Why are the prices of houses falling in CO?

[hello-world]

i pretty much agree with jazzlover's assessment of the situation for colorado. for the denver/boulder area, i would guess it might be similarly as tough, though there are lots of government and some other services (financial, technical, etc.) jobs that seem intact - i've not heard otherwise, anyhow. at the same time, lots of people might head for the area and compete for what opportunity exists, i'd imagine, not to mention the construction situation (huge construction work force that has been hit hard in the past - the below quotes 22000 jobs lost there in 2002 when things were not as bad as projected for '08 now).

yet another assessment and forecast:

http://www.coloradoeconomy.com/downloads/USB_Forecast08_FINAL.pdf (broken link)

basically, construction, population increase/inmigration, and consumer spending (and diminishing ability to spend due to limits on credit and falling home equity and employment, the basic faux foundation for spending to date) seem likely to hit things in CO in a mirror of much of the rest of the nation, though energy in NW colorado may buoy slightly there. plus, unemployment seems to be likely significantly higher than reported due to people that have stopped looking/claiming or have taken part time underemployment. (overall, pretty much a second of jazzlover's assessment in general terms, though this forecast seems a bit less dire).

an interesting quote that seems a little telling:

"Gasoline prices rose 12.8%, hitting consumers’ pocketbooks. Nevertheless, the share of people driving alone to work has increased since 2000, when gasoline was $1.50 a gallon; carpooling has dropped and the share of commuters using public transportation is unchanged."

[brightdoglover]

I'm not sure what the previous quote tells. I don't know that carpooling or public transport is even an option for most people.
Where I live, people do not live in any one town or area to get to our relatively stable jobs. We do shift work. There is no public transport outside the main city, and housing in the main city is impossibly expensive, not just somewhat more so.
I hesitated to move to an area where I'd be so car-dependent. My job is 20 miles away, no traffic with shift work. When I lived in the city, it was five miles, and I could get a bus or a lift or even a taxi if need be.
But I had no choice of home ownership, except for the 300 sq.ft. studio I did buy, with subsrance abusers renting alongside and below, and no way to have dogs. There was no choice of a totally modest house. I would have preferred that to being so car-dependent.

[formercalifornian]

Brightdoglover...I think the quote indicates that your heavy dependence on a car isn't unique. Rather, it's very widespread. Therefore, even when gas prices are rising, we have limited ability to reduce our driving because our lifestyles demand it, and public transportation isn't widely available outside city limits.

Interestingly, I think there is a perception that exurban (country) living is cheaper than urban living because housing prices are generally lower. That may be the case in some areas; however, when my spouse and I sat down to run the numbers, we found that over the long-term, it's a better choice for us to purchase a more expensive house near his work, so he can commute by foot or bike, than to continue living in the exurbs where we're forced to drive everywhere. By the time we added up the cost of purchasing, insuring, maintaining, and fueling a second car over the course of the ten years we'll probably own our next home, we found that it added up to MUCH more than the current cost differential between inner-ring suburban living and exurban living. We rapidly came to the conclusion that purchasing a big house in the country was not worth it. We'll be moving in 2008.

[hello-world]

Originally Posted by brightdoglover

I'm not sure what the previous quote tells. I don't know that carpooling or public transport is even an option for most people.
Where I live, people do not live in any one town or area to get to our relatively stable jobs. We do shift work. There is no public transport outside the main city, and housing in the main city is impossibly expensive, not just somewhat more so.
I hesitated to move to an area where I'd be so car-dependent. My job is 20 miles away, no traffic with shift work. When I lived in the city, it was five miles, and I could get a bus or a lift or even a taxi if need be.
But I had no choice of home ownership, except for the 300 sq.ft. studio I did buy, with subsrance abusers renting alongside and below, and no way to have dogs. There was no choice of a totally modest house. I would have preferred that to being so car-dependent.

