Inside Real Estate News » Homes

Drop in Denver building activity welcomed

John Rebchook — Wed, 17 Feb 2010 18:47:54 +0000

Yesterday, I blogged that only 3,408 building permits were issued in the Denver last year, the lowest number since at least 1980.

Today, some experts said that the record low, although bad news for those who make their living building homes and apartments and the overall economy, is good news for anyone trying to sell their own home, and for landlords of apartments who won’t face competition from new communities anytime soon.

“It is so important that we are getting control of the supply,” said Byron Koste, director of the Colorado Real Estate Center at the University of Colorado in Boulder. “It is very good news for the Denver area and the whole region that we are getting the excess out of the supply.”

That said, anytime an industry takes it on the chin, especially one with the huge multiplier effect of the construction industry, it hurts.

“The industry does not like it,” Koste said. “We like to go out and build things. That is what the industry is designed to do. Developers and builders look at what is happening, and say “What is good about it?’

Housing slump hits economy

As far the toll on the entire economy, much is not good about it. The economic fall-out far exceeds those directly involved in construction, because building touches so many other parts of the economy. As Tom Clark, executive vice president of the Metro Denver Economic Development Corp. said earlier, some person working in a factory making dishwashers may be laid off because of a slump in home building. It also means that out-of-work framers, plumbers and electricians are not frequenting the area 7-11 store to buy a Slurpee. The list goes on and on.

Still, building beyond demand makes no sense, Koste said.

“Continuing to build things that we don’t need, yes, would help job- creation for a short while, and jobs are very important,” Koste said. “But it is more important to come down on the side of getting rid of the excess supply. It is time to come down on the side of balance.”

There were only 2,378 permits pulled in the Denver area last year for single-family homes, the lowest on record. That is a 35 percent drop from the 3,686 permits issued in 2008, the second lowest on record. Permits signal future home starts.

That is good news for people who already are homeowners, as they do not have to compete with many new homes on the market. That, combined with the $8,000 tax credits for first-time home buyers and the $6,500 tax credit for qualified existing home buyers, should help the home sales market this year. Buyers must put the home under contract by April 30 and close by the end of June to take advantage of the credits.

“That should help the market,” Koste said. “But I don’t want people to read this and think, “Wow, the market is really going to soar now and prices will dramatically improve,” because that ain’t going to happen. We still have all this crap on the market that we need to burn off. That is what created the problem in the first place.”

Tougher to get loans

In addition, it is more difficult to qualify for loans than it was in the past, so not as many people will be able to take advantage of the confluence of super-low interest rates, tax credits and home prices that are at a much lower level than in recent years. Only lower-end home values have been rising from their lows in the Denver area.

Apartment hit hard

The biggest drop in permit activity was for apartments. Permits were only issued for 438 apartment units last year, a 90 percent drop from the 4,413 issued in 2008. That was the lowest number of apartment permits issued since 1991, when developers only pulled 208 permits for apartment unit.

Steve Rahe, an apartment broker with Grubb & Ellis, was glad only 438 permits were pulled last year.

“I like that number,” Rahe said. “I think that is fantastic!”

Rahe said that the drop in permits is a sign of what happened in the economy last year.

“I think that it shows just how bad off the economy was in 2009,” Rahe said. “We just had to many apartments on the market. The excesses in supply had to be dealt with and I think it is great that so few units were added to the supply. What that will mean is that today’s apartment vacancy rate in the 7.9 or 8 percent range will come down to 5 percent or 6 percent in the coming years. If you believe in supply and demand, it will mean that building owners will finally be able to raise rental rates.”

He said that the Torto Wheaton Research Group recently predicted that Denver’s apartment market will likely be one of the five top performers during the next three years, along with Boston, Austin, Atlanta and Minneapolis.

“I have to think a lot of that is because the number of our permits are so low that we are not increasing the supply,” Rahe said.

