Denver Realtors and business leader, who have become accustomed to favorable national press about the local economy and real estate market, feel as though they have been blindsided by an article in Forbes.com that describes the local housing market as the second worst in the country.
Many experts said that the article, which ranked only Milwaukee below Denver, gives Denver an undeserved black eye.
“It absolutely gives us a black-eye,” said Tom Clark, executive vice president of the Metro Denver Economic Development Corp. and the Denver Metro Chamber of Commerce. “I glanced at the article last week and realized it was absolute bull crap.”
Unsold inventory exaggerated
One thing that irked real estate brokers that track the market closely is that the article claimed that there were more than 42,000 unsold single-family homes on the Denver-Aurora metropolitan statistical area. However, Metrolist data shows at the end of the March there were only 14,989 single-family homes on the market. Even when condos and townhomes are included, the number is less than 20,000. Indeed, most experts doubt that there are even 42,000 unsold homes in the entire state of Colorado.
“This article is so incorrect that it should be removed from the online publication,” said Jeff Bernard, principal of Bernard Real Estate Analytics, and a long-time Denver broker.
“Perhaps there was a completely different scope of parameters for data gathered by Forbes this year versus data gathered last year,” in which Forbes.comsaid Denver’s housing markets was one of the best in the country, added Bernard, a broker with RE/MAX Alliance. “It even leaves me wondering if they collected data on the right city. Or maybe they’re spiking their Kool-Aid before they run their analytics. Forbes is usually a pretty good read, but this article seems to be slithering towards irresponsible reporting.”
Forbes claims inventory jump in Denver
The Forbes.com article, originally published on April 5, had this to say: “Before 2009, if any market seemed to be free from the rest of the country’s housing woes, it was (Denver.) But the city’s fortunes seem to have shifted: The recession hit Denver later, and only in the past year have sales slowed and inventory begun to pile up.” And the report, which it said was based on information from the National Association of Realtors, Zillow.com and Moody’s Economy.com, went on to say that “Denver doesn’t come to mind as a housing-crisis hot spot, but the city that once looked like it would escape the housing bust unscathed now shows signs of strain. More than 42,000 homes are on the market in the metro, 27% more than last year.”
Although it went largely unnoticed, in January, Forbes.comraised the specter that the Denver-area housing market was in trouble, even though at that time the S&P/Case-Shiller Home Price Index, which had just released its November statistics, ranked Denver as No. 1 of the 20 major housing markets it tracks.
“But real-time asking price data provided to Forbes by Altos Research, a Mountain View, Calif.-based real estate research firm, suggest the Mile-High city is taking a turn for the worse. In July 2009 listings showed a .5% decline from the year before, the first time the city posted a price tag decline since 2008. The slump has since worsened; in January year-over-year asking prices were down 3%, to $368,870.”
Larry McGee, principal of the Berkshire Group, said that today an out-of-state buyer who recently purchased a home in the Denver area, read the most recent Forbes.com article and is now questioning whether she made a mistake.
“It does hurt us when the national press makes statements like this that are false,” McGee said last Thursday, repeating and elaborating on his criticisms today. “I guess I do not trust Forbes anymore.”
Realtor believes Forbes is irresponsible
McGee sent a letter to his agents this morning and did not mince words.
“I am very angered by this latest example of journalistic prevarication,” McGee wrote. “Unfortunately, the media operates like other sharks, and is not generally willing to challenge a fellow shark, so we will probably have to live with this and counter with our own information. ”
Last week, McGee’s wife, Kristal Kraft, also a Realtor, Tweeted the author of the Forbes report. “Your numbers aren’t even close. Very irresponsible reporting. Maybe you should check your source,” Kraft Tweeted the reporter.
Forbes.com stood by its reporting, with this response, also sent through Twitter: ”Checked #s, all correct. Data is for metro areas (a city and its surrounding suburbs). Appreciate the feedback.” Forbes.com has not responded to an e-mail from InsideRealEstateNews.com asking it to defend its information. Efforts to reach the author of the report were unsuccessful.
