I moved to Denver in 1989 out of college because it was nearly free. I rented a former HUD condo in Boulder with a beautiful view of the Flatirons, tennis courts, a pool and a BBQ, for only $205 a month. Foreclosures, HUD homes and vacant condos and houses were everywhere. I mean everywhere. Even the office towers were empty.
Well, those days are coming back. Denver set the record this year for foreclosures.
Remember folks that Denver saw its real estate bubble in 1998 - 2001. So what's happening in Denver will be happening all across America in the next couple of years. They were just a little ahead of the game...
Get ready for a lot of empty condos and offices in Phoenix...
Denver-area foreclosures set record - Number tops 1988's oil industry bust - 17,782 and counting
It's official.
A record number of real estate foreclosures have been filed in the Denver area this year.
In the first 11 months of 2006, public trustees in the seven-county metro area opened 17,782 foreclosures. That's 3.85 percent higher than the record set in 1988, during the oil industry bust.
Experts say other parts of the country that recently had hot real estate markets need only look to Denver to see what's in store for them.
The biggest culprits in the rising mortgage tide are a flat housing market and overbuilding in certain areas, such as north Interstate 25, said Boulder lender Lou Barnes, principal of Boulder West Financial Services.
"Our housing market went flat in early 2001, and since then, foreclosures have been rising in the foreclosure belts about 50 percent a year," Barnes said.
December 06, 2006
I never thought I'd see the day: Denver real estate market worse than 1988
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23 comments:
RTC anyone?
I think you are mistaken joey. This is just getting started, even in Denver.
Denver is on that first part of the roller coaster ride where you consider whether to raise your hands in the air or whether to grip with white knuckles for the remainder of the ride.
Where is Osman? I want to know what his take is.
I wish that would happen where I live, My PITI is about $850 bucks a month. If I rented something similar, $1,400.
Apparently REFI numbers are up 8.1% last month.
Maybe that's people borrowing to get some christmas money to get that big screen TV. The human psyche senses one last joyous christmas before it all goes away.
At the beginning of the year, when the party is over, that might be when we get the big kahuna.
Boom, it's all going down.
The biggest reason foreclosures have increased in this area is mortgage fraud. Colorado has such lax laws when it comes to real estate.
The largest segment of foreclosures? FHA loans designed for first-time home buyers with low down payments. Only most of these people got in without a downpayment through seller gift programs. Now they're walking away from their homes and condos.
Better regulation has to be in the cards.
"The biggest reason foreclosures have increased in this area is mortgage fraud."
Well DUH!!!
Anonymous Duh, the article says,
"The biggest culprits in the rising mortgage tide are a flat housing market and overbuilding in certain areas, such as north Interstate 25, said Boulder lender Lou Barnes, principal of Boulder West Financial Services."
I submit it's more due to fraud than these other conditions.
But read the paragraph that says wealthy neighborhoods have not been touched. . .this brings me to an idea I have been kicking around - a new blog called 80/20. Basically 80% of USA lives paycheck to paycheck, and 20% are doing very well. . .I see this in San Diego. . .the stucco suburbs are in deep shit, but the old established neighborhoods like La Jolla and Point Loma are fine, thank you. No big suprise here as that report yesterday on 2% own 50% of wealth. . .we have a very two tier economy, those who benefit from globalization, and those who get screwed. . .all this is going to do is make that rift even larger, as the 20% will bid for the foreclosed assets of the 80%, and own a lot of rentals at cheap prices. . .thoughts anyone??
Boulder's a special case - due to the greenbelt around the city, and no-development rules, there's a limited supply of housing, and apparently infinite supply of people who want to move here. Move out of Boulder, and the prices are definitely wobbling. Poke around local realtors' lists, and you can come up with 15-20% discounts on existing homes from folks who're desperate.
The metric used to be 1 mile outside Boulder = a $10k price drop - e.g. $300k house in Boulder was $200k 10 miles away - but it seems like it's more than that now - $15k/mile?
I don't know about new homes, but there's vast tracts of farmland around Denver, e.g. near I25 and the new airport, that have recedntly gone under the bulldozer's blade, so I'm guessing that there's going to be quite a bit of surplus there.
Excellent blog!
So I guess Susanne DIDNT research this?
"all this is going to do is make that rift even larger, as the 20% will bid for the foreclosed assets of the 80%, and own a lot of rentals at cheap prices. . .thoughts anyone??"
Mark,
If these poor neighborhoods are anything like the poor neighborhoods in Louisville, nobody is going to want to buy into them. There's much more of an upside in a desireable neighborhood especially when time frames and rehab costs are similar. See this article for more.
