Denver Housing Market Report Card: Barely Passing

The Denver housing market was lousy in 2006, based on a year-end report released Wednesday by The Genesis Group, an Englewood-based market research firm. The new-home market received a “D” grade, as did the existing home market.

The metro-Denver apartment market earned a “B,” citing stronger absorption rates - which measures the increase in occupancy from one time period to another - and little new inventory coming on the market since 2002.

The report noted that strong local economic growth, retail sales and commercial real estate sales did not translate into a robust housing market.

“Meanwhile, metropolitan Denver’s housing market is hurting,” the report stated. “In spite of continued job growth and other signs of general economic improvement, both the resale and new housing markets suffered from declining sales volume, rising inventories and flat or declining home prices in 2006.”

The report characterized the number of home contract cancellations as “alarming” for the second half of 2006, with cancellations increasing nearly 23 percent for the fourth quarter because Colorado mortgage borrowers got scared at the last minute.

Last year’s lackluster housing market will translate into much of the same in 2007, according to The Genesis Group report.

“We believe the metro Denver area’s economic recovery will continue and pick up steam over the next several years. Unlike the years 2003 through 2005, however, when the new-housing sector was the engine driving the economic recovery, we anticipate other sectors will pick up the slack in 2007 while the new-housing market languishes before recovering.

Therefore, we anticipate no change in new production home sales volume in the Denver metropolitan area from 2006 to 2007, or a total of 14,000 new attached and detached home sales for 2007,” the report stated.

Other highlights of the report:

• For-sale housing permits were down 20 percent in metro Denver in 2006 as compared to the previous year.

• New home sales declined 21 percent, from 17,599 units sold in 2005 to 13,936 sold in 2006. Colorado mortgage loan applicants appear unprepared to purchase at the moment.

• New home communities reported less consumer traffic during the fourth quarter of 2006 than in any quarter since 1994.

• Sales of existing detached homes were down 9.2 percent, and sales of existing attached homes were down 8.4 percent in 2006.