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March home sales sizzle, but inventory fizzles

Highlights:

  • Inventory levels hit a new low in March.
  • Every other metric was strong.
  • The average price of a single-family home rose 12.5% 
A snapshot of the housing market. Source: Metrolist.

A snapshot of the housing market. Source: Metrolist.

March was a strong month for the Denver-area resale home market, with double-digit gains in contracts, closings and sale prices, according to reports released today.

However, the inventory of unsold homes fell to a new recorded low of 6,682, a 1.5 percent drop from the previous low of 6,786 in February, according to the reports released by independent broker Gary Bauer and Metrolist.

It was only the fourth time since Metrolist began keeping full-year records in 1985 that the inventory had fallen from February to March.

On the other hand, there were 5,328 homes placed under contract in March, a 12.2 percent increase from the 5,328 in March 2012.

Closings, which reflect homes placed under contract in prior months, were double the contract activity.

There were 4,333 closings in March, a 24.7 percent jump from the 3,475 in March 2012. From February to March, contract activity was up 18.7 percent and closings soared 46 percent

The low inventory and strong demand resulted in higher home prices.

The average price of a single-family hone sold was $319,366, 12.4 percent higher than the $284,035 in March 2012 and 5.5 percent higher than in February, when the average price was $302,475.

The median sales price of a single-family home was $268,200, 15.3 percent higher than the median price of $232,500 a year earlier and up 5 percent from February.

“March was a tremendous month,” said Bauer, who is the chairman of Metrolist, but released his analysis as an individual broker and not as an official at the data-collecting company that releases MLS reports.

“Looking back at historical records, I would say this is the third or fourth best March, overall,” Bauer said. “It was just a dynamic month.”

Bauer considered metrics such as under contracts, closings, and the dollar volume, in his ranking.

“My advice to sellers and buyers is to do your homework, be prepared and manage your expectations,” Bauer said.

Bauer, however, did note that for seasonal reasons, typically the inventory rises in March from February, as sellers look to take advantage of the kick off of the spring selling season.

“Historically, if you look at more of a normal market, such in the early 2000s, you might see another 1,000 to 2,000 more homes on the market in March,” Bauer said.

“Quite frankly, I’m surprised we didn’t see an increase in March,” he added. “Talking to other brokers, I know they are out there, knocking on doors trying to convince people given these great historically low mortgage rates and strong demand, now is a good time to sell.”

He said when people do put their homes on the market, “They are typically gone in three or four days.”

Kirby Slunaker, CEO and president of Metrolist, agrees.

“Our brokers are seeing a strong increase in ‘flash sales,’ where homes are coming under contract within days or even hours after being put on the market,” Slunaker said.

He noted that March marked the ninth month-over-month decrease in available listings.

The historic low inventory levels are widely considered to have a direct impact on home price increases and days on the market decrease, which at an average of 67 days in March, was down 35 percent from March 2012 and down 16 percent from February.

Low interest rates, combined with an undersupplied market puts new Denver-area listings at a premium, he said.

“For those who have ever considered putting their home on the market, today is about as good as it gets,” Slunaker said.

Peter Niederman, CEO of Kentwood Real Estate, said he “continues to be amazed,” by the low inventory levels.

“I would have thought that inventory levels would have jumped a bit,” Niederman said. “Just as surprising, was the jump in sales on a month-to-month basis. Inventory is dropping and sales velocity is strong and that has led to just a staggering increase in sales. Our months supply of inventory, already low, is now even lower.”

Niederman recently asked a number of brokers at Kentwood City Properties, why they thought so few people were listing their homes, given low interest rates, strong demand and rising prices.

“The No. 1 concern, which many sellers seem to be wrestling with, is that they know they will sell their home quickly, but they will not have someplace else to live,” Niederman said. “What they might want to do is buy a home first and get a bridge loan before they sell their current home. Or, they might want to rent for six months after selling their home, although I realize that will not the optimal.”

He also said that many people who bought houses during the go-go days from 2005 to 2007, may not have any, or enough, equity in their homes to sell.

“I’m still wrestling with that,” Niederman said. In any case, rising prices should help to convince some of those homeowners to sell, Niederman said.

Ty Dokken, president of Metro Brokers Inc., said when he plants “For Sale” signs in front yards, he will have prospective buyers clamoring for the property before he can get to his computer.

“That happened to me three times in a week,” Dokken said. “It is just crazy.”

He said all of the metrics tracked by Metrolist represent “great news, other than the low inventory.”

Dokken, however, said he isn’t surprised that more homes didn’t hit the market in March.

“Our grass still isn’t green, so our true seasonal change has not really hit yet,” Dokken said. “I think we are really going to start to see the seasonal shift in May, June and July. I have been pushing all of my clients to put their homes on the market now, instead of facing more competition later this year.”

He also fears that people wait too long will lose mortgage rates that are hovering near historic lows.

“On a national level, I am wondering when interest rates are going to go up,” Dokken said. “They can’t hold rates at this level forever.”

In addition to huge demand for houses, apartments in the metro area have the lowest vacancy rates in a decade.

Bauer said many renters, when they crunch the numbers, are better off buying a home than renting.

He also noted that new home builders are trying to fill the void created by the dearth of resale homes, by constructing homes as fast as they can.

“That is an alternative,” Bauer said. “Homebuilders, however, are pretty much building to contracts. They have very little standing inventory.”

Have a story idea or real estate tip? Contact John Rebchook at  JRCHOOK@gmail.com. InsideRealEstateNews.com is sponsored by Universal Lending, Land Title Guarantee and 8z Real Estate. To read more articles by John Rebchook, subscribe to the Colorado Real Estate Journal.