After four consecutive years of a “tough and challenging downturn, 2012 looks like a breakout year,” for Colorado’s and the nation’s housing markets, Lawrence Yun, the chief economist for the National Association of Realtors said in Denver today.
Yun was one of the keynote speakers on Monday morning at the Colorado Association of Realtor’s Convention that began Sunday and ends Wednesday at the Sheraton Denver hotel in downtown Denver.
About 1,600 Realtors from throughout the state are expected to attend the convention that has a beach theme.
Yun, during his presentation, called Town Hall: Opportunities in Reality, presented numerous slides tracking a number of metrics on the local and national housing markets, from foot traffic to permits to inventory levels.
Tom Clark, CEO of the Metro Denver Economic Development Corp. and the executive vice president of the Denver Metro Chamber of Commerce and Dick Clarka senior partner with Rothgerber, Johnson & Lyons LLP, and since 1991 the legal counsel for CAR, joined Yun. The talk was moderated by Gregg Moss of Channel 9.
Tom Clark, at one point, showed slides comparing the number of people leaving and moving to Denver, Phoenix and Las Vegas, with red lines representing an exodus from the city and blue lines illustrating those moving in.
Vegas and Phoenix were awash in red while Denver was dominated by blue lines.
At a later presentation by Coldwell Banker, Chris Mygatt, the company’s Colorado president, summed up home buying activity this way: “Wow. What a year it has been.” Coldwell Banker Colorado, so far, has paid $10 million more in commissions to its agents this year over last year, a sign of how much the market has improved. Economists such as Yun note those dollars flow back into the economy, fueling a recovery beyond real estate.
Denver is the No. 1 destination city for those between 25 and 34 years old, Clark said. People in that sought-after category who move here tend to be well-educated, he said. Answering a question from the audience regarding water, Clark said that consumers have shown they can do an excellent job of conserving the precious resource during droughts. However, he said more water storage facilities will be needed in the future to keep up with growth and demand.
On the same topic, Dick Clark said that the Colorado Association of Realtors may make a decision within the next 30 days to support the developer of the proposed Sterling Ranch community in Douglas County, which is struggling with an adverse judge’s ruling that is requiring it to show where it will obtain all of its water for the life of the development. He said that CAR might be able to help the developer get a “more favorable ruling,” on the issue.
Nationally, Yun said, home sales are projected to be about 8 percent higher in 2012 than in 2011.
“Colorado is doing slightly better than the nation,” Yun said. “Colorado will be about 10 percent or 12 percent higher.”
The Denver-area market is showing about a 40 percent decline in the inventory of homes for sales, which also is a nationwide problem.
“One problem is that seller interest is flat,” Yun said. “Sellers are not putting homes on the market.”
He said there is an “imbalance of too many buyers chasing after too few homes that are available in the market.”
He noted, however, that “All real estate is local,” and Colorado avoided the worst of the real estate bust.
Yun said there was a boom in Denver-area housing in 1999, which went largely unnoticed nationally. It was followed by a tech-crash soon, which led to housing prices climbing at a slower pace in subsequent years when compared to previous hot spots such as Las Vegas and Phoenix.
“Denver really never got to the bubble stage,” Yun said.
Much of the increase in housing sales, he said, is coming from investors, not owner-occupants.
While owner-occupant buying is flat, investor interest is picking up. Real estate now is the “preferred investment,” topping gold, bonds and equities for many people, he said.
Yun also said there is less “shadow market” of distressed clogging the market.
“There are fewer distressed properties coming on the market,” he said. That, he said, will push up the median sales prices.
And while housing starts are jumping 20 percent to 25 percent, they are coming off a low base, he said.
“New construction inventory is at a 50-year low,” nationwide, he said. He said builders, which still have trouble getting bank financing, so they cannot build as many houses as they want to meet demand.
With few new homes coming on the market, strong demand for housing the “housing shortage may persist,” he said.
On another topic, he said that he does not think that Congress is going to eliminate or greatly curtail the mortgage deduction.
He said that it is too popular and eliminating it would be too costly.
Following his presentation, he told InsideRealEstateNews.com that the NAR estimates that eliminating the mortgage deduction would drop the value of all homes by 15 percent to 20 percent.
He said he did think that Congress would discuss eliminating the mortgage deduction for second homes.
“Buy they won’t do it,” he said. “The increase in tax dollars they would collect by eliminating it would be very small, while the damage it would do to the second-home market would be very great. When you compare and weigh those two factors, it doesn’t make any sense to eliminate it.”
Real estate and politics are intertwined, said Sandy Trujillo, vice president of the Government Affairs division of CAR.
“We have a saying in Government Affairs that I am sure you have heard a thousand times,” Trujillo said. “If real estate is your profession, politics is your business.”