Denver's recession 'worst in 20 years'
Job losses suggest area is in bad shape, Genesis speaker says
[ 600 homes in Metro Denver, unsold with prices over $1M ]
By John Rebchook, Rocky Mountain News
September 18, 2002
The Denver area is mired in a recession that by one key measure - employment growth - is worse than the one following the oil bust of the mid-1980s.
That was the message keynote speaker Rick Pederson gave Tuesday to about 200 housing industry officials at a half-day, wide-ranging Genesis Group conference at the Adam's Mark Hotel. Genesis tracks and analyzes the Front Range housing market, and Tuesday hosted individual overview sessions on the north, south and central metro-area submarkets, as well as on Larimer and Weld counties.
Pederson, who heads Denver-based Foundation Properties and is co-founder of the Ross Consulting Group, has worked with Fortune 500 companies worldwide in addition to investing in commercial real estate.
In comparing employment growth in the metro area to the country as a whole, Denver is in worse shape now than it was in the mid-1980s, Pederson said. Even from 1985 to 1987, Denver's employment growth surpassed the nation's, he said.
"Arguably, this is the key measure," Pederson said. "We are losing more jobs than we did in the '80s. Is this recession worse? Time will tell. What happens with home prices and a lot of other factors will determine whether this one is worse."
Pederson said Denver's only major growth engine today is the government and much of that is short-term hirings for added security at Denver International Airport. "I do not like what I see," he said. "It's not safe out there."
Pederson compared the local economy to a "big, ugly barking dog. . . . Denver is very much in a recession, our worst one in 20 years or so."
The office market is in shambles and the apartment market is extremely overbuilt, but the industrial and retail sectors will continue to hold their own, he said. On the positive side, people who hold jobs have more income than economists measure, which is keeping spending fairly strong, he said.
Prices of $1 million-plus homes will fall, he said, noting there are more than 600 unsold homes in the metro area with asking prices of $1 million or more. Still, housing remains the strongest real estate sector. "Housing is the investment and construction bell cow," Pederson said.
Cheri Meyn, principal of Genesis Group, said the northeast market, Erie and parts of Denver are growth areas. "Denver has 14,000 lots at Stapleton, Lowry and Gateway (near DIA) to build on, which is unheard of in an urban area of this size," Meyn said. Areas that are "vulnerable" include the southeast and downtown Denver, she said.
Developers keep building high-end apartments and condos in the lower downtown area, even though LoDo has about a four-month supply of unsold homes with an average price of more than $300 per square foot, she said.
Overall, she expects the Denver-area housing market this year to be flat compared to last year, which was down 21 percent from 2000.
Mike Rinner of the Genesis Group said the home-buying market increasingly is being driven by "non-traditional" buyers such as empty nesters, single parents and female heads of households.
Even more important than price per square foot, Meyn said, is providing value at every level, whether it is for starter or luxury homes. Buyers don't like the idea of buying a home where there are "2,000 other homes just like theirs," she said.
rebchookj@RockyMountainNews.com |
