John Rebchook is a former Rocky Mountain News reporter with more than 30 years of experience in writing and communications... Last month was the best April on record for Denver-area home-buying activity, as buyers rushed to place homes under contract by April 30, the deadline for tax credits worth up to $8,000 for first-time buyers and $6,500 for qualified existing home owners.
In the Denver-area buyers, placed 6,616 homes under contract last month, a whopping 27.6 percent increase over the 5,183 homes placed under contract in April 2009, shows a report based on Metrolist statistics released today by independent broker Gary Bauer. There were 4,188 closings, a 23.5 percent increase over the 3,390 a year earlier, although that was not a record for April.
“Every statistic during the month of April gave an indication that April would be a record month and it was.” Bauer said. ‘It was absolutely a frenzy during the last three days of April. Some Realtors kept their offices open all the way to midnight. Sellers, especially at the lower-end, were receiving multiple offers for their homes, and buyers had to be making offers on multiple homes. It was absolutely amazing.”
Buyers need to close by June 30, to get the tax credits.
Deals don’t die with credits
Much as auto dealers did after the cash-for-clunkers program ended, many sellers will continue to offer deals to buyers in order to keep the home buying momentum going, he said.
“Selective home sellers will work with buyers to make sure buyers get the equivalent of the tax-credits,” Bauer said. “And a number of new home builders will make sure you get the equivalent of the tax credit, whether it is in the form of helping you with closings costs, buying down your loan, or upgrades.”
The market still has too many foreclosures and short sales, but May appears to have started out on a strong note, he said. “I think we are going to see positive activity, if not great activity, for the rest of the summer,” Bauer said, although closings are sure to be strong.
Most tax credits used by 1st-time buyers
Chris Mygatt, president of Coldwell Banker Colorado, said all of his offices saw a “flurry of activity” during the last week of April, so he wasn’t surprised that there were a record number of contracts written for an April. He noted the market experienced a similar surge last November, when many consumers thought Congress would not extend the tax credits.
Mygatt estimated that 85 percent to 90 percent of the people taking advantage of the tax credits are first-time buyers, with the remaining 10 percent to 15 percent of the buyers current homeowners, who are either moving up or downsizing. Mygatt said there was so much demand for lower-priced homes that it has driven up prices, and reduced the supply of the lowest-price homes.
Despite that, the average price of a single-family detached home sold and closed last month rose 7.8 percent to $274,253 from $254,442. And the median price of a single-family home rose 9.5 percent to $230,000 from $210,000 in April 2009.
“Part of that is the homes at the bottom of the scale rising in value with demand, and part of it is that we are increasingly seeing higher-priced homes selling,” Mygatt said.
Rising inventory encouraging
Mygatt also is enthused that the number of unsold homes in the market last month rose 4.2 percent to 21,565 from 20,705 in April 2009.
“That is the first month in almost three years that we have seen a year-over-year increase from the same month,” Mygatt said. “In the last couple of years, any good Realtor was advising clients not to put their homes on the market, if they really didn’t have to sell. Now, as the market is getting better, there is a lot of pent-up demand from sellers. ”
Mygatt expects a large percentage of the homes in the pipeline will close.
“The buyers really want to take advantage of that tax-credit money, so they have an incentive to do everything they can to close,” Mygatt said. “And since most of them are first-time home buyers, their deal is not contingent on them selling a home,” which often is what causes home deals to fall apart.
Billion dollar month
Last month, buyers bought about $1.05 billion in homes, 32.6 percent more than the $791.5 million in homes purchased in April 2009.
“When we see a lot of home-sale activity that bodes well for other facets of the economy,” said economist Patty Silverstein, principal of Development Research Partners in Littleton. “When people move into a new homes they need to purchase furnishings and things. First-time buyers especially need to buy lawnmowers and shovels and all type of things, so the spin-off effect goes through the entire economy. And you can’t ignore the whole universe of people involved in the process – title insurance people, inspectors, mortgage people, real estate brokers.”
Broker urged buyers not to wait until deadline
Chris Behrens, a broker with New Era Realty, did help a buyer put a home under contract near the end of April, “but for me, it was not so much of a flurry.”
Behrens said he had been urging prospective buyers to prospective buyers to find their dream home before weeks, or even months, before the April 30 deadline.
Even though is is human nature to wait until the 11th hour to pull the trigger, he said he spent a lot of time educating buyers on the advantages of not waiting until the last minute.
“I wanted people to buy homes when we still had a good supply of homes for first-time buyers,” Behrens said. “I told them that we are going to run out homes at those prices, and that is what happened. A lot of the low-priced homes have been gobbled up. I know some fix and flippers who were buying homes at $80,000 or $90,000, doing nice renovations, and then selling then homes for $160,000, and even $200,000 or more.”
Still, not all is lost for buyers who didn’t meet the deadline. The $8,000 tax credit isn’t the sole reason for buying a home, he said. In other words, it didn’t make sense to settle for a home that would make you unhappy just to land the tax credit.
“Some of the people I am working with are emotionally resigned themselves to the fact that they could not find something in time to take advantage of the tax credits,” Behrens said. “But is not all about the $8,000. If you look at what a 1 percent move up in interest rates will do to your costs, that has a more expounding impact on you than the $8,000 over the life of the loan, or even after a few years. Interest rates are still low, I think employment is going to pick up a bit, and more sellers are listening to their Realtors on pricing their homes to sell. So there will still be opportunities out there.”
Year Under Contract Closed Unsold Homes Average price s-f home Median price s-f home
2010 6,616 4,188 21,565 $274,253 $230,000
2009 5,183 3,390 29,705 $254,442 $210,000
2008 6,287 4,265 26,171 $267,259 $222,550
2007 6,173 4,399 27,858 $322,510 $248,000
2006 5,813 4,300 29,045 $318,949 $250,000
2005 6,240 4,461 24,164 $307,308 $245,000
2004 3,338 4,432 26,584 $284,853 $231,000
2003 2,497 3,823 24,972 $275,213 $227,037
2002 2,999 4,162 13,590 $259,705 $218,230
2001 3,183 4,242 12,727 $250,385 $209,970
Contact John Rebchook at JRCHOOK@gmail.com or 303-945-6865.
[...] for tax credits, that it was the best April on record for Denver home-buying activity, according to InsideRealEstateNews. Some 6,616 area homes went under contract last month, an outstanding 27.6 percent increase from [...]