i think that if the comment concerns public transport and carpooling, it has to do with regions with public transport and carpooling....that are seeing LESS car pooling and transit use while people are spending MORE money (that they may not even have - credit) on gas - that is 2-3 times what it used to cost just a few years ago - while commuting. if you take a look at that article, it might be more clear with some context. this seems sort of indicative of why and how things are out of whack. even with pressing times in some ways (people now actually spend more than they earn while property values decline and gas prices climb), people continue to go into debt for the "immediate gratification" of things like hopping in their own car and burning their own fuel (and credit), or otherwise continuing to buy things they can't afford. "the american dream", after all.

to formercalifornian's comment, there was a recent article (in many papers) concerning some of the most expensive places to live in considering commutes, and it showed that in some of these cities, the property values were actually relatively low, but their commute expenses were what made the list for them.

[formercalifornian]

there was a recent article (in many papers) concerning some of the most expensive cities to live in considering commutes, and it showed that in some of these cities, the property values were actually relatively low, but their commute expenses were what made the list for them.

I'd be interested in a link if you have one. Did Denver make the list?

[hello-world]

Originally Posted by formercalifornian

I'd be interested in a link if you have one. Did Denver make the list?

here's the spirit of it. this has to do with most expensive commute cities, where people spend nearly 20% of their expenditures on gas and commute-things (of course conventional wisdom is about 28% salary, e.g., should be max for housing - but such conventions are "old school" it seems these days ). yes, denver is on this one:

http://promo.realestate.yahoo.com/americas_most_expensive_commute_cities.html (broken link)

"© Shutterstock
10. Denver, Colo.
Percent of expenses spent on transportation: 19.2%

Annual delay per traveler: 51 hours

Congestion tacks on 40% more time to the average commute in Denver. Its high cost ranking is due in large part to Denver households ranking fourth overall in the number of cars per household."

denver metro folks love their "stuff" (cars, toys, etc.)...and to use it, evidently. i wonder if this includes ski and moab trips...

it seems a trend is places both more newly sprawling and more "encouraged" to sprawl and consume.

[mol666]

Housing prices are dropping in Colorado (and nationwide) because wages just haven't kept up with house inflation.

I don't know why people are trying to get into the fancy analysis of this. It's simple. Over the past few years, the only thing we had going in our economy was the housing/credit market. With more credit, housing costs went up and up until finally, the average family in an area couldn't afford the average price of a house. So, the financial institutions came up with various "exotic loans" (their phrase, not mine). Sure enough, people started defaulting even on these loans because...guess what, they didn't have enough financial maturity (hello? downpayment?) to take out these mortgages in the first place.

Prices have to come down (yes, even in Central Denver / Boulder), because more and more people will become apprehensive about buying a home. The buyers will wonder why they buy something if the value is going to drop in the foreseen future. Meanwhile the sellers will try to lower prices, but only to a point. Let's not forget a lot of these sellers have taken out 2nd and 3rd mortgages on their homes to "cash in" on their equity. There's only so far they can go. A lot of those sellers may well have to bring cash to closings.

The appreciation we've seen in the Denver market over the past 10 years is just not normal. I realize that the real estate agents on this board have to make a living, but surely, they must've seen this.

[Charles]

Originally Posted by mol666

Let's not forget a lot of these sellers have taken out 2nd and 3rd mortgages on their homes to "cash in" on their equity.

I've never understood the math on this. All other things being equal, the amount a person can borrow is a function of his cash flow (income). If the cash flow stays about the same and the interest rate stays about the same, then how can someone take out additional loans assuming they took out the biggest loan they could afford in the first place?

Originally Posted by mol666

The appreciation we've seen in the Denver market over the past 10 years is just not normal.

The rate of appreciation in Denver is a little over five percent over the past 20 years. Not too far from historical averages (of about four percent??? not sure). (Data from the Standard & Poor's/Case-Shiller home price index). We bought in LA in November 1997, a local minimum and sold in June 2006, a local maximum.