Market Conditions in Denver>Question Details

Jason, Home Buyer in Seattle, WA

My wife and I are moving to Denver in May.

Asked by Jason, Seattle, WA Thu Mar 6, 2008

We're concerned about the bottom falling out of the market. We only plan on living in Denver for 2-5 years and then either moving back here to Seattle, or to Austin (depends on what we can afford). We'd like to live in the Englewood area and plan on spending around $200k. Honestly, we're afraid of getting stuck if this turns into a bad recession. Can the housing market fall apart that bad? And if it gets worse between now and June will we still be able to get a home loan? We'll be first time buyers with pretty good credit.

Help the community by answering this question:


"Can the housing market fall apart that bad?"

Of course, Realtors are, by definition, optimistic. Otherwise how could we continue to do what we do. We sell homes to clients and friends and I would like to believe that most of us do that in good conscience.

That said, you might want to consider doing some independent research. Denver is not a great real estate market right now and no one can predict exactly when it will improve. Nor, can anyone realistically predict how bad it will get. However, there is some underlying factors that are very promising about the Denver market.

Denver is still a net growth market. Jobs are increasing. More people are moving into the metropolitan area than moving out. The economy here is still healthy. None of these things were true in Denver experienced its worst recession in housing. That was during the 1980s. We were a one employer town. And that employer was energy. When energy declined, jobs evaporated and people started moving out. Homes depreciated an average of 2%-3% per year during that period.

We just don't have that kind of market now. Could happen in the future? Sure. But, it would have to have a catastrophic event in the economy for that to occur.

What is the worst case did occur? Yes you could get stuck. Then what would you do? You'd have to do it people in the 1980s did. That was either to sell for less money than the last home sold for or rent out your home until things improved. Right now, that might not be such a bad alternative. Rents are rising here dramatically. It is not difficult to rent a good house.

When I rent in this market? Personally, I wouldn't. I believe the risk is low enough that buying is the better decision. Plus wait until you see what kind of rentals you can get in the same price range of monthly payment compared to buying a home. Rentals are generally not in good condition and often have bad locations.

I would suggest looking at both rentals and properties to purchase. That will give you a good comparison between the two. Best of luck and enjoy your new home in our great city!
3 votes Thank Flag Link Sat May 24, 2008
Jason: Before you commit to buying a home, it might be worthwhile to consider transaction costs: If you only stay for two years and need to sell when you leave, you may not have had enough appreciation (or income tax benefit) to offset the costs for buying a home and then selling that home. I would hate to talk you out of becoming a homeowner, which is the single best financial move a couple can make. But, before doing so, make sure that your plans are realistic with respect to how long you will own the property. Good luck.
2 votes Thank Flag Link Thu Mar 6, 2008
Hi Jason, I'm a Denver native and have some first-hand experience with the fluxutions. I don't like to give answers based on "I believe." My market analysis of the Denver Metro area indicates to me that this is a prime time to buy and in 18-24 months, I would expect to see a turn around. At that point, the forclusures will be absorbed in the market. (Englewood is a fairy consistant market) You have to remember,d Denver is a very desirable place to live and very affordable for people coming from the coasts. 300 days of sunshine and well educated population are strong draws to the city. Let me know if I can help you---I can give you specific data on neighborhoods and help you avoid more risky sceanarios.
Warren Petracek, GRI, SRES
Broker Associate, Showcase Properties Unlimited
Certified Residental Appraiser
1 vote Thank Flag Link Fri Mar 7, 2008
I agree with Susan. Very good answer. Nobody knows what the market is going to do, and if they tell you they do they are full of "you know what". But over time real-estate is historically safe and increasing investment. If you are looking at staying there for more than 5 years you will more than likely come out ahead. Anything less tan that is pure speculation (as if staying more than 5 years isn't).

Take Care...
1 vote Thank Flag Link Thu Mar 6, 2008
I wish we knew the answer to your question. No one does, it requires a crystal ball. If any purchase of real estate is approached as a long term investment then historically you should be fine. Just don't plan on selling in a down market and have an alternative 'exit' strategy if when you go to relocate if it is not a good time to sell. For example, if when you go to relocate are you willing to rent it out until the market improves? Will the rent cover the mortgage payment? etc... There will be no guarantee of performance and I believe most would agree that real estate is the safest financial risk you can make but it is still a risk and should not be approached haphazardly.

