The Denver-area housing market is looking strong compared with many other places in the country, according to a national report released Tuesday.
Only a dozen cities across the country were ranked better than the Denver-Aurora area, according to the PMI Mortgage Insurance Group's Winter 2008 Risk Index.
The index was based on third-quarter Office of Federal Housing Enterprise Oversight data. "Denver, actually, is looking reasonably good," said David Berson, chief economist for PMI. "That doesn't mean prices will not fall," he said. "But it means there is a very low probability prices will be lower than they are today in two years. That is pretty good news. That's better than the news in Las Vegas, for example."
Riverside-San Bernadino in California was deemed the riskiest market, followed by Las Vegas. Much of California and Florida, which had previously seen a huge run-up in prices - much of it driven by investors - were ranked as very risky markets by PMI. Fort Worth Texas, was ranked as the metro area with the least amount of risk.
LaVaughn Henry, director of U.S. economic analysis, said PMI uses a "high-faluting economic model" to judge each metropolitan area by five metrics: housing price movement, affordability, changes in local labor markets, housing supply and foreclosures. "Denver looks pretty good in four of the five," he said. "The positives in four of the five more than make up for your foreclosures, your one weak area."
Presenting the forecast for the 2008 real estate market in northern Colorado, Chuck McNeal, chairman of The Group Cos., tried convey one overriding message when it comes to real estate: keep focusing locally.
In sharp contrast to that national scene, optimism was in high order Monday night at the 2008 Northern Colorado Real Estate Forecast presented by The Group Inc. at the Budweiser Events Center in Loveland.
Thousands were on hand as the forecast, assembled by the more than 200 people associated with The Group Inc., projected that market drivers such as optimistic employment outlooks, pent-up demand and a market's propensity to head toward equilibrium would lead to a better-than-expected year from the real estate market in northern Colorado.
"The tone is things are not as bad as the national media would have you believe right now, but yes, they are going to get better," McNeal said. "It is inevitable. It is a cyclical thing that goes on and on, and there's just too much good going on here to keep it down for much longer, frankly."
Among the markets projected to improve slightly are the Fort Collins/Wellington and Loveland/Berthoud markets along with the Windsor/Severance market, which is projected to improve 1.5 percent. A total of 8,350 homes are expected to be sold in Weld and Larimer Counties this year, according to the forecast.
One of the markets not expected to perform as well, however, is the Greeley/Evans market, which is projected to decline 4 percent from last year.
McNeal noted, however, that the Greeley region is recovering from a period of unsustainable, "overheated" growth in the early part of the decade and is now in the process of recovering, particularly from the sub-prime loan crisis.
Two years ago, he noted, the Greeley market was projected to decline 16 percent, while last year was projected to decline 8 percent. This year, it is expected to experience a decline of 4 percent.
"So until the employment and the new buyers coming into the market absorb some of that inventory, Greeley will -- it's going in the right direction -- but there's probably a little more pain there yet," said McNeal, who said he hopes the market will return to normal levels by this time next year.
Maury Dobbie, chief executive officer of the Northern Colorado Economic Development Corporation, which was not involved with assembling the forecast, was among many who agreed with what was presented.
"I think it's very in line with what we're seeing," said Dobbie. "It's going to be a slow rebound it's not going to be a big spike, which is good. That's a healthy economy."
Denver is among those cities at the lowest risk nationwide for a decline in home prices in the next two years, according to a report released Tuesday.
Based on a risk-index model developed by Walnut Creek, Calif.-based PMI Mortgage Insurance Co., Denver has a chance of less than 5 percent that home prices will decline two years from now. The model takes into account five factors: foreclosures, number of homes for sale, unemployment rate, housing affordability and past changes in home prices. Denver fared well in all categories but foreclosures.
"This puts Denver in a pretty good position nationally in terms of the risk of home-price declines," said David Berson, chief economist and strategist for the PMI Group Inc., which operates PMI Mortgage Insurance as a subsidiary. "Believe me, you're no Las Vegas, where we think there's an 89 percent chance that prices will be lower two years from now."
Since peaking in the second quarter of 2005, nationwide home-price appreciation has decelerated for eight of the last nine quarters, according to the Office of Federal Housing Enterprise Oversight. National home values were only 1.8 percent higher at the end of the third quarter than their levels a year ago.