Denver I Q

The Business Section (Wall Street West) of The Rocky Mountain News (12/29/07) printed one “news” article, on “op-ed” piece, and a rather hard to comprehend Letter to the Editor,  all devoted to the housing “crises”. The letter to the editor simply made no sense, as it was difficult to tell if the writer was attempting to champion Realtors or dismiss them as self-serving.

The “news” article had a panic headline - New-home sales plummet in Nov. - , with an inset noting that the Denver-area new home market is down 29% in 2007. Down from where? and plummeted from what lofty heights? There is no question that the new home industry is selling less homes than previous years. That is because the home-building community has the same difficulty predicting the future as everyone else does. They cannot. So they built too many homes, selling many of them using sub-prime loans and providing product incentives to home buyers that should have been buying their first home in 2009 or 2010, rather than 2005 or 2006. Said another way, the builders took advantage of the opportunity made available to them by the market factors of that moment. The factors changed, and the new home market will take some time to adjust to whatever the new reality is.

The “op-ed” piece (reprinted from Bloomberg News) was well done, and should be required reading for everyone that owns or wants to own a home. While understanding what happened to the national housing market won’t prevent us from similar occurrence’s in 15 or 20 years, Bloomberg’s Caroline Baum described and discussed the factors affecting today’s housing market about as well as anyone I’ve read lately.

For many people that purchased a home using suspect mortgage financing, the market is not treating them well. For the 3 or 4  million people that make their living in the vast housing industry, business will be difficult for the next few years. For homeowners needing to sell without the protection of equity, it may not be easy, or even possible. But for the the majority of homeowners that do not need to sell in the near future, the panic headlines and confusing “expert” predictions will not have, and should not have, any real affect on their daily lives.

The fact is that most builders, most Realtors, and most mortgage lenders will be around in 2 years. Competition will make all of the survivors better and more valuable to the consumer, and the country will go on building, selling, and buying houses.  The competition will be painful for some, exciting for others, and barely noticeable for the vast majority of those in the industry already competent and well positioned.

-that’s 30-

Share This