McGee said he is checking, but does not believe that there are even 42,000 unsold homes in all of Colorado, much less in the Denver area.
Gary Bauer, an independent broker who prepares a monthly report on the state of the Denver-area housing market, agreed.
“Where in the devil is somebody saying we have more than 40,000 unit for sale? I think it would even be a stretch to say we had that much unsold inventory from the Wyoming border to the New Mexico border,” Bauer said. “This article was an unfair swipe. I am not aware of any national report as being this negative to Denver in recent memory.”
Niederman says report ignores facts
Peter Niederman, chief operating officer of the Kentwood Cos., e-mailed a letter today to the author of the Forbes.comarticle, filled with chief operating officer of the Kentwood Cos., e-mailed a letter today to the author of the Forbes.com article, filled with the most current statistics on the Denver-area market from Metrolist. The statistics, not only show Denver’s market is strong and healthy, but also shows that overall, Denver only has slightly more than a 5-month supply of homes on the market. A year earlier, it had more than a six-month supply, he said.
That is a sign of a market that is in balance between supply and demand, he said. He noted it is a seller’s market for lower-priced homes, while it is a buyer’s market for more expensive homes.
“I actually think we are in a very sweet spot with out single-family home supply,” Niederman said. “If anything, we could use some more inventory. But we don’t have any place near 42,000 unsold homes. We are enjoying a very healthy and stable market.”
Niederman said that perhaps the Forbes article was talking about the ‘shadow market,” of homes being held by banks or soon-to-be sold by banks, which some analysts believe could greatly increase the inventory of unsold homes in the Denver area.
“Reading the article, I did not get the impression she was talking about REOs or foreclosures,” Niederman said. Niederman sent an e-mail to Forbes.com, filled with information about the Denver-are market from Metrolist, which paints a much different and more bullish picture. But he received no response from Forbes.com.
Shadow market can’t explain numbers
Clark, of the Metro Denver Economic Development Corp., said that he recently spoke to a home builders group, and some bankers and mortgage company officials said that banks may be holding a “significant number of houses” that they haven’t yet placed on the market. They don’t want to flood the market with homes and further erode the value of houses in the neighborhoods, as well as the homes they are trying to get off their balance sheets, he said. (For an earlier blog on the Denver-area shadow market, please visit this link.)
While that makes sense, he said he doesn’t think it is likely that banks are holding double or triple the number of homes being listed in the market.
And broker Bauer noted that banks increasingly are working with distressed borrower to keep the homes from going to foreclosure sales. Increasingly, lenders are trying to modify loans to keep borrowers in their homes, or failing that, are agreeing to short sales, where the bank accepts less than the mortgage amount.
“If (Forbes.com) is including all of the foreclosures, existing and pending, in their numbers, maybe would add another 2,000, 3,000 or maybe even 5,000 homes into the market – and that is a pretty big IF,” Bauer said.
Patty Silverstein, principal of Economic Development Research Partners and the economist for the chamber, also thought that the number of unsold homes quoted by Forbes.com seems way too high.
“The Metrolist data could be a little on the light side, and may be under-counting by a bit the number of homes on the market, or that could go on to the market,” Silverstein said. “Even so, I cannot fathom how they came to the 42,000 level.”
Silverstein said that while you never want to sugar-coat the data, it is an unfair black mark against the Denver area, when any part of the economy is made to look worse than it is.
“I think this whole economic recovery is fragile enough, that consumers are very nervous,” Silverstein said. “When they hear negative reports like this one, it is like we are taking two steps back.”
Clark said that while the Forbes.com article is not good news for the Denver area, it won’t haunt the economy for the long-term.
“We got hit with some bad news from this one, but I guarantee you we will soon see another national report with good news, which will take the spotlight,” Clark said. “The bad news from this one won’t last very long.”