Metro housing holding its value - New report could spur investment in local real estate

For Immediate Release On: 1/15/2009

For Further Information, Please Contact:
John Rebchook - Rocky Mountain News at rebchookj@RockyMountainNews.com

Relevant Info on the Web: http://www.rockymountainnews.com/news/2009/jan/15/metro-housing-holding-its-value/

Home prices in the Denver-Aurora metropolitan area have less than a 1 percent chance of declining in value during the next two years, according to a national report released Wednesday.

The report by PMI Mortgage Insurance Co. could help accelerate an expected surge of real estate investments by savvy buyers looking for bargains, said one local expert.

"In the last couple of weeks, I have been hearing that some very large and fully capitalized hedge funds and opportunity funds are aggressively wanting to make deals in Denver," said Mike Rinner of the Genesis Group, which tracks Front Range housing.

"The kind of national press from the PMI report about Denver being a low-risk area, as far as declining values, is going to make these investors want to make their moves sooner rather than later," Rinner added.

The U.S. Market Risk Index released by PMI ranked Denver as the 10th least risky of the 50 largest metro areas in the country.

Dallas-Plano-Irving in Texas had the least risk of losing value, while the Fort Lauderdale-Pompano Beach-Deerfield Beach, Fla., market ranked as the riskiest of 50 metro areas, according to the third-quarter report.

The spread between the 10 least-risky markets is so small that it is almost statistically insignificant, said LaVaughn Henry, director of U.S. Economic Analysis for the PMI Group.

Overall, year-over-year home values in the Denver area are down 3 percent, while the average drop for the top 50 metropolitan areas is about 11 percent, Henry said.

"That's in line where Denver was a year earlier," Henry said. "In the third-quarter 2007, prices were down 2.21 percent."

In addition, homes were 15 percent more affordable in the Denver area in the third quarter than they were in 1995, when PMI began to measure affordability, Henry said. PMI uses a formula based on income, housing prices and mortgage rates to calculate affordability.

"As far as things go, Denver is better off than . . . coastal (states)" such as California and Florida, Henry said. "Nationwide, Denver is by far not the worst place to be."

In addition to metro areas in California and Florida, risky markets include Phoenix and Las Vegas, according to the report.

"I feel pretty good about it," Rinner said. "It means there is less chance to see a decline. But it does not mean we will see appreciation, so in that respect, it is a modest accolade."

Today's market increasingly is feeling like the late 1980s, when the market was beginning to recover from a hammering that resulted from years of massive overbuilding, a huge drop of high-paying jobs when energy prices crashed, and a change in tax laws that dramatically reduced the favorable treatment of real estate investments, Rinner said.

"I've been around long enough to begin to sense when the tide is about to shift," he said. "In the late 1980s, the smart investors began to wait for the bottom of the market, or as close to the bottom as they could, and begin buying real estate in a big way.

"We've been expecting this to happen during the past year, but there have been very few actual transactions."

That, however, appears to be changing, Rinner said.

About Trenka & Associates: Trenka & Associates is one of Downtown Denver's leading Real Estate Companies. http://www.condosandlofts.com

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