Since October 2006 when the Adams County Housing Authority joined in a statewide foreclosure prevention effort, local housing counselors have helped 2,000 clients avoid foreclosure in some capacity. The $370 million dollar volume is based on an average of $188,349 per loan. That is almost 10 percent of the $4 billion in mortgages saved since the Colorado Foreclosure Hotline, 1-877-601-HOPE, was launched.

Cost-effective solution

Executive Director Don May today shared the impact to the local economy with his housing counseling team.

“The team of housing counselors we have here in Adams County have been working diligently with homeowners across the county and with lenders across the country to insure the impact from this current foreclosure crisis is reduced as much as possible,” May said. Not only is $370 million a big number, but it is cost-effective, as the cost of the program is typically less than $300 per homeowner, May said.

“Knowing that the costs of this foreclosure prevention program can be leveraged to net such an amazing rate of return is an important rebuttal to those who would say let the homeowners fend for themselves,” May said.

Homeowners in Adams County can receive free housing counseling to avoid foreclosure from the Adams County Housing Authority either through a bi-weekly workshop or through individual counseling.

$4 billion savings statewide

In $4 billion overall savings, including the $370 million in Adams County, are important to the overall housing market, as providing important social and psychological benefits, said economist Patty Silverstein.

“Assuming that, indeed, these numbers are correct, I think that the impact on the entire metro region economy is quite significant,” said Silverstein, principal of Development Research Partners in Littleton. “First, it has helped to keep our home prices relatively more stable than in other parts of the country. But beyond that, it is just good for the overall economy to keep people in their more and not have them lose it. It plays into everything from the individual family’s psyche to helping them re-allocate their spending patterns. If they can keep their home out of foreclosure, they can remain productive contributors to the economy. How you put a value on that is hard to measure. But it certainly helps the overall market remain stable.”

Foreclosures infect like a fast-moving virus

When homes fall into foreclosure, it not only hurts individual households, but the homes around them, which can bring down the value of entire neighborhoods. Empty homes can become magnet for crime and graffiti, for example.

“Certainly, if someone loses their home in foreclosure, there are lots of negative multiplier impacts,” Silverstein said. “I’m not sure you can say that is moves you into a positive realm as far as multipliers if their homes do not go into foreclosure. I think it is more of a case of maintaining one’s positive momentum.”

Advice free to consumers

U.S. Department of Housing and Urban Development–approved housing counseling agencies,such as the Adams County Housing Authority, offer free advice for homeowners who are facing financial difficulty and are concerned about losing a home to foreclosure. Housing counseling uses solution-based methodology to find the most sustainable option for each individual homeowner, including loan modification; short sale; forbearance and repayment plans; and other potential workouts.

Housing counselors also assist borrowers in communicating with mortgage companies regarding hardship and potential workout options. Many national lenders have given housing counselors at the Adams County Housing Authority special phone numbers to call when they have a client who needs their case escalated beyond general customer service.

For more information on the Adams County Housing Authority, visit www.adamscountyhousing.com.

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

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Year-over-year home prices in the Denver area have risen each month since November 2009, according to the index, which was released on Tuesday and tracks 20 major markets across the nation. And each month the percentage increase has risen. In November, the 12-month change was 0.5 percent; 1.2 percent in December; 2.6 percent in January; and 3.6 percent in  February. The index of single-family home prices uses “matched price pairs” of thousands of homes.

Last year, Denver was often one of the top three cities tracked by Case-Shiller, as far as year-over-year changes. On occasion, it even was one of the top metro areas,  even though homes had slipped into negative territory – other markets were hammered far worse.

Denver No. 7

Denver’s performance in March, however, was only good enough for seventh place, as other markets, particularly in California, just shot the lights out. San Francisco, for example, was up 16.2 percent from March 2009. San Diego was up 10.8 percent, marking its 11th consecutive month of increasing home prices.

“California is such a yo-yo,” said Chris Mygatt, president of Coldwell Banker Residential Realty Colorado. ”Honestly, it is unusual for us to be No. 1, No. 2 or No. 3.  Denver is known  as a relatively stable marketplace. We don’t have the yo-yo pattern of collapsing and taking off again. Our numbers are being driven by unemployment, which is still a couple of points below the national average. There is something to be said for a steady, relatively affordable market.”