Osman? Oooossman!!??
The concentration of a lot of the foreclosures has been in the far flung newer suburbs East and Northeast of town (Weld county) where growth has exploded. One thing that I think has contributed to this is the massive amount of infill development that has gone on in the Denver metro in the last few years. Namely the old Stapleton airport redevelopment, the revitalization of the LODO 'lower downtown' area and the fact that Denvers RTD 'light rail' subway system was just completed a few weeks ago. A lot of the new development in the Metro area is concentratede around these RTD stations.
I think Osman is dead
Salt lake mortgage guy -
Thanks for the Louisville item. . .I would agree about inner city homes, but I think a lot around Denver and here in SD are suburban homes that went for zero down and 100 ARMS. . .those may be a good investment if the price is right. . .I was in Akron/Canton OH area recently, and you are right about old homes in the central areas - no demand, and really bad shape.
Wow. So it has taken Denver 5 years to hit this point, which may not even be the true bottom?
That would indicate that, as I have suspected, this housing downturn will not be a 6 or 12 month thing but take years to play out.
IT IS NOT A RECORD IF YOU LOOK AT THE PERCENTAGES!
Keith, aren't you as smart as you always say you are?
Again, like bubble markets within bubble markets there are depressed markets within depressed markets. The bigger issue is market fundamentals, supply and demand and local economics. I'm not up on all the dynamics of Denver's market but I'd imagine they are like a lot of western states with too much land and builders who built too many homes and too liberal credit to lend to those who had no reason to buy in the first place.
Also it sounds like the far off places are hurting because as a market corrects and homes closer to jobs become more affordable it makes it harder to buy, even if it is less expensive, out on the fringe.
Look at Queen Creek or Maricopa in Phoenix or Pflugerville, Kyle, Buda, Manor, in Austin. During their slump, also started in 2000, those out lying areas took a dump, foreclosures rose, but that didn't reflect the entire market in Austin and for the vast majority of workers/homeowners, it was apparent that some would and did get slaughtered while others held even (If you consider giving up all the previous gains with no appreciation for five years even). Still builders built, more slowly. Still homes sold. Still investors snapped up foreclosures (and many found they still were not a bargain), some areas saw significant appreciation (mini-bubbles in a flat market).
So if someone lives in Denver, tell me, do you think this is due to affordability issues or jobs? I've seen a lot of those areas homes and they are about the national median for price and seems like you can still buy a house there for $1200 a month PITI.
Is it because there is no job growth, a slowdown in in-migration or a positive out-flow of residents looking for work? If the slow down occured five years ago I'd think the supply issue would be job related rather than over building, like Phoenix has right now, right?
As far as the percentage thing mentioned above: I think at its worst in the 80's oil bust foreclosures were at 3%. Dont think were quite there yet but this is just starting. Also CO is one of only a few states that doesnt require a license to be a mortgage broker. The fraud stories have been in the papers a lot around here recently. As far as employment stats CO is outpacing the country for job growth. Sorry for lack of a link but it was just in the business sect. recently
I live in Denver in the Washington Park neighborhood. This is one of the nicer, older neighborhoods.
We are renting a nice bungalow for $1200 a month. The place is roughly 1000 square feet, has a large basement with two finished rooms. I have been looking to buy, but have had hesitation due to valuations. Price per square foot in this area runs from $240 to $290. Using a 5 year holding period I would require a 5% average yearly appreciation on an equivalent home in order to break even versus my rent and invest option. That has me sitting on the sidelines and hoping for lower prices. There are so many homes for sale in wash park and many of them have been on the market in excess of 4 months.
Anyone else tracking the rent/buy valuation differences in Denver?
> Is it because there is no job growth, a slowdown in in-migration or a positive out-flow of residents looking for work?
They're running out of greater fools. A guys making 40k/year can still get a 300k place, but only the most stupid of the stupid money is shopping for RE around here.
The increase in prices, IMO, correlates closest to the gullibility of home buyers as they are considering how much to spend and what kind of loan. There are less gullible (or pussywhipped) buyers out there now.
These places that they're foreclosing on, probably a median of 175k - 225k, aren't worth more than 100k or so, but we had our bubble a little earlier due to the tech and telecomm bubbles spreading out some money here before the RE bubble started.
Do you think it has to look like soup lines and Hoovervilles? When times get bad around here, people still look beautiful in their sunglasses -- that is SoCal. But I see things getting alot worse. It is a fast crash, or long water torture. So far, it looks like water torture.
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