Denver home sales strong in May

Nothing in the numbers surprised Lydia Lind, owner of One Realty.

“I put five deals under contract in the last week,” Lin said. “They were priced from $260,000 to $645,00. They were in Aurora, LoDo, LoHi, Congress Park and Stapleton.

She placed a downtown condo under contract for the full asking price of $325,000. It was a condo that she had listed last year and there were no takers.

“After we couldn’t get the price he wanted last year, I begged him to rent it until the market got better,” Lin said. “He’s been renting it for $1,750 a month and the lease is coming up. I put it on the market at the same price, with the same brochure, the same everything from last year. I sold it in one day and have two backup offers. It’s crazy.”

Scott Webber, president of Fuller Sotheby’s International Realty, said it would be hard to ask for a better market.

“Is this great news, or what? It’s just amazing. After four years of a down market, it is good to see such strong numbers.”

He said there is so much pent-up demand in the market, he doesn’t see the Denver area running out of buyers.

“If you have a job and good credit and are a qualified buyer, and you were ready to move into a new home, the only reason you wouldn’t buy today is if your home was under water,” Webber said. “Interest rates are still at historical lows and people know that prices are only going one way – up. “

While rising prices might knock some people out of the market, it creates other buyers.

“The great thing is that as prices begin to rise, more and more homeowners are going to start having some equity in their homes and will be digging themselves out of a bad situation. That means more buyers. There are still concerns about the job market and the election and the economy. But I think when people have made the decision to move that is what they focus on and they kind of put the other issues to the side.”

Peter Niederman, CEO of Kentwood Real Estate, said that May was an impressive month by a wide-range of measures.

He highlighted more than a half-dozen metrics – including under contracts, closings, days on market average listing prices – that often showed percentage gains of more than 20 percent from a year ago.

“If you look at each one of these metrics individually, they are nothing short of spectacular,” Niederman said. “Typically, we might talk about one metric that is really strong. In May, just about every metric showed a dramatic percentage gain. If something rises from zero to 10 percent that is interesting. But it is truly great news when a metric is up by more than 20 percent.”

Despite the improving fundamentals, Niederman said it may not be all smooth-sailing ahead.

“We are not seeing any huge improvements in unemployment, locally or nationally, or in consumer confidence,” Niederman said. This is an election year and there are global concerns. These are all potential headwinds. Most of them are national or international events, out of our control. I’m not saying these headwinds will slow down the Denver housing market, but they could slow it.”

And while there is also a lot of pent-up demand from buyers who are eager to move and take advantage of mortgage rates hovering around 3.5 percent, buyers need the employment history and strong credit to take advantage of the conditions.

“You need an able and willing buyer,” Niederman said. “But while a lot of people are willing to buy, not everyone is able, maybe because they don’t have the work history or their home is still too deep under water to sell.”

Shadow market

Niederman also noted that some people have raised the issue of the “shadow market” of unsold homes being held by banks the could flood the market.

“We have been hearing about the shadow market for three or four years now and we haven’t seen it,” Niederman said. “I do believe it exists. But we have so little inventory right now that we could easily absorb more homes on the market. And I have seen no indication that lenders plan to dump all of these on the market at this once. Rather, I think they are going to wait for a tick-up in prices before they put them on the market, which could be a sizable increase in value for them.”

Also, there are lot of cash buyers eager to snap up distressed properties, he added.

David Binkowski, owner of Prudential Real Estate of the Rockies, said he has been telling his brokers for several months that the market has moved from a buyer’s market to a seller’s market – with a caveat.

Homes have to be turnkey situations, especially with younger buyers.

“The younger demographic, especially, wants a home to be pristine,” Binkowski said. “But if a home is clean, in good condition and in a good location, I would say it is a seller’s market. I have actually had some clients who were afraid to sell, because they were worried their home would sell so fast they wouldn’t be able to find another home to move into. When is the last time we ran into that? It’s been many, many years.”

David Simonson, of REMAX Professionals, said that he has a number of clients who have missed out on buying a home because they wanted to think about it for a couple of days. By the time they were ready to make an offer, someone else had snapped it up.

“We don’t want buyers to over-react, but we need to educate them that the market has changed,” Simonson said. “It used to be that you could tell a seller you want him to do A, B, C and you would consider making a low-ball offer. No more.”

The Metrolist numbers seem almost too good to be true, he said.

“As busy as I have been, I find these numbers hard to believe,” Simonson said. “But knock on wood. Home are selling faster than they were just a couple of months ago. Many homes are selling faster than the numbers indicate. The numbers include all of the distressed properties – short sales and foreclosures – that take longer to sell. A year ago, a third of the home sales were distressed sales. If you remove those from the mix, homes are really selling fast.”

Much of the sales activity is for homes between $300,000 and $600,000, he said.

“It’s not just the $150,000 homes that are selling, like a couple of years ago,” Simonson said.

He said people buying and selling in the same market are even willing to take a loss in order to snare a bargain at the other end.

“If you paid $300,000 for a home and it is down 20 percent, that is a $60,000 hit, which is pretty painful. But if you can turn around and buy a home that previously sold for $600,000 for $480,000, it looks pretty attractive.”

Bauer said the only surprise May’s numbers had for him was the continued dearth of inventory.

“I expected that we would have at least another 1,000 homes – maybe another 1,500 homes – on the market.”