If “organic” growth such as people graduating high school and pent-up demand from people living with their parents who are eager to strike out on their own occurs and there appears to be a looming shortage of apartments to rent, Rahe “I suspect the development community will look at the demographics and will address that. I think we could see some people looking at building something at the end of 2010 or in 2111. Time will tell.”

Contact John Rebchook at JRCHOOK@gmail.com or 303-945-6865

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WSJ: Boulder finds it's not easy going green

John Rebchook — Sat, 13 Feb 2010 17:22:38 +0000

An article about Boulder’s struggle to go green was on the front page of today’s Wall Street Journal. This is what Roger Pilke Jr., who studies political response to climate change at the University of Colorado at Boulder had to say about the city’s efforts to go green: “If a place like Boulder that regards itself as being in the forefront has such a tough time, these type of efforts are not going to work as a core policy,” for the nation.

The story is an interesting read. For the entire story, please go to this link.

Contact John Rebchook at JRCHOOK@gmail.com or 303-945-6865.

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RealtyTrac: Colorado ranks No. 10 for forclosures

John Rebchook — Thu, 16 Jul 2009 06:04:37 +0000

The bad news is that Colorado still makes the top 10 list, if just barely, for foreclosure activity.

The good news is that the number of foreclosures in the state have dropped by 18.82 percent in the first half of the year, compared to the same period last year, according to a report released today by Irvine, Calif., based RealtyTrac.

A separate analysis by InsideRealEstateNews.com, released earlier this week, showed that new foreclosure filings in the Denver area are down 10.5 percent in the first half of the year, compared to the first six months of 2008.

RealtyTrac, which says it follows all phases of the foreclosure process, from the initial Notice of Default to Real Estate Owned (REO) properties, when the lender takes possession of the home, found 25,565 total foreclosure filings in Colorado during the first half of the year. That is the equivalent of 1.25 percent of the housing units in the state, slightly higher than the national average of 1.19 percent.

Nevada, by contrast, had the highest foreclosure rate at more than 6 percent, or one in 16 houses.

Nationwide, RealtyTrac found a 9 percent increase in total properties from the previous six months and a nearly 15 percent increase in total properties from the first six months of 2008.

Foreclosure filings were reported on 336,173 U.S. properties in June, the fourth straight monthly total exceeding 300,000 and helping to boost the second quarter total to the highest quarterly total since RealtyTrac began issuing its report in the first quarter of 2005.

Foreclosure filings were reported on 889,829 U.S. properties in the second quarter, an increase of nearly 11 percent from the previous quarter and a 20 percent increase from the second quarter of 2008.

“In spite of the industry-wide moratorium earlier this year, along with local, state and national legislative action and increased levels of loan modification activity, foreclosure activity continues to increase to record levels,” said James J. Saccacio, chief executive officer of RealtyTrac. “Unemployment-related foreclosures account for much of this increased activity, and the high number of borrowers who find themselves owing more on their mortgages than their homes’ are now worth represent a potentially significant future risk. Stemming the tide of foreclosures is a critical component to stabilizing the housing market, so it is imperative that the lending industry and the government work in tandem to find new approaches to address this issue.”

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Economist Silverstein: Money's forecast "crazy"

John Rebchook — Tue, 14 Jul 2009 22:20:28 +0000

Patty Silverstein, principal of Development Research Partners and economist for the Metro Denver Economic Development Corp., doesn’t buy Money magazine’s contention that Denver’s residential real estate market has another 15 percent to fall, before it hits bottom in 2011.

“I really do not understand where they are coming from on that,” Silverstein told me this afternoon. “It sounds crazy. I don’t believe it whatsoever. It almost seems like they are looking at the wrong data. I say that kind of in jest, but I really do not understand where they came up with this.’

Silverstein said that all of the evidence she has seen indicates that the Denver-area real estate market is on the mend, and one of best-poised metropolitan statistical areas in the country. According to Money only Las Vegas, Los Angeles, Miami, New York, Philadelphia and Phoenix will lose more ground than Denver before recovering. While that part may be true, is Denver really in worse shape in terms of real estate than Boston, Chicago, Cleveland, Detroit, Kansas City, St. Louis, and many others? Are prices going to drop twice as much than in San Francisco, as Money predicts.

