The Great Recession wiped out the greatest amount of wealth in the United States since the Great Depression. The catalyst, lest we forget, was the housing bubble created by lax lending policies, creating billions of dollars in bad loans and artificially inflating housing prices around the nation. The house of cards began to crumble in 2008 and, with it, property values.
Denver has never led the way in excess when it comes to housing prices. Before the recession it was common around the country to see consistent double-digit appreciation of home values—sometimes in just a matter of months. Not so in the Denver market.
Denver’s housing increase was driven by population and job growth. People bought real estate because they needed it and generally speaking, could afford it.
As the graph shows, by the end of 2008 — when the effects of the recession had fully kicked in — to the end of the recession in 2012, Denver home values largely just plateaued. Property values did not plunge off the cliff as in many parts of the country but remained relatively stable. In fact, in some of the most popular neighborhoods in Denver, values actually went up during the recession. Not bad.
Because of the recession and a few other factors, builders to a large extent stopped dead in their tracks and no new housing stock was added for about four years. What didn’t stop during those years was population growth. The result was and is a housing shortage.
It is estimated that by the end of 2012 Denver and the Front Range had a housing shortage of around 45,000 units. With the economy improving, builders started to jump back in, but closing that gap has proved a vexing problem because of continued growth. Builders were and are building, but the gap between supply and demand has changed little, causing steadily rising prices. In fact, prices in Denver are up nearly 50 percent since the recession ended in Denver.
Prices can only go so high until real estate becomes out of reach for more and more prospective homebuyers. Buyers who want to, but can’t afford housing in Denver, either start looking outside the city limits for less expensive housing or they become long-term renters.
Tom Snyder is managing broker and owner of the Snyder Realty group based in Denver. His office is located at 1598 S. Lincoln St. in Platt Park.
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