May, 2010

So, How’s the Market, May, 2010

All real estate data taken from Metrolist, Inc, on May 5, 2010. Denver, Colorado.

 

“Did the Tax Credit Work to Increase Real Estate Sales?”

 

STAT ONE:    Properties that are currently Under Contract are at a 5 year high.

 

 

April properties under contract on April 5^th was 7484 and May 5^th was 8592 or a gain of 1,108 units in 30 days. There has not been an 1100+ gain in properties under contract in one month since we started tracking data. Did the Tax Credit ramp up buyers to buy? The figures do not lie, YES.

 

STAT TWO:    More properties closed in April of 2010 than the previous two years in April. Sold data is a trailing indicator of a market turning around and Denver has now had two month in a row of beating the previous year. Did the Tax Credit create more sales in the Spring of 2010.

 

 

The Denver Market should see increases in sold data for the next several months over the previous years. The increase in buyers pushed sales to higher levels than we have seen for several years. Prices are rising in the Denver, specifically the price range from zero to $300,000 is seeing ½% to 1% increase per month for the first four months of 2010. Has the Tax Credit made a significant impact on these numbers? Yes!

 

STAT THREE:    Inventories in the Denver Metro area are at historical low levels. Usually single family and condo inventories grow in the spring of each year. That is not happening in 2010. With lower inventory prices will rise.

 

 

Inventory varies in price ranges. For example there are currently 6035 single family and condos on the market between zero and $250,000 as of May 5, 2010. There have been 5500 closed units from January 1, thru April 30^th for the same price point. If we annualize the sold number, the yearly number of sales would be 21,153 in the price range zero to $250,000, which leaves a 3.42 month supply. This is considered very low inventory and prices will continue to rise.

 

Conversely, there are 1376 single family and condos above 1 million dollars on the market today. There have been 129 single family and condos close in the first 4 months of 2010. When annualizing that number the number of million dollar properties would be 496 closed units or a 33.29 month supply of homes. Even though upper price range homes are selling better than 2009, the amount of inventory above 1 million will hold prices to lower levels. Did the Tax Credit for Move-up Buyer create a new buyer pool? No. It does not appear by the numbers that the $6500 dollar tax credit for existing homeowners made any dent in the upper end market.

 

STAT FOUR:    In March of 2010, 48.2% of all homes sold were to First Time Home Buyers. This is the highest recorded number of first time buyers and April’s figures will more than likely exceed that record. The Tax Credit did bring an abnormal amount of buyers into the market.

 

Current Homeowner purchasers made up 33.5% of the buyers in the market and the balance of buyers were investors who made up 18.3% of the marketplace in March.

 

The Tax Credit did create more buyers in March and April then the market would normally have seen.

 

STAT FIVE:    Real Estate Companies had record showings for the month of April, 2010.

 

Total Company Daily Average

Week One 452 Daily Average

Week Two 434 Daily Average

Week Three 435 Daily Average

Week Four 416 Daily Average

Week Five 357 Daily Average

Total for Month 12129 showing on 1693 listings

 

These showing levels are higher than most summer months! A normal spring month would have 8000 to 9000 showing on 1700 listings. There were definitely more buyers in the market in April than previous months.

 

CONCLUSIONS:

 

What does this mean for the balance of the 2010 Denver Real Estate Market? The Tax credit created an artificial crunch on real estate, especially in the lower price ranges. The number of available buyers pushed their buying decision earlier than seasonal trends would suggest and although closing for May and June will exceed previous years, the true litmus test on the solidity of the real estate market will be based on what happenings to showing the next two months and the number of sales in June, July and August.

 

Interest rates, at historical lows will creep up later in 2010 causing some buyers to potential not make a buying decision or asking sellers to compensate the increased monthly payment with either points or less of a price. For example, a 5% PI payment on a $250,000 loan amount is $1,336 dollars per month. At 6% that payment goes to $1491 or $155 dollar higher house payment. Interest rates do alter the ability for buyers to buy.

 

Even though the Tax Credit has subsided, the obvious observation would be to suggest that the market will slow down, even with low interest rates. However, as rates start to rise, watch for another wave of buyers wanting to enter the market so they do not miss the window of opportunity.

 

2010 has been a year of the start of the recovery. There is no question the Tax Credit created an artificial growth that is now over, but Denver will definitely outperform previous years in the number of homes closed, which will hold the inventory lower helping prices to rise. It’s a good time to be buying.

 

What should sellers do in today’s market?

 

• Consider an Extension of the Tax Credit on your home by offering $8,000 worth of points or concessions.
• Change the dynamics of the inventory in your price range by entering the market as the first home in your neighborhood on the pricing ladder.
• Be the best conditioned property in all price ranges. Foreclosed properties will be priced better, but will never be in better condition.

 

What should buyers do in today’s market?

 

• Enter the market now while rates are ridiculously low.
• Ask for seller concession in upper price ranges to make the transaction more attractive to you.
• When buying a foreclosed property ask your real estate professional about the FHA Rehabilitation Loan program

 

 

 

 

 

SO, HOW’S THE MARKET, MARCH, 2010

ALL REAL ESTATE DATA TAKEN FROM METROLIST, INC, ON MARCH 6, 2010.  DENVER, CO

“Future Real Estate Markets can be predicted by three factors: Inventory, Interest Rates and Job Stability.” 

