We are still seeing very low inventories in the Denver area which will lead to prices starting to turn around. The current inventory for single family and condo units is at 20,492 which is a 19% decrease from February of last year. In past years we have seen double digit percentage increases in the inventory from January to February, but this year's increase was only 8%.
The inventory in the price range from $0 to $250,000 currently stands at 8816 total units. In the last 12 months 27,374 units in this price range closed. This means a meager 3.864 months supply of homes in this range. Prices have already started slowly rising in this price point and we predict that they will probably continue at .15% increase per month or an average of $300 per month for the next 6 months on a $200,000 home. Thus, Denver will experience appreciation in lower prices, however small, for the first time in 4 years.
The inventory from $250,000 to $500,000 is also at a level that will eventually cause prices to go up later this year starting in the summer. At this price point there are 6627 units available. The last 12 months has seen 11,578 units close in this range, meaning we now have a 6.86 month supply of homes. To see prices start to rise we will need to see a 4.5 to 6 month supply. Homes at the $300,000 price will start to see the rise sooner as there are less homes available at that price than there are at the closer to $500,000 price.
As I have said in previous writings, homes above $500,000 have higher inventories and homeowners in that price range are finding it necessary to reduce prices considerably in order to sell. These homes will not start to see prices rise until next year. The opportunity to buy more house than you thought was available is now here for the taking. This is where the deals are and these homes will be superb long term investments. I know of some really great deals above $500,000 that I have seen lately and would love to help someone take advantage of them. Call me if you are interested in seeing them.
The second portion of determining the market conditions is the under contract statistics. As of February 5, 2009, there were 5337 units under contract in the Denver metro area. This is a 15% increase over January. We usually expect 8% to 9% increase in under contract properties from January to February. We are seeing more buyers entering the market because of low rates and low prices. We will track this and hope to see a trend throughout the year of upward numbers in contracts.
February of 2009 is the second highest under contract month recorded in the last 6 years. Here are the February totals from the past 6 years:
The sold data is the lagging indicator. 2017 homes closed in Denver in January, down 21.46% from one year ago. This is probably due to the turmoil in the lending industry and uncertainty about the stimulus. The stimulus is all but done, now, so we should see this closing number start to increase.
Let's look at the reasons for confidence looking into the future of housing in Denver:
- Job stability in Denver is much steadier than nationally
- That large number of under contract units this month will start to close in March and April. As we start to see the closed statistics increase, more buyers will feel confident and start to shop for a home so they, too, can take advantage of the low rates, low prices and the new $8000 tax credit.
- Much has been written by experts and economists in the last couple of months about the stability of the Denver economy over cities in other parts of the country.
What does this mean for buyers and sellers today?
Buyers, as we said above, can take advantage of the lowest rates in 40 years, the low home prices and, for first time homebuyers or buyers who have not owned a home in the last 3 years, the new $8000 tax credit that is a true credit, no pay back.
If you are looking for a great investment, a home in the $250,000 price range will see appreciation this year. Homes above $300,000 will take longer, but are the best deals right now and will see more long term increase.
Sellers moving up from the below $300,000 range to above $300,000 are in the best position. They can sell at a good price and buy low.
Sellers can also consider making their existing home a rental and go ahead with the purchase of a more expensive home. They will see appreciation on the existing rental unit and on their newly purchased home at the same time.
As I have expressed before, make sure your home is the best home in the area and at a fair price. Then, even if you lose a small amount, moving up you will eventually see much more gain on your new home which you have bought for a great price!
Call me if I can be of service to you in learning more about your market in your neighborhood in the Denver area so you can price your home correctly. My number is 303-268-4240 or email me at email@example.com.