Denver ranks 10th in U.S. on housing-market strength

Denver Business Journal
October 27th, 2011

Denver ranks 10th out of the nation’s top 100 cities in the strength of its housing market, according to new data from market-intelligence firm Hanley Wood.

Denver achieved its ranking because its home values are holding steady, its foreclosed-homes inventory is dwindling, and its economy is stronger than most other markets.

“Denver is at the end of a long valley, but there’s still a slow, gradual recovery ahead,” said Jonathan Smoke, executive director of research for Costa Mesa, Calif.-based Hanley Wood. “The good news is, it’s not getting worse. Denver is right at the point of recovery.”

Smoke spoke Thursday at an “Intel for a Changing Market” event at the Hyatt Regency Denver Tech Center. The top-100 markets data is in the September issue of Builder magazine.

In a speech entitled “Adapt or Die,” Smoke laid out statistics showing how Denver’s market has gone through the worst, and is expected to continue to rebound — regardless of this being an average year for home building and sales.

“Despite this being an excellent time to buy [because of low interest rates and lower house values], people are just not buying,” Smoke said. “Denver definitely fits into that category.”

But the net demand for homes here exceeds the supply of new construction, Hanley Wood research shows. Home prices here have been moderate, and though there haven’t been any huge gains, the values have hit bottom and are moving up, Smoke said.

“It does not look this way in other parts of the country,” Smoke said. “I don’t enjoy these sessions in California.”

Denver’s economy is the key, he said, and is expected to recover jobs lost during the recession six months before the rest of the country. Hanley Wood predicts that national recovery will be in 2014.

While the level of distressed properties here is higher than in many markets, there are still more re-sales and new home sales than real-estate owned (REO), or foreclosure sales by banks and lenders.

“It’s Denver’s negative supply that we like about this market,” he said.

There was a time banks were out-selling builders by a 3-1 margin as the values of those distressed properties were, on average, 40 percent cheaper than other market homes, according to Smoke.

The ZIP codes with the strongest REO ratio are 80238 and 80230, both in Denver, and 80023 in Westminster. The two counties that have “turned the corner” and have the strongest housing market are Broomfield and Douglas, Smoke said, but only in Broomfield are builders selling more than banks.

As far as values, Denver homes have been selling at the same average price as 2005, though with much less volume, Smoke said.

“This was one of the only markets in the country where we saw this play out,” he said.

The top builders in the metro Denver area flipped in five years, with Richmond American Homes (the homebuilding brand of M.D.C. Holdings Inc. M.D.C. Holdings Inc.

“You just need to appreciate where you are in Denver, as compared to the rest of the country,” Smoke said. “We expect increases in Denver’s market next year, but it will be very slight. At least it’s not a decrease.”