John Beeble, co-chair of the Metro Denver EDC and president of Saunders Construction, called for business leaders to actively engage in economic development endeavors within the region.

“We are privileged to have local and state governments as crucial partners in our efforts,” Beeble said. “But for the region and state to succeed, the private sector must do its share. It must play a prominent and equal role and be at the table with government as a political and financial partner.”

Beeble also highlighted economic successes – and challenges – of 2010, as the metro Denver region worked its way out of the recession.

“While we lost two notable corporate headquarters operations last year-First Data and Qwest-we have also been successful in recruiting other high-profile headquarters including DaVita, TriZetto Group, and juwi,” said Beeble.

Prospects strong

“The Metro Denver EDC finished 2010 with a record number of prospect companies. Volume is up and 2011 is starting strong,” Beeble added. Indeed, Gov. John Hickenlooper recently announced that he has been talking to large companies considering moving their corporate headquarters to Denver, although he did not name them.

In trying economic times comes unexpected opportunities, Tom Clark, EDC’s executive vice president, told the audience.

“This year we’ll add $2 billion in new healthcare facilities to the region, DaVita’s $90 million headquarters will rise from the Platte Valley, and a new rail line will emerge connecting DIA to Union Station. These investments help advance the region’s recovery,” Clark said.

Contact John Rebchook at JRCHOOK@gmail.com

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Today, the U.S. Census Bureau released data that indicates they are correct.

Prices hold steady

The median value of a home last year in the Denver-area, described as the Denver-Aurora-Broomfield Metro Area by the Census Bureau – was $248,500 in 2009, only a 0.48 percent drop from the median price of $249,700 in 2008. By contrast, the U.S. median price fell about 5.9 percent in 2009 to $185,200, from $196,700.

“I think it is fair to say that home values in the Denver MSA (metropolitan statistical area) did hold their values better than the U.S. did, as our market sustained a very small drop, while the U.S. overall, fell far more,” said Patty Silverstein,  principal of Economic Development Research Partners and chief economist for the Metro Denver Economic Development Corp.

Census targets all homes

Unlike other reports, such as Metrolist, the National Association of Realtors, and today’s S&P/Case-Shiller report, the Census Bureau does not measure homes that sold, but all owner-occupied units.

On the other hand, the Census Bureau does not use precise numbers, but results from surveys of homeowners.

“The value is the respondents’ estimates of how much their property would sell for if they were for sale,” Silverstein said. “So it really is a self-declared value.”

That does not mean it is inaccurate, or even suspect. “Obviously, they have their own ways of trying to screen the survey results to make it as accurate as possible,” Silverstein said. “And I take comfort in the survey numbers in that they are generally in the same ballpark as NAR and Metrolist data.”

Silverstein also noted that the “fine print” in the Census Bureau notes that it changes its methodology in 2008, so cautioned using pre-2008 for comparisons for previous years. For the record, the median price for the metro area was $251,800 and $260,800 in 2007 and 2006, respectively.

Owner-occupied homes dip

The Census Bureau also showed there were 638,885 owner-occupied homes in the Denver area in 2009, down about 1.9 percent from the 651,001 owner-occupied homes in 2008. the number of those homes with mortgages fell slightly to 79.6 percent last year from 79.8 percent in 2008. There were 649,942 owner-occupied homes in 2007 and 646,194 in 2006.

“The survey was for 2009, and that was at a time when we were seeing a really big increase in people losing their homes in foreclosures, as well as people owning high-end homes leasing them out, rather than losing to them to their lender,” said independent broker Gary Bauer. “I think the drop in ownership was a product of the economy.”

The Census Bureau said that 2.0 percent of the homes in the Denver area last year were valued at $1 million or more, down from 2.3 percent in 2008.  Home ownership for houses in the $100,000 to $149,999 range rose to 8.8 percent last year, from 7.7 percent in 2008.

Bauer agrees with Silverstein that the Census report, overall, bolsters the common-held notion that Denver housing economy, though battered to some extent, is out-performing the country as a whole.

