Nestled in the foothills of the majestic Rocky Mountains and blessed with an average of 300 days of sunshine a year, Denver has long capitalized on its natural outdoors lifestyle. And boomers, eyeing the region as a potential retirement haven that still offers four distinct seasons, have flocked to the region, making Denver the baby boom capital of the United States, according to the city's own demographic analysis.
Denver's housing market is idiosyncratic, says Dan Jester, an economist at Moody's Economy.com. "It never went through the big cycles [and] is holding up because it is small."
One sign is the light-rail system that is being built throughout the region, a move that is projected to be a boom for many builders looking to create new homes in Denver's many development pockets adjacent to the rail line, such as Lone Tree and Aurora, Colo. Ultimately, the rail line is estimated to bring new housing to the region, some estimates are between 250,000 and 350,000 new homes.
"The light rail will generate more [home building] and a better test of how it can change the development over the next 10 years," says Mike Rinner, vice president of the Genesis Group, a Denver-based housing market research company. "There will be probably 50 to 70 potential transit-oriented development locations; it's the greatest opportunity we have."
Rinner says Denver needs a few healthy economic quarters to get rid of the large inventory and to deal with its high foreclosure rate, which is one of the largest in the country thanks to a poor regulatory structure to protect consumers, as well as the use of interest-only loans and adjustable rate mortgages.
"The story right now in Denver is foreclosures–people got into homes they cannot afford," Rinner says.
While there is plenty of energy in Denver and lots of potential home buyers, economists still see a bleak time for the region until it shakes out of the downturn.
Other experts say Denver is coming back gradually rather than dramatically. When the tech sector fell in 2000, Denver lost about 100,000 jobs, and it has taken the last few years to get them back, according to Marilee Utter, president of Citiventure Associates, a Denver-based consulting company on mixed-use and transit. "Now we've absorbed the jobs, and we're back. There's lots of infrastructure investment. Our job growth is over 2 percent, higher than the national average," Utter says.
"I think we have at least another year of difficulty," says Tucker Hart Adams, chief economist for the Rocky Mountain region for U.S. Bank. "There are two pieces of good news. This is the third year housing permits are down, and we have not created the excess of new homes that some parts of country have." Community Ties
Jeff Kappes, Shea Homes' division vice president for the Denver region, likes to think his company has what it takes to sell homes here. And that, he says, means more than just building a nice house.
Shea has been working in Denver for 26 years, and its communities include Reunion in Commerce City, Colo., and Highlands Ranch which is in Douglas County. "We are really trying to emphasize that we are providing a community appeal that is different than what many of our competitors are applying," he says.
Pulte Homes is building new communities, too. At Anthem, northwest of the city in Broomfield, Colo., one typical sales magnet is conspicuously missing. Pulte decided not to build a golf course at the development because of Coloradoans' preference for undeveloped land, plus Anthem residents can simply walk across the street and join a club at another development, says Tony Barbee, Pulte's Denver president.
Eric Wittenberg, president and CEO of Boulder, Colo.?based McStain Neighborhoods, says he is approaching the Denver market with cautious optimism, expecting a decent 2007 and a better 2008. "In general what works are the best locations," Wittenberg says. "It's really a micro market versus a macro market. ? If I had to generalize, I would tell you fringe and suburban areas are feeling much more pain than the close-in or infill sites."
McStain is one of the 18 to 20 builders developing homes at Stapleton, the redevelopment of the former airport project led by Forest City Enterprises. According to stapletondenver.com, nearly 6,800 residents are already calling Stapleton home, and officials expect that number will grow to 8,000 residents by the fall. John Laing Homes also is building at Stapleton.
While there are plenty of signs that Denver will be coming back, economists say the Denver market is neither overheated nor contracted, and it will take a few seasons to stabilize. The region is expected to perform well in the next few years. But it will still take a magic formula to get it back to normal. Hanley Wood Market Intelligence predicts that the median price of an existing home is expected to gain 4 percent in 2007.
- Population: 2,402,800
- Job growth: 1.4%
- Permits: 14,865, as of 3Q06 (down 0.1%)
- Closings: 15,636, as of 3Q06 (down 16.5%)
- Cancellation rate: 21.4 %
- Total inventory: 50,077, as of 3Q06 (up 23.3 %)
- Median single-family home price: $304,990