Denver a better bet than Vegas

Long-term data from Case-Shiller supports Mygatt’s thesis. Both the Denver and Las Vegas markets peaked in price around August 2006. At that time, Denver’s prices had risen about 41 percent from January 2000, while Las Vegas prices were up just under 135 percent during the same time period, according to Case-Shiller. Since January 2000 until March 2010, Denver prices are up an overall 25 percent, while Las Vegas prices are up a mere 2.6 percent.

“That really tells the whole story,” Mygatt said. “Basically, Denver home prices have kept up with inflation. And that’s not bad, for a home that you can enjoy living in. And when you think about it, if you bought a house 10 years ago for $100,000, you probably put no more than $15,000 down. Your house is probably worth $125,000 today, but your cash-on-cash return is much greater than that $25,000 in appreciation And that’s not a bad investment, especially when you consider that you enjoyed the tax breaks of owning a home. And investing in a home may seem especially attractive now, considering  how volatile the stock market is these days,

Part of the reason that the $1 million-priced home sales activity has been rising in the first four months of 2010 in the Denver area is because people have been taking some money out of stocks and putting them into homes. “They see they can get a really good deal in upper-end homes, and want to take advantage of that,” Mygatt said. “I think people will increasingly be looking at the huge ups and downs in the stock market, and invest it in upper-end homes. I’m going to be watching that $1 million and up market very closely in May. I think it will be crucial to see that market to continue to improve.”

No place to go but up

Tom Cryer, a broker with the Kentwood Co., said he is not surprised that Denver in March saw appreciation from a year earlier.

“Once again, we are working off a baseline in 2009 that was just awful,” Cryer said. “If you can’t beat 2009, we just aren’t doing our job. When the bar is as low as it was in 2009, we have to be better this year.”

Also, the $8,000 tax-credit for first-time buyers, which required that a contract be placed on a home by April 30, was still in effect in March, he noted. “I would say, let’s wait and see what happens when the tax credits are no longer a force,” he said. Mygatt, however, noted that mortgage rates near the lowest point in a half century, will pick up some of the slack of people who didn’t cash in on the tax credits. Zillow.com reported today that the average price of a 30-year, fixed-rate loan was 4.6 percent.  A major reason rates are so low is because of problems with the economy in Europe, as investors seek a safe haven in U.S. bonds.

Super-low rates offset tax-credit loss

“It was not that long ago when everyone was saying that rates were going to rise 100 basis points, 1 percent, because the Fed had ended its $1 trillion purchases of mortgage-backed securities,” Mygatt said. “But for a lot of people who missed the tax credits, the lower rates will provide an even bigger benefit. They couldn’t be coming at a better time.”

Cryer wasn’t surprised to hear that major cities in California are seeing double-digit increases. Colleagues in northern California have been recently telling him what a robust market they are seeing.

“I was talking to a relocation broker who is helping 100 people move from Chevron in California, and she said they are selling their homes in a week,” Cryer said.  “They are selling for lower prices than they used to sell for in 2007, but they are receiving multiple offers, if the homes are not too far of a commute. Also, the technology business and hiring is picking up in California. Last year, was the year when a lot companies decided they have to start getting upgrading their technology again.”

Recovery is real

Economist Patty Silverstein said that today’s Case-Shiller report shows that “here in Denver, the housing recovery is well under way. There is something to be said about our stability, compared with the ups and downs of other cities over the last several years.”Silverstein, principal of Development Research Partners in Littleton, agreed with others that the ‘big question mark” is how the housing market will perform now that the tax credits are gone. And while the ultra-low mortgage rates can reduce the cost of people buying homes, as well as putting money back into people’s pockets who are refinancing, she said they are also a grim reminder of what is often global, financial turmoil.

“That’s a little frightening,” Silverstein said. “As much as we like to celebrate the steps that we are taking into the recovery – and most of our indicators are either in positive territory or are moving toward positive territory – we must be aware that there are some dark clouds looming behind us.”