“I think it absolutely does that,” Bauer said.

Contact John Rebchook at JRCHOOK@gmail.com

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Denver-area homeowners could potentially save almost $600 million a year by refinancing their mortgages into the record-low rates available, according to an analysis by InsideRealEstateNews.com.

While there does appear to be an uptick in refinancing, phones are not ringing off the hook in lender offices. Meanwhile, even the trifecta of good news for home buyers – super-low rates, housing prices well off their peaks, and an increased of supply of unsold homes on the market to choose from – have not been driving people to buy homes. In June, the number of homes placed under contract plunged by 31 percent from June 2009.

InsideRealEstateNews used Census Bureau data and national reports to estimate the number of homeowners who could shave 2 percentage points or more off their mortgages. If they all did, it would save them an estimated $597.3 million annually, excluding the costs of refinancing. And the estimate is likely conservative, as some lenders say it makes sense for some homeowners to refinance, even if they could cut their mortgage rate by a half of a percent or less.

Crazy low rates

Zillow.com reported today that the average 30-year, fixed-rate at 4.49 percent, a 15-year, fixed-rate at 3.98 percent and a 5-year ARM at 3.98 percent. “It is absolutely crazy,” said Kay Cleland, president of the Colorado Association of Mortgage Brokers. “Everybody should be taking advantage of these unbelievably low mortgage interest rates.”

One way to look at it, is that refinancing would be the equivalent of the metro area homeowners getting a $600 million, tax-free raise.

“That would have a huge impact on the economy,” said independent real estate broker and consultant Gary Bauer. “And those savings would have a three or four times trickle rate, so if you take that $600 million, it could have a $2.4 billion impact on the economy. To put that into perspective, in the first six months of this year we sold $5.3 billion in homes, so the savings would be the equivalent of about 45 percent of the homes sold.”

He said he has one client who refinanced his mortgage and is now saving about $600 per month.

Fixed rates and ARMs attractive

Pete McGlynn recently refinanced his mortgage, cutting about two points from his mortgage.

Although he didn’t want to discuss exact numbers, he said he is saving so much he will recoup his closing costs in only two months, and the rest of the savings will be gravy.

“When you can save a third, it’s not really a tough one to think about,” McGlynn said.

Unlike many people he went from a 30-year-fixed-rate loan, which had about 27 years remaining on it, to a 7-year, adjustable rate mortgage.

“I had enough equity in my home to qualify for an interest-only ARM,” McGlynn said. McGlynn, a sophisticated purchaser who works in the financial arena, thought it was unlikely that he would spend 30 years in his 3,175-square-foot house, so he didn’t want to pay for 30-year money.

“I probably will be in my house for just about the length of my mortgage, and probably no more than 10 years,” he said.

Another person, so prominent that he has a spokesman, recently traded his $1.1 million, 5-year, interest-only loan with a 6-percent interest rate, for a $1.057 million, 30-year fixed-rate loan with a 5 percent interest rate, according to documents obtained by InsideRealEstateNews. That would save him about $920 a month in principal and interest payments.

The spokesman, who talked about the refinance on the condition that his employer’s name not be used, said that his boss is like thousands of other homeowners who wanted to save money. He also wanted the security of fixed-rate loan, he said. He didn’t take any money out of the home with the refinancing, even though the home is worth $1.508 million, according to public records. “He’s like thousands of other homeowners who wants to take advantage of the low rates,” the spokesman said.

Tough economy hurts refinancing

Yet, a surprisingly small number of homeowners are taking advantage of the lowest rates in their lifetime. During past periods of falling rates, consumers typically were beating down the doors of lenders. Many of them had to hire additional staff to meet the demand.

A big part of it could be the economy, said Mike Rinner, of the Genesis Group, which tracks housing along the Front Range.

