In the past 10 days, the Denver area has welcomed a number of good news announcements on the economic development front, which will spur the creation of  jobs, and in turn will increase the demand for housing.

DaVita opening its new headquarters at Denver Union Station, a national poll praising Colorado’s business environment, and job announcements by Vestas, the wind-turbine company with operations in Windsor, Brighton and Pueblo, were among a half-dozen announcements highlighted by Tom Clark, the executive vice president of the Metro Denver Economic Development Corp., today.

Good news on the horizon

“In a time where confidence in the local market is crucial, these events are giving us some optimism that an overall lift in the economy will commence in 2011,” Clark wrote in his blog. And there is more good economic news coming, Clark notes: “As we look forward to the completion of several big projects, such as ConocoPhillips’ R&D facility in Louisville and DaVita’s HQs in 2012, and the commencement of the East Corridor construction, 2011 through 2014 are looking very strong.”

For his entire blog, please go to this link.

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

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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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This report by Gary Bauer, using Metrolist data, shows far fewer homes on the market than Forbes.com. (Note: Single Family category includes single-family detached homes and condos, and Residential refers to only single-family detached homes.)

Denver Realtors and business leader, who have become  accustomed to favorable national press about the local  economy and real estate market, feel as though they have been blindsided by an article in Forbes.com that describes the local housing market as the second worst in the country.

Many experts said that the article, which ranked only Milwaukee below Denver, gives Denver an undeserved black eye.

“It absolutely gives us a black-eye,” said Tom Clark, executive vice president of the Metro Denver Economic Development Corp. and the Denver Metro Chamber of Commerce. “I glanced at the article last week and realized it was absolute bull crap.”

Unsold inventory exaggerated

One thing that irked real estate brokers that track the market closely is that the article claimed that there were more than 42,000 unsold single-family homes on the Denver-Aurora metropolitan statistical area. However, Metrolist data shows at the end of the March there were only 14,989 single-family homes on the market. Even when condos and townhomes are included, the number is less than 20,000. Indeed, most experts doubt that there are even 42,000 unsold homes in the entire state of Colorado.

“This article is so incorrect that it should be removed from the online publication,” said Jeff Bernard, principal of Bernard Real Estate Analytics, and a long-time Denver broker.

“Perhaps there was a completely different scope of parameters for data gathered by Forbes this year versus data gathered last year,” in which Forbes.comsaid Denver’s housing markets was one of the best in the country, added Bernard, a broker with RE/MAX Alliance. “It even leaves me wondering if they collected data on the right city. Or maybe they’re spiking their Kool-Aid before they run their analytics. Forbes is usually a pretty good read, but this article seems to be slithering towards irresponsible reporting. Forbes is usually a pretty good read, but this article seems to be slithering towards irresponsible reporting.”

Forbes claims inventory jump in Denver

The Forbes.com article, originally published on April 5, had this to say: “Before 2009, if any market seemed to be free from the rest of the country’s housing woes, it was (Denver.) But the city’s fortunes seem to have shifted: The recession hit Denver later, and only in the past year have sales slowed and inventory begun to pile up.” And the report, which it said was based on information from the National Association of Realtors, Zillow.com and Moody’s Economy.com, went on to say that “Denver doesn’t come to mind as a housing-crisis hot spot, but the city that once looked like it would escape the housing bust unscathed now shows signs of strain. More than 42,000 homes are on the market in the metro, 27% more than last year.”

Although it went largely unnoticed, in January, Forbes.comraised the specter that the Denver-area housing market was in trouble, even though at that time the S&P/Case-Shiller Home Price Index, which had just released its November statistics, ranked Denver as No. 1 of the 20 major housing markets it tracks.

“But real-time asking price data provided to Forbes by Altos Research, a Mountain View, Calif.-based real estate research firm, suggest the Mile-High city is taking a turn for the worse. In July 2009 listings showed a .5% decline from the year before, the first time the city posted a price tag decline since 2008. The slump has since worsened; in January year-over-year asking prices were down 3%, to $368,870.”

Larry McGee, principal of the Berkshire Group, said that today an out-of-state buyer who recently purchased a home in the Denver area, read the most recent Forbes.com article and is now questioning whether she made a mistake.

“It does hurt us when the national press makes statements like this that are false,” McGee said last Thursday, repeating and elaborating on his criticisms today. “I guess I do not trust Forbes anymore.”

