The temperature of the Denver-area housing market in June was like the weather – in a word, hot.
“It was a dynamite month,” said independent Realtor Gary Bauer. “The market is hot – dynamite hot.”
A report released today by Metrolist, the largest Multiple Listing Service in Colorado, showed that by almost every metric the market improving at a blistering pace in June from June 2011.
It’s a trend that is expected to continue.
“We expect the Denver market to really sizzle this summer,” said Kirby Slunaker, CEO and president of Metrolist, Slunaker, President and CEO of Metrolist,
There were 5,363 homes placed under contract in the Denver area last month, a 12.6 percent increase from the 4,761 in June 2011.
The 4,904 closings last month were up 20.2 percent from the 4,080 in June 2011.
The average price of a single-family home hit $324,497 – the highest level in almost two years – and 11 percent higher than the $292,230 average price in June 2011. Prices are up primarily because of the mix of homes being sold, Bauer said.
The median price of a single-family home was $269,500, up 12.3 percent from $240,000 a year earlier.
“I don’t like to focus on the days on market, but they have gone down dramatically,” Bauer said.
The average days on the market for all homes fell 30.8 percent to 72 days in June from 104 days a year earlier.
“There is now about a 2 1/2 month supply of unsold homes in the market,” Bauer said.
“I won’t say that it has turned into a seller’s market from a buyer’s market until we are well past that point, but clearly in many neighborhoods it is a seller’s market,” Bauer said. “And the number of areas where that is happening is growing every day.”
Inventory remains low
The number of unsold homes on the market fell 39.4 percent in the 12 months ending in June. There are only 10,925 unsold homes on the market, compared with 18,026 in June 2011. The number of unsold homes rose only 3 percent from May, when the inventory stood at 10,591.
“In other words, product that’s priced right and ready to sell is moving quickly,” Slunaker said.“The bottom line is we need more available inventory for homebuyers to choose from.”
Dan Polimino, of Keller Williams-DTC, said he expected far more homes to have been placed on the market from the start of the seasonal strong selling season.
“I really thought that we would see an influx of maybe 3,000 or 4,000 single-family homes added to the market from April 1 to July 31,” Polimino said.
“It didn’t happen and it isn’t going to happen.”
He noted that the supply is low, while demand is rising.
Bucking the trend
“Denver is an anomaly compared to a lot of other parts of the country,” Polimino said. “A lot of it is just supply and demand. We need to explain that to a lot of people who are relocating from other markets,” where the buyers can still take their time before signing on the dotted line.
That is a sentiment shared by Slunaker.
“With double-digit increases in prices and sales volume from last year, I have to think Denver is among the better performing markets in the U.S. today,” Slunaker said.
Denver’s housing market never had the highs and never had the lows of many other markets, Polimino said.
And to borrow an accounting term – FIFO, Denver was first in, first out.
“Our market peaked in 2006, while a lot of other markets didn’t peak until 2008,” he said. “In 2006 and 2007, we were still leading the nation in foreclosures, while other markets didn’t start experiencing that it in a big way until 2008 and 2009.”
Scott Webber, president of Fuller Sotheby’s International Realty, said there are not many foreclosures, or REOs (Real Estate Owned homes) on the market now.
“Six months from now, I think prices will be higher,” Webber said. “I don’t know if today’s market conditions are sustainable. A year from now, there may be more REOs on the market and there will definitely be more competition from new homes,” which eventually will be part of the resale market, he said.
“Clearly, we are well past the bottom and are starting to come up again,” Webber said.
One reason that the inventory is so low, “is because a lot of homeowners are still under water,” Webber said. That is, their mortgage is still worth less than the sales price.
“With values rising, more people will be able to sell their homes in the future,” Webber said. “There is quite a bit of pent-up demand out there. People want to take advantage of these historically low interest rates while they are still around. And after November, people will know who has won the Presidential election, which will bring some certainty to the market.”
He said some well-heeled buyers are starting to snap up luxury homes in markets where there had been no activity for three or four years.
“And we are starting to see people buy vacant lots to build custom homes,” Webber said. “We haven’t seen that for three or four years. We also continue to see multiple offers on a lot of homes.”
Polimino said that the blistering heat may be keeping some prospective buyers from looking at homes.
“Honestly, I’ve tried to get a handle on the weather to determine to what degree it impacts buying, without much success,” he said. “I think when it is really nice out, Coloradans like to be outside. When it is really crappy out, they like to stay indoors. So I think the best weather is when it is kind of in-between.”
But are buyers turned off by a home when a home doesn’t have air conditioning or a swamp cooler?
“When it is 100 degrees outside, I’m sure people think about air conditioning, and I’m sure it turns some people off,” Polimino said. “It shouldn’t. Air conditioning can always be a negotiating point. You can write in the contract they either give you a credit for a.c. or install it for you. This is something most people won’t give a thought to in October, but it is high on everyone’s list when it is this hot out.”