Housing still mixed, nationally

Nationally, “The housing market may be in better shape than this time last year; but, when you look at recent trends there are signs of some renewed weakening in home prices,” said David M. Blitzer, Chairman of the Index Committee at Standard & Poor’s. “In the past several months we have seen some relatively weak reports across many of the markets we cover. Thirteen MSAs and the two Composites saw their prices drop in March over February. Boston was flat. The National Composite fell by 3.2% compared to the previous quarter and the two Composites are down for the sixth consecutive month.

“While year-over-year results for the National Composite, 18 of the 20 MSAs and the two Composites improved, the most recent monthly data are not as encouraging. It is especially disappointing that the improvement we saw in sales and starts in March did not find its way to home prices. Now that the tax incentive ended on April 30th, we don’t expect to see a boost in relative demand.”

From February to March, Denver home prices rose by 0.6 percent, compared with a 0.5 percent drop for the 20 metropolitan areas in the index. Only Cleveland, San Diego and Seattle performed better than Denver from February to March.

Metropolitan Area	Change from January 2000	Change from March to April	1-Year Change
Atlanta	2.85%	1.0%	-4.6%
Boston	50.98%	2.7%	-3.2%
Charlotte	10.44%	0.8%	-5.1%
Chicago	12.01%	1.7%	-8.1%
Cleveland	-1.12%	1.3%	-6.6%
Dallas	14.31%	0.9%	-4.7%
DENVER	24.0%	1.4%	-3.3%
Detroit	-37.99%	-2.8%	-9.3%
Las Vegas	-4.4%	0.5%	-3.2%
Los Angeles	69.07%	0.5%	-3.2%
Miami	38.6%	1.2%	-5.3%
Minneapolis	8.34%	2.6%	-11.7%
New York	64.96%	0.7%	-3.2%
Phoenix	0.4%	0.0%	-9.5%
Portland	34.5%	1.2%	-9.1%
San Diego	54.78%	0.2%	-5.1%
San Francisco	34.42%	1.8%	-5.4%
Seattle	36.56%	1.1%	-7.0%
Tampa	25.10%	-0.6%	-9.5%
Washington, D.C.	84.9%	2.4%	1.3%
Composite-10	53.64%	1.1%	-3.6%
Composite-20	39.87%	1.0%	-4.5%

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Source: Standard & Poor’s

Denver-area home prices rose by an average of 2.6 percent in the 12-month period ending in January, shows the closely watched S&P/Case-Shiller Home Prices Indices released on Tuesday.

The increase, the largest since the worst housing market since the Great Depression began, provides strong evidence that the Denver-area housing market is past its bottom and is recovering.

That ranked Denver No. 6 for year-over-year appreciation, according to the index of 20 major metropolitan statistical area. (See chart at the end of the article for a comparison to other cities.)

More importantly, Denver’s appreciation was the biggest one-year percentage gain since the fall of 2006, according to an analysis of Case-Shiller data going back to 1987 by InsideRealEstateNews.com. The last time the Denver-area experienced a bigger one-year percentage gain was the 6.75 percent in October 2006 from October 2005

It was also the best  January to January period since the market gained 5.62 percent from January 1995 to 1996.

The latest report also shows the third  consecutive year-over-year gain for the Denver area. In December, Denver-area housing prices rose slightly more than 1.1 percent from December 2008, while it rose about a half percent from the one-year period ending last November. November ended 2.5 years of year-over-year housing prices dropping in the Denver area. Until November, prices had fallen every month-to-same month from the previous year,  since a slight increase in May 2007 from May 2006, shows the InsideRealEstateNews.com analysis.

“I think this is definitely a very good sign,” said economist Patty Silverstein, principal of Economic Development Research Partners. “When we start to see several months of a positive trend, we start to think, “OK, maybe we really are moving forward and we are finally starting to recover. . .I think we can safely say now that we have bottomed out. We are past the bottom and we are on an upward swing.”

The  Case-Shiller report reaffirms what a lot of Denver brokers are seeing.

“That is all perfectly consistent with the Denver-area market. It is tracking what happened in the housing economy and the overall economy,” said Bauer, who releases a monthly report on the Denver-area housing market based on Metrolist numbers.

