John Rebchook is a former Rocky Mountain News reporter with more than 30 years of experience in writing and communications... Buyers paid about $200 billion for more than almost 1.3 million homes in the Denver area since 1975, shows an analysis of real estate data by InsideRealEstateNews.com.
The total sales since 1975 is the equivalent of all of the homes in Denver, Colorado Springs, Aurora, Lakewood, Littleton and Arvada – and then doubling them.
And the $200 billion represents more than 10 times the Colorado state budget. Another way to look at it: The $200 billion is equal to the annual GDP of Israel.
“Isn’t that staggering? It really paints a picture of just how big the residential real estate industry is,” said Tom Clark, executive vice president of the Metro Denver Economic Development Corp. “Basically, we sold all of our houses – twice. It’s like the old adage from our parents: Buying a house is the best way to create wealth.”
And even if home prices only slightly exceed the inflation rate, as they have in the Denver area, it’s still worthwhile, Clark said.
“It is a form of forced savings,” Clark said. “And when you look at the magnitude of it for the Denver area over a long period of time, it is just incredible.”
Inflation-adjusted numbers staggering
When adjusted for inflation, the total dollar volume is about $277 billion, according to the analysis based on data from independent broker Gary Bauer and Tom Cryer, of the Kentwood Co. Their numbers, based on Metrolist statistics, represents mostly previously owned homes sold by Realtors. It would not include homes sold by builders that did not use Realtors, or for sale by owner properties. But the numbers likely represent at least 85 percent of the sales in the metro area over more than three decades.
While the 42,070 home closings last year represent a 12 percent drop from the 2008 – the biggest year-over-year percentage drop since 1982, when home sales fell by 15.3 percent from 1981 – if you take a longer view, home sales represent some big numbers. Last year marked the third largest year-over-year drop since 1975. The largest was in 1980 from 1979, when sales dropped by almost 23 percent.
Trickle rate of homes huge
“Wow,” said Bauer, when informed of the findings. “That is pretty amazing. It indicates once again the value of the real estate market. And when you take into consideration that the current “trickle” rate from real estate is about four times, it really has had an $800 million impact in 35 years.”
Consumers clueless on housing’s impact
Bauer said he does not think most consumers have any idea of the size of the housing economy and its importance to the Denver area economy.
“I think the focus is when you are in the transaction and when you are contemplating that transaction,” Bauer said.
Cryer agrees that the residential real estate is extremely crucial to the health of the overall economy.
“The residential real estate market is the swizzle stick that stirs the economy,” Cryer said. “I don’t know who originally said that – I think I first heard it during the housing bust of the late ’80s – but it is really true. When you stop selling houses, you stop selling refrigerators, and that means some guy working in a factory in Indiana that makes refrigerators loses his job. It doesn’t take long for that trend to occur. It just goes on and on. It touches just about every aspect of the economy.”
Cryer said the “question that haunts him,” as whether the Denver area is going to fall to about 30,000 closings each year, or rebound to the 50,000s, where it was a few years ago.
Mike Rinner, of the Genesis Group, which tracks housing along the Front Range, said the InsideRealEstateNews analysis is “pretty cool.” He said he plans an even more in-depth analysis, which would use a variety of historical to project exactly where the local housing market is in the real estate cycle and when it can expect to rebound from its slump.
“It’s interesting when you think about it,” Rinner said. “We’re talking about some really big numbers over 35 years.”
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| Year | Closed Sales | Dollar Volume | Inflation-Adjusted Dollar Volume |
|---|---|---|---|
| 1975 | 19,156 | $665 million | $2.7 billion |
| 1976 | 24,345 | $875 million | $3.3 billion |
| 1977 | 29,875 | $1.2 billion | $4.2 billion |
| 1978 | 31,213 | $1.4 billion | $4.6 billion |
| 1979 | 31,024 | $1.7 billion | $5.1 billion |
| 1980 | 23,952 | $1.6 billion | $4.1 billion |
| 1981 | 22,215 | $1.7 billion | $4.1 billion |
| 1982 | 18,756 | $1.6 billion | $3.5 billion |
| 1983 | 23,566 | $2.0 billion | $4.5 billion |
| 1984 | 23,264 | $2.1 billion | $4.4 billion |
| 1985 | 24,489 | $2.3 billion | $4.7 billion |
| 1986 | 25,865 | $2.5 billion | $4.9 billion |
| 1987 | 23,414 | $2.3 billion | $4.3 billion |
| 1988 | 24,120 | $2.5 billion | $4.5 billion |
| 1989 | 25,142 | $2.5 billion | $4.3 billion |
| 1990 | 26,436 | $2.7 billion | $4.5 billion |
| 1991 | 26,410 | $2.7 billion | $4.2 billion |
| 1992 | 33,477 | $3.6 billion | $5.5 billion |
| 1993 | 38,598 | $4.5 billion | $6.7 billion |
| 1994 | 38,072 | $4.8 billion | $7.0 billion |
| 1995 | 36,038 | $4.9 billion | $7.0 billion |
| 1996 | 38,101 | $5.5 billion | $7.6 billion |
| 1997 | 40,185 | $6.2 billion | $8.3 billion |
| 1998 | 45,951 | $7.8 billion | $10.4 billion |
| 1999 | 46,742 | $8.8 billion | $11.4 billion |
| 2000 | 48,611 | $10. 6 billion | $13.3 billion |
| 2001 | 47,832 | $11.1 billion | $13.6 billion |
| 2002 | 47,919 | $11.7 billion | $14.6 billion |
| 2003 | 47,966 | $12.2 billion | $14.3 billion |
| 2004 | 53,482 | $14.2 billion | $16.3 billion |
| 2005 | 53,106 | $14.9 billion | $16.5 billion |
| 2006 | 50,244 | $14.4 billion | $15.6 billion |
| 2007 | 49,789 | $14.0 billion | $14.6 billion |
| 2008 | 47,837 | $11.9 billion | $12.0 billion |
| 2009 | 42,070 | $10.2 billion | |
| Total* | 1.3 million | $200 billion | $277 billion |
Sources: Gary Bauer, Tom Cryer
* Dollar volume and total numbers are rounded.
John,
Really a great article. Thank you for all the valuable information you have provided to the real estate community over the last few months!
Colorado Title Insurance
John,
The true volume of home sales is considerably higher than reported by Metrolist in recent years because of the "shadow market" of foreclosures. When these homes are purchased at a foreclosure auction, the transaction won't appear in Metrolist. The best we can figure is that roughly half the 25,000 home foreclosures in the metro Denver area in 2008 were ultimately sold in the shadow market in 2009 and not reported in Metrolist. If this is reasonably accurate it represents about 23 percent of the total market which was actually around 55,500 home sales in 2009.
This means that when the shadow market is included using this methodology the actual number of home sales in 2009 was greater than the number of closings reported in Metrolist for any year ever!
John,
There were about 110,000 foreclosures in the metro Denver area over the past five years. It is hard to imagine that many of these former homeowners have now purchased another home, so there are probably close to 100,000 more rental households than before. This would mean that the home ownership rate has probably dropped from about 65% in 2005 to somewhere between 55% and 60% today.
Is this good or bad? Or is it neither? After all, if aggressive lending resulted in foreclosures of homes purchased by people who shouldn't have bought them in the first place, the market is simply readjusting to "normal" in a painful way.
Mike,
Both of your comments make excellent points.
John