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The GENESIS Perspective
Metropolitan Denver
Mid-Year 2008
The expected decline continues, market rapidly approaching bottom Volume 2008, Issue 2
CONTENTS
Since the housing market began to feel the impact of increase for the same time period, and was one of
the national credit crisis last fall, the decline in metro only seven metropolitan areas to post any increase at
Denver new home sales has been dramatic. Comparing all. New Housing
the 3,243 sales for First Half 2008 with the same period 2
in previous years, the decline was 47 percent from a While foreclosures for the first half of 2008 were Sales Trends
year earlier (6,113 sales) and 68 percent from three higher than the same period a year earlier, the rate of
years ago (10,041 sales). At a time of solid job growth increase has slowed greatly. And while the resale
with mortgage interest rates hovering around 6.75 per- market remains oversupplied, the number of homes New Housing
cent, the decline in new home sales has been far on the market as of mid-year has declined for the 2
Inventory
deeper than in 2001-2002 when job losses numbered second year in a row. Both of these key indicators
in the tens of thousands and interest rates were around are in contrast to national trends.
7.0 percent.
We believe the sharp decline in new home sales is Building Permit
2
Despite, or rather because of these negative reports, it is planting the seeds of recovery. The local economy Activity
becoming clearer to us that the market is rapidly ap- continues to exhibit signs of strength in terms of job
proaching bottom. The Genesis Group has been fore- growth, office absorption and retail sales. Net in-
casting challenging housing market conditions through migration to the state and to metro Denver continues,
2008 for over two years. However, we did not foresee and the apartment market has finally recovered to Resale Housing
3
the credit crisis, and we anticipated that an anemic near normal vacancy rates; as rents begin to increase, Closing Trends
market would persist while employment and household the option of renting rather than buying a home will
growth slowly caught up with the oversupply of hous- become less attractive.
ing. Instead, the credit crisis is inducing a dramatic
purge of the excess, increasing our confidence that For these reasons, we believe the metro Denver new Resale Housing
3
2008 will mark the bottom of this market. housing market is nearing the bottom of a long and Inventory
challenging period. We are dubious about the pros-
With most economists forecasting further national aver- pects for rapid improvement, but we believe that the
age home price declines through 2008 and into 2009, days of declining new and existing home sales vol-
our optimism about metro Denver’s housing market for ume, flat and periodically falling home prices in Average Price
2009 may seem misplaced. A review of national versus many submarkets and falling demand in the face of 3
Trends
local metro Denver economic and housing market fun- supply increases are finally nearing an end.
damentals can serve to explain our forecasts.
More can be found in The Genesis Group’s Second
The S&P/Case-Shiller Home Price Composite Index of Quarter 2008 Metropolitan Denver Housing Over-
20 metropolitan areas in the U.S. declined by 2.6 per- view. www.GenesisGroup.net/Products.html The Genesis Tour 4
cent from First Quarter to Second Quarter 2008. In
contrast, Denver led all 20 areas with a 3.3 percent
Economic Trends
Consumer confidence in the mountain region which includes Since 2004, employment growth has continued to remain positive
Colorado has also been battered over the past year, falling by 48 and since 2005 has grown at a relatively consistent rate ranging be-
percent from July 2007 to 2008 to 72.2 with little change over the tween 1.5 to 2.0 percent. However, the annual rate of job growth
previous three months. Although the mountain region index indi- has been about half the rate posted for most of the years from 1993
cates that consumers remain relatively more optimistic than the through 2000 when the growth rates were generally four percent or
rest of the nation, this level near 70 is similar to the very low lev- higher. While job growth is starting to experience a slowdown, it is
els reached when the metro Denver area was experiencing mas- still at 1.9 percent growth in Second Quarter 2008.
sive employment losses during 2002 and 2003.
Environment . Economy . Community . HOME
Page 2 The GENESIS Perspective
Volume 2006, Issue 1
New Housing Sales Trends
New Production Built Housing
Denver Metropolitan Area - Historical Sales Trends
1988 Through First Half 2008
21,000
18,75919,432 17,784
Total Number of New Home Sales
Detached Sales 18,282 16,889 17,579
18,000
Total new production home sales (3,243 units) during Attached Sales 15,608 77%
75% 70%
15,704
16,577
Percentage of Total Sales
First Half 2008 were down 47 percent from First Half 15,000 13,641 77% 67%
70% 71% 68% 65%
14,000
2007 and 63 percent below First Half 2006. Overall 12,000
12,112 80% 60%
sales volume decreased in all seven metropolitan Den- 9,801 9,590 81% 9,594
ver market areas. Attached housing continues to be a 9,000 8,113 91%
87% 60%
6,718
significant part of the new housing market as sales of 6,000 3,870
5,547
94%
condominiums, townhomes and duplexes accounted 3,457
3,724
25%
30% 33% 30% 29%
32%
35% 40%
40%
60%
for 38.4 percent of the market during First Half 2008.
