While home prices in Colorado are rising, the state ranked 47th nationally for home appreciation during the 12 months ended March 31.
So why have Colorado homeowners missed out on the sharp gains in home values that low mortgage rates have triggered across the country?
The answer is jobs – or more precisely, the big job losses in 2002 and 2003 that resulted in a surplus of unsold homes and vacant apartments, argues Mike Rinner, a senior analyst with The Genesis Group in Centennial.
“We won’t see (significant) price appreciation for the next year or two until we have enough new jobs to use up that excess (housing inventory),” Rinner said.
Home prices in Colorado gained an average of more than 4 percent a year during the past three years, according to an index compiled by the Office of Federal Housing Enterprise Oversight.
By comparison, home appreciation nationally is running closer to 10 percent a year over the same period.
Homeowners in California and Nevada have seen home values rise at a 14 percent to 15 percent clip per year.
Rinner sees a correlation between job losses locally and a lag in home appreciation, expressed in the inventory of unsold homes and unrented apartments.
In the first quarter of 2000, the seven- county metro area had a relatively thin inventory of about 7,000 unsold homes on the market.
By the first quarter of 2004, the supply of homes for sale had ballooned to 23,000 and has since fallen to about 20,000.
A jump in the metro-area apartment vacancy rate from 5 percent in 2000 to 13 percent in 2004 generated a surplus of 20,000 to 25,000 apartments.
An imbalance between supply and demand, which Rinner estimates remains at about 30,000 housing units, explains why home prices are rising more slowly here than elsewhere.
That imbalance is directly attributable to the loss of 60,000 jobs in the area following the hit that the technology, telecommunications and tourism industries took, he said.
Jobs attract new migrants to the state who rent apartments and buy homes.
Colorado has gained 43,400 jobs the past 12 months through May, according to the Bureau of Labor Statistics.
Forecasts call for the state to add about 50,000 to 60,000 jobs in 2005.
“We can expect the economy to recover and after a couple of more years of catching up we will see some significant price appreciation again,” Rinner said.
But rising interest rates and overbuilding could moderate home-value increases for some time, other economists said.
Builders continue to add more homes and apartments to the market than migration and population numbers would justify, U.S. Bank regional economist Tucker Hart Adams said.
Single-family home permits peaked at 38,588 in 2000 and fell slightly for three years.
Last year, builders pulled 38,164 permits in Colorado. That’s despite a decline in net migration to the state from 82,500 in 2000 to 10,000 in 2004.
Ken Griego, a project manager at Amber Homes in Aurora, said homebuilders have several advantages over the resale market, including interest-rate subsidies and incentives.
That said, he said he doesn’t view the local housing market as particularly robust.
“Everything is slow right now,” he said. “People are cautious.”
Staff writer Aldo Svaldi can be reached at 303-820-1410 or asvaldi@denverpost.com.
