- Several hundred people attended an economic forum sponsored by Kentwood Real Estate, despite blizzard conditions.
- Prominent local economists and CU professors provided local, national and international forecasts.
- Colorado home prices soared in 2012 from 2011 and are expected to rise another 6% this year.
Denver-area homes appreciated 12.1 percent in 2012 from 2011, twice the national average, a well-respected professor at the CU Real Estate Center told several hundred Realtors and business and civic lenders attending an economic forum this week.
Tom Thibodeau, professor of Global Real Estate Markets and Academic Director at the CU Real Estate Center in Boulder, was one of five speakers at the economic outlook on Wednesday evening at the Hyatt Denver Tech Center.
More people likely would have attended the event, if not for the storm that snarled traffic.
Edie Marks, a long-time broker at Kentwood, questioned Thibodeau on whether prices had actually gone up that much, or rather the 12 percent jump was a result of the mix of homes being sold. She added that she certainly didn’t see a 12 percent increase in luxury homes along the southeast corridor.
Thibodeau used Zillow.com as a source. Thibodeau serves on a technical advisory board for Zillow. While a number of Realtors and consumers are critical of Zillow’s efforts at valuing individual homes, especially in urban areas, Thibodeau said the year-end index does accurately reflect appreciation.
“It is an index,” he said, and not just a change in the average or median price of homes. “I don’t pay too much attention to average and median prices,” he said, as they are influenced by the mix of homes selling.
Thibodeau said such a large one-year percentage gain is scary and not sustainable, especially in a year when inflation was only 1 percent to 1.5 percent.
Thibodeau displayed a graph that showed home values, when adjusted over a long period of time, basically track inflation, although there will be stretches of periods in individual markets when that is not the case.
Following the presentation, Thibodeau told InsideRealEstateNews.com that although home prices in real dollars tend to be flat over a long period of time, he said it still makes more sense to buy than to rent.
“Buying is cheaper,” Thibodeau said. “After you have been in your home for three years, it is cheaper than renting, given the mortgage-interest deduction and everything. But you have to plan to stay in your house for at least three years.”
Thibodeau also said that low mortgage rates are here to stay.
In fact, he said he doesn’t expect mortgage rates to skyrocket again in his lifetime.
“With $16 trillion in debt, the government can’t service its debt if interest rates rise,” Thibodeau said. That means, he said, the government will do everything in its power to keep interest rates low.
He asked the audience how long it would take to pay off $1 trillion, if you paid $1 per second. One person guessed 5,000 years.
“Too low,” Thibodeau said. “It would take 33,500 years to pay off $1 trillion at $1 per second.”
He said he expects that Denver-area homes could rise another 6 percent or so this year from 2012.
“I would be thrilled to see homes go up another 4 to 6 percent this year,” Peter Niederman, CEO of Kentwood Real Estate said, following the forum.
Thibodeau said that Colorado homes did not have a bubble during the great recession.
“From peak to trough, Colorado homes fell by 14 percent,” Thibodeau said. “A 14 percent drop is painful, but not a bubble. There was no bubble in Colorado.”
However, there were housing bubbles in other states, primarily California, Florida, Arizona and Nevada., he said. In Miami, for example, home prices tripled during the go-go days, and then lost 50 percent or more of their value during the crash, he said.
Formerly battered real estate markets such as Miami and Phoenix are currently staging big percentage gains.
Niederman said he prefers what is happening in Denver.
“Slow and steady always seems to win the race,” Niederman said.
In addition to Thibodeau, other speakers included:
- David Ikenberry, Dean of the Leeds School of Business at the University of Colorado at Boulder.
- Richard Wobbekind, Senior Associate Dean for the Leeds School of Business.
- Sherman R. Miller, Executive Director for the CU Real Estate Center.
- Patty Silverstein, president and CEO of Development Research Partners and the chief economist for the Metro Denver Economic Development Corp. and the Denver Metro Chamber of Commerce.
Silverstein compared the Denver-area and national economies trying to traversing a Fourteener in Colorado.
Sometimes it looks like you will never reach your goal, progress can be slow and there can be unforeseen setbacks, she noted.
Worldwide factors such as the global economic slowdown, tension in the Middle East and the U.S. drought that will impact economic growth locally. Positives include low inflation, a labor surplus, and excellent real estate opportunities, she said.
According to Silverstein, nearly 25 percent of metro Denver employers are planning on adding workers in 2013, with much of the area’s growth sparked by aerospace and aviation, bioscience, broadcasting and telecommunications, energy, financial services, healthcare,and IT/software.
Opportunities in real estate will be fueled by low-interest and inflation rates, stronger consumer spending, active home sales with low inventory, and the improving commercial segment of the real estate business.
Miller reviewed all aspects of commercial real estate, including offices, retail, land and industrial.
Miller’s “bottom line” projections include:
- User activity will remain strong — Landlord market coming soon.
- Investment activity to stay strong.
- Overbuilding not likely.
- Built-to-suit activity to continue.
To learn more, please visit DenverRealEstate.com
Place* December 2012 Month-over-month Quarter-over-quarter Year-over-year
U.S. $157,400 0.8% 2.5% 5.9%
Boulder $320,900 0.8% 2.0% 5.4%
Colorado Springs $186,000 -0.4% -0.4% 2.5%
Denver $228,600 0.9% 3.1% 12.1%
Fort Collins $227,400 0.3% 0.7% 5.7%
Grand Junction $161,000 -0.4% 0.0% 3.0%
Greeley $166,100 0.2% 2.0% 6.5%
Pueblo $101,900 -1.1% -0.7% 0.5%
Source Zillow.com Metropolitan Statistical Areas
Have a story idea or real estate tip? Contact John Rebchook at JRCHOOK@gmail.com. InsideRealEstateNews.com is sponsored by Universal Lending, Land Title Guarantee and 8z Real Estate. To read more articles by John Rebchook, subscribe to the Colorado Real Estate Journal.
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