The Home Hunter Blog - TheHomeHunterBlog.com: The Daily Dirt - Real Estate News Update from Michael Clarkson

Issue 08-02.04

February 2008

Denver Market Conditions February 2008

Dear Mile,

I apologize for sending such a high volume of emails this past few weeks, but SO MUCH is happening in our local market. I know you are busy with your lives, so in my effort to provide you the best information, I wanted to forward my lastest market condition report to you.

Denver Market Conditions as of February 3, 2008

For more information, please click to www.MileHighMLS.com

Wow! The data this month really signifies a sea change!

Why?

There are three factors in the data that indicate Denver has a very favorable outlook in residential real estate:

Continually strong sales activity, drawing down existing resale inventory - a 1,838 listing reduction in the month of January alone
- This should jump back up as previously frustrated Sellers become encouraged and re-list their homes
- However, sales activity continues above the 12 trailing month average rate. In January, one would have expected essentially one week's worth of activity to dry up due to the mid-week New Year's holiday - which people seemed to cause people to take off the whole week. However, instead of the expected 683 unit drop in sales, we saw only a 252 unit drop, or 1/3 of the normally anticipated drop. So, sales continued at a healthy pace.
Builders are heavily discounting their inventory homes in an effort to improve balance sheets and retain market share.
- We have already seen TOUSA - locally known under the brand Engle Homes - file for Chapter 11 reorganization.
- Moreover, builders are moving to a build-on-contract model, which will take lots of inventory out of the market. This should have a very favorable impact on home prices, particularly where new home incentives have created "hostage values" - these are values held hostage by the builder. In other words, the incentives a builder offers holds the net prices of resale homes down, largely by the amount of the incentives. Take those incentives away, upward pricing pressure is allowed to re-establish itself.
Interest rates are having downward pressure exerted on them.
- The dropping of the Fed Funds rate to 3.5% and 3.0% within a 3 week period indicate that there is a larger concern about the economy stalling. It also would appear to be a means to soften the ARM Adjustment/Foreclosure phenomenon

Factors aside, how did the Denver market fare?

In January, the market composite of the communities featured were:

Seller's Market - 11 (down from 13)
Netural Market - 5 (up from 3)
Buyer's Market - 1 (though static, this market moved from Erie to Golden)

So, the market, though impacted by the holidays, stayed largely healthy.

Additionally, the in-month trends appear to be very favorably impacted from the TWO Fed Funds rate cuts. The trends changed in the following way in January:

Trend toward a Seller's Market - 13 locales (up from 6)
Trend toward a Buyer's Market - 4 locales (down from 11)

The change in trend is determined by taking the current month under contract homes and determining the percentage change from the 12 trailing months' average monthly home sales. So, if you sold an average of 100 homes per month the past twelve months, and had 110 go under conract in the present month, then you would see a 10% trend toward a Seller's Market {([110-100]/100) = +10%}. The data for each featured community is shown in the table.

Well, the numbers continue to be strong, even while we had most of the first week of the month wiped out by a mid-week holiday (New Year's), which caused a lot of buyers to self-eliminate from the market. However, over half a month of rate reductions from the Fed caused a significant upswing in lead activity. Indeed, the author of this article saw website traffic jump by nearly 10%, with average daily new leads doubling the seasonal average.

The National Association of Realtors® (NAR) recently published a report that stated, "Prices will still rise by 2% in 2008 if mortgage rates rise to 7.5% next year from the current 6.5%." They further added, almost as if they foresaw the Fed Funds rate cuts, there is a potential for a price improvement between 5.7% and 14.6% based on interest rate changes and corresponding debt service capacity. Please see the "Alternate Price Forecasts" table in the NAR report on my website:

http://www.milehighhomehunter.com/Price_20_Outlook.html

So, is it a good time to buy? That you can only answer for yourself. However, I can share that many brokers in the Metro Area are seeing what this broker is seeing: increased activity. Please read the article on my blog: http://www.milehighmls.com/2008/02/michael-clarkson-interviewed-for-denver.html

*Market Trend Analysis - Denver Metro Selected Towns/Cities*

Based on information from Metrolist, Inc. for the period January 2, 2008 until February 2, 2008.
Single Family Residences Between $100k and $1,000k
Excludes Housing Not Listed in MetroList

*Note: Six (5.5 to 6.5) Months of Inventory Tends to Indicate Neutral Market, Over 6.5 Months a Buyer's Market, Under 5.5 Months a Seller's Market*

					6
*Locale*	*Active Listings*	*12 Months Sold*	*Sold per Month (Avg)*	*Months Inventory (MOI)*	*Current* *Mkt State*	*Under Con-tract*	*Sales Trend*	*Sales Trend Chg.%*
Arvada	494	1,439	119.9	4.1	*Seller's Market*	126	*Seller's Trend*	5%
Boulder	78	269	22.4	3.5	*Seller's Market*	21	*Buyer's Trend*	*-6%*
Broomfield	294	791	65.9	4.5	*Seller's Market*	70	*Seller's Trend*	6%
Castle Rock	706	1,323	110.3	6.4	*Neutral Market*	133	*Seller's Trend*	*21%*
Denver	3,796	7,657	638.1	5.9	*Neutral Market*	850	*Seller's Trend*	*33%*
Erie	163	305	25.4	6.4	*Neutral Market*	30	*Seller's Trend*	*18%*
Golden	383	702	58.5	6.5	*Buyer's Market*	50	*Buyer's Trend*	*-15%*
Greenwood Village	53	101	8.4	6.3	*Neutral Market*	9	*Seller's Trend*	7%
Highlands Ranch	334	930	77.5	4.3	*Seller's Market*	112	*Seller's Trend*	*45%*
Lafayette	74	197	16.4	4.5	*Seller's Market*	15	*Buyer's Trend*	*-9%*
Lakewood	508	1,413	117.8	4.3	*Seller's Market*	132	*Seller's Trend*	*12%*
Littleton	746	2,981	248.4	3.0	*Seller's Market*	182	*Buyer's Trend*	*-27%*
Louisville	27	100	8.3	3.2	*Seller's Market*	13	*Seller's Trend*	*56%*
Northglenn	201	411	34.3	5.9	*Neutral Market*	47	*Seller's Trend*	*37%*
Parker	630	1,603	133.6	4.7	*Seller's Market*	153	*Seller's Trend*	*15%*
Superior	26	130	10.8	2.4	*Seller's Market*	8	*Buyer's Trend*	*-26%*
Thornton	747	1,620	135.0	5.5	*Neutral Market*	183	*Seller's Trend*	*36%*
West-minster	557	1,246	103.8	5.4	*Seller's Market*	151	*Seller's Trend*	*45%*
Wheat Ridge	131	303	25.3	5.2	*Seller's Market*	30	*Seller's Trend*	*19%*

*Total of Selected Towns & Locales*	*9,948*	*23,521*	*1,960.1*	*5.1*	*Seller's Market*	*2,315*	*Seller's Trend*	*18%*

Total MetroList*	16,997	35,531	2,960.9	5.7	*Neutral Market*	3,690	*Seller's Trend*	*25%*
* Single Family Residences Only

http://www.MileHighHomeHunter.com
http://www.MileHighForeclosure.com
http://www.HomesInColorado.com/mclarkson
http://www.MileHighMLS.com
http://www.CashPathRealEstate.com




Note: This representation is based in whole or in part on content supplied by Metrolist, Inc. Metrolist, Inc. does not guarantee nor is in any way responsible for its accuracy. Content maintained by Metrolist, Inc. may not reflect all real estate activity in the market.