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Months unsold inventory hits new low

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Highlights:

  • Gary Bauer tracks inventory levels of unsold homes.
  • Overall, there’s a 1.49-month supply.
  • There is still a 20.6 month supply for homes over $2 million.

There is less than a two-month supply of unsold single family homes on the Denver-area market, according to an analysis by independent broker Gary Bauer.

Gary Bauer

Gary Bauer

Bauer’s analysis of Metrolist data found that at the end of April there was a record low of only a 1.49-month supply of unsold on the market, down from the 1.55-month supply of homes at the end of March.

For homes priced below $200,000, there was less than a month’s supply of homes on the market, according to Bauer.

“I used a very simple calculation of the current sales and compared it to the current month’s inventory,” said Bauer, who plans to calculate the supply using a different methodology later.

Last week, the Wall Street Journal, using a different methodology, found the Denver area had a 2.1-month supply of unsold homes at the end of March.

The Wall Street Journal also found that Denver showed a 44.3 percent year-over-year decline in inventory from March 2012, the biggest percentage drop of any of the 20 metropolitan statistical areas tracked in the Case-Shiller index. Seattle was No. 2 with a 42.87 percent drop.

Buyers and sellers must be prepared for a continued shortage of homes, at least for the near-term, Bauer said.

“That means we are going to continue to see multiple offers and bidding wars,” Bauer said. “With a few exceptions, we are going to see the final contract prices higher than the asking price.”

Higher prices, while good for sellers, is leading to worries of another bubble forming, he said.

That is a concern,” Bauer said. “From my perspective, higher prices are a positive for the market up to a certain point. But it is just not positive for the market for them to go up so much and so fast that it makes them unaffordable to most buyers.”

He said if the Federal Reserve curtails its $85 billion a month purchase of mortgage-backed securities and Treasury bonds anytime soon, it will cause interest rates to rise.

“If that happens, what it will mean initially is that people won’t be able to buy as expensive homes,” Bauer said.

On the other hand, most people who buy homes are in it for the long haul.

“I think people who buy homes today will be very happy in five years,” Bauer said. “I think prices of homes will be much more five years from now, just like most everything else.”

Bauer already is seeing inflation in other products that dwarf price increases for home.

“To give you an example, I eat Cheerios typically four times a week and today I needed to buy some more,” Bauer said. “The last time I bought a big box of Cheerios it cost me about $5.20. Today, I paid $6.99.”

That is a 34.4 percent jump.

Of course, he is neither saying nor expecting home prices to show such a dramatic change in prices.

“It is just an example I noticed of how prices are going up for a lot of things, not just homes,” Bauer said.

Bauer said that a shortage of homes is clearly national trend.

“Last week, at the Gathering of Eagles conference, Steve Murray (owner of Real Trends, the sponsor of the event that drew about 300 top real estate executives from the country to Denver), took a straw poll. He asked how many people felt like they had a three-month supply of homes on the market and most people raised their hands. They asked how many had two months or less and I raised my hand. When he asked how many felt they had one month or less, only a group from Seattle raised their hands.”

Price RangeSingle-Family Homes SoldActive Months of Inventory
Under $99,99967580.87
$100,000 to $199,9997646530.85
$200,000 to $299,9991,2731,1800.93
$300,000 to $399,9998119161.13
$400,000 to $499,9993787391.96
$500,000 to $699,9993028822.92
$700,000 to $999,9991325774.37
$1 million to $1.999 million614517.39
$2 million and over1029620.6
TOTALS3,7985,6621.49
 

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.