Highlights:
- Economist Patty Silverstein analyzes sales per 1,000 people.
- The Denver housing market is rebounding from slumping sales in 2010 and 2011.
- Silverstein thinks more people will list their homes, thanks to rising housing prices.
This is likely to be the year when the Denver-area real estate sales market returns to its historic sales pace, according to an analysis of sales and population data by economist Patty Silverstein.
Silverstein, the chief economist for the Metro Denver Economic Development Corp., analyzed sales per 1,000 people in the metro area from the mid-1980s.
She is projecting that sales will hit 16.6 sales per 1,000 in 2013, close to the average of 16.8 per 1,000 since 1986. Sales per 1,000 fell to below 14 during the real estate slump of 2010 and 2011, the lowest sales rate since 1991.
“Patty’s analysis makes sense to me,” said Lane Hornung, CEO and cofounder of 8z Real Estate.
Silverstein, also principal of Development Research Partners, said she is not aware of anyone else using this metric, which is based on Metrolist and Census Bureau data.
“I was pondering looking at a metric that would show sales in relation to the size of our population,” Silverstein said. “I think looking at the relationship of homes sales per 1,000 population is a reasonable type of indicator,” she said, although she noted that Metrolist, the publisher of the largest Multiple Listing Service, or MLS, in Colorado, does not include all new-home sales. It will include new homes sold by Realtors that belong to Metrolist, however,
Her projection is that this year will be one of equilibrium.
“I really think this is the year that has the potential to reach an equilibrium in home sales that is sustainable,” she said.
“We know that in 2004 and 2005, when we were seeing sales of 20 or 21 per 1,000 population, those kind of numbers were not sustainable,” Silverstein said. “We were selling below our potential in 2009 and 2010 and above our potential in 2004 and 2005.”
The biggest issue that could place a governor on the sales velocity is the lowest inventory in memory.
At the end of January, there were fewer than 7,100 unsold homes on the market, believed to be the fewest number of homes for sale in the metro area since the 1970s.
To put that into perspective, the Denver metro area’s population grew by 77 percent from 1980 to 2012. In 1987, there were 20,155 unsold homes on the market, according to Metrolist.
“I think we are going to start seeing more people start to put their homes on the market,” Silverstein said.
“Median home prices have been rising and now they are back at pre-recession levels,” Silverstein said. “Rising home prices should serve as an incentive for more people to sell their home, especially as long as they can take advantage of these extremely low mortgage rates.”
Peter Niederman, CEO of Kentwood Real Estate, hopes Silverstein is right.
“If you ask 100 Realtors what is the biggest problem facing the market today, you would get 100 Realtors telling you it is the low inventory,” Niederman said.
A lot more homeowners would sell their homes today but they worry it will sell so fast they won’t have any place to, Niederman said.
“I really think the new homebuilders are filling this void,” Niederman said.
“Builders are hitting it out of the park. They can create their own supply. If they have the ground, they can build the homes people and deliver them when they are needed. I think more sellers are going to be working with builders.”
Meanwhile, Niederman is thrilled with Silverstein’s analysis. Silverstein will be one of the speakers at an invitation-only economic forecast Kentwood is sponsoring on Wednesday night. About 1,000 people are expected to attend.
“I think it is really cool,” Niederman said about Silverstein’s analysis. “I’ve wondered for a long time why someone wasn’t analyzing the market in relationship to the population. Patty’s report shows the market without question has recovered. It is an excellent metric.”
Year YOY Home Sales Growth Homes sold per 1,000 population.
1986 6.8% 13.5
1987 -8.9% 12.3
1988 4.0% 12.8
1989 4.3% 13.3
1990 4.5% 13.8
1991 -1.8% 13.3
1992 25.1% 16.0
1993 13.8% 17.7
1994 5.1% 18.2
1995 -4.4% 17
1996 4.8% 17.4
1997 6.4% 18.1
1998 14.3% 20.1
1999 1.7% 19.9
2000 4.0% 20
2001 -1.8% 19.3
2002 0.2% 19.1
2003 0.1% 19
2004 12.6% 21.1
2005 -1.7% 20.6
2006 -5.4% 19.1
2007 -0.9% 18.6
2008 -3.9% 17.6
2009 -12.1% 15.2
2010 -7.7% 13.9
2011 1.5% 13.8
2012 17.5% 16
2013 (Projected) 4.8% 16.6
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I’m curious about what the added dimension of population growth in Denver will do. Do we expect it to grow at the same rate? Increase? It seems like we’re seeing some big employers move to the area, but maybe this is at an average pace.
I trust what Silverstein says, especially if Rebchook has vetted it. Good news.
Sales per capita is one metric. One only realtors would care much about, so I don’t understand why the Denver Metro Ecomonic Development Corp focuses on that metric (unless they a shill for the Realtor Board, which could be, I have no idea what they do). The metric that interests me is days on market. By that metric, this is the best market I have ever seen, by a long shot.