It might not be a good time to be in the “For Sale” sign business – at least not in the Denver area.
The number of homes for sale in the Denver area plunged by a record 41.6 percent in January from January 2011, shows a report released today by independent broker Gary Bauer.
At the end of last month, there were only 10,443 unsold homes on the market – 8,356 single-family homes and 2,087 condos – compared with a total of 17,890 homes on the market in January 2011. It was the lowest number of unsold homes on the market in a January since 2001, when there were 9,540 unsold homes on the market.
Bauer said he wasn’t surprised by the dramatic drop. “I actually thought it was going to drop more,” he said. “I thought it would fall to 10,000.”
The inventory of unsold homes also fell by 5 percent from December, when there were 10,993 unsold homes on the market, according to Bauer, who bases his monthly housing report on Metrolist data.
“We were looking at those numbers this morning,” said Bruce Alexander, president and CEO of Vectra Bank Colorado. “There is only a 3.3-month of supply of homes on the market, which is unbelievable.”
Builders may help fill void
With relatively few new homes being constructed, and a dearth of resale homes on the market, is only a matter of time that home prices will start to rise, he said.
“Homebuilders are starting to make a move,” to build more homes to fill a void created by the lack of resale home, Alexander said.
And while year-over sales activity was strong – under contracts rose by 10.8 percent from January 2011 and closings increased by 14.6 percent, the overall housing market showed a drop in prices.
“You can tell we have really hit bottom,” and houses should start to appreciate, he said.
The average price of a home sold in January was $272,328 compared with $277,922 and $275,610 in January 2011 and December, respectively. The median price of a home also was down to $218,855 in January from $225,00 in January 2011 and $230,000 in December.
But that doesn’t tell the whole story, Alexander said.
“That is true in the aggregate, but what I think you need to do is look at price point strata,” Alexander said. “My sense is there is a lot of demand for homes priced under $300,000, while when you look at homes priced at $1 million or above, they are selling for 30 percent or 40 percent from where they sold at the peak of the market.”
Doug Kincaid, of the Kincaid Realty Group with RE/MAX of Cherry Creek, said the low inventory is good or bad, depending on whether you are a buyer or a seller.
“It’s been a little bit of a problem for some buyers to find a home,” Kincaid said. “But three years ago, when we had a glut of homes on the market, buyers had an inability to make a decision because they were so overwhelmed with choices. But now is a fabulous time to be listing your home. I’m coaching people to get their homes on the market now, when there isn’t much competition.”
Peter Niederman, CEO of Kentwood Real Estate, described the inventory as “painfully low.”
Yet, he was pleased to see 3,486 homes placed under contract last month, a 23.1 percent increase from the 2,832 in December, and a double-digit jump from the 3,147 in January 2011. The 2,470 closings in January were down 21.7 percent from December, but up substantially from the 2,156 in January 2011. Closings represent housing activity from previous months, so they are a lagging indicator of the health of the housing market.
But home showings are a leading indicator, and those have been strong, Niederman said.
“Brokers are busy showing homes and a lot of contracts are being written,” Niederman said. “I think there is a little bit of urgency with buyers, especially for conforming loans below $417,000. That means homes that are selling as much as $450,000 to $500,000.”
One nice thing is that while sales are softer at the high end, there is activity in all price points.
“We’re seeing traction across the market, which was not true a couple of years ago, when most of the activity at the lower end.”
Stable stock market helps
He also said that the relative stability in the stock market bodes well for home sales.
“It has a psychological effect when there are these wild swings – down 300 points one day, up 500 points the next. Even if it results in a net gain of 200 points, it unsettles people to have such violent swings. We’re only six weeks or so into the new year, but so far the financial markets have been fairly stable and steady.”
While all markets are local, and Denver is doing better than most of the country, Niederman said the global economy is the wild card.
“I think if we were just talking about the U.S., we are moving in the right direction with unemployment dropping, which will lead to more consumer confidence. But global events are something we have no control over, but they still impact local markets. Right now, people are focusing on Greece. Who knows what will be next? I don’t want to sound like a cliche, but I am cautiously optimistic about Denver’s housing market. I think we’re going to see a 3 percent to 5 percent increase in sales and dollar volume this year over last year.”
Contact John Rebchook at JRCHOOK@gmail.com
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