Home sales activity in the Denver-area housing market plunged in October from a year earlier, while sale prices were up, signifying a shift in the make-up of the market.
There were only 3,706 single-family homes and condos placed under contract in the Denver-area last month, a 24.5 percent drop from the 4,910 placed under contract in October 2009, shows data released today by the Kentwood Co.
Meanwhile, only 2,842 single-family homes and condos closed last month, a 28.2 percent drop from the 3,846 closings in October 2009. The data is based on information supplied by Metrolist, which tracks homes sold by members of local Realtor boards. That was the lowest number of closings since 1991, when only 2,364 homes closed.
There were 2,280 single-family home closings last month, a 25.3 percent drop from the 3,052 single-family home closings in October 2009. And closed sales volume fell 18 percent to $144.45 million from a year earlier.
“The numbers speak for themselves,” said Pete Niederman, CEO of the Kentwood Co. “The numbers are showing the general market is showing some weakness. But it is nothing to panic about.”
Falling off a cliff
“I’m used to dips, but this is going off a cliff,” said Ed Tomlinson, a broker with RE/MAX Alliance. He described the drops in under contracts, which reflect the current month’s activity, and closings, which reflect activity from previous months, as “enormous.”
In addition, the number of unsold homes on the market rose 12.7 percent to 21,360 from 18,945 in October 2009. However, that is still not a huge inventory number by historic standards. In October 2008, for example, there were 23,120 unsold homes on the market. Single-family listings were up 14.6 percent from October 2009.
While the number of unsold homes on the market is down substantially from September that is largely due to a normal seasonal month-to-month drop as the year draws to a close.
In addition, the supply of unsold single-family homes on the market rose to 7.3 months in October, a 55 percent increase from the 4.7-month supply in October 2009. “That is significant,” Niederman said. “That is a bigger increase in the supply than I would have expected.”
Bright spot: Prices up
Despite the growing inventory and gloomy sales activity, the price of a single-family home sold last month rose by 9.6 percent to $287,048 from $261,771, a year earlier. And the price of all homes sold and closed in October showed a similar increase, rising to $261,750 from $238,807.
Tomlinson said the increase in sale prices is a bit of a head-scratcher.
“I’m certainly not seeing it,” Tomlinson said. Part of it, may be that high-end homes are now selling for bigger discounts than they have, changing the mix of homes being sold.
“Also, at the beginning of the year, because of the tax-credits, a lot of lower-priced homes were being sold,” Tomlinson said. “Maybe a lot of that demand has gone away, and is shifting more to the move-up buyer.”
Tomlinson said in the Arvada area, and other nearby suburbs where he specializes, the market appears to be dormant.
Last weekend, he manned the floor in his office, and “I didn’t get one inquiry over eight hours. And we do a lot of volume in the north end of town, so that is stunning.”
Tomlinson said there is “nothing to suggest” that the market will improve for the rest of the year.
Amy Terry, a broker with 8z Real Estate, a sponsor of this site, which recently celebrated its one-year anniversary, said on a personal level, she had a pretty good October.
“My own personal business did not reflect what the overall statistics are showing,” Terry said.
That said, she said she is surprised by how much sellers are willing to cut their prices in order to unload their homes.
“I’m working with one client right now that started off listing a home at $320,000, and we have it under contract at $265,000,” Terry said. “They are taking a big hit. They are going to be bringing quite a bit of money to the closing. Sellers, who are serious, are very motivated about price. I’ve been surprised how motivated sellers have been.”
Serious sellers motivated
Her client who slashed the home price is only selling because he is being transferred to Philadelphia. Otherwise, he would have held on to his home, which he bought in 2007, for more than $330,000.
“This year, I’ve probably talked more people out of selling their homes than taking a listing,” Terry said. “I would say the only people selling their homes right now are people who need to be selling.”
Independent broker Gary Bauer couldn’t agree more.
“My personal experience is that nobody is selling their home in this market, unless they have to be selling,” Bauer said.
Terry, of 8z, said the tax credits that fueled sales to mostly first-time home buyers at the beginning of the year, created a market with artificially low prices, which is now why the average and median prices are jumping
“It’s so hard to compare our market now to what it was six, seven or eight or nine months ago, because it was a false market because of the tax credits,” Terry said. “Today is a realistic market. I don’t see anything changing the market. We might be bumping around the bottom for a while.”
Bauer said the end of the elections also is a positive for the market.
“No matter how you feel about the outcome, you are glad the elections are over,” Bauer said. “No one was focusing on long-term investments like buying a house during the elections.”
The end of the mid-term elections does more get than get rid of the distracting political TV commercials that everyone quickly learned to despise.
Elections end may boost market
“I think a lot of employers were holding out on hiring anybody, until the elections were over,” Terry said. “I have a number of clients who work for the government and they said there was pretty much of a hiring freeze during the elections. Hopefully, now some more jobs will be created in the private sector and maybe the public sector, too.”
Gretchen Faber, managing broker at Kentwood Co. Cherry Creek, agreed that there is likely been a shift to the move-up market, in the wake of the tax credit buying that ended on April 30.
Despite the overall data, she said that her office had a strong October.
“Summer was really slow and then it really picked up from us in September and October,” Faber said. “We wrote a lot of contracts last month. Talking to brokers, they see a lot of pent-up demand building. Also, people are starting to realize that these super-low interest rates, and these prices, are not going to be around forever. Prices are not going to keep falling. They’re going to stabilize and then start to rise.”
Faber said she is seeing not only activity in the central Denver neighborhoods, but also in some suburban locations. In other words, it’s not just Highland, but Highlands Ranch.
“We’ve had some multiple offers on homes in Highlands Ranch,” Faber said. “There are a lot of homes for sale there, because there are a lot of homes in Highlands Ranch. But there also is quite a bit of interest from buyers for homes there, too.”
Still, she said it is unlikely that the overall market will see much change, as the year draws to a close, she said.
“We’ll probably keep bumping around where we are,” Faber said. “But I think we are going to have a strong spring.”
Consumer confidence key
Niederman agreed, adding that until consumer confidence returns, many people will not be willing take advantage of the historic low rates and the prices.
“If we see the overall unemployment rate fall from 9.6 percent to 9 percent, for example, we might see some pick up in sales,” Niederman said. “Even people who have jobs, are unwilling to take advantage of these prices and unbelievably low mortgage rates, if they are not secure in their jobs. And it is the buyers who determine the market, not the sellers.”
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