The number of unsold homes on the Denver-area market plummeted 30 percent in November from a year earlier, likely the biggest year-over-year drop in the metro area’s history.
“The headline is that the inventory is down 10 percent on a month-to-month basis and down 30 percent year-over-year,” said independent broker Gary Bauer who today released a housing report based on Metrolist data.
There were a mere 14,275 unsold homes on the market last month, compared with 20,392 in November 2010 and 15,794 in October.
“It is unbelievable,” said Peter Niederman, CEO of Kentwood Real Estate.
The last November there were fewer unsold homes in the market was in 2000, when there were only 10,282 homes listed by area Realtors.
The unsold inventory peaked at 31,989 in July 2006.
Bauer said he believes the 30 percent drop is the largest ever. Still, he said it is a good news-bad news story.
“The good news is that there are still buyers out there,” Bauer said. “The bad news is they have less to choose from. Long-term, if this trend continues, we may have some real concerns for the market. This might be a very good idea for people who were holding off putting their home on the market until next year to consider to do so now, because there is so little to choose from.”
By the numbers
Other than the drop in inventory, the other metrics were not too bad:
- There were 3,365 homes placed under contract, a 12.5 percent drop from October, largely for seasonal reasons, but up 8.5 percent from the 3,101 in November 2010.
- In the first 11 months of the year, 44,541 homes have been placed under contract, down 4.5 percent from the 46,621 during the same period last year.
- Closings were even better. Some 3,068 homes closed in November, up 15 percent from the 2,666 in November 2010, and down 3.6 percent from October.
- In the first 11 months of the year, 36,231 homes have sold, 1.2 percent more than the 35,794 during the same period in 2010.
- Total sales volume is up slightly to $9.2 billion, compared with $9.1 billion in the first 11 months of 2010. Single-family homes accounted for $8.1 billion of the sales volume this year, while condo sales were unchanged at $1.1 billion from 2010.
- The average price of a single family home that closed in November was $275,951, compared with $281,466 a year earlier and $269,503 in October.
- The median price of a single-family home that closed in November was $230,300, compared with $233,990 in November 2010 and $226,021 in October. The median price of a condo was $125,000, unchanged from October of November 2010.
“Every metric, other than the inventory, is relatively stable,” Niederman said.
“I think we are seeing such a big drop in inventory is because a lot of people are saying they are going to take a wait-and-see attitude, before they put their home on the market,” Niederman said.
Niederman expects another big drop in the inventory in December, but more consumers may brave listing their homes in early 2012.
“It will be really interesting to see what happens in January,” Niederman said. “A lot of people will not put their homes on the market between now and the end of the year before the holiday season.”
Niederman said that he thinks that home prices are doing better than the numbers reflect.
The overall prices are being dragged down because of haircuts sellers of $1 million-plus homes are taking, as well as short-sales at the lower end, in which the bank agrees to accept less than the mortgage amount.
“There are also some REOs, that is foreclosures, also hurting the overall prices,” Niederman said. “I think if you look at homes with conventional loans, those at $417,000 are below – or typically homes that sell for $470,000 or less – you will find they are very stable or even appreciating a bit. We have even seen bidding wars, but probably only out of 1 out of every 10 sales.”
Bullish on 2012
Shannel Ryan, sales manager at Fuller Sotheby’s International Realty Denver, is quite bullish on the Denver-area housing market in 2012.
“We are starting to see a little increase in consumer confidence and that affects not only the buy side, but the mind-set of the seller as well,” Ryan said. “More and more, I think people are seeing that if they are a losing a little bit as a seller, they will more than make up for it by buying right. No offense, but part of the problem is that people read all of these negative reports in the media. But the overall market here in Denver and Colorado is not as bad as the picture being painted.”
Although since all real estate is local, different pockets of the market will out-perform others.
“On a micro-level, it makes a difference whether you are in Castle Pines Village or City Park,” Ryan said. “We can’t get enough homes to sell in Country Club and Hilltop, but in a gated community like Castle Pines Village, you need to expect that the days on market for a home will be quite a bit longer.”
New home market filling resale void
One silver lining to the dearth of supply of previously owned homes is that a lot of consumers appear gravitating to new homes.
“We are hearing a lot of comments from our builder members that there are just not a lot to choose from in the resale market,” said Jeff Whiton, CEO and President of the HBA of Metro Denver.
“I heard from a lot of our members in November that they were seeing a big increase in traffic from people considering new homes,” he added. “A lot of new homes being constructed by home builders are Built Green or Energy Star-designated homes and those are really gaining traction for in the market.”
It’s not just entry level new homes that are selling, as it has been during the past few years.
“I was talking to one builder last night who said he is seeing a lot of activity in the $450,000-plus market, which had been kind of the hardest-hit part of the market,” Whiton said.
The number of new homes being sold have been accounting for about 11 percent of all homes that have been sold, half of where they were at during the buying frenzy of the mid-2000s.
“I think we are going to start seeing the new housing market penetration pick up again,” Whiton said. “Our objective is to get it back up to 20 percent or 22 percent. I can’t really predict when that will happen, but I do see it climbing right now.”
Chris Mygatt, president of Coldwell Banker Residential in Colorado, called described the low inventory number as “remarkable.”
He said that a big part of the low number is a Denver-area economy that while not robust, is better than many places in the country.
“I think because of our relatively decent employment picture those who do not have to sell their homes are going to wait-out the market,” Mygatt said.
Meanwhile, the low inventory numbers are putting upward pressure on prices, he said.
“In that respect, a low-inventory is healthy,” he said.
Last year, he noted, the first half of the year was driven by “those amazing tax credits. The second half of the year was simply devastated,” he said.
He said is it is a testament to the Denver market that without tax credits, sales are slightly ahead of where they were at this time in 2010.
Niederman noted early in 2011, most observers were predicting an over-supply of homes on the market, not a shortage.
The only question was not if Denver and other markets were going to be enveloped by the shadow market – homes held by banks not yet on the market – but the magnitude of the shadow.
“It didn’t happen,” Niederman said. “And I hear that next year we will see a big drop in foreclosures, mostly replaced by short sales. Lenders are realizing that they lose less money in a short sale than in a foreclosure. They might get 75 cents on the dollar for a short-sale, compared with 65 cents for a foreclosure. And if they do a foreclosure, the house sits vacant and they have to hire a property management company. It’s better for banks to keep someone in that house.”
Early in the year, Niederman predicted that 2011 would be slightly better than 2010, at a time when many thought the market was heading off the cliff.
His prediction appears to be on the money, despite a number of unexpected events that have roiled the markets, primarily the economic turbulence in Europe.
“I’m glad that I took a contrarian point-of-view when there was so much doom and gloom in the market,” Niederman said.
Contact John Rebchook at JRCHOOK@gmail.com