Colorado, Boulder economy and real estate should remain steady in 2008 despite national woes

The future of the national economy and housing market may appear grim, but the picture a local economist and real estate expert are painting for the Boulder area and Colorado in 2008 isn’t quite as gray.

Colorado’s economy will experience modest growth in 2008 and should outpace the nation’s, said economist Richard Wobbekind of the University of Colorado at Boulder’s Leeds School of Business.

“The Colorado economy seems to be going along at a pretty good clip and doesn’t seem that shaken by national events, so we think the impacts on Colorado’s economy will be more incremental if there is a national downturn,” he said at the 43rd annual Business Economic Outlook Forum in December.

The seizing of credit markets and the resetting of adjustable rate mortgages to higher rates are leading to much of the economic uncertainty in Colorado, Wobbekind said.

“It turns out that part of our foreclosure problem in Colorado is that we have a lot of people in ARMs and these are resetting as we speak,” Wobbekind said. “So, how many of these are resetting, and how many are resetting at a rate that is going to make it very uncomfortable for Colorado homeowners to continue to make payments …? Nobody knows at this point.”

Foundation in wealth

Ken Hotard, senior vice president of public affairs for the Boulder Area Realtor Association, said Boulder has avoided much of the real estate struggles affecting other parts of the state and nation, thanks to modest job growth, which creates a demand for housing and sustains prices, and the fact that Boulder’s is a wealth-based real estate market instead of income-based.

And since Boulder specifically – and Colorado generally – didn’t see the rapid and unjustifiable run-up in home prices from 2002 to 2006, no “bubble” was created that would require a market correction like those that have occurred elsewhere, he said.

While the number of home sales in the Boulder area market was down in 2007, the median sale price increased 1 percent. The drop in home volume indicates that Boulder wasn’t untouched by the state and national downturns, but it didn’t repeat the significant negative market changes in the late 1980s, Hotard noted.

“We should all be counting our blessings that we live and own a home in this community,” he said. “Boulder continues to outperform expectations in a vary stable market.”

Local vs. national markets

It’s unlikely the forecasts about a national recession and a spiraling housing market in 2008 will have a measurable impact in Boulder, and what impact it will have is more psychological, Hotard said. It is up to Realtors to educate their customers about how the local real estate market doesn’t necessarily reflect what the media is reporting as “nationwide” troubles.

Other than some homebuyers and investors putting their purchases on hold until they see what the 2008 elections will bring and how they are governed by newly elected officials, Hotard said he expects this year to look much like 2007, with modest job gains and a “steady as she goes” real estate market, barring any unforeseen circumstances.

“I don’t see the big event that’s going to turn the market around on the horizon,” he said. “If I was in a position to do so, I would be investing as much I could in the Boulder real estate market; it’s going no place but up.”

More jobs on the horizon

Wobbekind predicted that Colorado will add 43,300 jobs this year, and an employment growth rate of 1.9 percent compared with a national rate of 1.1 percent. Colorado’s unemployment rate for 2008 is expected to hover around 4.2 percent, compared with a national rate of 4.9 percent.

The professional and business-services sector will lead the state in job growth, adding 15,500 jobs, many of which are high-paying jobs including engineers, computer systems designers and scientific research and development groups, he said.

“However, in terms of relative growth, far and away the fastest growing sector in the state is natural resources and mining,” Wobbekind said. “The strength in this sector is a big part of the reason for the growth in professional and business services because we’re seeing the need for design people, accountants and all sorts of support businesses that are serving this sector.”

Colorado’s education and health-care services, leisure and hospitality sectors also should remain strong in 2008. However, for the eighth consecutive year the manufacturing sector will probably lose ground, shedding 4,000 jobs, Wobbekind said.

Manufacturing sector will struggle

The state remains heavy in manufacturing, and the tech sector has been struggling with off shoring, he said.

“This year is particularly bad because the Intel facility is closing in Colorado Springs, and that’s going to be a big hit for Colorado,” Wobbekind noted.

Colorado's population is expected to grow at a rate of 2.1 percent in 2008. With a net migration of 62,500 people to the state, Colorado's population will hit 5 million for the first time.