“If you had a 50 percent drop in your income, no matter how low interest rates go, it might not help you,” Rinner said. “I don’t think people are dumb. They know interest rates are down. But I think the key is you also have to have jobs. Even though we might be slightly better in the Denver area and in Colorado than in the nation as a whole, there are fewer people working today than a year ago, and that is not encouraging. If people had jobs and were confident they would keep them, everything else would fall into place.”

Still, Rinner said if you can qualify for a lower rate and increase your cash flow, it is easy enough to estimate how long it will take to pay back the cost of refinancing, he said.

And increasingly homeowners are taking a advantage of the low rates, although not as many as many experts would expect.

Refinance surge is tame

“I think everyone’s business is up,” said Peter Lansing, president of Universal Lending, a sponsor of InsideRealEstateNews and one of the largest locally owned mortgage banking companies in the Denver area. “But I wouldn’t call it off the hook. I’d say we’re up 10 to 15 percent. In the past, when we saw big drops, we were up 40 percent or 50 percent.”

There are likely several reasons why more consumers aren’t cashing in on refinancing, Lansing said.

“No. 1, many people may have already financed to a level not as low as today’s rates, but still one they are happy with,” Lansing said. “No. 2, people are concerned about the appraised value of their homes. In some cases, they might have to bring cash to the closing to get the full value of the lower rates. And others might have job issues that are keeping them from refinancing.”

Part of it might be psychological, he said. Even if the numbers pencil out, some people may simply be numb to the super-low rates.

“I suspect for some people going from a 8 percent to a 6 percent loan may seem like a bigger deal than going from a 6 percent to a 4 percent loan,” Lansing said. “I don’t know why that is, but I suspect that could be part of it.”

Tom Clark, Executive Vice President of the Metro Denver Economic Development Corp., agreed that more people should be taking advantage of the low rates.

“I cannot tell you how many people I have been talking with who have $200,000, $300,000 mortgages, and they know they should be refinancing, but just aren’t,” Clark said. “I think the reason people are hesitating, when it it is in their best interests, is all relative to how freaked out they are by the economy. With everything going on, it just leads to this kind of paralysis. It’s amazing what inertia can do. It really is giving yourself a pay raise without having to argue with your boss. It’s free money.”

Lansing said that rates this low are astounding.

“We put my sister into a 6.125 percent loan last year, and I thought we were giving her the lowest rate she would ever have,” Lansing said. “I thought that was going to be her last mortgage. And we just did a refinance for her for a 20-year loan. It has a rate of 4.125 percent, I think.”

Underwater homes don’t sink refinancing

Anita Padilla-Fitzgerald, president and CEO of MegaStar Financial, said she thinks media reports of falling home values may have convinced consumers that their homes won’t appraise at high enough values to refinance. However, she noted that the Federal Housing Administration, Fannie Mae and Freddie Mac all have programs that allow refinances without appraisals.

Still, reports that homeowners can’t take advantage of the low rates might be one reason that MegaStar’s business is currently 70 percent for purchases and 30 percent for refinances. Often, when rates were falling, many lenders experienced the opposite – 70 percent refinances and 30 percent purchases.

Depending on the situation, it could make sense for some people to refinance for a half-percent or less, Padilla-Fitzgerald said.

“It might make some sense for some people to go from a 5 percent to a 4.5 percent loan,” she said.

One road-block for some people refinancing is that they can’t roll their closing costs into the new loan, because their homes are so deeply under water – that is, their mortgages are worth far more than their homes, even when using various programs that don’t require appraisals, said Tom Gross, a mortgage broker with Crestline Mortgage, which is part of Universal Lending. Those programs include Freddie Mac Streamline and Fannie Mae RefiPlus and DU RefiPlus, as well as some FHA and VA programs.

“I just haven’t had any clients who want to do that,” Gross said.

But Dan Brown, principal of Spire Financial, said that is not a huge problem. If a homeowner has no equity in their home, he said a lender can often structure a loan that is higher than the rates available to the most qualified borrowers with great credit scores and lots of equity, but still lower than the existing.

