When Case-Shiller released its most recent real estate report, David M. Blitzer noted that it appears the country is shifting “back to regional housing markets, rather than a national housing market.”
Indeed, the latest downturn marks the first national housing downturn since the Great Depression.
Blitzer, the chairman of the Index Committee Index Committee at S&P Indices, included Denver, along with Dallas and Washington, D.C., as “relatively strong” markets.
The shift from a national to more regional markets caught the eye of Lane Hornung, CEO and founder of COhomefinder.com and 8z Real Estate.
Hornung recently expanded on the apparent shift with John Rebchook of InsideRealEstateNews.
John: Lane, why did this comment catch your attention?
Lane: It was an interesting comment. Basically since the peak in real estate in 2006, if you look at any of the national reports breaking things down state-by-state or city-by-city, it has been really surprising how all of the real estate markets have moved together in lockstep.
John: And that is quite unusual, isn’t it?
Lane: That is really atypical. Probably everyone has heard the statement that “All real estate is local.” And that is true. But in this downturn, almost every market moved in synch with only one exception, Washington, D.C. You can draw your own conclusion why D.C. was the only market going up. (Laughs.) The markets have really moved together, but that is starting to break down a little bit.
John: What do you think that means for Denver and Colorado?
Lane: I think that is a good thing for Colorado. The reality is while this may not be the best of times, Colorado is doing better across a number of economic indicators, from jobs to home prices, than the national figures. People are still moving into Colorado at a greater rate than they are moving out. It seems there are four or five markets breaking out of what has been the national trend and Denver is one of them. It will be interesting to see how much the consumers in Colorado follow the national trend, or if we start to decouple from the rest of the country.
John: Because the Front Range is fundamentally in somewhat better shape than most of the nation, do you think that will translate into an increase in consumer confidence locally, even if many consumers nationally remain pessimistic?
Lane: I am glad you brought up consumer confidence. That is the one force keeping the Colorado housing market from acting more autonomously than it is. The corollary to the saying that “all real estate is local” is that “consumer confidence is national”. Consumer confidence, or more accurately, a lack of confidence, is holding back the real estate recovery in Colorado – arguably even more than the unemployment picture.
John: Can you elaborate on that point?
Lane: Don’t get me wrong. Unemployment is obviously a very important factor. But let’s say you have a good job and you are secure in your job. You are aware of the unemployment rate, but it does not necessarily impact you directly. But you look around, and see everything that is happening around the globe, and you may not feel this is a good time to take on the burden of buying your first home or moving up to a bigger home. Instead, you hunker down. Consumer confidence impacts everyone, whether you’ve got a job or do not have a job.
John: The stock market crash that began in August was not good news for consumer confidence, was it?
Lane: The gyrations in the stock market came just when consumer confidence was starting to come back. Then, stocks went on their wild ride, and brought the consumer confidence index back down.
John: What will it take to improve consumer confidence?
Lane: I think any good news on the job front will immediately have a very positive impact on consumer confidence. The news doesn’t have to be dramatic. I think what is going to be a driver is stability. I think if we see some stability in the job market and a slight trend to the positive, some stability in the stock market, and some stability in the European debt crisis, consumer confidence could improve quickly.
John: Considering that the Denver-area housing market showed great improvements by many measures in July and August, why isn’t the local housing market more robust?
Lane: My concern is that the good news in our Front Range market is being drowned out by all of the other national news. We’ve had two good months in a row and I expect September will bring some pretty good news. But I think this is only being heard by consumers who are actively in the market and industry professionals. The good housing news locally is just not being heard. It is being lost in the noise of the daily headlines of moves in the stock market, what’s happening in Europe, and what’s happening in D.C. Eventually though, the story about our relatively healthy local market will become known and can only help in this slow motion housing recovery.
John: Thanks Lane.