Realtor believes Forbes is irresponsible

McGee sent a letter to his agents this morning and did not mince words.

“I am very angered by this latest example of journalistic prevarication,” McGee wrote. “Unfortunately, the media operates like other sharks, and is not generally willing to challenge a fellow shark, so we will probably have to live with this and counter with our own information. ”

 Last week, McGee’s wife,  Kristal Kraft, also a Realtor, Tweeted the author of the Forbes report.  “Your numbers aren’t even close. Very irresponsible reporting. Maybe you should check your source,” Kraft Tweeted the reporter.

Forbes.com stood by its reporting, with this response, also sent through Twitter: ”Checked #s, all correct. Data is for metro areas (a city and its surrounding suburbs). Appreciate the feedback.” Forbes.com has not responded to an e-mail from InsideRealEstateNews.com asking it to defend its information. Efforts to reach the author of the report were unsuccessful.

McGee said he is checking, but does not believe that there are even 42,000 unsold homes in all of Colorado, much less in the Denver area.

Gary Bauer, an independent broker who prepares a monthly report on the state of the Denver-area housing market, agreed.

“Where in the devil is somebody saying we have more than 40,000 unit for sale? I think it would even be a stretch to say we had that much unsold inventory from the Wyoming border to the New Mexico border,” Bauer said. “This article was an unfair swipe. I am not aware of any national report as being this negative to Denver in recent memory.”

Niederman says report ignores facts

 Peter Niederman, chief operating officer of the Kentwood Cos., e-mailed a letter today to the author of the Forbes.comarticle, filled with chief operating officer of the Kentwood Cos., e-mailed a letter today to the author of the Forbes.com article, filled with the most current statistics on the Denver-area market from Metrolist. The statistics, not only show Denver’s market is strong and healthy, but also shows that overall, Denver only has slightly more than a 5-month supply of homes on the market. A year earlier, it had more than a six-month supply, he said.

That is a sign of a market that is in balance between supply and demand, he said. He noted it is a seller’s market for lower-priced homes, while it is a buyer’s market for more expensive homes.

“I actually think we are in a very sweet spot with out single-family home supply,” Niederman said. “If anything, we could use some more inventory. But we don’t have any place near 42,000 unsold homes. We are enjoying a very healthy and stable market.”

Niederman said that perhaps the Forbes article was talking about the ’shadow market,” of homes being held by banks or soon-to-be sold by banks, which some analysts believe could greatly increase the inventory of unsold homes in the Denver area.

“Reading the article, I did not get the impression she was talking about REOs or foreclosures,” Niederman said. Niederman sent an e-mail to Forbes.com, filled with information about the Denver-are market from Metrolist, which paints a much different and more bullish picture. But he received no response from Forbes.com. 

Shadow market can’t explain numbers

Clark, of the Metro Denver Economic Development Corp., said that he recently spoke to a home builders group, and some bankers and mortgage company officials said that banks may be holding a “significant number of houses” that they haven’t yet placed on the market. They don’t’ want to flood the market with homes and further erode the value of houses in the neighborhoods, as well as the homes they are trying to get off their balance sheets, he said. (For an earlier blog on the Denver-area shadow market, please visit this link.)

While that makes sense, he said he doesn’t think it is likely that banks are holding double or triple the number of homes being listed in the market.

And broker Bauer noted that banks increasingly are working with distressed borrower to keep the homes from going to foreclosure sales. Increasingly, lenders are trying to modify loans to keep borrowers in their homes, or failing that, are agreeing to short sales, where the bank accepts less than the mortgage amount.

“If (Forbes.com) is including all of the foreclosures, existing and pending, in their numbers, maybe would add another 2,000, 3,000 or maybe even 5,000 homes into the market – and that is a pretty big IF,” Bauer said.

Patty Silverstein, principal of Economic Development Research Partners and the economist for the chamber, also thought that the number of unsold homes quoted by Forbes.com seems way too high.

“The Metrolist data could be a little on the light side, and may be under-counting by a bit the number of homes on the market, or that could go on to the market,” Silverstein said. “Even so, I cannot fathom how they came to the 42,000 level.”

Silverstein said that while you never want to sugar-coat the data, it is an unfair black mark against the Denver area, when any part of the economy is made to look worse than it is.

“I think think this whole economic recovery is fragile enough, that consumers are very nervous,” Silverstein said. “When they hear negative reports like this one, it is like we are taking two steps back.”