Few loans for self-employed

A bigger problem is that while loans are relatively easy to get for people with standard paychecks and W-2 income, there are few options available for the self-employed. For example, a business owner might take a lot of write-offs, which under-estimates how much the owner actually earns.

Brown has one client who makes $80,000 a month, has an 800-credit score, and a a great deal of equity in his home, but it still took four months to find a lender willing to refinance his loan.

“I know a lady who wanted to buy a home in Boulder for $400,000,” Brown said.”She does not currently have a job, but she is receiving a settlement from her brother’s death, which will mean $1.6 million in her bank over the next two years and nine month. He said she was planning to make a large down payment, but didn’t want to pay cash and use up a quarter of her assets. But when she couldn’t get a loan, she walked away.

“Think of that poor home seller,” Brown said. “He thought he had a buyer of his home at a reasonable price. Now, he has to put it back on the market.”

Get help help from a pro

Brown said because every case is different,  the old rule of thumb that you need to lower your rate by a full percentage point, is not true for everyone.

“If you have a $417,000 mortgage, it might make sense to refinance if you can drop your rate by a half percent, because the savings are so great,” Brown said. “But if you have a $100,000 loan, it might only make sense if you can lower it by a full percentage point or a point and a half. Anyone who tells you there are rules of thumb is just full of it. This is not a business where one size fits all.”

And for some people, it doesn’t make sense to refinance, no matter how low rates fall.

One homeowner in Evergreen, for example, has only 6.5 years left before his loan is paid off, and so has been ignoring the siren call of low rates.

“He is absolutely right,” Brown said. “When you’re that close to paying it off, you are paying mostly principal, anyway. There is no point of amortizing a loan over 15 or 30 years, when you can see the light at the end of the tunnel.”

The only exception might be if a sophisticated borrower was looking at the home as just  another asset that could generate cheap money, which could be used to invest that could provide a much greater return than the negligible after-tax cost of the mortgage.

But if Brown could leave consumers with only one piece of advice, it would be to encourage them not to do it alone. He suggests that they use a trusted mortgage broker or mortgage banker that they have used in the past, or has been referred to them by someone they trust.

“I tell people I don’t care if it is me; I honestly don’t,” Brown said. “I don’t think it is a good idea to get a loan through the Internet or by calling a 800 number. If you try to navigate this process yourself, you are taking a big risk. Discuss your particular situation with someone who you trust. Tell them exactly what your goal and he can help you achieve those goals.”

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Below is the article posted on Monday by Francesca Levy. She even mentions me in the piece, although I would not describe myself as a “critic.” Rather, I am messenger giving others a forum to voice their opinions. In this case, however, it was difficult finding someone supporting the conclusions of the first article.

Forbes article

“An April 5 article that ranked the Denver metro area’s real estate market as the nation’s second worst-selling elicited objection from the city’s real estate community. Some Realtors and real estate bloggers disagreed with the housing inventory numbers, provided by Zillow.com, that contributed to the rankings.

Many felt that Zillow’s numbers, which showed a 27% year-over-year increase in homes for sale on the site and an inventory of over 42,000 unsold properties, were inflated, because the site hosts multiple same-property listings, and transactions may not be recorded as quickly as they occur. This means properties could be on Zillow, but no longer on the market.

Zillow’s metric measured inventory from January 2009 to January 2010, the latest available when the article ran. Metrolist, a firm that collects and analyzes Colorado real estate data, shows a March 2010 inventory of 20,073.

Zillow.com confirmed that double counting was possible. Zillow spokeswoman Katie Curnutte says that Zillow’s numbers represent the homes for sale on the site, and that data from January will differ from any count that’s more current. She added that the company regularly takes on new partners who provide the site with listings, skewing year-over-year comparisons.

“It can be difficult to derive any assumptions about market conditions from the year-over-year numbers,” she says.

Zillow provided Forbes.com with year-over-year homes-for-sale numbers for each of the metropolitan statistical areas examined; each metro was scored by the same measures. Since Zillow has acknowledged that these numbers may have been artificially increased, Forbes.com has decided to limit the use of year-over-year homes-for-sale statistics from the data provider.