I certainly hope it doesn't get worse 5 years from now than what it is currently. Real Estate, like any business, is cyclical. It goes up and it goes down and how long the highs and lows last is just a good guess but I think most believe it will be on an up swing 5 years from now. Again, no guarantees except that whatever goes up must come down, and whatever goes down must come up.

It is a buyers market with low mortgage rates. Much better to buy in this market than a sellers market and high mortgage rates. Find an excellent, experienced buyers agent. Maybe interview 2-3. Find someone who knows the stats, current events/plan and historical data for the area you are interested in. Location, location, location is going to play a big part of your ability to resale. Find an agent to help with that.

Lastly, there is one assurance in regards to the bottom falling out. First the people of America need housing and since we aren't making any more land/dirt you know there will always be value in it. Second, it's not like owning stock in a company and having a piece of paper that can go up in smoke with an indicted CEO.

There are great first time home buyer programs in CO. Make sure you check into them when get close to buying.

Good luck!
Susan Walker
1 vote Thank Flag Link Thu Mar 6, 2008
Denver has weathered the storm better than most cities, so home values have remained pretty good. You should act quickly though if you're thinking of buying, in order to take advantage of the $8000 home buyer tax credit. You should check with your tax advisor to see if you qualify. Denver is a great place to live and has some amazing neighborhoods.
Here's an article you may find useful on availability and current loan costs:
Good luck with your search.
0 votes Thank Flag Link Thu Mar 12, 2009
so how is Denver? Where did you end up?
Yolanda 303 748 6559
0 votes Thank Flag Link Wed Feb 11, 2009

Have you decided on renting vs. buying? There is a great article in this month's 5280 magazine that I think you might find useful.

John Keene
0 votes Thank Flag Link Mon May 5, 2008

According to a recent article in Realtor Magazine, Denver is currently ranked 7th in the nation for cities that are good for home seller. This is due to a significant drop in new home construction and an increase in the job market. That being said, if you plan on staying here closer to the 5-year mark buying a home would be your best bet. Not only would it allow time for the market to recover, but you wouldn't have to worry about capital gains taxes.

Colorado is also an excellent state for first-time home buyers thanks to the CHFA (the Colorado Housing and Financing Administration) and FHA programs that are available. I've worked almost exclusively with first-time buyers in this market because that is where the real opportunity is now. Low prices, low interest rates, and a lot of properties to choose from.

I also have a fantastic search tool that I would love for you to check out. My other out of state buyers have really found it very useful, as it accesses all the homes in the MLS and provides a ton of bells and whistles that will help educate you on the area. Best of all, it's free and comes with no obligation.

Let me know if you'd like me to enroll you.

John Keene, EcoBroker
Keller Williams
* call to find out how you can live carbon free for 3-years!
0 votes Thank Flag Link Thu Apr 24, 2008
Jason: If you are moving only for 2 years-- perhaps you should just rent. If you plan on 5 years in the Denver Region-- you are safer with purchasing a home. Make sure it is under market value-- and there is equity in the house (so you have money in the home-- in order to sell it in 5 years, in addition to making a profit).
0 votes Thank Flag Link Wed Apr 23, 2008
Hi Jason,

For now, most of Metro Denver has been removed from the Declining Markets Watch List, meaning prices have leveled. (I can send you the list if you wish, it is dynamic loaded with macros, meaning when you open it, it will be up to date with latest changes).

2-5 years down the road could be anyone's guess. And, "yes" it could fall apart that bad, but it could also hold together and even grow, "That Good".

One should never put on the table what they cannot afford to loose. If it is THAT critical to you, renting might be your option. I would suggest you contact a local Denver Lender/Broker and discuss your options.

I can refer you to someone if you wish.............but the list is short.. :)