3,000 23%
23%
9% 19% 20% 40%
6%
This decade, sales housing has generally accounted 0
13%
for 30 percent of the total sales volume in the metro
8
9
0
1
2
3
4
5
6
7
8
9
0
1
2
3
4
5
6
7
08
8
8
9
9
9
9
9
9
9
9
9
9
0
0
0
0
0
0
0
0
19
19
19
19
19
19
19
19
19
19
19
19
20
20
20
20
20
20
20
20
2Q
Denver area, but has reached 40 percent for more
r u
th
o
than two years.
m
12
Sources: The Genesis Group; Hanley Wood Market Intelligence
New Housing Inventory
New Production Built Housing
Denver Metropolitan Area - Historical Inventory and Month's Supply Trends
Mid-Year Comparisons - 2000 Through 2008
2,700 12.0
2,415
10.9
2,400
10.0
New home inventory (started unsold homes) remained
2,100
2,037
unchanged at just over 3,500 homes in Mid-Year 2007
# of Homes in Inventory
1,861 1,859
and 2008 comparisons. This was primarily due to the
Month's Supply
1,800 1,622 1,624 1,709 8.0
1,570
1,500
1,498 1,474 decline in new detached inventory.
1,263 1,219 1,241
1,205 6.0
1,200 1,076 1,073 1,101
953 5.3
900 4.8 4.0 Attached – The number of available attached homes
was up 18.6 percent from Mid-Year 2007 to Mid-Year
4.2 3.3
2.6
600 3.6 3.6 3.3
2008.
2.9 1.8
2.6 1.4 1.3 1.3 2.0
1.2 1.1
300 0.9
0 0.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 Detached – The number of unsold new detached
Detached Inventory - 2nd Quarter Attached Inventory - 2nd Quarter homes dropped over 25 percent from Mid-Year 2007 to
Detached Month's Supply Attached Month's Supply
Mid-Year 2008.
Sources: The Genesis Group; Hanley Wood Market Intelligence
Building Permit Activity
Denver Metropolitan Area
Total Housing Permits
1992 Through Second Quarter 2008
35,000
For Lease
29,038
Total Permits - There were 5,350 residential building 30,000 For Sale 27,955 27,742
Percentage of Total Permits
25,746
permits issued for First Half 2008, down 37 percent
Total Number of Permits
25,000 22,952
33% 22,244
from First Half 2007. 19,384 19,504 18,941
21% 34% 21,887
20,880
20,000 24%
30% 18% 18,269 12% 17,990
2%
For-Sale Permits - For-sale residential building per- 15,886
24% 26% 19% 10% 10%
14,729
mits declined 55 percent from 6,967 permits in First 15,000 13,177 12%
25%
Half 2007 to 3,158 in First Half 2008. For-sale per-
13%
10,000 8,556
mits made up 59 percent of all permits issued in First 87% 88% 76% 74% 81% 76% 70% 79% 66% 67% 82% 90% 88% 98% 90% 75% 19%
5,350
Half 2008, down from 81 percent in First Half 2007. 5,000
81%
41%
59%
0
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 First First
Half Half
2007 2008
Sources: Home Builders Association of Metro Denver; The Genesis Group
Environment . Economy . Community . HOME
The GENESIS Perspective Page 3
Metropolitan Denver Area
Historical Closing Trends of Existing Homes
Resale Housing Closing Trends
1999 to First Half 2008
60,000
52,460 51,830
50,000 47,183 48,307 48,119 47,197
47,326
47,946 47,297 The total number of existing home closings decreased 7.5
Total Number of Closings
percent in the metropolitan Denver area from First Half
40,000 2007 to First Half 2008.
30,000
73.3%
73.3% 72.6% 72.9% 74.0% 75.2%
75.0%
74.7% Attached – In first half comparisons, existing attached
24,477
74.8%
22,632
home closings declined 14.3 percent.
20,000
74.7% 76.6%
Detached – Detached home closings declined 5.3 percent
10,000
26.7% 27.4%
comparing the first 6 months of 2007 to 2008.
26.7% 27.1% 26.0% 24.8% 25.0% 25.2%
25.3%
25.3% 23.4%
0
1999 2000 2001 2002 2003 2004 2005 2006 2007 First Half First Half
2007 2008
Attached Closings Detached Closings
Sources: The Genesis Group; Metrolist Inc; IRES LLC.
