John Rebchook is a former Rocky Mountain News reporter with more than 30 years of experience in writing and communications... The Denver-area resale housing market , without the help of last spring’s federal tax credits, experienced a 16.3 percent drop in under contracts in February from February 2010, shows a report released today.
The drop was widely anticipated and is a trend expected to continue for the first part of the year, as the federal government is no longer providing up a an $8,000 dollar-for-dollar write off for qualified buyers, as it did in the first four months of 2010.
“As I have mentioned before, the market remains soft on a year- on-year basis mainly due to the loss of the tax credits,” said Peter Niederman, CEO of Kentwood Realty.
Training wheels off
Lane Hornung,co-founder and president and CEO of 8z Real Estate and COhomefinder.com, called the tax credits that fueled sales a year ago, “training wheels.” (8z Real Estate is a sponsor of InsideRealEstateNews.)
“From the perspective of a parent watching the market, February, to me is like watching a kid who is still upright on the bike, but is a little wobbly,” Hornung said. “There is a lot of swerving going on.”
On the other hand, the bike isn’t being ridden off a cliff. Hornung, for example, noted that home prices are stable from a year ago.
Demand up a bit
“And we’re starting to get a little bit of a tail-wind on the demand side of the equation due to a better jobs picture,” he said. “Although it is still a little weak, at least we’re not having to fight a headwind of rising unemployment numbers. It’s more like having a breeze that is gently pushing the rider from behind.”
Overall, February’s market was about what he expected.
“There are pockets of strength and pockets of weakness,” he said. “As Realtors, we have to learn to live with the new normal. It is going to be wobbly for a while.”
He said if you look at the “great big, macro-demographic picture,” with the giant Echo Boomer generation waiting in the wings to buy homes, there is little doubt that there will be strong demand in the future. “However, that is long-term,” Hornung said. “Don’t expect that to impact the market over the next month or two.”
By the numbers
By the numbers, there were 3,693 homes placed under contract in February, compared with 4,414 in February 2010, according data released today by Metrolist Inc., a Realtor-owned group that tracks home sales data. There were 17.3 percent more contracts in February, compared with the 3,147 in January, although contracts always go up in February from January for seasonal reasons. And this year’s month-to-month increase trailed the 19.6 percent January to February increase last year, shows a report based on Metrolist data released by independent broker Gary Bauer.
Bauer’s report showed that there were 2,229 homes closed last month, an 8.5 percent drop from the 2,436 closings in February 2010. Closing were up 3.4 percent from the 2,156 in January.
David Simonson, a broker with RE/MAX Professionals Inc., said in his report some of the increase in closings can be “attributed to movement within the short-sales market.” He said that banks are “attempting to move some of the stagnated pre-foreclosure inventory, and granting more short sales to owners in financial difficulty.” A short sale is when a bank accept less than the mortgage amount.
The Bauer report also shows that there were 18,865 unsold homes on the market, a 3.4 percent drop form the 19,349 homes on the market a year earlier, and virtually unchanged from the 18,804 on the market in January.
The average price of a home closed in February was $265,277, 1.6 percent down from the $269,688 a year earlier and down 4.5 percent from $277,922 in January. The median price of a single-family home was $220,000 in February, almost unchanged from the $220,750 a year earlier and down 2.2 percent from $225,000 in January. The average price of a condo was $155,656 in February, up 3.7 percent from $150,085 in January, but down 6.7 percent from $166,206 in February 2010. The median price of a condo last month was $124,780 compared with $132,500 a year earlier and $124,995 in January.
Bauer said the fluctuations in price from a year ago and in January, were primarily a function of the mix of homes sold.
New normal across U.S.
Overall, he shared Hornung’s take on the market, even using the same phrase, “new normal,” to describe what the expected year-over-year declines in most metrics.
“We don’t have the impact of the tax credits that we had a year ago, and we have to realize that adjustments have to be made, not only in Denver, but in cities across the country,” Bauer said. “If you take the tax credits into consideration…I think we did very well. I was very happy with the Denver-area housing market’s performance in February. Yes, we are not seeing the the type of closings and under contracts we have seen historically. This is the new normal that we are going to experience going forward. I think if you look at the numbers in context, they are very positive as we move into the prime buying and selling season.”
And Niederman, of the Kentwood Co., said that he thinks 2011 will end up being better than 2010.
” I still hold to my prediction the market will be up 3 percent to 5 percent by year end,” Niederman said. Contact John Rebchook at JRCHOOK@gmail.com.
