What happened? How could my house depreciate like this? How could 1/3 of my family’s most valuable asset just go up in smoke? Supply and Demand… It’s that simple.
As the chart below clearly demonstrates, we continued to build million dollar + inventory while transaction numbers declined. The result, an imbalance of epic proportions. In Denver‘s high end neighborhoods around the city from peak to trough we’ve seen as much as 50% declines in value.
Therefore, as I have listened to sellers sitting at their kitchen tables bemoaning their economic plights of fortune, I sit quietly and think to myself. I think about the millions and millions of households that placed their future in their shelter, borrowed from their shelter and owe a great deal on their shelter.
The result continues to be cataclysmic for many. We have to remember some very critical points. First, 1/3 of households own their homes “free and clear”. Of the remaining homes with mortgages, 93% are making their payments and too are moving ever so slowly toward “free and clear”. Finally, there is a thriving market in our lower price ranges of first time buyers buying and building equity. Hopefully, they will be wiser than their fore-bearers. It is clearly not as dark as the picture is painted every day in the media.
Therefore, whatever you think about how bad the market is right now, it has the ability to repair itself and stabilize quickly. That’s exactly where I believe we are right now. Stability in the trough of the market. When looking at the potential residential market trend, inventory has dropped to under a potential year’s supply of inventory over $1M. Like water, the market is slowly seeking its own level. The future looks bright. Where are your sunglasses? You may need them sooner rather than later!
2012 Denver Market Update Report
Good article. I guess I stand somewhere between the free & clear & the deep in debt sides. Unfortunately, much closer to the deep in debt than we used to be, but knowing that most all of my other investments are still below where they were a number of years back, still happy I decided to spend dollars (even if I can’t get it back for many years ((and some dollars maybe never)) in an asset I can appreciate each day (at least until my wife kicks me into the dog house…). Maybe I should consider putting a flat screen in the doghouse to cover my bases???