Trends in sold data, inventory data and under contract data for the Denver market for the last 6 years helps us to predict what 2009 will bring to Denver's housing market.
February sales have had a decline from 2006 to today. 2005 and 2006 were when the aggressive lending practices were plentiful and this helped to push the numbers of sold homes up to the high numbers you see in the chart. Denver, however, did no experience such inflationary housing sales numbers as other markets in the country. That is why surveys, like Standard and Poors/Case-Shiller Report, indicate Denver will be one of the leading metropolitan areas in the U.S. in housing for 2009 and 2010. The Denver real estate trends are as positive as any market reported in terms of stability and growth in real estate in these national surveys. The trends of lower inventory and higher buyer confidence indicates a trend that the sold data will start to tick up this spring and summer.
The next trend to consider is where do the inventory numbers stand as of March, 2009. In March of 2009, there are 15,861 single family homes on the market and 5023 condo or attached homes on the market for a total of 20,884. One year ago the total inventory for both single family and attached homes stood at 25,416. So over one year the inventory dropped 20.54% and that inventory has trended lower the last 5 years. March inventory of homes in Denver is the lowest in 6 years.
The lower current supply of homes coupled with the overall increased demand for homes due to the new jobs coming to Denver, low interest rates and the new $8,000 tax credit will cause people to move faster to buy so they get what they want before someone else does, thus, causing prices to increase somewhat. Add to that the fact that real estate in Denver has out performed other products during the slowest months of Nov., Dec. and Jan. and you can see why we look for Denver real estate sales to really start to pick up. My company, Prestige, has seen a really large number of showings in the last month which also indicates this brighter future for Denver real estate.
The number of homes under contract stands at 5907 up from 5559 in March of 2008 or a 6.26% increase in the number of buyers putting homes under contract in 2009. Comparing this trend to the sales trend we see that many of those contracts are not being consummated in a sale. There are 2 reasons for this. First, many of those contracts were for bank owned properties. It is quite common for these not to close because of the length of time required and because of the problems often found upon inspection of these homes. Second, lending guidelines are tighter now and many loans just don't get approved. The large number of homes under contract in 2005, 6989, shows the period of time when fraudulent and mismanaged lender practices created more buyers than really should have been buying. With that being said, there were still a large number of those contracts that were cancelled because buyers could not get the financing they thought they could. The numbers for 2006 are more inline with other years. This didn't just happened in Denver, but nationwide lending practices caused homes sales to skyrocket and allowed the supply and demand to be artificially changed. The difference Denver experienced in 2004 to 2006 was that the average price of a home in Denver did not increase as rapidly as other markets around the U.S. giving Denver a different trend analysis than what is currently being pictured, portrayed or reported from the national media on housing. Finally, the trends indicate some very different predictions for the future based upon the price range you are trying to measure. Homes in the zero to $250,000 price range currently represent 41.72% of the total inventory available in Denver, but over the last 12 months made up 65.43% of homes sold. This means we currently have a 3.85 months supply of homes. This trend of monthly supply has decreased over the last 26 months in this price point indicating the trend should be to have an increase in price at the starter home prices. We are now seeing multiple offers on well priced starter homes, giving the owners of these properties more money than in the past. The one thing that is keeping the average price in starter homes from increasing more is that there are still quite a few short sales and foreclosures which also have numerous offers, but their selling price tends to stay very low because these buyers are looking for bargains. We still believe that because of the low inventory and the influx of new buyers we are seeing, prices are headed up in this price range and in 3 to 6 months, the houses priced $100,000 more will start to move faster and every 3 to 6 months that will happen in the houses priced in the next $100,000 higher and so on. As this happens, each of these price ranges will see appreciation in pricing. Conversly the upper price points of $1 million to $1.5 million, for example, shows an nventory of 739 current single family and attached homes and the number of properties sold the last 12 months is 315 single family condo's sold or a 28.15 month supply. With high loan balance financing being more available in the coming year, which has not been available for more than a year now, the upper end inventory from $750,000 and above offers the best discounts in the Denver market place in terms of price, but the opportunity will only exist at these higher inventory levels. Once the levels become more modest, the opportunities will disappear making today a perfect time to sell your existing home if you are priced below $400,000 and get a discount at an upper end priced home above $750,000. What should buyers do today? What should sellers do today? Need some help? Give me a call at 303-268-4240.
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