The Denver-area home market in January, while it did not book shoot-the-lights-out activity, appears to have set the stage for a much stronger spring season, as consumers are expected to take advantage of tax credit that are expiring, and lock in low mortgage rates, widely expected to shoot up in the coming months.
The average and median prices of homes sold last month showed double-digit increases from the anemic levels of January 2009, shows the report based on Metrolist data by independent broker Gary Bauer. And while the number of homes placed under contracts rose 21.9 percent from December, that is actually rather tame compared to the usual seasonal increase from December. For example, from 2005 to 2006, before the market hit the skids, the month-to-month increase was 43 percent. And even in January 2007, under contracts rose 29 percent from December 2006.
January not that bad
Still, it wasn’t a bad month for the overall market.
“I think January started out pretty good,” said Bauer. “We had that big let down in December, after people got the news that the tax credits were going to be extended. The January numbers show that Denver is a market on to itself. People are out there buying in all price ranges.”
By the numbers, here ares some of the highlights:
- There were 3,690 homes placed under contract in January, a 21.9 percent increase from the 3,028 in December, but a 3.7 percent drop from the 3,831 in January 2009.
- There were 2,353 closings, down 20.5 percent from 2,959 in December and down 4.7 percent from 2,469 in January 2009. There were 17,785 unsold homes on the market, down 9.9 percent from the 19,748 in January 2009, but 8.1 percent more than the 16,456 in December.
Average price up
The average price of a single-family home rose 12.8 percent from January 2009 to $260,530 from $230,878 in January 2009, but was down 7.5 percent from $281,756 in December. The median price of a single-family home at $210,000, was 15.7 percent higher than $181,500 in Janaury 2009, but down almost 5 percent from $221,000 in December. The average price of a condo was $157,701, up 6 percent from $148,509 a year earlier, but down about 1.7 percent from December’s overall price of closed condos of $160,399. The median price of a condo rose 15.5 percent to $130,500 from $113,000 in January 2009, but was down slightly from $131,000 in December.
At least one brokerage, however, far out-paced the averages. At the three Kentwood offices, overall activity is up 57 percent in January from January 2009, noted Dee Chirafisi, co-owner of Kentwood City Properties. Also in the Kentwood family: Kentwood at Cherry Creek and Kentwood DTC.
“To sum it all up, I personally feel this year started out much better than last year,” said Tom Cryer, a broker at Kentwood-DTC. “I think we are looking at more of a normal normal. I have to believe that last year was abnormal. We lost something like 20 percent to 25 percent in transactions last year, and I do not believe Denver as an overall market was inflated by 25 percent.”
John Lucero, principal of the Denver-based Lucero Financial Group, is bullish about the Denver market.
“The market has opened up; it is huge,” Lucero said. “The market seems to be night and day from where it was even 60 days ago. I am seeing multiple offers on properties again; the phone is ringing off the hook. Investors are as hungry as heck right now.”
Short sales tough
The only troubling sign he sees is banks unwilling to take the market rate for short sales, he said. Instead, banks prefer to be paid insurance by Fannie Mae and Freddie Mac. The banks get more money, but the taxpayers have to make up the loss on what Fannie and Freddie pay, he said.
And he sees the market gaining steam in the spring, as buyers scramble to take advantage of the federal tax credits.
Consumers were surprisingly quiet in the first three weeks of the year, but activity increased a lot the last week in January, and has continued at a rapid pace ever since, said Chris Mygatt, president of Coldwell Banker Residential Colorado. Showings are way up, he said.
“A lot of it is being driven by the tax credits,” Mygatt said. Congress renewed the $8,000 tax credit for first-time buyers and offered a new $6,500 tax credit for some current homeowners.
“We had this pent-up demand that hit in November, but then the urgency was gone in December,” Mygatt said. ”Now, people need to have their home under contract by April 30 and close by June 30 to take advantage of them.”
Bauer noted that because of new closing rules regarding good faith estimates on the HUD-1 Settlement Statement that went into effect on Jan. 1, it could take another five to 10 days to close homes.
“I’m telling people to get their home under contract no later than the end of March, giving them 60 days to close,” Mygatt said. “It would be terrible to get your dream home under contract in time, but not be able to take advantage of the tax credits, because it took longer than expected to close. It’s more important than ever to start work with a reputable lender.”
Uncle Sam is expected to stop buying mortgage-backed securities by April 1, which leads many to believe that mortgage rate will rise to 6.5 percent or 7 percent. Not long ago, fixed-rate loans were available below 5 percent.
“We became spoiled with these super-low rates,” said David Simonson, a broker with RE/MAX Professionals. “But actually, any rate below 8 percent is considered a very good rate.”
He noted that rates are expected to start rising about the time that the tax credits go away. He said lenders may start raising rates gradually, so consumers don’t suffer “sticker shock,” when rates start to climb from their current levels. Rising rates may help some people get off the fence, he added.
He said just about everyone agrees rates will rise, the only question is by how much. But he said even if they do increase a couple of points over their current levels, it will not have that much impact on the buying public, but will put a damper on refinances.
Bauer is not so sure.
“Every time rates rise, a certain percentage of the population can’t afford to buy a home,” Bauer said. “And these low rates certainly allow people to buy more home than they could in the past.”
Contact John Rebchook at JRCHOOK@gmail.com or 303-945-6865.< class="related_post_title">Related Posts:>