Clark said that while the Forbes.com article is not good news for the Denver area, it won’t haunt the economy for the long-term.

“We got hit with some bad news from this one, but I guarantee you we will soon see another national report with good news, which will take the spotlight,” Clark said. “The bad news from this one won’t last very long.”

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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Denver’s housing market showed only a only a 0.1 percent dip in housing prices in the year ending in October, compared with an overall drop of 7.3 percent for the 20 areas in the report. The 10-city index in the report fell overall by -6.4 percent.

Tom Clark, executive vice president of the Metro Denver Economic Development Corp., said that Denver’s No. 1 ranking is the latest sign that Denver’s economy is out-performing the nation’s.

“Job growth does matter,” Clark said. “What a concept.”

Gary Bauer, an independent residential broker in Denver couldn’t agree more.

“Once again, this shows the strength of the Denver market,”  Bauer said.  “We continue to lead the nation as far as recovering from the recession – the recession is not over yet – but we will be one of the first to emerge.”

Bauer said that “two-thirds” of the Denver-area housing market “still moving,” if not showing spectacular performance. Only the high-end market continues to be soft.

“The market has moved from the only activity being in the first-time buyer to what I call the “move” buyer,” Bauer said.

Bauer has said that the move buyer will benefit from the expansion of the federal tax-credit for qualified people who own their owns. Some of those buyers who qualify for the $6,500 tax credit will downsize to smaller, less expensive units, while others will move-up, according to Bauer and other Realtors.

Bauer said that while it some ways he is a “little surprised,” that Denver out-performed the other 19 cities in the Case-Shiller index, in “another way I am not…We have seen two or three months of very consistent activity.

Tom Cryer said if a homeowner wants to sell a house quickly in Denver, he or she needs to price it slightly below the market.

“If you think the market is $100,000, and you price it at $97,000, it will go away,” said Cryer, a broker with the Kentwood Co.

Cryer also said he thinks that move-up buyers may decide that it is an excellent time to snap up homes priced up to $500,000, with sellers willing to deal, near-record low mortgage rates, and the $6,500 tax credit for qualified existing home owners, starting in 2010

“I feel we are going to start see a wake-up call in the $250,000 to $500,000 price range,” Cryer said. “But we will know better after the first quarter of 2010.”

The market for homes that require more than a conforming loan of $417,000, however, remain soft, he said.

“In the last 60 days, we have seen houses that previously had sold for $5.9 million selling for $4.1 million,” Cryer said. “I think the luxury housing market remains in a state of  malaise.”

He also said people who bought McMansions during better economic times that they thought would never end, are facing buyer’s remorse as large as their 10-bedroom estates.

“There has been a mind-set change,” Cryer said. “Let’s take a hypothetical guy in Cherry Hills who bought a 10,000-square-foot home with Monopoly money. Now, he says, “Gosh, with taxes and water bills, (which can hit $4,000 during a hot month), and my kids are grown and are only here a couple weeks a year, why do I need this? I don’t mean to be trite, but it’s like the Prius effect. If my Prius seats four comfortably, why do I need a Cadillac?”

Overall, “the report should be described as flat since the turn-around in home prices seen in the spring and summer of this year has faded with only seven of the 20 cities now seeing month-to-month gains,” said David Blitzer, managing director and chairman of the Index Committee at Standard & Poor’s.

From September to October, Denver prices were down 0.4%, while the overall market for the 20 cities showed no change from the same period in 2008.

“Coming after a series of solid gains, these data are likely to spark worries that home prices are about to take a second dip,” Blitzer continued.  “Before jumping to conclusions, recognize that the one time that happened at the beginning of the 1980s, Fed policy saw dramatic reversals, which is very different from the stable and consistent Fed policy we have today.  Further, sales of existing homes – those included in the S&P/Case-Shiller Home Price Indices – have been very strong in recent months, working off the inventories of houses for sale. At the same time, housing starts remain weak, fears that the market will be swamped by a wave of foreclosures are heard and government programs aimed at the housing market will expire in the first half of 2010.”

The peak-to-date figures for the 10-City and 20-City Composites through October 2009 now stands at -29.8% and -29.0%, respectively.

Long-term, however, the Denver housing market remains in the middle-of-the-pack. Denver showed a 28.91 percent increase in prices since January 2000, slightly better than the inflation rate. By contrast, the 20 cities in the index showed an overall gain of 46.58 percent.