“Though Zillow’s numbers allowed us to compare the number of homes for sale across the country’s metros,” says Lucy Maher, executive editor, Forbes. “We recognize that these numbers may not have given us an accurate look at local inventories.”

In addition to the number of homes for sale on Zillow.com, used to measure inventory, the story looked at home price data from the National Association of Realtors; and sales rates from Moody’s Economy.com. The article looked at each of the country’s Metropolitan Statistical Areas with a population of more than one million.

Metrolist’s data looked at the housing market two months later. What’s more, it may not account for all foreclosures and new home sales. Still, Metrolist spokeswoman Melissa Olson says that those differences alone can’t explain why Zillow reported over twice as many homes for sale than Metrolist.

“In the Denver market, new home sales and foreclosure sales are not significant enough to make a doubling effect,” she says.

Critics including John Rebchook, who writes about local real estate in his blog InsideRealEstateNews.com, Krystal Kraft, a local Realtor who first raised her objections to the story via Twitter, and Denver Mayor John W. Hickenlooper also voiced their objections to Zillow’s data.

“It was hard for me to imagine we could have gotten into such a desperate environment without anybody noticing, and without me hearing about it,” says Hickenlooper. “When I first read the story I talked to brokers who said a year ago we had a six-month supply of homes and now we have a five-month supply, so we’re actually doing better.”

The National Association of Homebuilders, a lobbying group, reports that because of a lack of overbuilding in Denver during the housing boom, signs that home prices are normalizing and foreclosures falling below the national average, they anticipate that, on the whole, Denver real estate will steadily emerge from the recession.

“We don’t expect the Denver market to be either best or worst, but rather to be pretty middle of the pack, improving with a broad swath of United States housing markets,” wrote Donna Reichle, NAHB spokeswoman, in an e-mail. “Our forecast for the Denver housing market is for recovery continuing this year from the early 2009 bottom and gaining momentum through 2010 and beyond.”

Local response to article.

“I thought it was interesting,” Hickenlooper said Tuesday afternoon. “They didn’t go as far as describing the health of the Denver housing market as we might have liked or desired. But they did explain, and they were very open about, what the problem was.  I would have liked to have heard some more positive descriptions of our real estate market. But I have no complaints.”

Hickenlooper said it is difficult to measure if the first article caused any damage to the market.

“Anecdotally, you do hear about transactions that deals that didn’t close that might otherwise not have closed because of the article,” he said. By the same token, Hickenlooper said, it is difficult to know whether the second article will erase doubt from prospective buyers who were influenced by the first one. “The thing now is to put it to bed in an official way and put it behind us,” Hickenlooper said.

Peter Niederman, an owner of the Kentwood Cos., said he was pleased with the second article, ‘but I was hoping that she would go into detail about how great the Denver market is. The main thing that came out from her second article is that she realized that Zillow might double-count information and isn’t the best source of information on the local housing market. She admits it and was quick to do it, which is commendable.”

Niederman, however, said he wished she had pointed to statistics that showed the improving market. “We probably started the year with eight months of inventory, and now we’re at about five months,” Niederman said. “That is a very good place to be. Those are good numbers. I like the trend.”

Like Hickenlooper, Niederman said it is hard to quantify the impact of the first one, and the second article, for that matter. “You do hear rumblings that some deals might not have happened, or people have had second thoughts, of course,” Niederman said. ‘”If a real estate broker who may be working with a buyer who read the article, can now show him the second article, which provides some ammunition, or cannon fodder, to say this may be the best time to buy.”

Word getting out

Tom Clark, executive vice president of the Metro Denver Economic Development Corp., said he wants to get the word out about the second article.

“I think it is great,” Clark said. “We plan to give it wide distribution.”

He said that he was disappointed and surprised by the first article, because he had always held Forbes in high regard. “Whenever I was interviewed by Forbes in the past, it was always old-school, with the reporters calling me back to check their facts,” Clark said. “Of course, that was Forbes, the magazine, and not Forbes.com. But I would think that the same standards would apply.”

