Denver Housing Market Report: Colorado Mortgage Defaults a Problem

The Genesis Group research firm of Englewood has issued its “report card” for the Denver housing market in the first quarter - giving its lowest marks to foreclosures, the new-home market and permit activity.

Genesis’ “Metropolitan Denver Housing Overview” analyzes housing data for metro Denver’s seven counties — Adams, Arapahoe, Boulder, Broomfield, Denver, Douglas and Jefferson. It also looks at some parts of Longmont and Erie.

Foreclosure filings and Colorado mortgage defaults in the first quarter increased 33 percent from a year earlier.

Foreclosures, as a percentage of owner-occupied households, increased to 2.6 percent for all of ‘06, compared to 2 percent for ‘05. Adams County’s 4.1 percent foreclosure rate for last year was a 27-year high. Adams, Arapahoe and Denver counties accounted for most metro-area foreclosures in the first period, or 77 percent.

“This is a very high and troublesome rate, but remains well below the 3.2 to 3.8 percent foreclosure rates for the years 1987 and 1989,” the report said of the Denver area.

Despite efforts to help people avoid foreclosure, Genesis expects the number of foreclosure filings to continue to climb this year as home mortgage rates adjust upwards.
Genesis further believes “foreclosures represent the most significant challenge contributing to the woes of both the new and resale housing markets,” the report said. Foreclosures have the greatest impact on low- to middle-income home prices in both new and existing homes. When sellers of homes in those price ranges have a hard time selling, because of an oversupply of underpriced foreclosure properties, they have less money to spend on another home.

Sales of newly built houses decreased 39 percent in the first quarter, to 2,800 from 4,585 in last year’s first period. Most of the sales decline came from single-family detached homes, or standard houses, whose sales dropped 42 percent. Sales of new attached homes - condos, townhomes, duplexes, etc. - declined 34 percent.

In the first quarter, builders had 3,488 unsold new homes in their inventories, which is up 6 percent from a year earlier. The increase was all from attached housing such as condos and townhomes.

Because of higher inventories of attached housing and lower selling prices, this Colorado housing market are had a 5.2-month supply of those homes, compared to a 3.5-month supply a year earlier.

Other points in the report include:

• Sales of existing detached houses dropped 7 percent in the first quarter from a year earlier, while sales of existing attached homes decreased 3 percent as mortgage borrowers waited for stability in the market.
• Average selling prices for existing detached homes dropped 4.8 percent to $290,268. Attached homes’ average selling price declined 3 percent to $176,889.
• Looking at existing detached homes selling for less than $150,000, sales rose “an astounding” 52 percent in the quarter. Attached homes selling for less than $125,000 increased 13 percent.
• The excess supply of existing homes on the market “remained at critical levels” in the first quarter, with a 5.9 months supply compared to a 5.7 months supply a year earlier.
• Supply of lots for single-family homes dipped 0.7 percent in the first quarter from a year earlier.