Thursday, May 6, 2010

Denver Market Real Estate Update May 2010

So, How’s the Market, May, 2010
All real estate data taken from Metrolist, Inc, on May 5, 2010. Denver, Colorado.

“Did the Tax Credit Work to Increase Real Estate Sales?”

STAT ONE: Properties that are currently Under Contract are at a 5 year high.

April properties under contract on April 5th was 7484 and May 5th was 8592 or a gain of 1,108 units in 30 days. There has not been an 1100+ gain in properties under contract in one month since we started tracking data. Did the Tax Credit ramp up buyers to buy? The figures do not lie, YES.

STAT TWO: More properties closed in April of 2010 than the previous two years in April. Sold data is a trailing indicator of a market turning around and Denver has now had two month in a row of beating the previous year. Did the Tax Credit create more sales in the Spring of 2010.

The Denver Market should see increases in sold data for the next several months over the previous years. The increase in buyers pushed sales to higher levels than we have seen for several years. Prices are rising in the Denver, specifically the price range from zero to $300,000 is seeing ½% to 1% increase per month for the first four months of 2010. Has the Tax Credit made a significant impact on these numbers? Yes!

STAT THREE: Inventories in the Denver Metro area are at historical low levels. Usually single family and condo inventories grow in the spring of each year. That is not happening in 2010. With lower inventory prices will rise.

Inventory varies in price ranges. For example there are currently 6035 single family and condos on the market between zero and $250,000 as of May 5, 2010. There have been 5500 closed units from January 1, thru April 30th for the same price point. If we annualize the sold number, the yearly number of sales would be 21,153 in the price range zero to $250,000, which leaves a 3.42 month supply. This is considered very low inventory and prices will continue to rise.

Conversely, there are 1376 single family and condos above 1 million dollars on the market today. There have been 129 single family and condos close in the first 4 months of 2010. When annualizing that number the number of million dollar properties would be 496 closed units or a 33.29 month supply of homes. Even though upper price range homes are selling better than 2009, the amount of inventory above 1 million will hold prices to lower levels. Did the Tax Credit for Move-up Buyer create a new buyer pool? No. It does not appear by the numbers that the $6500 dollar tax credit for existing homeowners made any dent in the upper end market.

STAT FOUR: In March of 2010, 48.2% of all homes sold were to First Time Home Buyers. This is the highest recorded number of first time buyers and April’s figures will more than likely exceed that record. The Tax Credit did bring an abnormal amount of buyers into the market.

Current Homeowner purchasers made up 33.5% of the buyers in the market and the balance of buyers were investors who made up 18.3% of the marketplace in March.

The Tax Credit did create more buyers in March and April then the market would normally have seen.

STAT FIVE: Real Estate Companies had record showings for the month of April, 2010.

Total Company Daily Average
Week One 452 Daily Average
Week Two 434 Daily Average
Week Three 435 Daily Average
Week Four 416 Daily Average
Week Five 357 Daily Average
Total for Month 12129 showing on 1693 listings

These showing levels are higher than most summer months! A normal spring month would have 8000 to 9000 showing on 1700 listings. There were definitely more buyers in the market in April than previous months.


What does this mean for the balance of the 2010 Denver Real Estate Market? The Tax credit created an artificial crunch on real estate, especially in the lower price ranges. The number of available buyers pushed their buying decision earlier than seasonal trends would suggest and although closing for May and June will exceed previous years, the true litmus test on the solidity of the real estate market will be based on what happenings to showing the next two months and the number of sales in June, July and August.

Interest rates, at historical lows will creep up later in 2010 causing some buyers to potential not make a buying decision or asking sellers to compensate the increased monthly payment with either points or less of a price. For example, a 5% PI payment on a $250,000 loan amount is $1,336 dollars per month. At 6% that payment goes to $1491 or $155 dollar higher house payment. Interest rates do alter the ability for buyers to buy.

Even though the Tax Credit has subsided, the obvious observation would be to suggest that the market will slow down, even with low interest rates. However, as rates start to rise, watch for another wave of buyers wanting to enter the market so they do not miss the window of opportunity.

2010 has been a year of the start of the recovery. There is no question the Tax Credit created an artificial growth that is now over, but Denver will definitely outperform previous years in the number of homes closed, which will hold the inventory lower helping prices to rise. It’s a good time to be buying.

What should sellers do in today’s market?

• Consider an Extension of the Tax Credit on your home by offering $8,000 worth of points or concessions.
• Change the dynamics of the inventory in your price range by entering the market as the first home in your neighborhood on the pricing ladder.
• Be the best conditioned property in all price ranges. Foreclosed properties will be priced better, but will never be in better condition.

What should buyers do in today’s market?

• Enter the market now while rates are ridiculously low.
• Ask for seller concession in upper price ranges to make the transaction more attractive to you.
• When buying a foreclosed property ask your real estate professional about the FHA Rehabilitation Loan program

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