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Record July for contracts

Highlights:

  • Metrolist releases July figures.
  • Best July on record for under contracts.
  • Inventory tops 10,000
Snapshot of Inventory

Snapshot of Inventory

Buyer closed on a record 6,104 homes in the Denver area in July, according to reports released today.

 

“It was an all-time record,” said independent broker Gary Bauer, who along with Metrolist released reports on home sales activity for July. “The previous record was in June 2005, when there were 5,720 home closings.”

Buyers also snapped up 7,406 homes last month, the most homes ever placed under contract in a July in the Denver area and the second best month on record. In Junly 2012, 5,236 homes were placed under contract.

The 42 percent year-over-year increase also was a record on a percentage basis.

The only better month for contracts was last June, when 7,420 homes were placed under contract. Still, the 0.19 percent is a smaller than usual seasonal month-over-month drop.

Also, for the first time this year, consumers in July had more than 10,000 homes to choose from.

“Overall, I give this market an A,” said Peter Niederman, CEO of Kentwood Real Estate.

The number of closings in July represented a 32 percent increase from the 4,618 in July 2012. Closings also rose by 10 percent on a month-to-month basis. There were 5,566 closings in June. Closings reflect contract activity from previous months.

Earlier reports by some in the media that the Denver-area real estate market was cooling off appear to be wrong, said Lane Hornung, CEO and founder of 8z Real Estate.

“Record number of closes at near all time high prices.  Not too shabby,” Hornung said

“I wouldn’t exactly say our market is “cooling off” or “slowing down,” which was a common assertion by national websites after a slight drop in closes from May to June,” Hornung continued.

“The June numbers may have been a blip caused by the simple fact that there were only 20 closing days in the month,” Hornung said.

“Fast forward a month and we have record closings in July. Our market is being fueled, not impeded, by more listings coming on the market.  This added inventory is allowing buyers to think in terms of days instead of hours, resulting in more buyers finding suitable homes, ultimately increasing the number of closes and the overall velocity of the market.”

The average home price of a closed home in July was $315,250 up nine percent from $286,884 in July 2012, and down one percent from June, when the average priced of a home closed stood at $318,541. The median price of a single-family home closed in July was $286,500, 10.6 percent higher than the $259,000 in July 2012 and 1.2 percent lower than the $290,000 in June.

Meanwhile, there were 10,025 homes on the market last month, a 9 percent increased from the 9,187 in June and down only 7 percent from July 2012, when there were 10,827 homes on the market.

To put that in perspective, the inventory levels were down 38 percent from in July 2012 from July 2011.

Also, the number of active listings has risen 50 percent since it set an all-time low number of 6,682 in March.

“While still very competitive, the market in Denver seems to be growing at a sustainable pace,” said Metrolist CEO and President Kirby Slunaker. “Inventory increases within the last 90 days are providing a stabilizing factor for the market overall.

Slunaker said there is especially a great deal of demand for luxury homes in the metro area.

“As we review the details of the statistics we continue to see segments of the market that are more competitive than others. Certainly the upper levels of the market continue to remain very hot with the entry-level of the market being more impacted by changing interest rates and slim inventory availability.”

Niederman said many consumers want to lock in rates, which are still low by historical standards.

“People want to get a rate that has a 4 in front of it,” Niederman said.

Rates, hovering around 4.5 percent, although more than a point higher than their all-time low, are still far less than the 8.56 percent average at the end of July during the past 42 years.

Rising rates themselves, do not slam the brakes on home buying, especially if the economy is strong.

“Unemployment, while still higher than it should be, is moving in the right direction,” Niederman said.

“We do not hear much about companies in the Denver area laying off people,” he said.

Strong demand and low inventory numbers have led to increased prices, but they have not gone through the roof, like in other markets, such as Las Vegas and Phoenix, which had seen much bigger price increases during the go-go days and much bigger drops during the crash than Denver experienced.

Niederman said that rising prices “will allow some people who previously had been under water to transact real estate. As I have said before, these percentage increases we are seeing in Denver and across the country, are good in the short-term, but unsustainable for the long-term.”

He also noted that some people who lost their homes during the Great Recession, are now finally able to buy homes again.

Market metrics strong 

Bauer said it is hard to find any weakness in the July data.

“Right now, i don’t see any,” Bauer said. “Overall, we have a two-month supply of condos and single-family homes on the market. Ultimately, rising interest rates, will impact the market.

Bauer said that July is a “transition” month from the strong summer market.

“We normally see an increase in closings, but not an increase in under contracts,” Bauer said.

“One of the reasons is that many children will be in schools in just a matter of weeks,” so if their parents wanted to move to be in a different school district, many of them already have made the move.

In the first seven months of the year, buyer paid $9.83 billion for homes in the metro area, a 34.4 percent increase from the $7.3 billion during the same period in 2012, according to Bauer’s analysis. Year-to-dae, there have been 44,373 homes placed under contract, a 26.2 percent jump from the 33,152 in the first seven months of 2012. Also, there have been 32,302 sales so far this year, a 22 percent increase from the 26,478 in the first seven months of 2012.

Indeed, the $9.8 billion figure is a record for the first seven months of the year in non-inflated dollars.

Still, starting last month, the market was not as frenzied as it had been earlier in the year, said Leo Rowen, a broker with RE/MAX of Cherry Creek.

“From January until the beginning of July, the market was ridiculous,” Rowen said.

“People were paying well over the list price and homes were getting multiple offers,” he said. “Last month, it slowed down a little bit.”

He agreed with Bauer that part of the slow down reflected the normal seasonality.

Rowen said prospective buyers also are “spending more time on inspections than I have ever seen,” and are walking away from homes that don’t past muster.

“People are very picky,” he said. “I’m seeing more people terminating the contract after the inspection without trying to negotiate on items. I don’t know whether they are getting cold feet or they are worried they are over-paying and are continuing to look with hopes of finding a better deal.”

That may not always be the best strategy, he said, as there are still relatively few choices for consumers.

“Inventory levels, although rising, are still really low,” Rowen said. “That is what is really driving the market.

“That is why the strong MLS numbers don’t surprise me.”

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.