Lane Hornung identifies a new breed of buyers - the "Collectors.:
By Lane Hornung
Overall, the market is stable…despite what you may read in the headlines. The same trends we saw last month continued to drive the market in April. Specifically, slightly increased sales from the previous month that outstripped the sparse supply of new listings, causing the months of inventory supply to drop from 6.4 months to 6.2 months.
When it comes to year- over-year comparisons, the market still can’t escape the skewed year-over-year comparisons as a result of last year’s federal home-buying tax credit. In fact, the comparisons are entering their most skewed phase since tax credit activity peaked in April, May and June of last year.
For all the markets along the Front Range (Colorado Springs to Denver to Fort Collins and east to Greeley and the communities of the Plains), closed sales volume this March decreased 17.9 percent compared with April 2010, but was up 7.6 compared with March 2011.
In general, the supply of new listings overall continues to lag the increasing demand represented by sales volume. Of course, when demand grows faster than supply, prices eventually tend to rise.
This begs the question: Why is the supply of inventory down? The obvious answer is that many home owners who could sell, but don’t have to sell, are simply choosing to wait until they feel the market is stronger and they can get a better price. That is certainly a reasonable strategy.
Sales volumes continue to lag last year's tax credit driven market. Year-over-year comparisons will remain challenging through July.
“Collectors” not selling
Beyond the homeowner who is simply choosing to wait, we are starting to see another type of homeowner who is related, but with a slight twist. These are the folks I am calling the “Collectors.”
The supply of inventory across all Front Range markets decreased slightly in April.
Collectors are home owners who have decided that now is a good time to buy due to attractive interest rates and prices. However, rather than selling their existing homes, they are in the fortunate position that allows them to hold onto their homes and turn them into rental properties, thereby starting their own property “collection.”
Rental homes hots
The reasons to become a Collector are compelling. First, the rental market is tight, so the likelihood of finding a good tenant is high. According to a May 24 report from the Colorado Division of Housing, vacancy rates and days on the market for rentals are at all time low. Boulder County actually recorded a vacancy rate of 0.0 percent.
Due to high demand and limited inventory, rental rates are rising. In some areas, the market is becoming frenzied, with stories of folks responding to postings on Craigslist within minutes and putting down deposits on properties sight unseen.
The ability to find a tenant who will pay a healthy rental rate, coupled with a low monthly mortgage payment at a great rate, results in positive cash flow and is creating an entirely new group of residential landlords.
Lane Hornung is co-founder, president and CEO of COhomefinder.com and 8z Real Estate, a sponsor of InsideRealEstateNews. For more on what is happening in various neighborhoods along the Front Range, please visit this 8z Real Estate link.
