Housing Goes Frothy to Flat in Denver Area

[UpInArms]

http://www.nytimes.com/2005/07/17/national/17denver.html?incamp=article_popular&oref=login

(free registration or try www.bugmenot.com)

PARKER, Colo., July 12 - Tom Woods, a 37-year-old defense industry consultant, wanted to build a nest egg for one of his young sons' college tuition. Inspired by rising prices for homes in this Denver suburb, three years ago he invested in a new three-bedroom townhouse for $155,000. His hopes were that renters would cover most of his mortgage and that the property's value would appreciate by at least $10,000 a year.

<snip>

With economists warning that prices in hot markets cannot continue to rise as sharply as they have in the past few years, the experience of Denver's homeowners may foreshadow what could happen if those markets start to cool. Denver's circumstances are in some ways particular to the area, driven largely by job losses in the telecom sector, but they illustrate how a moderate slowdown could play out for homeowners in other parts of the country and stand as a potent reminder that galloping price appreciation is not the norm.

Economists are divided as to whether certain markets will simply cool off, or whether they will actually melt and send prices plummeting, as happened in parts of California, New England and New York in the 1980's and early 1990's. Earlier this year, Federal Reserve Chairman Alan Greenspan said some metro areas were showing signs of "froth."

...more...

[teknomanzer]

1. Just waiting to see what will happen...

in the South Florida market. There is a lot of talk about the housing bubble and how it will drag the economy down when it bursts.

[TroubleMan]

9. I waiting to buy in WPB, it's waaaaayyyy too expensive right now

Right now, I'm very happy to be renting.

I know it's gonna bust, but I don't know if it's gonna be a year or 5 years.

My dad is a real estate agent, so it's a double-edged sword. He's one of the more successful ones and very well established, but I don't want the bubble to pop too hard just for him.

[leesa]

2. I cannot for the life of me understand why people would think house

prices would continue to go up and up when wages are flat or declining. It just doesn't make sense.

[Cronus Protagonist]

5. My landlady just raised my rent by $100 a month

My income, however, is declining and she doesn't give a shit. So I'll have to move soon, out of the area, because all the landlords think we renters should pay extra so they can live on the cashouts from their remortgaged houses. It ain't gonna work. Once I move, they'll have at least one, maybe two months of no rent. It will take them 15-30 months to recoup the losses from me moving just to break even, even if they get the higher rent from another tenant. And they'll have to fix the place up too - new carpets, microwave, etc.

I just don't see how raising the rent when your tenants are not getting more money is a winning situation for the landlord unless the tenants accept the increase and stay. And I'm not going to be doing that for long...

:(

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[getmeouttahere]

8. When the depression sneaks up on them....

then maybe they'll figure it out...I think in some way some of these upper middle class folks see it coming but are trying to get what they can, while they can, so to speak.

[HockeyMom]

20. Just like that condo I saw

I wouldn't buy it at $240,000 and certainly won't buy it now at $275,000. I will sit it out and rent instead.

This is WAR.:grr:

[benddem]

12. we have a glut of rental properties

cause of all the people buying for investments. It probably won't take too much longer in your area. Maybe you could show the lady some statistics.

[HockeyMom]

18. Found something on the Net from newspaper ad of 6/03

New "affordable" rental apartments; 2 bedrooms, 2 baths for $1,100 a month. So I went on the complexes website to check out what the rents were today. Those same 2 bedrooms are now $2,100 month. Raised them $1,000 a month in 2 years.

It isn't just single family homes for sale. Rents have skyrocketed too.

[Cronus Protagonist]

23. True - the greed of the propery owners knows no bounds

Basically, they've got us by the short and curlies. I am looking forward to when there's tons of foreclosures, though, and I can move into a place cheaper AND better, and let the landlords weep over their empty house that they thought would be a cash cow for ever.

If they would keep the rent the same, I'd be happy to continue to pay their mortgage. So much for book learning (they work everything from a book they bought).

:)

[donco6]

3. A coworker of mine is in trouble because of this.

She and her husband bought this humungous house in N Metro about three years ago - peak price. Every option in the book. Well, now hubby has divorced her. She took the house, but it's been a nightmare from the beginning. She's trying to sell, but is upside down by $100,000. She may have to be foreclosed on. Both her neighbor's houses are for sale, too.

[bluestateguy]

4. For some people the bubble bursting is a good thing

It's not fair to those of us who work hard and have good jobs, who are still locked out of the housing market because of inflated values.

[Cronus Protagonist]

6. Forget about being locked out of the market

I'm just trying to find affordable rents.

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[BlueStateBlue]

19. I'm with you, bluestateguy

I'm in the same boat, and it sucks :-(

[tridim]

7. I'm in Denver, with a $145,000 townhouse that I want to sell

I'm fairly sure I'll take a loss as there are about 30 others on the market in my complex that aren't selling. Some have been on the market for over 6 months. When I bought 3 years ago there were only 4 units available. I thought I'd be safe with a cheap place ($145k is cheap for Denver) but thanks to Bush's economy I'm screwed.

