by Larry Hotz, Denver Real Estate Broker
With the rest of the country expecting an economic dip in 2008, the question for Denver is whether we will suffer a recession.
“Absolutely not…” is the conclusion of Richard Wobbekind, Economist with the Leeds Business School at the University of Colorado. Last week, he presented The 2008 Colorado Economic Outlook at Denver’s Hyatt Hotel. It represents contributions of over 100 Colorado economists, business leaders and academicians.
The report predicts Colorado jobs will increase by 1.9%, or some 43,500 jobs, next year. Population increase will also beat the nationally forecasted increases. The unemployment rate in Colorado is expect to rise slightly to 4.2%. National unemployment is predicted to be 4.9%.
Talking about the predicted national recession, Tim Shessley, an Economist with Xcel Energy, said: “We may not get to this”. In fact, many business leaders are optimistic about the coming new year. There have been many times that Colorado ran contra-cyclical to the national economy. The boom years of the mid-1980’s never happened in Colorado. During the national recession of the early 1990’s, Colorado prospered during a recovery from our recession in the previous decade.
Net migration for 2008 is expected to increase from an estimated 55,300 in 2007 to 62,500 in 2008. These are people moving to Colorado from anywhere else and includes corporate relocation transfees. That will bring the total Colorado population above 5 million for the first time ever!
What does all this mean for housing. In a separate report, rental vacancies are the lowest since early 2001. Only 5.2% of residential rentals are vacant. As a Realtor, I have observed that some of the folks moving to Colorado have chosen to rent rather than to buy for various reasons. This has filled rental units throughout the Denver metro area.
Also, builders have dramatically cut back on building new homes unless they have purchase contracts for a specific unit. They have also lowered incentives in communities where standing inventories of pre-built homes have been reduced.These factors alone should help bolster residential resales in 2008.
So, more people will move here in 2008. Apartment vacancies will be harder to find. New homes will be less available and incentives will likely be less. But resale homes will be plentiful. If interest rates stay low and home loans are as available as they currently are, I expect 2008 will be a respectable year for residential real estate.
We will have the worst Recession since the 1930’s starting now. Job growth is anemic at best and wages are a joke. However that is only a small piece of the puzzle.
MEW is the big story homeowners took out 800 billion dollars in 2005 and 2006. 2007 numbers aren’t in but they are probably going to come in 100-150 billion less. Why is this impotant? Well every 100 billion in MEW= 2.5 million 40000 dollar a year jobs. Roughly = to the entire amount of people who are unemployed. If MEW drops 400 billion you are looking at the equivalent of 10 million unemployed people. Will it drop 400 billion probably, historically it ran around 100 billion through the 1990’s. If it dropped back to 100 billion that would equal 17.5 million lost jobs.
As for a pick up in home sales good luck for multiple reasons.
1) Prices are to high using normal financing. I make roughly 80k a year and can only afford a piece of crap home in Colorado Springs. I rent a 500k home for 1500 a month why buy a 240k home?
2)The baby boomers are on the downhill side of their homebuying years.
3) Several million people who would have bought now, already bought during the boom. Their credit is shot to hell so they are out of the game.
4) Lending standards are tightening and will get even tighter as home prices fall. Toxic waste totally insane loans are gone. Without them you return to late 1990’s prices as the inventory rises to 16 months nationally next year.
Next subprime is a small fish in a huge ocean of debt.
Alt A
Neg Amortization.
IO
Commercial loan defaults.
Credit card defaults.
Auto loan defaults.
LBO’s falling apart.
High oil prices.
World wide housing bubbles bursting.
Baby boomers ending their peak spending years.
Sorry RECESSION hopefully no DEPRESSION.
Recession, Yes. Colorado is way to expensive already, I will stay in Texas where its cheaper. get ready to see home prices go down, and your neighbors moving out.. Congress help us…