Metrolist tracks all of the homes sold by Realtors, while Case-Shiller “pairs” same home sales in an attempt to remove the statistical bias of home sold each month in a wide-variety of homes. For example, a large number of low-priced foreclosures being sold can drive down the average and median prices, while a few huge sales may drive the overall prices up.

Losing streak ends

The latest Case-Shiller report marks the first time since 2004, that the Denver market had been in positive territory for a 12-month period ending in January. From January 2003 to January 2004, the market gained 1.9 percent. the best January to January period was form 1999 to 2000, when prices rose 13.7 percent overall. The market also showed a double-digit return from January 1993 to January 1994, gaining 11.29 percent.

“When I started in the business in Denver in 1994, it was like we could do no wrong,” because the market was so strong, Bauer said.

Bauer said the most recent Case-Shiller report is very positive.

“We had that big let down at the end of last year,” following the renewal and expansion of the federal tax-buying credits in early November. Earlier in the fall, buyers had been busy buying homes for fear that the tax credits would disappear, and when they were renewed, a sense of urgency left. Now, qualified first-time home buyers and some move-up buyers have to place homes under contract by April 30, and close in two months after that, to take advantage of the tax credits. Qualified first-time buyer can receive a tax credit of up to $8,000, while qualified current homeowners can receive a credit up to $6,500.

Improvements across board

Bauer said what is encouraging about the Denver market is that “it isn’t just first-time home buyers” purchasing homes, and prices appear to be past the bottom at just about every price level, except perhaps for the most expensive homes in the market. “We are seeing price increases in a lot of price levels, and we have adequate inventory, which brings us into a feasting activity,” Bauer said. “It’s not quite a frenzy, but we are seeing multiple offers at the lower-end.”

Jeff Bernard, principal of Bernard Real Estate Analytics, said the “big question is what happens after the stimulus plans are over.By definition, the purpose of a stimulus is to stimulate the market, and that is what it is doing. The key thing I am going to be watching is what happens in July, when the stimulus money has worked its way through the market, assuming that there is nothing else offered. It will be interesting to see what happens in the market when private enterprise returns, when no public stimulus will be affecting the housing market.”

Ending tax credits a concern

Economist Silverstein also is concerned what happens when the tax credits end.

“That really is the big question,” Silverstein said. “”You hope that consumers will start to feel strong enough to move forward without the tax credits, but is that the reality?  I don’t think we can say that yet. When they do expire, we will see some softening in the home sales market again. Even though the recession may technically be over, it is over, but still there are a lot of people who are challenged in their job situation. Until more people, in general, are comfortable with their job situation, both in Denver and across the country, people won’t feel like it is a good time to buy a home.”

Silverstein also is concerned about the number of home foreclosures in the Denver area.

“There are still some things to be leery of  in out marketplace,” Silverstein said. “We still have very high levels of foreclosures. While the big increases in foreclosure activity have decreased, we are still stuck with some very high levels of foreclosures, not just here, but across the country. It is going to take a little bit of time to work through that issue. But I do think overall, we are moving in the right direction.”

National news mixed

From December to January, the news is not as good for Denver or for the nation. Denver prices fell by 1.3 percent in December to January, compared with a 0.4 percent drop for all 20 cities in the index.

“The report is mixed,” said  David M. Blitzer, Chairman of the Index Committee at Standard & Poor’s. “While we continue to see improvements in the year-over-year data for all 20 cities, the rebound in housing prices seen last fall is fading. Fewer cities experienced month-to-month gains in January than in December 2009, on both a seasonally adjusted and unadjusted basis. “Moreover, in four cities – Charlotte, N.C., Las Vegas, Seattle and Tampa – prices reached new lows following the financial crisis. Tampa and Las Vegas experienced some of the largest gains and declines in this cycle, while Charlotte and Seattle saw much more modest price booms and relatively late peaks. On a brighter note, San Francisco and Minneapolis are 15.2% and 12.9% above their trough values.”

Blitzer added that other “data on housing also paint a mixed picture. Housing starts continue at extremely low levels, recent reports of home sales suggest the market remains difficult, and concerns remain about further foreclosures and a large shadow inventory of unsold homes. We are in a seasonally weak part of the year, but given the S&P/Case-Shiller Home Price data reported today, we can’t say we’re out of the woods yet.”