Silverstein said that while the Denver-area economy has suffered some recent hits, and may continue to have some issues such as increased unemployed, relative to most of the rest of the country, Denver is in good shape. Indeed, she told me she believes that Denver will help lead the nation out of this economic stupor.

And that bodes well for home prices.

“Our expectations that we are seeing from a lot of indicators – sales activity, interest in the markets, falling inventory, little new construction – is that why we are really not expecting this year to be a great year by any stretch of the imagination, we expect to see some firming up by the end of the year,” Silverstein said. “For them to think that we are going to work through some huge downward-price issues until first quarter 2011, really does seem crazy.”

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Foreclosure investing hot

John Rebchook — Tue, 14 Jul 2009 10:51:24 +0000

Outside investors with cash or lines of credit, are increasingly picking up foreclosed homes at public trustee auctions.

The auctions are the end of the line for people who have unfortunately lost their homes during the foreclosure process.

A second-quarter study by Adams County Public Trustee in Adams County found that a large number of banks are selling homes for deficiencies – that is, for less than the mortgage amount. She said that she has seen cases where the home may have a total of $200,000 of debt, and determine that the fair market value of the home is only $38,000. An investor steps in and out-bids the bank, paying $40,000 at the closing. The investor might need to spend $10,000 fixing it up, but with a $50,000 investment can still rent the home out for a profit each month.

“They might hold it for a couple of years, with hopes of the market appreciating, and sell it for a profit,” Snyder said.

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Adams County: Outside bidders buy 475 percent more foreclosures

John Rebchook — Tue, 14 Jul 2009 10:41:18 +0000

Outside bidders purchased 115 foreclosed homes from the public trustee’s office in the second quarter, a 475 percent increase from the 20 sales in the second quarter of 2008, a whopping 475 percent increase.

The report by Adams County Public Trustee Carol Snyder also found that the number of bankruptcies during the second quarter of Adams County also soared. There were 140 bankruptcies in Adams County during the second quarter, a 366.67 percent increase from the second quarter 2008. Many more people who are losing their homes at foreclosures, are declaring bankruptcy first.

Yet, the number of homes sold at public trustee auctions in Adams County barely budged. There were 651 homes sold by the public trustee’s office at auctions in the second quarter, only a 0.93 percent increase from the 645 a year earlier.

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Foreclosures down, not out

John Rebchook — Tue, 14 Jul 2009 10:29:06 +0000

It may be the bottom of the Denver-area housing market, but it is too early to say that the foreclosure crisis is over.

There were 10,726 foreclosure filings in the metro Denver area in the first half of the year, a 10.5 percent decline from the 11,992 the first six months of 2008.

“That is still a big number,” noted Ryan McMaken, spokesman of the Colorado Division of Housing, when I shared the numbers with him.

But beyond that, changes in the state law late last year and bank moratoriums on foreclosure filings last fall, played a role in the drop in foreclosures.

“There is no obvious trend right now,” McMaken said. It may not be until the third-quarter numbers are available that it is clear where we stand in the foreclosure cycle.

One of the big factors that helped drive down foreclosures this year were lenders voluntarily not pursuing foreclosures, starting last fall, and into the spring of this year, said Carol Snyder, public trustee for Adams County.

“The major, big-boy lenders had a self-imposed moratoriums on filings, starting around Thanksgiving of last year,” Snyder said. “That led to a huge drop.”

But starting in about April, attorneys began to send more foreclosure filings to her office, she said.

Overall, Adams County saw a 11.6 percent drop in the first six months of the year compared to the same period last year. But from April 2008 to April 2009, Adams County saw a 14.98 percent increase in foreclosures, and from June 2008 to June 2009, it saw a 9.6 percent drop. But from May 2008 to May 2009, there was a big lull, with new foreclosure filings dropping by 22.5 percent.