Clark said in this fast-paced information world, it may be tempting to use information from any source, without checking  its accuracy first.

“We have always been kind of suspect of Zillow, which is why we don’t use their information,” Clark said. Many Denver-area Realtors have said since the first Forbes.com article came out, that they frequently find that homes they have listed on Zillow remain there after they have been sold, giving credence to the notion that Zillow over-counts unsold homes on the market.

David Simonson, a broker with RE/MAX Professionals, said he is “excited” about the second article.  He said he has found Zillow to be “problematic” for years, and thinks using MLS statistics from Metrolist paints a much better picture of the market than Zillow does.  He said about two years ago, a  buyer almost backed out of buying a $600,000 house that had been appraised twice, because Zillow estimated its value at only $483,000.  Also, he said he has had problems with other brokers pretending on Zillow that they were listing homes in which he was representing the owners.

Somewhat surprisingly, perhaps, none of the buyers or sellers Simonson was dealing with were troubled by the first article. He said his clients shopping for expensive homes do their own extensive due diligence, while those at the lower-end find what a national publication says irrelevant.  ”I did get a few phone calls from people who were neither selling nor buying, who wanted to know how the MLS could get it so wrong,” Simonson said. “These are the people who glance at the headlines before rushing to work.  I explained to them that they got the “wrong one, wrong,” Simonson said. “I told them that Zillow is very user-friendly, but is not a good real estate-evaluation tool.  I told them the MLS is good data, with no leeway or emotion involved. It factually tells you what 20,000 Realtors in the Denver area are doing.”

Unintended benefit of first article

Larry McGee, principal of the Berkshire Group, said that the second article will not immediately reverse any damage done by the first one, such as people being spooked from buying homes or suffering buyer’s remorse.

“I do think the first article was bad,” McGee said. “I do appreciate the fact, personally, they reconciled the fact that they did have a problem. I do think they threw Zillow under the bus. I think we all know now that Zillow’s approach to listing active inventory is not very good for statistical analysis. They don’t vett the information, they don’t purge it, they get information from different sources, which  constantly changes. Zillow does serve a purpose. We probably list all of our active listings there. The problem is it is very hard for the typical broker to change the status once the home has been sold, so it languishes there for months.”

Now that Forbes.com has indicated it will not use Zillow’s year-over-year data for inventory comparisons, it should save other cities in the country suffering the problems faced in Denver, he said. “Since it looks like Forbes learned from the mistake it made in Denver, other cities probably won’t have to go through what we did,” McGee said.

But even the first article had an unintended positive consequence, McGee said.

“I think the best thing that came out of this is that a widely disparate group of people came together with no other interest than to make things right, came together,” McGee said. “Without any leadership, a sort of grassroots movement started and I was happy to have something to do with it. There is something extraordinary positive about that. That may even be more important than the article.

(To see what all of the fuss is about, please visit these blogs: Forbes writing another article on Denver,  Hick not buying Forbes’ take on Denver housing market, Forbes article criticized)

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

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Permits issued for single-family homes, condos and townhomes and apartment units fell by almost 64 percent from the 9,429 issued in 2008, which was the second lowest year for building activity since at least 1980 in the Denver area, according to data from the Home Builder Association of Metro Denver, obtained by InsideRealEstateNews.com.

“The big picture is that this is sort of a necessary evil,” said economist Patty Silverstein, principal of Littleton-based Development Research Partners. “As painful as this is for builders and developers, we have to see a stop in the increase of the supply, in order to see improvements in the market. While I think that this year will continue to  be slow, I think we can see some improvements next year.”

In addition to a lack of demand, banks also have been unwilling or unable to lend, which also has crimped the ability of many small builders, she said.

Whatever the reason for the downturn, one thing is clear – the  collapse in Denver-area construction activity last year was unprecedented.

