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September 17, 2018
The Lehman Brothers collapse in 2008 and subsequent financial crisis has left a permanent mark on the Colorado economy. Atlas co-founder and partner, Ryan Boykin discusses the aftermath and the impact on the Denver metro real estate market:
“Fundamentally, when Lehman collapsed and the downturn began in 2008, the U.S. was forced to hit a reset button,” said Ryan Boykin, a co-founder of the Atlas Real Estate Group in Denver.
Boykin started his real estate investment firm in June 2008, just a few months before Lehman went down. Bear Stearns had failed that March and the housing market was already turning to mush. People thought he had lost his mind.
“I had a lot of wise people tell me I was crazy for doing this,” Boykin recalled. “It was impossible to get credit or bank loans.”
Investors, stung by the sharp drop in stock values, began hoarding their capital and looking for lower risk alternatives. Residential real estate, which was selling below replacement cost in many places, seemed to offer an opportunity.
Mortgage credit went from being abundant and easy to obtain to scarce and hard to secure. People who stretched too far to obtain overpriced homes lost them, depressing property values. Some who avoided risky mortgage products, but lost their jobs, saw their assets depleted and eventually tossed in the towel. More people were forced to rent.
But Boykin also said he was confident of Denver’s long-term prospects. The market was down, but he didn’t expect it to stay down.
Normally, the answer to a shortage of housing is to build more homes, across all price points. But the housing crash damaged the ability to do so. For five years, there was little new home construction in Colorado, Boykin notes.