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Nine indicators – including the indicator for foreclosures – moved positively for the month, compared to seven indicators in the prior report. Six indicators moved in a positive annual direction, compared to one indicator in the prior month’s report.

Recent residential real estate data suggest housing markets are shifting due to a variety of influences. The extension of the homebuyers’ tax credits in late 2009 removed a sense of urgency for buyers, therefore, existing home sales nationwide and in Metro Denver have slowed.

Tax credits still key

“Many buyers still hoping to receive the credits are now returning to the market, though, and brokers say the pace of home sales should accelerate in the coming months,” said  Patty Silverstein, chief economist for the Metro Denver EDC and president of Development Research Partners.

Increased sales volume should help home prices, which are stabilizing – and even rising – in some markets. The Denver-Aurora-Broomfield metropolitan statistical area, for example, was one of 24 metro areas to report an increase in median home price between 2008 and 2009.

Mortgage delinquency rate to fall

As home prices continue to stabilize, mortgage delinquency rates should gradually subside. Data from the Mortgage Bankers Association show the nationwide delinquency rate declined in the fourth quarter of 2009, and Colorado’s rate ranked ninth-lowest in the nation. Significant delinquency challenges remain, though, as roughly one in 17 Colorado home loans was at least 90 days past due or in foreclosure in the fourth quarter.

Foreclosures are an even greater concern in California, Nevada, Arizona, Illinois, Michigan, and Texas – all key economic development competitors with Colorado.

“These six states alone represented 60 percent of U.S. properties with foreclosure filings in January,” said Silverstein.

Housing prices stable

The nationwide median home cost for 2009 ($173,200) was down nearly 12 percent over-the-year, while the median in the Boulder MSA ($346,000) fell by just 3.8 percent. Price trends were stronger in the Denver-Aurora-Broomfield MSA, where the 2009 median price of $219,900 represented a slight, 0.3 percent increase from the 2008 median. The Denver-Aurora MSA was one of 24 metropolitan areas to report an increase in median home price between 2008 and 2009, and the region’s median price ranked 26th-highest in the nation. The Boulder MSA’s 2009 median home price ranked 11th-highest overall.

Data from the Mortgage Bankers Association’s National Delinquency Survey for the fourth quarter of 2009 show Colorado’s rate of mortgage delinquency – 6.91 percent – ranked ninth-lowest in the nation.

Unemployment a concern

Clearly, residential markets are facing a combination of early momentum and continued challenges, the report notes. High unemployment and policy changes in the months ahead – including an end of the Federal Reserve’s financial support for mortgage-backed securities and the expiration of the homebuyers’ tax credits – will bring additional hurdles. Ideally, residential markets will build momentum in the coming months that can sustain a recovery as the policy environment changes.

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 report said the overall drop was “due largely to a cutback in multi-family construction,” although it did not break out the drop in apartment and housing construction. There were 30,334 total permits issued last year in the six Rocky Mountain region states. In the Denver metro area, building permit activity peaked at 28,310. “Now that is a comparison for you,” said economist Patty Silverstein, principal of Littleton-based Development Research Partners.

Silverstein noted that there were 3,408 building permits issued in the Denver metro area last year, the lowest on record. (For a separate report on the Denver metro area’s construction activity, please go to this link.)

“The regional numbers track pretty well with the Denver-area numbers,” Silverstein said.

Jeff Hawks, principal of Apartment Realty Advisors in Denver, said that apartment construction in the Denver area “has come to a screeching halt. There really was no new construction at all.” From about 2005 to 2007, apartment communities in Denver and almost every other major city in the US. were selling for cap rate of 4.5 percent, while cap rates have now risen to 6.5 percent. The cap (short for capitalization) rate is the net operating income divided by the sales price or value of a property expressed as a percentage. The lower the cap rate, the higher the sales price.

“I believe that every apartment building that was sold during the past couple of years at these low cap rates is not worth its debt,” Hawks said. “Because of that, the developers and lenders have pulled in their horns. They have to handle these legacy issues and they are not building anything new. To build anything new today in Denver, you would have to convince your construction lender and your equity partners that you could basically get 20 percent or 30 percent more in rents than you are getting today.”

