San Diego Housing Bubble News and Analysis

I think I've said this before on this website - Denver is a market that we should always watch because it is a canary for the coastal markets. It's always the first in and first out of the trends, whether they're up or down. They're 2 years into their downswing right now and I think they'll be 2 years ahead of us when they turn around, too. If people still have a stomach for RE investing after this, I think Denver would be a good place to start.

Above comments jibe with my anecdotal evidence. Sister-in-law sold her house in a somewhat upscale suburb of Denver called Westminster in 2001 and did very well. Unfortunately, she bought in Boulder County shortly thereafter and is now down about $100k.

Denver has a disproportionate number of federal civil servants and contractors relative to other metro areas its size. When the federal government is finally forced to cut spending, Denver will get hit even more. Nice area in many ways, but like San Diego, real estate there is declining.

We just closed on our house in the Springs and got what I thought was a fair price, no more and no less. Plus it sold in less than a month and averaged one showing a day. Unlike Denver though, I'm not seeing any evidence of a decline, although it will eventually come. With all the Army and Homeland Defense coming here, we might be one of the last areas to fall. But I can't help thinking that the peak in Colorado Springs is happening right now.

The guy who bought the house is from Las Vegas and apparently made alot of money on his house there.

Considering we had the house for less than three years, we did ok. The little bit we made just might end up in a down payment for something in San Diego, although not for a long time. We want to see at least a 40% drop before jumping in.

I beg to differ -- I don't think the Denver market is comparable at all to the coastal markets. The Denver area experienced no bubble or over-heated housing market like the coasts have enjoyed. If Denver is 10% overvalued, it is because there have been a lot of higher priced homes sold in the last three years. It's not exactly because other segments of the market have been appreciating with gusto. So, I don't know if "overvalued" is the correct term for what's happened here.

As Gone to Colorado noted, the Denver area has a lot of government employment (me included!) and this area was hard hit by the internet bust, due to the over emphasis here on tech and financial services employment. Of course, those jobs evaporated very quickly. According to Gov. Owens, we lost 30,000 jobs when that happened, and, with the double whammy of 9/11, we just never recovered. I've heard some areas of the country have emerged from recession, but we still haven't really recovered. As long as those good paying jobs are gone, I don't see us really making a strong comeback, and our housing woes won't be going away any time soon.

I took a look at historical housing prices (OFEHEO) for denver (denver-auora), they seem to contradict some of the claims here:

1.75% 3.39% 6.70% 8.15% 11.33% 7.14% 5.61% 6.07% 6.59% 10.80% 13.87% 10.34% 4.95% 2.34% 3.47% 4.30%

They show the y-o-y increase since 1990 to 2005. As far as these numbers show, from '96 to 2005, prices increased by a mere 82% (compared to the 200%+ in a number of california cities), but a correction hasn't started to happen yet although the rise did start to slow since 2002. Also, interestingly prices have been on a continuous rise for the past 15 years.

One thing though, the area spans Denver to Aurora. I don't know the Denver area well. Perhpas its covers too large an area for numbers to average out.

The Local Housing Monitor's recent study found the Denver market fairly priced, at only 10% overvalued.

I can't make sense of the discrepancy between the data and pippoule's observations. Job losses are the usual reason that housing prices decline.

Sorry - I meant picpoule. Anyway, there must be a way to reconcile this. He knows his local economy best. Picpoule, do you think the foreclosures are caused by job loss, or by ARM resets, higher payments on equity lines/credit cards, or too many cash out refis that caught up to people? In a weak economy, those factors can take hold faster.

They are caused by job loss and ARM resets. When there's no robust appreciation, people aren't using their homes as ATM's. That isn't that common out here. Also, the article you cite about Denver foreclosures suggests that these foreclosures are particularl widespread in the bottom part of the market, so probably low quality loans and easy money to people who wouldn't ordinarily qualify is another reason.

Don't forget, the Denver market seems to have appreciated, but it is due to the number of sales of higher end properties, not those in the middle or bottom. This fact has been repeated in the real estate section of the Rocky Mountain News for at least three years, with realtors having to explain to sellers expecting to jack up their listing prices that there has been no real estate bubble in our area, so sellers must lower their expectations. The Denver market only looks overvalued because of the number of higher priced homes sold, not the mix of homes sold. I hope this clairfies matters.

Colorado is a strange area. I bought a house there in 1985 when prices were distressed and people looked at you as if you were crazy if you mentioned buying a house. There were real estate signs everywhere. The house has about doubled in price since then--nothing to write home about. They are about 6 years out of sync with California's real estate cycle.

My sister and her husband are real estate brokers above Denver, and business has been so bad, that both have second jobs. There is no problem with listings, there just aren't any buyers.

Its the last place I would suspect of being a speculative bubble, but if you look a Arizona a few clicks away 40,000 houses for sale and 5,000 are selling a month it kind of makes you wonder.

Maybe the baby boomer's have hung up their skis and have moved the the elephant graveyard of Phoenix. Its kind of like watching water run up hill.