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Home sales decline from July, but up YOY

Highlights:

  • Record number of home contracts for an August.
  • Still below July’s numbers, also a record.
  • Record sales volume.

August.MLS.ChartMore homes were placed under contract in the Denver area last month than any August on record, but sales still dropped 14.2 percent from July, according to information in reports released today.

However, the 6,353 homes placed under contract in August were 22.3 percent higher than the 5,196 in August 2012, although lower than the 7,400 placed under contract in July, show reports by Littleton-based broker Gary Bauer and Metrolist.

Both reports used data from Metrolist.

By all year-over-year comparisons, the Denver market is significantly healthier than it was at this time last year, according to the Metrolist report.

“We expect to see continued high sales velocity and inventory numbers well into the winter months,” said Metrolist President and CEO Kirby Slunaker.

There were 10,587 unsold homes on the market in August, 5.6 percent more than in July and only 2.2 percent down from the 10,826.

The last time there were fewer unsold homes on the market in August was in 1999, when buyers had only 10,079 homes to choose from.

“The impact of seasonality may not be as significant as we’ve seen in years past,” Slunaker said. “Increasing inventory spurred on by a hot early buying season will continue to provide sellers and buyers prolonged opportunities late into the year.”

August marked the fourth consecutive month of a record number of homes being placed under contract for that month, Bauer said.

“It is definitely not as strong as the prior month,” Bauer said.

Bauer said record low rates and record low inventory numbers in the first part of the year, accelerated home buying.

“It was almost like when we had the first-time home buying tax credits,” Bauer said. “They took sales from the end of the year, by packing them in the first part of the year.”

Peter Niederman, CEO of Kentwood Real Estate, said it is important to put today’s market into perspective.

Earlier in the year, the market experienced a confluence of record low interest rates and record low inventory.

“That was unprecedented and historic,” Niederman said. “We could live a lifetime and never see that happening again.”

He said while rates have risen by slightly more than a percentage point to 4.5 percent for a 30-year, fixed-rate mortgage and now there might be less than a two-month supply of unsold homes on the market compared with less than a one-month supply of homes, “any other time we would have been doing back flips for 4.5 percent rates or two-months supply of homes. This is still a strong market. I talk to a lot of broker and they say they have gone from a frenzied pace to a busy pace.”

School also started earlier this year in many districts, prompting parents to make home buying decisions earlier in the buying season, Bauer said.

The average price of a home sold in August was $345,487, down slightly from $346,254, but up about 10.8 percent from $311,893 in August 2012.

The median price of a home sold was $287,000, compared with $286,500 and $262,000 in July and August 2012, respectively.

Bauer said the slight month-to-month dip was primarily due to the mix of homes sold.

Niederman said he doesn’t want to see homes rise too much, too fast, as they appear to be doing in some other markets across the country, such as Phoenix and Las Vegas.

“My biggest concern is regarding housing affordability,” Niederman said. “Housing prices have been rising faster than incomes. One of Denver’s great strengths, in addition to its quality of life, has always been that houses are affordable here, compared to other major cities in the U.S.”

Homes were on the market for an average of 39 days in August, a 39 percent drop from a year earlier, Slunaker said.

Some critics have charged that since home prices peaked in the spring, the market is in dire straits.

Bauer disagrees.

He noted there were $1.76 billion in total sales last month, a record for August.

Year-to-date, there have been $11.6 billion in sales, also a record.

“I wouldn’t call $1.76 billion in sales a declining market,” Bauer said.

There were 5,635 home closings in August, a 7.7 percent drop from the 6,104 in July and a 20.3 percent increase form the 4,686 in August 2012.

Closings represent homes placed under contract in prior months.

Year-to-date, some 50,726 homes have been placed under contact, 25.7 percent more than the 40,348 in the first months of 2012.

Closings showed a similar trend.

There were 37,937 closings in the first eights months of the year, 21.7 percent more than the 31,163 in the same time period in 2012.

However, both Bauer and Slunaker said rising rates could slow sales activity, especially at the lower end.

“Rising mortgage rates have impacted the local market slightly, primarily in the mid-level market,” Slunaker said. “Luxury listings are still seeing significant strength, while first time and entry level buyers seem to have taken the changing rates in stride.”

When rates first began to rise in May, some prospective buyers moved to lock in still low rates, Bauer said.

“We are going to see more of an impact from rising rates going forward,” Bauer said. “I do think they will slow the market a bit in the coming months.”

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.