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Denver’s housing market, past and present

To better understand current events and gain an appreciation for what the future may hold, it is important to take a look into our housing market, past and present.

Steve Blank

Provided by LIV Sotheby’s International Realty

Steve Blank

Nationally, a recession was becoming apparent and was in full swing by the 3rd quarter of 2008. Denver however, had a slow-to-moderate economic and real estate climate since 2002 and did not see the over-building and speculative investing taking place in cities like Miami, Phoenix and Las Vegas — bursting the bubble. Values in those metro areas plummeted 40% to 60% over a four year period while Denver suffered a 5% to 25% loss of value, depending on the type of property. This was the worst economic recession our country had endured since the 1980s, when rates hit over 14% for a mortgage.

Sharply rising prices was only one contributing factor to the recession (2008-2011). That economic bonfire was stoked primarily by subprime and loose documentation for mortgages. Credit worthiness did not always play a role. This recession was based largely on greed by financial institutions, offering loans starting at low rates that had lethal escalators that borrowers would not be able to afford within a few years. There were interest-only loans adding monthly principal repayment to the original amount borrowed, without paying down the loan with each payment. Borrowers put 0 – 5% down on a loan and within 5 years actually owed 105% (or more) above the purchase price, with interest rates rising, while prices got softer. Thousands of people jumped on the fix-and-flip bandwagon.

In 2006, flipped homes accounted for nearly 9% of national sales. For a variety of reasons, in 2016 only 5% of all sales were flipped homes and that decline will continue. In many cities people put big money down on new construction developments with the intent of selling their contracts for profit by completion of construction. I visited Miami in 2008 and literally saw a couple dozen “see-through” buildings. These beautiful structures ultimately sat empty because people chose not to close on their contracts, couldn’t sell their contracts, or get loans; giving up significant earnest money deposits. Many developers there, and across the country, were unable to complete construction of their buildings and homes. It took many years to clean up these messes.

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