 1989, a prime time in Denver to find bargain-basement-priced homes. He thinks people who don’t buy today, will wish they had by 2012, when he thinks a Denver-area housing recovery will be well on its way.
I don’t think I would bet against him.
Contact John Rebchook at 303-
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What is the effect, do you think, of now needing 20 percent down to buy a house?
That's a big chunk of change for anyone to come up with these days. I think its going to depress the home market for quite a bit longer.
Could be, Rachel. You can still get FHA-insured loans, of course, with far less than 20% down. And that is where most of the action is in today's market. What is really interesting, I think, is that a lot of commercial properties were bought with 20% down payments, in an industry where developers used to be able to get 125 LTV loans ( S&Ls like Silverado would pony up the entire loan amount and kick in another 25%) Now, developers are finding that even with hefty down payments their equity has been totally wiped out. And that is certainly true for people who bought homes in places like Phoenix and Las Vegas in 2006 and 2007.