“Historically, if we look over the last 30 years, we have issued an average of 17,000 permits per year,” Silverstein said. The market peaked in 2000, with 28,310 permits issued.  And to put last year’s activity into perspective, consider that it was a 78 percent drop from the 15,890 permits issued in 1980. Since then, the population of the area has grown by about 70 percent. Overall permit activity in the Denver area has dropped from the previous year every year since 2005. Permit activity is down 88 percent from its 28,310 peak in 2001 and is down 77 percent from 2007, when 14,729 permits were issued.

The biggest hit last year was to the apartment market. Permits were issued for only 438 apartment units last year, a 90 percent drop from the 4,413 in 2008. Jeff Hawks, co-owner of the Denver office of Apartment Realty Advisors, said that rental rates in the Denver area need to rise by 20 percent to 30 percent to justify new construction. Because inflation of rents does not appear to be in cards anytime soon, especially given the poor state of the economy, there is no need to build more market-rate apartment communities in the metro area for four or five years, he argues.

What little appreciation people have seen in their homes recently, in large part is because builders are not increasing the supply, noted Tom Clark, executive vice president of the Metro Denver Economic Development Corp.

On one hand, that is good for individual home owners, “although sometimes we view affordable housing as an economic advantage,” for attracting companies to the area and encouraging companies to stay, he noted. Hawks noted that unlike the mid and late 1980s, when Denver was mired in a recession because of the collapse of oil prices and an economy that was not diversified, “now there is no place to go.” Indeed,  people continue to move to Colorado with the hope that our economy will recover faster than other parts of the country, Clark said.

Still, the construction industry coming to a standstill hits the overall economy hard, Clark said.

“Construction is sometimes a leading indicator and sometimes a lagging indicator, depending on what kind of recovery you are having,” Clark said. “But when you look at the unemployment rate in construction approaching the levels we have not seen (since the Great Depression) of the 1930s, it has a huge impact. A large percentage of the people in the construction industry get paid well and they turn over their money very quickly in the marketplace. It has a huge multiplier associated with it, because the housing market touches so many other parts of our economy.”

In years past, Denver has used huge construction projects to pull itself out of its economic doldrums.

“Historically, we built ourselves out of a crisis. We built DIA, and the Colorado Convention Center,” as well as Coors Field and Invesco Field,” Clark noted. “Unfortunately, when the financial institutions are in meltdown and people have lost 30 percent of their net worth, it is hard to get excited to fund these massive projects.”

One bright spot is the redevelopment of Union Station as part of FasTracks, thanks to the federal government planning to provide a $300 million loan. “The federal government did its part in that instance,” Clark said. “But what we really need from Washington is to point which direction we are going. The federal government has never been very good at execution, but it is usually very good at finger pointing. There is no finger pointing, at least not in the direction they expect us to head. If they did that on health care, for example, companies could pull out their calculators and look at their expected profits and losses. But there is no fingers pointing us in a direction that will get us out of this mess. I blame both Republicans and Democrats. I think Congress should be ashamed of itself.  There is no reaching across the aisle to accomplish what needs to be done.”

As grim as it is, it is far worse in other parts of the country, Clark noted.

“At least we’re not Phoenix, or other markets, where a great number of people have experienced huge losses in their home values,” Clark said.

What ultimately will get the construction industry back on its feet is jobs, especially well-paying ones, he said.

“Construction always follows jobs,” Clark said.

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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.”

For related blogs, please visit these links:

Denver a better bet than Las Vegas

Historic look at home prices

Denver home sales drop by $1.75 billion

Sources: Gary Bauer, Tom Cryer

* Dollar volume and total numbers are rounded.

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Housing played an important role in her outlook.

“Metro Denver won numerous accolades for its relatively stable housing markets in 2009,” Silverstein noted. “Forbes called Metro Denver one of 10 “Best Cities for a Housing Recovery” and the nation’s best metropolitan area in which to buy a home. Real estate correspondents with NBC’s “Today” show named Denver the U.S. city most ready for a housing rebound, and Builder magazine named Denver among five housing markets likely to recover quickly. Business Week identified Boulder as the nation’s strongest housing market in 2009.”

