Although the COVID-19 pandemic seemed likely to cool off Denver's red-hot housing market, things haven't gone down that way.
Prices have actually climbed for many Mile High City properties below the luxury threshold, sparking feverish bidding wars. And while foreclosures, including so-called zombie foreclosures (of homes that have been sitting empty for an extended period of time), are on the rise in many parts of the country right now, a new study shows that's not the case here.
"The phenomena isn't playing out much at all in the area," confirms Rick Sharga, executive vice president at RealtyTrac, a leading provider of foreclosure stats and a partner of ATTOM Data Solutions on its latest survey. "It's a sign of just how strong the housing market has been in Denver over the past couple of years."
Of all the residential properties around the country facing possible foreclosure during the third quarter of 2020, according to ATTOM Data, 3.7 percent have been vacated by their owners, up substantially from the previous quarter and the same time period in 2019. And the situation is much worse in one of Colorado's neighboring states, Kansas, where the zombie foreclosure rate is 15 percent. Also well above the national average are Missouri (11.2 percent), Georgia (11 percent), Kentucky (10.7 percent) and Tennessee (10.3 percent).
In contrast, according to ATTOM/RealtyTrac figures provided to Westword, the percentage of vacant properties up for foreclosure in Colorado is just 0.77 percent, less than a quarter of the national average. And in the Denver-Lakewood-Aurora metropolitan statistical area, or MSA, the digits are even lower: 0.68 percent.
In Sharga's view, this scenario "is nothing more complicated than the fact that the market for housing in Denver has been so hot and the rate of foreclosure has been so low for the past few years. In other parts of the country, where there were higher numbers of properties in some state of foreclosure, the federal government moratoria on foreclosure and evictions has exacerbated the problem, because the longer something has remained in foreclosure, the more likely it is to be vacant. But if you have very little foreclosure activity, the situation doesn't have the chance to progress much."
As for why home prices in these parts haven't fallen, Sharga points to demographics. "The average age of a first-time home buyer is between 33 and 34, and the millennial cohort has an enormous number of people who are 31 or 32, just on the precipice of home buying — and they're looking at the lowest thirty-year mortgage rates in history," he says. "The last housing boom we had, the interest rates were between 6 and 7 percent, but today, that same type of borrower can get 3 percent or sometimes even lower. That has an enormous amount to do with someone's ability to purchase a home, and we're seeing a lot of pent-up demand that would have hit during the spring, in March, April, May and June, happening now."
The current recession "is very unusual in the unemployment distribution," he goes on. "When the pandemic hit and shelter-in-place orders went out and started to close down economies, there were certain industries that were severely impacted: travel, tourism, restaurants, retail, entertainment — all the service industries. Those industries tend to be populated mainly by renters, and they usually have very low home-ownership rates. So people who were either home owners or were in high-income jobs haven't been hit as hard by the pandemic, which has really widened the divide between the haves and the have-nots. So higher-wage employees haven't really had their path to home ownership affected as much as some of their counterparts have."
Moreover, Sharga believes, "The pandemic has, to a certain extent, accelerated other trends. As millennials are aging, they're getting their first real jobs, they're getting married, they're having kids, and that moves them toward suburban home ownership. People found out that being quarantined in a 750-square-foot apartment with a toddler wasn't as much fun as they expected, so they're looking for a safer environment. Plus a lot of industries are allowing people to work from home, and they want bigger homes so they can use the home for an office."
Hence the dearth of bargain homes in Denver — and Sharga doesn't see that situation changing anytime soon.