December 2009
Business confidence increasing and housing sector stabilizing in Metro Denver
Regional business confidence levels are increasing and the correction in housing may end – or at least stabilize – before other sectors recover, according to data collected by the Metro Denver Economic Development Corporation (Metro Denver EDC) in its Monthly Economic Summary for December 2009.
Annual declines in a majority of the S&P/Case-Shiller Home Price Indices have reached bottom, and the indices for Denver are close to a positive annual return.
Additionally, according to the National Association of Realtors (NAR), the Denver-Aurora-Broomfield metropolitan statistical area was among 30 areas that reported an increase in median home price between the third quarters of 2008 and 2009. The increase was also the first reported for Metro Denver in two years and contrasted with an 11.2 percent over-the-year decline in the nationwide median.
Metro Denver home sales rose 2.9 percent between September and October. October home sales were 7.6 percent below sales from October 2008, but this over-the-year gap in sales was the smallest reported since December 2008.
"Put another way, the pace of Metro Denver home sales is slowly strengthening and should reach a point early next year where monthly sales exceed those reported in 2009," stated Tom Clark, executive vice president of the Metro Denver EDC.
Slow improvements in home sales have also helped stabilize home prices in Metro Denver. The October average sales price for single-family homes increased 4.6 percent over-the-year, and the average price for the first 10 months of the year moved within five percent of the average for the same months of 2008. The year-to-date average condominium price was down 7.1 percent in October, but condominium prices are also showing signs of gradual improvement.
Challenges certainly remain for housing markets. The Mortgage Bankers Association’s most recent National Delinquency Survey shows roughly one in seven U.S. mortgages were past due or in foreclosure at the end of the third quarter, and overall delinquency rates continue to break records nationwide. In Colorado, closer to one in 10 home loans were delinquent or in foreclosure at the end of the third quarter. The state’s overall delinquency rate of 6.7 percent was the highest reported since at least 1990, Colorado still had the 10th-lowest rate in the nation.
Unemployment has largely replaced subprime loans as the key driver of mortgage delinquency, although additional resets of adjustable rate loans are looming in 2010. Stronger trends in home sales and prices can only help with these challenges, though, and government programs including the now extended and expanded homebuyers’ tax credit should also help housing markets stabilize in the months ahead.
Local business confidence is improving as well, according to several regional indices. The University of Colorado’s Leeds Business Confidence Index for the fourth quarter rose to 49.7 from 47.5 in the third quarter as business owners reported a better outlook for the national economy. Respondents’ expectations for profits, capital expenditures, and hiring also improved in the fourth quarter survey, although the indexes for these components remain below the growth-neutral point of 50. Generally speaking, Colorado business leaders expect better conditions in the fourth quarter but stop short of anticipating growth.
The Vectra Bank Colorado Small Business Index rose from a revised 70.9 in September to 72.3 in October. Indications of recovery in the national economy strengthened the index reading.
The Goss Institute’s Mountain States Business Conditions Index increased between October and November. The gain suggests economic conditions are improving in Colorado, Wyoming, and Utah, although supply managers in the three-state region remain pessimistic about near-term hiring and wage growth.
A total of 11 indicators moved positively, up from six indicators in the prior report. Current trends remain weak when compared to last year’s trends, however; only two indicators moved in a positive direction in this month’s report and in the prior two reports.
The
Monthly Economic Summary provides a snapshot of metro area economic activity, as well as its relationship to national and regional economic trends.