Raising rents is tough at a time when a lot of new high-paying jobs aren’t available, he said. The HUD report noted that Colorado’s unemployment rate at the end of last year was 7.5 percent, the highest of the six states in the Rocky Mountain region – that had an overall unemployment rate of 6.8 percent. Colorado’s unemployment rate, however, was lower than the U.S. unemployment rate of 10 percent. The report also noted that the population grew 1.7 percent from the 52-week period ending on July 1 for the six-state region, even though the number of non-farm employment fell by 3.7 percent in Colorado. That compared with a 3.6 percent drop for the region and a 3.0 percent drop for the U.S., according to HUD.

If Colorado would see job growth, and it were possible to raise rents by 5 percent annually, it would still be another four years before new apartment buildings would be built, Hawks said. “And we have 180,000 kids turning 20 in Colorado over the next five years, which is going to mean we are heading for a huge shortage of apartments,” Hawks said. “The last time we saw that kind of increase was from 1969 to 1975 and we built 70,000 units. We’re going to face a real push and pull with supply and demand. We’re going to see a real shortage of apartments.”

Jeff Thredgold, corporate economist for Vectra Bank, said that Colorado’s overall housing market still is in better shape than many other places in the country, such as California, Nevada, Arizona and Florida.

“Colorado is in a recession, but Colorado did not get hit as hard in the recession, as some of these other states that had these excesses of housing,” Thredgold said. “Colorado did not see the huge increase in housing prices and then the huge deflation of housing values as some of these other states. Colorado did not get as carried away as some of these other states. Even states like Idaho have been hit hard.”

Still, the drop in construction activity hurts the entire economy, he said. “It hurts everybody,” he said.”We have seen a huge decline in home building across the country from its peak. But of course, you don’t want to keep building when you are already over-built. There are some excesses to still be worked off in Colorado, but we’re not nearly as bad as a lot of other states.”

S. Robert August, a Denver-area housing consultant, said the drop in building activity, “is a bad thing. It is bad for Colorado and it is bad for the country.” August blamed the banks. “The biggest issue is that banks are not lending money,” August said. “Until the banks start lending and circulating money, the permits are going to keep going down. Pent-up demand is not being met, based on the fact of the organic direction of life continues to go on.”

He said that big, national builders, such as Denver-based MDC Holdings, parent of Richmond American Homes and KB Home, are continuing to build because they have lines of credits to finance construction. “It’s the smaller to mid-sized buildings that do not have the ability to get loans,” August said.

Source: HUD

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

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Still, many Realtors contend that doesn’t really capture  what is  happening in the market.

They argue that interest in homes that most people buy – those below $300,000 – is quite robust. And if it were not for the huge drop in values among the most expensive houses, the Denver-area market would be extremely strong.

“I am always afraid when someone reads an article showing an overall gain, or a peak, or a loss in the Denver metro area, they think that is what they are going to find in every neighborhood,” said Corey Wadley, a broker-owner of Denver-based Nostalgic Homes.

He said that reports looking at an overall market do not take into consideration that different market exist at different price points.

“First-time home buyers read it is a buyer’s market, and think the can throw a wet noodle at the wall and it will stick,” Wadley said. “But it is not a buyer’s market in the areas around downtown Denver under the $250,000 price point. People in the trenches can tell you that we are looking at multiple offers at these price points below $300,000 or $250,000. The overall numbers for a metro area do not really tell you much in relationship to homes people are looking to buy right now.”

He said in northwest Denver example, where Nostalgic Homes is headquartered and does two thirds of its business, home prices appreciated last year for those priced $300,000 or below. Developers of luxury spec homes – those without buyers – in northwest Denver had to drop their prices, because of extremely high carrying costs, making the market look weaker than it really was for the majority of buyers, he said.

If you removed the luxury housing market from the statistics, which has seen huge slashes in prices, the rest of the market would look pretty solid, said Jeff Bernard, principal of Bernard Real Estate Analytics and a broker with RE/MAX Alliance.

