Friday, March 6, 2009

So, How's The Market March 2009

So How’s the Market, March 2009 All data taken from Metrolist, Inc on 3.4.09

The difference between a Real Estate Number and a Real Estate Trend is a significant difference in reporting where the real estate market is and where it is going. Know the difference and it will help you help buyers and seller’s best understand how to take advantage of today’s Denver real estate market.

In the most recent past months and what will be reported for March of 2009 you will see people report a number to give their description of the current market. That number will be the number of sold properties is off 22.52% from February of 2008 to February of 2009. These are accurate numbers for the moment of time someone has taken the data to report.

A number is like taking a picture. Look back at a picture you have of yourself from the past. Has your looks changed? But what really has happened between the picture of yore and the present you? The space between the two is a trend. You didn’t get wrinkles over night or in some cases lose all your hair overnight. Trends help you project where the market is going, a picture can only tell you what happened at the time of the picture.

Do not let the statistic of the moment blind you of the trend the market is in?

Sold data is off 22% year over year. Why? What happened to the economy in the fall and early winter set a stage for home buyers to wait on the sidelines till something positive happened, which it didn’t. For many industries, sales in November, December and January stalled. Hence the lower number of home sales for February 2009 is a pure reflection of the previous 3 months, but not a trend in real estate.

The trend of sold data over the past 6 years is interesting to reflect upon to predict what 2009 will bring to Denver.

February sales have had a decline from 2006 to today. We look to 2006 as being the recipient of aggressive lending practices in 2005. As 2009 moves along you will see 2006 sold data to start to flatten out as those lending practices were recognized in August of 2006 as being inflationary in some markets. Denver, however, did not experience such inflationary housing numbers, causing national surveys, like Standard and Poors/Case-Shiller Report, to 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.

What this sold data trend tells us is that Denver is primed to experience an appreciation not necessarily enjoyed in Denver the early part of 2000 decade. This is actually a blessing in disguise for Denver. Sold data is the picture of today, but the trend of lower inventory, higher buyer confidence in homes being put under contract indicates a trend that the sold data will start to tick up this spring and summer.

The next trend to consider is where does the number of available inventory stand as of March of 2009. The picture of a gloomy market that is a result of a picture being displayed is not the trend in Denver.

In March of 2009, there are 15861 single family homes on the market and 5023 condo or attached homes on the market for a total of 20884. One year ago the total inventory for both single family and attached homes stood at 25416 units. 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.

This trend tells us that the number of available properties is at a lower current supply than previous years which will cause an increase in the demand for those fewer properties on the market. Hence, increasing buyer activity in the coming months for Denver is a very likely outlook based upon supply and demand of homes. Considering the current economic world, real estate in Denver has frankly performed pretty well against other products during the slowest of months.

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. Is this a trend or a picture? It’s a picture, but does help in seeing the trend.

In 2005, the year which recorded the highest March under contracts in the history of Denver, indicates something happened then that didn’t happen in other years. As we now know, fraudulent and mismanaged lender practices created more buyers than really should have been buying. This didn’t just happen 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 makes for a monthly supply of 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 dollars than in the past. When that trend occurs in rolls up the price ranges and take 3 to 6 months for every $100,000 of price range to catch on fire. So by July, homes price below $500,000 will start to move at a faster pace then previous years. Once that occurs, price increase follows.

Conversely the upper price points of $1 million to $1.5 million, for example, tells of an inventory 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. Historically upper end priced property owners have more staying power in high inventory times causing the inventory to drop at more rapid rates than lower priced inventory supplies. Although some buyers bought McMansions when they shouldn’t have, this inventory will tend to level off at a faster rate than lower price ranges. With high loan balance financing being more available in the coming year, which has not been available for more than a year now, this 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?

• Consider making a move up as the old adage buy low and sell high is met when selling below $400,000 and buying above $750,000.
• Keep your current residence and make an offer to lease option an upper end property. This will allow you to get in at today’s prices, and if for some reason the price you enter at today is not good enough for you at the end of your option, you haven’t lost anything.
• Get pre-approved if you are buying below $417,000. The competition for buyers is greater at this point and the sellers are scrutinizing the qualifications more than before.
• Look to alternative financing methods in upper price range homes. The pricing strategy you employ needs to consider, price, terms and time to make the entire transaction more advantageous to your situation.

What should sellers do today?

• If your home is in the starter price ranges and you want to move up, get it on the market now while the inventories are low.
• Homes that are at a market value of $500,000 or more need to consider alternative financing methods to attract buyers. You cannot keep dropping the price, but instead offer more attractive terms to capture today’s buyers.
• The information pipeline to buyers is enormous. Couple aggressive marketing with market experience to coordinate a negotiable price acceptable to you. Do not rely solely on dropping the price to be your defense in the market.
• Be the best conditioned home to get top dollar. There are too many deals out there for buyers who need to fix up the property themselves. You do not want to compete with that, but you want buyers to DESIRE your home, not TOLLERATE your home to get the best price.

Good Selling!.