Good Luck
0 votes Thank Flag Link Fri Apr 11, 2008
Jason: If you plan to move to Denver-- only for 2 years-- you should probably rent. Moving here for 5 years-- you can find great deals for under 200,000-- in the Englewood area. FHA has great first time home buyer programs. Seller can pay 3% down and 3% for Closing Costs-- so Zero Down.
For a free list of homes in Englewood and surrounding areas: -- Your list will be sent to you within 24 hours.
Kathryn Carlson, Licensed Real Estate Broker Owner ,
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Memberships: National Association of Realtors,
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0 votes Thank Flag Link Fri Apr 11, 2008
Hi, The market here is not like on the coasts and midwest. We feel like we have bottomed out here. There will continue to be some fall-out in the sub-prime arena and several homes have foreclosed this year as a result of those problems. So, with that, now is a prime time to buy while the market is low. You may want to investigate FHA loans - the loan limits were just recently increased to over $400K and they still only require a 3% downpayment, as well as allow Sellers to pay closing costs and downpayment assistance. FHA has historically ignored credit scores and goes with overall credit history, looking most critically at the last 12 months of payments. I have a great e-mail service that will send out new listings automatically if you would like. Colorado is awesome! You may not want to leave once you get here. We moved up from Texas 21 years ago. Let me know if I can help you further!
0 votes Thank Flag Link Wed Mar 12, 2008
I would like to clarify: Nehemiah is not government sponsored. My buyers and we are working with the Nehemiah Program in order to secure an FHA loan, and having never heard of it before, I researched it with intense paranoia to be certain we are not getting burned. It is a valid and useful not-for-profit that charges $499 (or so) for arranging the 3% to be "gifted" from the sellers to the buyers. We adjusted our agreed-upon price to cover the cost of "gift". The gift is not a tax deduction as a donation but it does qualify as a "selling expense". I contacted the program and was very happy with their customer service. I've included Nehemiah's website link below.

Coincidentally, my spouse and I are moving to the Denver area in May also.
0 votes Thank Flag Link Mon Mar 10, 2008
Hi Jason-

Come to Colorado with your wife! You will love living here! Buy in an area that is experiencing a high appreciation over other area(s). Englewood is a great investment- as well as the surrounding areas. Don't worry about FHA guidelines and first time home buyer programs- they are actually getting stronger than ever. Meaning- you are good! In fact, FHA didn't get much business over the last few year(s) because of the sub-prime market (100% financing with 80/20 loans). So they are coming back in to the market stronger than ever and they want you to own a home! They are getting extremely creative with their financing! Buy at the low end of your budget- but don't be afraid to spend more if the investment makes sense. I would suggest that you do a FHA loan (30 year fixed- keeps you safe) and negotiate with a seller 3% downpayment through a governmental grant program such as Neimiah program (this gives you 3% equity to start). You also can negotiate that a seller pays for your closing cost which is around 2.5% after that use the rest to buy down your interest rate. If none of this makes sense- contact me so that I can put you in touch with my mortgage consultant to explain more in depth what this looks like on paper. One last thing, try to do the above mentioned items without increasing the purchase price above and beyond asking price. Professionally speaking the market is picking up- Colorado is one of the best places to live. I say this only as a native who has lived here my entire life. Tried other places- stuck on the sunshine and mountains! I am certain you will enjoy them too-

Feel free to utilize the website below and email me direct if you need more advice.

Sarah Solomon
Broker Associate, REALTOR
Coldwell Banker
0 votes Thank Flag Link Mon Mar 10, 2008
Hi Jason; I agree with what others, who have told you to 1st consider the transaction cost. And really 1st and foremost call a reputable mortgage broker to get prequalified and ask about closing costs. Then when you are ready to move ask your Realtor to provide you with data on the area you looking to buy this will assit you in making your deicison. Also, ask your Realtor/agent for the "absorption rate" in the area you are serach also are you flexible as to other areas in denver that may have stronger sale and resales...these are all things to consider. Bottom line the data for an area doesn't lie....BYT I love living in Denver so I hope to see you here soon! Good Luck
0 votes Thank Flag Link Fri Mar 7, 2008
You really do not have to be so concerned with the Denver market. Last year, one of our worse ever, metro Denver dropped 1.8% in market value. Many areas actually saw their values increase by several percent. The areas that had the largest percent of forecloses saw greater than 1.8% decrease in values. So, first in importance for you would be to consider only areas that have the best appreciation and best school systems. You can find an interactive map on my Denver Real Estate Blog (on my web site) that will show you neighborhood by neighborhood the appreciation, average price and percent of foreclosures.

All of the real estate information I can get my hands on and several economists are predicting Denver to have bottomed out on market declines for 2008. Predictions are for prices, metro wide, to start increasing again in 2009.

If you have reasonably good credit, you will ALWAYS be able to get financing. Lenders are not all going out of business. FHA financing only requires a three percent down payment. If you have good credit, many lenders are still offering 100% financing. There are many great loan programs available for first time buyers. We just need to get you in touch with a local lender.

Hope this helps you. Feel free to contact me directly for more information.

Best wishes,

Bill Kosena, ABR, CRS, SRES
0 votes Thank Flag Link Thu Mar 6, 2008
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