“I really believe so,” Bernard said. “The luxury housing market is experiencing a pretty amazing crash. I would think that is the only thing that would really be hurting the overall Denver residential real estate market…I don’t want to sound trite, but it really is almost a street-by-street market. There are certain aggregates than you need to look at when we start drilling down into the market. I think the $300,000 and below is a very healthy market. It is a ticking time bomb in the $750,000 to $1 million and beyond market. I would say that is really a black hole out there, although it is a small percentage of the market.”

Economist Patty Silverstein, principal of Development Research Partners, said she has not paid as much attention to the sales in price point like many Realtors have, but she believes that they are probably correct that the luxury housing market is a drag on the overall market.

“The higher-end housing market seems to have more swing to it,” she said

Bernard said the $8,000 tax credit for first-time home buyers helped the overall Denver housing market last year.

“I know that from first-hand experience,” Bernard said. “I helped my daughter buy her first home last year. She was looking in the $210,000 range and we saw the prices increases, as people bid up the prices on those homes.”

He said at the low-end, first-time buyers not only are competing against owner- occupants like themselves, but also against investors who plan to fix them and flip them, or rent them.

Bernard and Wadley said that the extension of the $8,000 tax credit to the end of April, as well as a $6,500 tax credit for some current homeowners, should drive traffic in the first few months of this year. Wadley said he is surprised by how many people who unaware of the tax credits, especially the one for existing homeowners. He said he is encouraging people to start looking now, rather than waiting until February, and risk not getting their home under contract in time to take advantage of the tax credits.

Early signs are promising, Wadley said.

“If we judge it by open house traffic, the interest out there is huge so far this year,” Wadley said.

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

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The Denver-area market didn’t experience the meteoric rise of other markets such as Las Vegas, Phoenix, Miami and Los Angeles, but neither did it suffer the spectacular falls of those markets and others.

Today,  S&P/Case-Shiller  released a report that confirms that.

The index, which tracks 20 major metropolitan statistical areas across the country, released a report that shows from Denver’s peak in August 2006, home prices have fallen by 8.1 percent.  Only Dallas fell less from its peak, about 5 percent from June 2006, according to the report, titled “A Year In Review.”

By contrast, Las Vegas fell 55.4 percent from its peak, Phoenix fell by 49.3 percent,  and Miami was off just less than 50 percent. The peaks vary from Metropolitan Statistical Area to MSA.

“Since 2000, the area traditionally defined as the Sun Belt – Arizona, California, Florida and Nevada- has experienced the largest run-up in prices and, subsequently, has been hit the hardest in the downturn,” according to the report.

By contrast, ”Markets such as Boston, Charlotte, Cleveland, Dallas and Denver never saw the large double-digit price increases in the 2004-2006 period, but their relative rates of decline have also remained comparatively benign,” according to the analysis by S&P/Case-Shiller. “As of the October 2009 report, Denver’s rate of decline is close to flat, at -0.1%,and Dallas is not far behind, down only 0.6% on an annual basis.” The October report was the most recent one. (Denver was rated No. 1 in the October report. To read more about it, please go to this blog.)

The Detroit market was the only one currently below its 2000 level, down by almost 27 percent

Of course, Denver never saw the dramatic, short-term run-up in prices of  other markets. In 2004, Las Vegas was up by 53.2 percent and Phoenix jumped by 49.3 percent. Los Angeles, Miami, San Diego, San Francisco and Tampa all saw peak annual growth rates above 30 percent. Denver rose by 40.3 percent from January 2000 to its peak in August 2006.

“i think this certainly tracks with what we have been seeing,” said economist Patty Silverstein, principal of Development Research Partners. “Our home prices have been much more stable through this entire period. Our stability means we are in a better position for this whole recovery in the housing market, than most other markets. We have certainly felt the pain of falling prices, and we have certainly felt the pain of rising foreclosures. But the extent of our decline is nothing in comparison to many other markets in other parts of the country. There is something to be said for having a more stable pattern.”

She also said that with almost a 50 percent from January 2000 to Denver’s peak, and then a drop of less than 10 percent from the peak to October, means, “We still have had a net gain position for the whole decade. Considering that we lost about 40,000 jobs and we have seen many other economic indicators that are very flat to negative,  we still managed to see some housing appreciation. I think that is  pretty good. I think we are really in a better position than almost every other market.”

(For another take on the Denver market, please visit this blog.)

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

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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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