| HousingIntelligence Spotlight: Denver-Aurora, CO |
| Written by Jonathan Smoke | |
| 10.23.2007 | |
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Discuss this article on the forums. (0 posts) A subscriber recently asked us to focus attention on Denver, so in this post we’ll run through what our reports and data currently have to say about Denver. I first started with a macro perspective and asked, “Is now a good time to invest in housing in Denver relative to other markets?” Looking at our Housing Prospects Index report, the Denver-Aurora, CO MSA ranks 166 out of 361 markets. Looking at the underlying components of the Housing Prospects Index, Denver looks very good for the current state of the construction inventory. Our proprietary view of total permit equilibrium for Denver shows the market currently in an undersupply based on continued household growth coupled with a significant pull back in permits, especially single family permits which peaked in the second half of 2004. )) Click on graph for larger view Denver also benefits from strong local economic conditions, putting the MSA squarely in the top quartile of MSAs for economic strength. With continued strong job growth in 2007, the unemployment rate in Denver has continued to fall so unemployment is significantly under both the average MSA and the national rate. The only somewhat troubling economic indicator is the 2007 rise in bankruptcies.
)) Click on image for larger view Detracting from Denver’s prospects are pricing issues. According to our most recent calculations, the Denver MSA has greater than a 90% probability of seeing further price declines between now and the end of 2008.
Correspondingly, Denver has bottom quartile price appreciation potential over the next three years. The pricing pressures are evident in the performance of the new home premium, or the percentage difference between new home price per square foot over existing home price per square foot.  Builders had worked themselves back to a positive premium for new homes once the oversupply conditions improved in late 2006, but in 2007 what started positively has turned negative, just like the national scene as builders are discounting heavily in order to keep pace with falling prices and increasing existing home inventories. Drilling into average home price trends by county in Denver, we see that prices are not down across the board in Denver. Four of the MSA’s ten counties have seen declines in average prices through July 2007 over 2006. Three more have eked out minor gains, but two counties, Denver and Arapahoe have seen 5% appreciation in average prices. The size of homes being sold is not impacting the price trends, as the price per square foot trends look very similar. )) Click on chart for larger view Arapahoe County and Denver County are seeing the biggest gains—likely a reflection of demand in those counties still outpacing existing homes inventory pressures. Of course, our Neighborhood Insights reveal patterns well beneath the county level—by zip code, census tract, or even subdivisions. Our premium subscribers can see which areas within Denver offer the most potential for future success by monitoring trends in prices and changes in the demographics of the buyers. 
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