John Rebchook is a former Rocky Mountain News reporter with more than 30 years of experience in writing and communications... As I reported yesterday in a blog yesterday, home sales in the Denver area fell by more than $1.75 billion last year from 2008.
To put that into perspective, you could have bought 7,244 average-priced homes and condos in the Denver area last year with that $1.75 billion, increasing the sold volume by 17 percent. Or, you could have used that money to pay cash for 78,760 Subaru Outbacks or purchased about 1.6 million ounces of gold.
Since 1991, that marks only the third time that the dollar volume had not risen from the previous year, according to historic data supplied to me by independent broker Gary Bauer. Last year also was the third consecutive year that Denver’s sales volume dropped. In 2007, sales volume dropped by about $2 billion from 2006.
Sales volume dropped slightly less than 3 percent in 2006 from 2005. By contrast, the year-over-year drop in 2009 and 2008 were each just under 15 percent.
Last year, just under $10.2 billion in homes sold. You would have to go back to 1999 to find a year when the dollar volume was lower. But if you adjusted for inflation (don’t worry, I did it for you), you actually have to go back to 1997 to find a year when the dollar volume was lower.
Historically, dollar volume tends to rise each year, even if the previous year wasn’t a particularly strong year for home sales.
That is because as new homes are re-sold, which tend to be bigger and more expensive, they are added to the mix, and drive up overall prices.
Of course, that all changed with the foreclosure crisis, as well as the difficulty of getting jumbo loans for expensive homes, and a drop in demand for the houses, as consumers change their priorities on major purchases such as homes, as well as the worst economy since the Great Depression.
In short, the mix of homes on the market has changed. And with home sales, as with margaritas, the mix is crucial.
Last year, there were only 480 homes sold and closed in the Denver-area that sold for more $1 million or more, according to an analysis by Tom Cryer, a broker with the Kentwood Co. Homes costing at least seven figures accounted for only 1.19 percent of the sales market last year. And perhaps even more startling, there is now almost a three-year supply of $1 million-plus homes on the market, according to Cryer. Overall, there is only a 5-month supply of unsold homes on the market, Cryer’s research shows. And for homes priced below $200,000, there is slightly less than a three-month supply of homes on the market, Cryer said.
| Year | Dollar volume for homes and condos | Inflation-adjusted dollar volume |
|---|---|---|
| 1991 | $2.7 billion | $4.24 billion |
| 1992 | $3.6 billion | $5.5 billion |
| 1993 | $4.5 billion | $6.7 billion |
| 1994 | $4.8 billion | $7.0 billion |
| 1995 | $4.9 billion | $7.0 billion |
| 1996 | $5.5 billion | $7.6 billion |
| 1997 | $6.18 billion | $8.3 billion |
| 1998 | $7.6 billion | $10.4 billion |
| 1999 | $8.8 billion | $11.4 billion |
| 2000 | $10.6 billion | $13.3 billion |
| 2001 | $11.1 billion | $13.6 billion |
| 2002 | $11.7 billion | $14.6 billion |
| 2003 | $12.2 billion | $14.3 billion |
| 2004 | $14.2 billion | $16.3 billion |
| 2005 | $14.9 billion | $16.5 billion |
| 2006 | $14.5 billion | $15.6 billion |
| 2007 | $14.0 billion | $14.6 billion |
| 2008 | $11.9 billion | $12.0 billion |
| 2009 | $10.2 billion |
Here's your headline: Denver (real dollar) home sales drop 37% from their peak in 2005.
Most brokers don't know, or care to know, the replacement cost of what they're listing. Most have started using non arms length sales (foreclosures, shorts, etc.) to try to convince sellers they have to list or reprice at a number far less than the cost to build. Brokers have a fiduciary obligation to get the highest and best price for a property, and I think need to learn and educate buyers of the cost of a product and its relationship to a properties value. You see very little new building as prices have been beaten down below costs, and new homes will beocme a scarce commodity. National builders have downsized their new products about 20% to try to meet this bottom market. The various parasite (government) costs show only signs of dramaticly increasing. In short, I think the biggest reason for the reduced sales volume is the constant beating down that every broker I've talk to recently tries, unfairly. I think they need to learn their product better. I expect this will raise some eyebrows in the brokerage community. My number is 303-758-4272.
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