Colorado Housing Market Split into Three Segments
It’s not easy being the Colorado housing market these days.
The New West, a journal chronicling business and the new economy in the Rocky Mountain region, reports a record number of foreclosures in the state, particularly in the Denver area, which have given it a bad rap.
Some say that foreclosure flap has even affected the sale of luxury homes in the hills above Denver and Boulder.
But understanding the state of Colorado mortgage demand requires more info than just foreclosures.
Yes, home sales for the middle class in Colorado are awash in bad credit mortgage problems right now, enough so in fact that the state Legislature is looking into ways to help. But other housing markets in the state are doing just fine.
Both the Denver Post and the Aspen Times report that home sales in Pitkin County, home of Aspen and Snowmass, were up 19 percent in 2006 to a total of $2.69 billion. As Aspen home sales rose, the average price hit $5.44 million in 2006, up more than $1 million from 2005.
Buyers are generally wealthy and from out-of-state, and space for building is limited, officials say, which means demand is likely to be high - and not dependent on the costs of Colorado home loans.
Also in Pitkin County, officials report that so-called “worker housing” or affordable housing sales hit $21.6 million in 2006, the highest it’s been in at least five years. Granted, it’s just a mere fraction of the regular housing market in Pitkin County, but this market is much different.
Worker or affordable housing is generally subsidized by state, federal or other funding sources, and doesn’t operate in the same way. Prices are capped, appreciation is limited and the number of units for sale is based on how many openings there are in the system.
Buyers have to apply and qualify for a home, and (obviously) be able to make the home mortgage loan payment, and units generally aren’t available as second homes.
Such a system helps those with limited incomes purchase a place of their own, but getting into one isn’t easy, in Pitkin County and beyond, given the limited supply and the numerous qualifications.
But the lure of owning has pushed many people to sign bad credit home loans that aren’t as friendly. And that’s where the foreclosure problem begins.
Democrats and Republicans in the Colorado Legislature are looking at bills to address the problem, and many are focusing on the culture of lending: Who is doing the appraisals on these homes and who is offering what kind of mortgages?
This is to say nothing of foreclosure or other botched financial obligations associated with the worker housing projects.
Maybe another avenue for lawmakers is to find ways to add more worker housing projects, to lessen the demand for the kind of mortgages that got so many people into trouble in the first place.