[54anickel]

10. Hmmm, driven by job losses. And what was it that Challenger was

saying the other week about upcoming layoffs and hiring again?

Sounds like a buyer's market in that area right now - ...Inventories of available homes have tripled from 8,010 in January 2000 to 25,817 in June, according to Gary Bauer, a real estate broker and consultant in Denver. Sellers are also competing with homebuilders, who are offering incentives like discounted mortgage rates and free air-conditioning.

Wonder how long before there are a few abandoned, partially completed developments. Oh wait, this time it's different - developers are more "mature" and "established" to go belly-up. (Read that somewhere this week) :eyes:

At least they are still appreciating, though at a lower pace (5% according to the article). With all the ARMs and no-down mortgages out there it won't take much of a rate hike to put a lot of folks upside-down. Heh, but then again - will rates go up significantly in this "new economy" they keep yammering about?

[redacted]

11. Here houses that were selling for 900K a few months ago are going

for low 800's and anyone with a house on the market for more than 30 days is lowering their price.

Median home price has gone from 300K to 600K in less than 5 years and recent PMI study said we were the 16th most risky housing market in the country.

[HockeyMom]

16. The aren't selling, but prices not gong down either

Greed taking over? We were told last year there were a record number of houses on the market, this year there are even more. I watch MLS. For every house sold, 4 or 5 go on the market.

Examples, 5 bedroom house where we used to lived went on market in May of last year for $799,000. The taxes alone are nearly $20,000 a year. It is still on the market, but the owner has not lowered the price.

The best one? I was looking at a 2 bedroom condo last August for $240,000. It is not only still on the market, but now it is listed at $275,000. Umn. What is wrong with this picture? You condo hasn't been sold in almost a year, so you RAISE the price?

[Cronus Protagonist]

24. There's a lot of stupid people out there hanging onto their real estate

- they want to show a profit, so they keep on hoping, and raising the prices...

[sadiesworld]

13. Definite slowdown in my area.

Houses that would have been snapped up for the asking price a year ago aren't moving now. Sellers are dropping prices for the second round on some.

Pretty well sucks as hubby and I wanted to finish redo, sell, and move to something smaller. :(

[yorgatron]

14. i'm in san jose,and

the bubble is HUGE!
thing is,lots of people started putting money in real estate (also classic cars,gold coins etc.) because the stock market is so untrustworthy.
i know a lot of people that lost a LOT of money when the dot-com boom went bust.

[Strelnikov_]

15. The Happy Talk That The Denver Market Has Adjusted / Stabilized

seems incorrect considering the following statement:

In fact, analysts say the Denver market has remained as healthy as it has because of low mortgage rates as well as creative financing, including no-money-down and interest-only loans. Interest-only loans have accounted for a high rate - 42 percent - of purchase loans over $360,000 in Denver this year, according to LoanPerformance, a mortgage data firm.

. . .

And where does all the equity go? Why into the bigger McMansion.

The Kuklinskis, who have three sons, ages 11, 7 and 5, paid $197,000 for their home in 1999 and ended up with enough appreciation to help with a down payment on a house they are building nearby, a $385,000 four-bedroom with a three-car garage.

[wallwriter]

17. Hard to feel sorry for the guy...

making "only" $10,000 on what was pure speculation anyway.

[cliss]

21. Here are some things that are driving the market -

1) I've read on the DU that no less than 30% of all real estate is being purhcased for investment - i.e., people who already have homes, and are buying for speculation.

2) People are deathly afraid that interest rates will rise, which will make mortgages more expensive. So they're speculating now, while interest rates are still low.

3) Jobs and the economy are still not recovering. If anything, purchasing power of Americans has dropped, in particular because gas prices and energy prices have gone up dramatically.

4) Our economy sucks. Jobs are still being outsourced. Our manufacturing base is nothing but an empty shell. And we're supposed to believe real estate will keep going up?

Upping the Ante at the Poker table, that's all it is. Wait until the gamblers start to fold.

[progressivebydesign]

22. Hmm.. Here, multiple offers on most houses.

The dogs of the market are taking longer to sell. Most that are not selling either have a fatal flaw, or were overpriced for the market. Houses here are selling before the sign goes up in many cases. Perhaps it's because the prices are reasonable and there is no particular job loss around here... EVERY market is different. I sometimes am amused at many at DU that secretly HATE people who can afford to own nice homes... I think it makes them feel better as apartment renters, if they think that those of us that own houses are going to get screwed. It's just not happening nationwide. The desirable places to live are still desirable, and people will still pay to be there. It's cyclical, of course, but I've seen nothing to tell me that it's on the downswing nationwide.