Tuesday, October 2, 2012

Regional Snapshot:Grand Junction home prices and foreclosures

(See the follow-up post on employment and rental housing.)

Home prices and home sales in the Grand Junction area continue to register well below peak levels, and foreclosure activity is well above more "normal" rates as of mid-year 2012. Thanks to the oil and gas boom of the last decade, demand for real estate accelerated from 2005-2008, but fell off substantially by late 2008. Home-ownership markets are still dealing with the effects of that short boom-bust cycle as well as the effects of a national recession that lasted from 2007-2009.

The first graph shows home sales transactions in the Grand Junction area compared to metro Denver. The totals have been indexed for comparison purposes.  There were approximately 252 single-family home sales in the Grand Junction area during August 2012, which is a 17-percent increase over August of last year. Year over year- home sales have been steadily increasing in the area since late 2010. Proportionally, home sales have fallen more in the Grand Junction area than in the metro Denver area since 2006, although sales totals in the region are moving toward 3-year highs.

The second graph showsthe median home price in the Grad Junction area. As of August 2012, the median price was 27 percent below August 2007's peak of $229,000. The median home price was $165,000 during August 2012. The median home price fell to a trough of $151,000 during October 2011.
The third graph shows how prices bottomed out in Grand Junction must later than they did in the metro Denver area. Home prices bottomed in metro Denver back in mid-2009, and have been slowly rising since. Grand Junction prices bottomed out two years later, in 2011.  As of August 2012, the Denver median home price was $262,000, which is up from its previous 2006 peak of $259,000. Not only is the Grand Junction median home price much lower (as expected), but it has only recently begun to move up from its trough. The price would have begun its decline much earlier, of course, had it not been for the oil and and gas jobs that were propping up prices into early 2008.(These prices are indexed to base period March 2006.)

Home price growth has only recently begun to show up in Grand Junction, and as the fourth graph shows, growth rates are much smaller in Grand Junction than in metro Denver. The median price has not exceeded more than  five percent at any point since early 2008, and it fell by 15 percent or more each month for several months during 2011.

Using the House Price Index from the Federal Housing and Finance Agency,  we find a similar trend. The FHFA data is only current through June of this year and does not yet show any uptick in home prices for the Grand Junction area or metro Denver. In the Grand Junction area, home price growth was very large between 2005 and mid-2008, and has seen almost continual declines since 2008. The decline in the metro Denver area over the same period is much smaller. The third-quarter report from FHFA will likely show a small increase in the HPI for both regions. 

Much of the relatively weak home price trend is due to the fact that foreclosures continue to be at very elevated levels in the area. The sixth graph shows foreclosure filings in Mesa County versus foreclosure filings in all metropolitan counties combined. The general trend in all combined metro has been one of slow decline since 2008. As jobs began to leave Grand Junction in 2008, however, the foreclosure situation was just warming up. Foreclosure filings more than doubled from 2008 to 2009, as the graph shows. Totals have declined slightly since, but foreclosure filings persist at double 2008's levels.

The final graph shows foreclosure sales at auction, the final step of the foreclosure process. The increase here is even more severe as foreclosure auction sales more than tripled in the Grand Junction area from  2008 to 2010. There is a slow downward trend in auction sales now, but levels are well above what they were in 2008.

Foreclosures are declining in the area, but unlike the metro Denver area and the Front Range in general, Mesa County did not really begin to suffer form foreclosure problems until 2008 which is well after the Front Range began to see problem in 2003 and 2004. As foreclosures begin to decline, home prices will continue to stabilize and move upward. As with most other markets nationwide, the Grand Junction market has also benefited from very low mortgage rates, and easy-money policies will contribute toward ongoing demand for homes in the region. 

Nevertheless, as has been the case on the Front Range, the Grand Junction will require several years to deal with foreclosure and homeownership disruptions brought on by the small oil and gas bust and by the national recession. The area saw the effects of declining real estate demand later than most of the state, and will also come out of it later.