However, some Southwest cities that are frequently compared to Denver, have seen their long-term, as well as short-term prices fall to earth, after prices surged into the stratosphere a few years ago.

Since 2000, prices in Las Vegas and Phoenix, respectively, have risen only 4.7 percent and 10.71 percent.

“That is kind of good news and bad news,” said Clark, of the Metro Denver Economic Development Corp. “That good news is that it shows fundamentally, housing values are built on job growth,” and not on ‘build it and they will come philosophy in Phoenix or hope that home buyers will continual to flock to Vegas, no matter the state of the economy.

“The downside is that prices had risen so much in Phoenix during the boom, that their prices were equal to us, so it was not so much sticker shock when someone from the Midwest looked at Denver housing and Phoenix housing,” Clark said.

“Now, Phoenix is losing that disadvantage, as their housing stock declines in value,” Clark said, and comparable home prices trail those in Denver, as has been the historical pattern. That means that Denver will not be able to tout inexpensive housing as an economic incentive, when compared to Phoenix, he said.

“But I don’t think this will be a huge problem, because home prices have declined across the nation,” Clark said. “I do not think it will be quite the obstacle for companies to overcome as far as attracting and retaining people as it would have been in the past.”

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

Area	Appreciation since 2000	September to October change	1-year change from October
U.S.	46.58	0.4%	-7.3%
Atlanta	10.12%	-1.0%	-8.1%
Boston	54.7%	-0.6%	-2.8%
Charlotte	19.05%	-0.7%	-7.0%
Chicago	30.78%	-1.0%	-10.1%
Cleveland	4.97%	-1.6%	-3.5%
Dallas	19.90%	-0.6%	-0.6%
DENVER	28.91%	-0.4%	-0.1%
Detroit	-26.93%	0.2%	-15.1%
Las Vegas	04.7%	-0.1%	-15.1%
Los Angeles	68.43%	0.3%	-6.3%
Miami	49.09%	0.4%	-14.0%
Minneapolis	24.51%	-0.5%	-8.4%
New York	75.01%	-0.0%	-7.7%
Phoenix	9.26%	0.8%	-21.8%
Portland	49.72%	-0.5%	-11.8%
San Diego	55.37%	0.4%	-2.4%
San Francisco	35.81%	1.3%	-2.6%
Seattle	49.26%	-0.4%	-12.4%
Tampa	40.27%	-1.6%	-15.2%
Washington, D.C.	79.71	-0.4%	-2.8%
Composite-10	58.82%	0.0%	-6.4%
Composite-20	46.58%	0.0%	-7.3%

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The report says that regional business confidence levels are increasing and the correction in housing may end – or at least stabilize.

Clark noted that the “annual declines in a majority of the S&P/Case-Shiller Home Price Indices have reached bottom, and the indices for Denver are close to a positive annual return. (For my earlier blog on the most recent Case-Shiller report go to this link.)

“Additionally, according to the National Association of Realtors (NAR), the Denver-Aurora-Broomfield metropolitan statistical area was among 30 areas that reported an increase in median home price between the third quarters of 2008 and 2009. The increase was also the first reported for Metro Denver in two years and contrasted with an 11.2 percent over-the-year decline in the nationwide median,” the report notes.

Metro Denver home sales rose 2.9 percent between September and October. October home sales were 7.6 percent below sales from October 2008, but this over-the-year gap in sales was the smallest reported since December 2008, according to the report. (For more on the Denver-area housing market in October, go to my previous blog.)

“Put another way, the pace of Metro Denver home sales is slowly strengthening and should reach a point early next year where monthly sales exceed those reported in 2009,” Clark said.

Slow improvements in home sales have also helped stabilize home prices in the Denver area. Denver. The October average sales price for single-family homes increased 4.6 percent over-the-year, and the average price for the first 10 months of the year moved within five percent of the average for the same months of 2008. The year-to-date average condominium price was down 7.1 percent in October, but condominium prices are also showing signs of gradual improvement.

Challenges certainly remain for housing markets, the report notes.

“The Mortgage Bankers Association’s most recent National Delinquency Survey shows roughly one in seven U.S. mortgages were past due or in foreclosure at the end of the third quarter, and overall delinquency rates continue to break records nationwide. In Colorado, closer to one in 10 home loans were delinquent or in foreclosure at the end of the third quarter. The state’s overall delinquency rate of 6.7 percent was the highest reported since at least 1990, Colorado still had the 10th-lowest rate in the nation.”

