Denver Housing Market: Confusion Reigns

At midyear 2007, the Denver housing market continued its recent pattern of conflict, according to a new Metrostudy report.

“These are confusing time for home builders, who find themselves in the midst of a steadily growing economy. … [But] the recent home loan rate increase to nearly 7 percent has put a damper on consumers’ willingness and ability to purchase new homes,” John Covert, director of Metrostudy’s Colorado and New Mexico operations, said in a statement.

Based in Houston, Metrostudy researches and produces reports about the U.S. housing market.

Positives in the Denver area that affect the housing market include the following, according to the Metrostudy report:

• The local economy continues its moderate growth, with 25,100 new jobs added through June in the 11-county area around Denver, according to the Colorado Department of Labor & Employment. That’s a 1.8 percent increase from the same period in 2006.

• The Denver area’s June unemployment rate was 3.3 percent, compared to 4.5 percent nationwide.

• Metro Denver’s housing resale market “improved slightly” in the first six months. Sales increased to 25,513 units in the second quarter from a year earlier, according to Multiple Listing Service.

• Finished vacant new-home inventory is down by 500 units since the end of 2006. As of June, there was only a two-month supply.

“Since builders started fewer speculative homes, inventories are falling back toward …equilibrium, and should be manageable if the current closing pace continues,” Covert said in a statement.

Lot development for new houses has dropped through midyear, with 985 lots delivered in the first quarter and 1,504 in the second. That’s the lowest six-month total in six years.

The local Colorado housing market continues to face the following challenges:

• New-home starts dropped 38 percent to 2,938 in the second quarter, from 4,747 units a year earlier. Those starts include single-family detached homes, as well as attached product such as townhomes and duplexes.

• Local demand for new houses has been hurt, as it has been nationwide, by fallout from the collapse of the bad credit mortgage market.

• Closed sales of single-family houses declined 33 percent to 3,040 units in the second quarter. Closings now outpace new-home construction, as Colorado mortgage demand picks up and the gap “illustrates the current market correction, and reinforces the need for additional job growth and inmigration to boost housing demand,” according to Covert.

• Twenty-seven percent of single-family houses sold from June 2006 through this June were priced at less than $300,000. Two years ago, 49 percent of houses sold at that level.