U.S. home prices will fall next year for the first time since the Great Depression, and most areas of Colorado will participate in the decline, according to an analysis by Moody’s Economy.com.
Median prices for existing U.S. homes will drop 3.6 percent next year, with 20 areas, including Greeley and Weld County, declining 10 percent or more, according to “Housing at the Tipping Point,” a report that Economy.com released Wednesday.
Economy.com is an economic- analysis firm run by Moody’s, which is best known for its bond-rating services.
“This is a healthy, necessary correction,” said Daniel Jester, an economist with the Pennsylvania-based firm.
Denver-based real-estate analyst Gary Bauer disagreed with Economy.com’s forecast, calling it aggressive. While price declines are expected in Weld County, which has a high rate of mortgage foreclosures, Bauer said job and population growth are still holding up in other areas of Colorado.
Colorado home prices have appreciated at a low-single-digit rate in recent years, lagging hot markets such as Phoenix and Las Vegas, where double-digit gains were the norm.
But Colorado buyers have taken on riskier loans to get into their homes and are devoting a higher share of their incomes to housing costs than residents of other states, Jester said.
Economy.com predicts home prices in the Greeley area will fall 10.7 percent from a peak reached in the first quarter of this year to a bottom sometime in the second quarter of 2008. Other metro areas in Colorado are expected to suffer more moderate declines, according to Economy.com:
Prices in Fort Collins are expected to drop 6.1 percent, with the housing market hitting bottom in the second quarter of 2007.
Denver prices are expected to drop 4.6 percent during a two-year slump that likely started in the second quarter.
Boulder County is expected to suffer a 2.8 percent decline in a short-lived downturn that hits bottom by year-end.
Pueblo prices are expected to decline 2.1 percent, Colorado Springs 1.6 percent and Grand Junction 1.3 percent.
Bauer, the Denver-based real- estate analyst, disputed these projections, arguing that unique strengths of Front Range communities such as Denver, Boulder and Fort Collins will moderate the downward pressure.
“Fort Collins is in the top 10 most desirable cities in the U.S.; there is still an influx of people going there,” he said.
Economy.com looked at 379 metro areas and used two economic models to project price trends.
Those models showed home values in 133 metro areas declining, with cities in California, Florida, the Northeast, Arizona and parts of the Rust Belt most vulnerable to a correction.
Housing markets in Texas, the Farm Belt, the Southeast and the Pacific Northwest are expected to hold up better.
The Economy.com housing forecast assumes a slowdown in the economy, not a contraction. Should a recession result from the slower housing market, then homeowners can expect even sharper declines, Jester said.
Staff writer Aldo Svaldi can be reached at 303-954-1410 or asvaldi@denverpost.com.
Falling prices?
Colorado home prices are expected to decrease in the next year, according to Economy.com, joining the nation’s first downturn in decades:
Greeley – 10.7%
Fort Collins – 6.1%
Denver – 4.6%
Boulder County – 2.8%
Pueblo – 2.1%
Colorado Springs – 1.6%
Grand Junction – 1.3%