And from May to June, foreclosures rose by 21.6 percent in Adams County.

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Foreclosures fall 10.5 percent

John Rebchook — Tue, 14 Jul 2009 10:26:45 +0000

Denver-area foreclosures in the Denver area first half of 2009 fell by 10.5 from the first six months of 2008.

There were 10,727 foreclosure filings in the seven-county area, compared with 11,992 from January through June of 2008, according to county public trustee offices surveyed by InsideRealEstateNews.com.

Denver had the most new filings with 3,153 in the first half of the year, but it also showed one of the largest percentage drops, at 16.5 percent. Only Arapahoe County, with a 20.17 percent drop, showed a bigger percentage decline. Broomfield County showed a 15.7 percent increase, but the numbers were small. It went from 152 foreclosure filings in the first half of 2008, to 176 filings in the first half of 2009.

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Denver top city on S&P/Case-Shiller list

John Rebchook — Tue, 30 Jun 2009 13:39:23 +0000

Although homes in the Denver area lost 4.9 percent in April from a year earlier, that was good enough to land the top of the closely watched S&P/Case-Shiller Home Price Indices released today. And from March to April, Denver homes rose by 1.5 percent, second only to the 1.7 percent gain posted by Dallas.

“I think it is awesome,” said Stacy Neir, an agent with Kentwood City Properties. “It is a bit of being the best of the worst. Still, only dropping about 5 percent when compared to the rest of the market, shows that we are in much better shape relative to the rest of the nation.”

Neir also noted that “obviously, these are just averages. Real estate is very local and depends on what neighborhood you are talking about.”

For the one-year period, through April, the 20 major metropolitan areas on the list showed a 18.1 percent drop. It also is broken into a 10-city list, which includes Denver, which posted a 18.0 percent drop. Phoenix was the worst-performer, showing a 35.3 percent lost. It was followed by Las Vegas, with a 32.2 percent decline and San Francisco, which fell 28 percent.

Following Denver as the best performers, were Dallas and Boston, down 5 percent and 7.7 percent respectively, in the the one-year period that ended in April.

Overall, the 20 cities are not as doing as poorly as they have in the past.

“The pace of decline in residential real estate slowed in April,” said David M. Blitzer, chairman of the Index Committee at Standard & Poor’s. “In addition to the 10-city and 20-city composites, 13 of the 20 metro areas also saw improvement in their annual return compared to atha of March. Furthermore, every metro area, exept for Charlotte, recorded an improvmeen tin monthly returns over March. While one month’s dta cannot determine if a turnaround has begun, it seems tha some stabilization may be appearing in some of the regions. We are entering the seasonally strong period in the housing market, so it will take soem time to determine if a recovery is really here.”

He also said that other parts of the economy also have shown some strength.

“The stock market bottomed in March and measures of consumer confidence have turned upward,” Bitzer said. “This report shows that these better spirits are also appearing in the housing market.”

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Forbes: Denver best place to make real estate deal

John Rebchook — Mon, 29 Jun 2009 23:22:52 +0000

Forbes magazine ranked Denver No. 1 for making real estate deals. It used a novel statistical way to rank the metropolitan area’s in its analysis.Here is what it had to say.

“Denver tops the list. It had 25% of its property sales occur within approximately 25% of the city’s ZIP codes. This means sales in various parts of the city were fairly evenly distributed, showing proportionate activity. The further a city deviates from the 25% mark, the less evenly distributed the market is in that city, and thus the lower that city ranks.

“Denver scores very well in terms of being able to bring people into a stable housing market,” says Christopher Cornell, an economist at Moody’s Economy.com. “It has better growth potential than most cities today.”

Cornell attributes Denver’s stability to its main industries–energy and technology–that he says aren’t likely to decline simultaneously. He also says its housing market didn’t grow as much as in other parts of the country over the last five years. “Little boom, little bust,” he says.

Forbes

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