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Lone Tree, Colorado 3Q 2008 Home Price Performance

By
Real Estate Agent with Your Castle Real Estate




The average home price in Metro Denver increased +2% in the full year 2005 to the full year 2006. Comparing 2006 to 2007, the average home price across the metro dropped 3%, to $303,000. The average price in the first three quarters of 2008 was $272,000 vs. similar period of 2007 was $308,000: an 11% decrease. These numbers will be slightly different than Metrolist, as they are just Denver Metro and don't include outlying areas like Colorado Springs or Boulder.

Much of the decline is a mix issue. For example, sales volume of homes over 4,000 square feet has plummeted in the last twelve months. Middle-market homes have generally been steady in their sales volume. Very inexpensive homes under 1,000 square feet have greatly increased their sales volume. You can explain it to your clients like this: Imagine you own a car dealership and you sell Chevys and Cadillacs. If you sold 50 of each type of car last month, but then you sold 75 Chevys and 25 Cadillacs this month, the average price at your dealership would have dropped quite a bit. This would be true even if you didn't change the price of the cars. This is what we mean by a mix of what is sold issue.

Our guess is that the buyers of the 4,000 square foot homes are sitting on the sidelines since very few people really need that much space - it is a decision that can be postponed. They are probably waiting for the bad news in the headlines to blow over and for the rates on jumbo loans to return to more reasonable levels. While they wait, the investors are snapping up bargain REO properties to use as rentals.

This market behavior is likely to continue for at least another nine to eighteen months. However, once the REO volume starts to decline a little, and the jumbo rates come down, we'll see a reversal to the mix problem. Suddenly, the pent-up demand at the high end of the market will be unleashed, and we'll finally start to run out of bargain basement REO homes. Using the car dealer analogy, we'll be selling 25 Chevys and 75 Cadillacs each month. You can guess what will happen to the average prices - in some neighborhoods they will increase as fast as they have dropped in the last few years.

The attached chart shows different neighborhoods in our region. Each region has the neighborhood's name and the percentage of sales in the last twelve months that were either short sales or bank-owned properties. The second line has the price change the twelve months from October 2007 to September 2008 vs. the twelve months immediately preceding. Next, you'll see the average home price in the last twelve months and the average days on market (DOM) in the last twelve months. There had to be at least twenty sales in the last year for an area to be included. The numbers are more reliable in areas where there were more sales.

 Source: Your Castle Real Estate analysis, MLS data

(c) Copyright 2008, Your Castle Real Estate

Show All Comments Sort:
Brandon Gill
Your Castle Real Estate - Aurora, CO

It is amazing to see how much some of these markets have dropped and look like they are continuing to drop.  I hope the bottom is near for some of these communities.  On the flip side, what a great market to buy an investment in.

Oct 17, 2008 04:24 PM
Jim Goffred
Your Castle Real Estate - Parker, CO

Awesome Information!  It definitely pays to educate everyone in the investing process.  With all of the free classes that Your Castle provides as well as the knowledgeable agents it would be hard to go wrong with using an agent like yourself.

Oct 17, 2008 04:43 PM
Lori Hinsberg
Your Castle Real Estate - Castle Rock, CO

This map definitely confirms everything we are seeing out there on the market.  Another observation is that the red areas are "red" hot with investor activity.

Oct 18, 2008 07:42 AM
Todd Houghton
Your Castle Real Estate - Aurora, CO

It is amazing to see how much some of these markets have dropped and look like they are continuing to drop.  I hope the bottom is near for some of these communities.  On the flip side, what a great market to buy an investment in.

Oct 18, 2008 08:19 AM
Josh Hunter
Your Castle Real Estate - Denver, CO

Very interesting that some areas have a relatively high foreclosure rate (above 25%) with a positive average price change.  The Baker neighborhood is a perfect example.

Oct 18, 2008 08:25 AM
Rex Jarnagin
Your Castle Real Estate - Lafayette, CO

Awesome Information!  It definitely pays to educate everyone in the investing process.  With all of the free classes that Your Castle provides as well as the knowledgeable agents it would be hard to go wrong with using an agent like yourself.

Oct 18, 2008 01:58 PM
Dano Keys
Your Castle Real Estate - Denver, CO

Very useful information for investors.  Many people do not know that there are many options when they are helping clients.  The more educated your clients are the more deals that will be done.

Oct 18, 2008 02:09 PM
Brandon Gill
Your Castle Real Estate - Aurora, CO

Wow!  With all of the negative press on the real estate market it is really great to see how each local market is actually doing independently of one another.  It makes sense when you see the map on where many areas are declining.  My question is, will the declining markets shift in the next few quarters?

Oct 20, 2008 04:32 PM
Jim Goffred
Your Castle Real Estate - Parker, CO

Have you heard that the days on market have been decreasing the last two months?  I think that maybe we are past the bottom and climbing on up. It will still take some time but I'm seeing the first signs of things turning around.

Oct 20, 2008 04:47 PM
Jim Goffred
Your Castle Real Estate - Parker, CO

Have you heard that the days on market have been decreasing the last two months?  I think that maybe we are past the bottom and climbing on up. It will still take some time but I'm seeing the first signs of things turning around.

Oct 22, 2008 04:46 PM
Jim Goffred
Your Castle Real Estate - Parker, CO

Wow!  With all of the negative press on the real estate market it is really great to see how each local market is actually doing independently of one another.  It makes sense when you see the map on where many areas are declining.  My question is, will the declining markets "shift in the next few quarters?

Oct 25, 2008 02:44 PM