The report also notes that “unemployment has largely replaced subprime loans as the key driver of mortgage delinquency, although additional resets of adjustable rate loans are looming in 2010. Stronger trends in home sales and prices can only help with these challenges, though, and government programs including the now extended and expanded homebuyers’ tax credit should also help housing markets stabilize in the months ahead.”

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

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Home closings nationally are up 10.1 percent from October and a whopping 23.5 percent from October 2008, according to the National Association of Realtors. By comparison, home closings were down 7.6 percent in the Denver area from a year earlier and were up only 2.9 percent from September.

But I would consider this a bullish sign, if I were either looking to buy a home, sell a home, or if I were in the business of selling homes.

The reason is mathematical.

Everything reverts to the mean. That is, whether you are talking about stocks or housing, things have a way of settling down to whatever is  “normal” for that market, despite short-term spikes up or down.

What I think that is going to mean (no pun intended)  is that home sales are going to pick up in Denver and fall nationally.

And don’t forget, Denver’s economy often is counter-cyclical to the national economy.  That  economic-sword cuts both ways – we’re often down when the nation is up, and vice versa.

Another reason to bet on Denver’s housing market recovery is that it and Colorado have one of the best “balanced energy economies” of traditional and  alternative energy companies in the nation, as Tom Clark, of the Metro Denver Economic Development Corp., points out. The  Denver-area should become a magnet for high-paying jobs in the alternative energy sector,  especially since the Golden-based National Renewable Energy Laboratory, the nation’s premier renewable energy research outfit,  is in our backyard.

Also, mortgage rates remain near their historical lows, if you have the credit and work history to qualify. That mortgage rate window won’t stay open forever.

Still, there are storm clouds dampening Denver’s housing market. A declining workforce even as unemployment rates drop, is not encouraging. The area, and much of the country, is bracing for another wave of foreclosures due to more people losing their jobs. And lenders may have thousands of foreclosed homes waiting in the wings that have not yet been put on the market,  creating a shadow market, as I reported earlier.

Kentwood Co.  broker Tom Cryer says this reminds him of 1989, a prime time in Denver to find bargain-basement-priced homes. He thinks people who don’t buy today, will wish they had by 2012, when he thinks a  Denver-area housing recovery will be well on its way.

I don’t think I would bet against him.

Contact John Rebchook at 303-

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At the time, I thought it could long-term set the stage for creating even more green jobs in the Denver area.

I was wrong.

It’s already happening.

“I just came from there, and deals are going on in the hallways right now,” Tom Clark, executive vice president of the Metro Denver Economic Development Corp., told me this morning.

“And as I was walking out, I was handed five business cards from people who are interested in doing business here,” added Clark, who was instrumental in helping to convince NREL to hold the forum in Denver for the third consecutive years.

Executives and leaders in solar, energy storage, wind, and nanotechnology  are among the speakers, in addition to financial wizards who discuss how to get funding. Experts from household names such as Toyota and Cisco, also are on panels at the forum that started at 7 a.m. on Tuesday and ends at 12:30 p.m. on Thursday.  Sessions run into the evening. My initial blog has a link to the agenda.

“Anyone who is anyone in the clean-industry cluster is speaking,” Clark said. “I just heard a guy speaking about nanotechnology that was simply fascinating. Nanotechnology is going to allow us to paint our homes so the paint on the outside becomes solar panels.”

Clark said this forum shows the wisdom of his group to target clusters several years ago, instead of taking a shot-gun approach and go after whatever industry is hot, as economic development agencies had traditionally approached recruiting businesses.

Currently, his group is looking with about 15 companies – including a few done deals such as Vestas – that are in the pipeline, not pie-in-the-sky prospects.

Together, these companies would create 15,000 primary jobs over the next two years.

“When you use the multiplier and spin-off jobs, we’re talking about 40,000 jobs,” Clark said. “About half of them are in the clean-energy field, with the others in clusters such as IT, aerospace,  bio-science and in traditional energy, such as oil and gas.”

He said most of the clean-energy jobs pay between $40l,000 and $65,000 annually.

“I think these jobs will give the housing market a boost,” Clark said. “And it probably will keep some people from losing their homes to foreclosures.”

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

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