Resale Housing Inventory Metropolitan Denver Area
Existing Inventory Homes and Month's Supply
Mid-Year Comparisons - 2000 though 2008
25,000 10.0
The number of existing homes actively listed for sale fell by 13 8.9
percent from 27,547 homes at Mid-Year 2007 to 23,958 20,000 7.7
7.9 19,909
8.2
19,268 8.0
homes at Mid-Year 2008. 7.1 17,119
17,465 17,472
7.1
Number of Listings
15,577
Month's Supply
Attached – The number of available attached homes was 15,000 14,246
6.1
6.3 6.5
6.1
6.0
down 22 percent from 8,279 homes at Mid-Year 2007, to
5.0
5.5
6,486 homes at Mid-Year 2008. The supply of unsold at- 10,000
9,805 4.7
8,271 8,453
4.7 9,430
8,279
4.0
3.3
tached homes declined to 7.1 months at Mid-Year 2008, down 6,267
7,212
6,486
from 8.2 months a year earlier. 5,000
2.2 2.8 5,072
2.0
1.4 3,058
Detached – The number of unsold detached homes also de- 1,508
clined in mid-year comparisons, down 9.3 percent from 0
2000 2001 2002 2003 2004 2005 2006 2007 2008
0.0
19,268 to 17,472 homes. The supply of available detached Mid-Year Attached Inventory Mid -Year Detached Inventory
homes declined slightly from 6.5 months at Mid-Year 2007 to Attached Month's Supply Detached Month's Supply
6.1 months at Mid-Year 2008.
Sources: The Genesis Group; Metrolist Inc; IRES LLC.
Denver Metropolitan Area
Historical Average Price Trends - New and Resale Housing Average Price Trends
Second Quarter Comparisons - 2000 Through 2008
$400,000
$372,544
$375,000 $352,132 Attached – The average price of a new attached home
$340,310
$350,000 $325,380 $341,888 increased 10 percent from Second Quarter 2007 to
$325,000 $307,095 $339,882
Second Quarter 2008.
Average Price
$294,138 $334,508
$300,000 $283,611 $313,887 $316,471
$275,000
$271,922 $303,638 $303,879
$293,279
Detached – Based on second quarter comparisons, the
$289,044
$250,000
$249,962
$274,567 average base price of a new detached home in the
metro Denver area has increased every year since
$225,313
$254,603 $211,790
$225,000
2000. Average base prices increased 3.6 percent from
$201,933
$226,184 $180,739
$200,000 $213,497
$202,820 $203,289 $200,800
Second Quarter 2006 to 2007 and 5.8 percent from
$175,000
$176,633 $177,508 $183,864
$192,205 $191,904
Second Quarter 2007 to 2008.
$150,000 $168,262
Meanwhile, the average closing prices of both de-
$152,771
$125,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 tached and attached existing homes posted notable
New Attached Average Price New Detached Average Price
Resale Attached Average Price Resale Detached Average Price
declines in Second Quarter 2007 and 2008 compari-
sons, dropping by 14 percent and 4.4 percent, respec-
Sources: The Genesis Group; Metrolist Inc; IRES LLC; Hanley Wood Market Intelligence tively.
Environment . Economy . Community . HOME
Environment . Economy . Community . HOME
The Genesis Tour
#1 BackCountry: Whispering Wind Collection — Shea Homes
BackCountry is a luxury, gated community located in the Highlands Ranch master
plan featuring unique and luxurious product types. Ultimately, the project will
feature 1,200 luxury production and custom homes. Nearly all will be located on
open space with private Wildcat Reserve open space available to its residents.
Whispering Wind is a collection of maintenance-free patio homes which recently 3
opened models. Plans range in base price from $590,000 to $672,500 and from
2,751 to 3,113 square feet.
#2 Meridian Village — Meritage Homes
Meridian Village is part of the Douglas County Master Plan and its location just two
miles east of I-25 along Lincoln Avenue offers good proximity to the south I-25 busi-
ness corridor. Meritage Homes plans to open the Meridian Village models in early
September with prices starting in the mid-$200s. They will offer five 2-story plans
ranging in approximate size from 1,550 to 2,250 square feet. These front-loaded 2
home plans are 30 feet wide, the smallest home width in Meridian Village. 1
#3 Hyland Village — McStain Neighborhoods
Hyland Village is a suburban, mixed-use community in Westminster planned to
include single family homes, townhomes and condos along with retail on the east-
ern portion of the community. It will also include a zero energy clubhouse.
McStain has several models open and offers two collections of homes at Hyland
Village. The Craftsman Bungalows are single family detached and start from the
upper $400s ranging from 1,950 to 2,424 square feet. The Penthouse Townhomes
start from the mid-$300s ranging from 1,790 to 2,450 square feet.
The Genesis Perspective is a quarterly newsletter containing excerpts from our quarterly Metro Denver Housing Overview, which is con-
sidered to be the most informative analysis and forecast of the Denver housing market. This newsletter is available free via email, and if
you prefer, we can mail you a hard copy for a $50 annual fee. To order or change your subscription, please contact Nancy Boehler at
303-662-0155 or at nboehler@thegenesisgroup.net.
Waterview Three
8000 S. Chester Street, Suite 150
Centennial, CO 80112
Phone: 303.662.0155
Fax: 303.662.0158
www.TheGenesisGroup.net
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