For an overview of the entire report, go to this link.

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

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Broker Tom Cryer of the Kentwood Co. believes that we're heading into an era of "rational apathy," replacing "irrational exuberance" of the previous decade.

Forget the age of “irrational exuberance,” a phrase coined by then Federal Reserve chairman Alan Greenspan in 1996, and later popularized by economist Robert Shiller in a book bearing the same name.

Instead of irrational exuberance – the notion that assets like stocks and homes move  in only one direction, and it ain’t down – we are witnessing the era of  ”rational apathy,” according to Denver real estate broker Tom Cryer.

“Here’s my prediction for the next decade: Think Affordable, Think Self Sufficiency, Think Homegrown, and Think Down the Street,” Cryer, a broker with the Kentwood Co., wrote on his blog, explaining where he is coming from with the two-word description of an age in which McMansion envy will seem  so 2006.

I was in Santa Fe last week, and after talking with  about the S&P/Case-Shiller report (yes, the same Shiller who made irrational exuberance a household phrase), Cryer said that we need to come up with another moniker to capture the new direction of the housing market and economy.

“Rational apathy” born

Moments after we got off the phone, the CFL light bulb went off in Cryer’s head, and the phrase “rational apathy” was born.

“That’s a very cute idea,” said Tom Clark, executive director of the Metro Denver Economic Corp., when I told him about it.

“I think that rational apathy absolutely covers all the bases,” Clark added.

Jim Haynes, president of Behavior Research Center Inc. in Phoenix, said that his company has not specifically looked into data addressing Cryer’s thesis.

“But I think there is no doubt that most of the signs, including the stuff you read  and anecdotally from people being interviewed on talk radio and things, there was a hard lesson learned and a lot of people are taking it to heart,” Haynes said.

He doesn’t know if rational apathy will capture the public’s fancy, as irrational exuberance did.

“But probably in many ways it is fairly descriptive,” Haynes said. “If it makes you not interested in doing what your friends and neighbors and brother-in-law tell you to do,  that is probably a good thing. I think it may have many applications.”

Apathy? Who cares?

Economist Patty Silverstein, principal of Littleton-based Development Research Partners, doesn’t like the word “apathy,” in Cryer’s word-duet.

“When I heard the word apathy, I think of not caring,” Silverstein said. “But I agree with the premise of spending within our limits.”

Jeff Bernard, a broker associate with RE/MAX Alliance and principal of Bernard Analytics, also liked the idea behind the words, but felt strongly that apathy doesn’t capture the mind-set of consumer’s in today’s economy.

“It captures your attention pretty quickly,” Bernard said about Cryer’s creation. “But I would say people are not apathetic, as much as they are pragmatic. But “rationally pragmatic” is a bit redundant.”

After giving it some thought, Bernard sent me an e-mail describing his own short description of what he thinks the future holds.

“Perhaps merging two famous quotes from different times by changing Alan Greenspan’s “irrational…” to “rational” and then using Dr. Mohamed Abdulla El-Erian’s now famous quote “new normal” gives you a ”rational new normal.”  Bernard said.

On the fly, Silverstein coined her own two-word catch phrase.

“I guess it is more of a new frugality,” she said. “I think that is what would characterize where we are heading the next few years.”

But whether you call it “rational apathy” or “new frugality,” Silverstein is not sure the concept has legs.

“People will be much more frugal for a few years, but you have to wonder how long it will last,” Silverstein said.  ”It’s human nature to figure out the “new greed” once again.”

New greed.

Now there’s a two-word phrase that is more economical way of saying that “greed is good,” the mantra of the Monopoly money go-go days following Michael Douglas’ portrayal of slimy tycoon Gordon Gekko in the 1987 movie Wall Street.

“I have to agree with Patty’s take on that,” Clark said. “I do not think we can  make it through a decade of  frugality.”

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

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