March 2010 inventory is showing seasonal growth, but still remains low compared to previous years. Inventory is at a 5 year low for March 2010. Inventory in March of 2010 has grown by 1784 units or 9.53% over February. This is higher than previous February to March inventory growths as the average growth is typically 2.87%.  

  

An interesting factor is happening in upper end properties for the first time in 3 years. The inventory is shrinking. We predicted last year that upper end inventories would come down primarily due to homeowner’s ability to ride out the economic downturn and that is what is happening. Look at the chart to show February to March Inventory compared to February closing from $750,000 and above.  

 Here’s the sold data above $750,000 to show a slight increase in upper end properties selling in 2010 over 2009. Watch this trend, as we would predict a higher inventory of upper end priced properties to hit the market in the spring and summer of this year and a slight increase in upper end properties selling over the previous year. This does not indicate a full turnaround for upper end properties but a positive trend that should be watched to better predict the upper price range future.

 

 Single Family Homes priced above $750,000 make up 12.2% of total inventory which is higher than normal.

• Single Family Properties priced above $750,000 in the single family category that sold in February 2010 make up 2.7% of all sales in Denver.
• Inventories of single family homes in the 0-$250,000 make up 37.9% of the listing on the market for March.
• Properties priced from 0-$250,000 that sold in February 2010 made up 59.35% of all sales in the Denver area.
• Homes priced from $250,000 to $500,000 make up 38.35% of the sold inventory for March of 2010
• The sold data of homes closed in February 2010 priced between $250,000 and $500,000 represent 33.16% of single family homes sold.
• Single Family Homes constituted 78.37% of all February sales in the single family-condo markets in metro Denver.
• Condominiums priced from 0-$250,000 made up 84.55% of all the condo’s sold in February 2010.
• Condominiums priced above $750,000 represented 1.1% of all condo sales in February 2010.

 Historically Low Interest Rates are Allowing Buyers to Buy in Today’s Market

• First Time Homes Buyers can receive up to $8000 Tax Credit when buying a home this spring.
• Move up homeowners can receive up to a $6500 Tax Credit when buying a home before April 30, 2010.  

Rates as of March 6, 2010: What do these rates mean to buyers buying today?

•  Conventional Conforming Rates are loans that are less then $417,000. These loans may require a down payment of 5%, 10% to 20% in today’s market. A buyer may be able to obtain a 5% down payment in certain circumstances so long the underwriters are not considering the market as a “declining market”, but for the most part, on a conventional loan the buyer must have very solid credit and a strong down payment and most of Denver has not been considered a declining market.  

Conventional Conforming 30 year fixed: 4.75%

Conventional Conforming 15 year fixed: 4.25% *(No Origination)

Conventional Conforming 5/1 ARM: 3.625% 

Jumbo Financing is available in today’s market, which are loan amounts above $417,000. The buyer’s down payment and credit scores are more stringent than the conforming loans. A buyer is almost certainly needing to put 20% down or more and their past credit history must be stellar. However, if you look at the rate of 5.375%, this is historically low and on a $750,000 loan the payment for principle and interest would be $4,181 per month. Someone buying a 1 million dollar property today will be able to get a discount off of the price and finance the purchase with very attractive rates. 5/1 ARM is a loan type that is fixed for 5 years than adjusts to an index after the 5 year period. Adjustable rate loans may a an attractive loan for someone who will live in the home a shorter period of time than the adjustment.

 Jumbo 30 year fixed: 5.375%

Jumbo 5/1 ARM: 4.750%

 First time Home Buyers gravitate toward FHA financing for two reasons. 1. Lower down payments of 3.5% allows the buyer to get financed and 2. The qualifying ratios for this type of loan are higher than conventional allowing the buyer less income to buy a home. FHA loan limits for the Denver metro area counties are $406,250 and for Boulder County is $460,000. Look at the FHA 5/1 ARM as a very attractive rate for 5 years. The payment on $400,000 at 3.5% is $1791 dollars for principle and interest. There are additional costs with FHA loans, but these are very attractive loans for people purchasing below the $420,000 price range.

FHA / VA 30 year fixed: 5.00%FHA / VA 5/1 ARM: 3.50%

 Prime rate: 3.25%

 Job Stability Creates Confidence for Buyers to Buy Properties 

• National Unemployment is running at 9.7%.
• Metro Denver Unemployment is approximately 7.5% or more than 2% better than the national average.
• Denver has a resurgent energy industry with both renewable energy and hubs for coal, oil and gas which will expand in 2010 and 2011.
• Service sector jobs have been a large segment of Denver workforce in the past, which has decreased over the last three years. These jobs are construction, sales and retail.
• Health care is another emerging industry in the Denver metro area for the next two years.

 Market Trends as of March 2010 

• As inventory decreases in lower price points, prices will continue to rise in 2010 in Denver.
• Short Sales will increase as a selling alternative for homeowners and lenders vs. foreclosure.
• The Colorado Foreclosure Protection Hotline provides consumers with excellent FREE information on the foreclosure process. Colorado Foreclosure Prevention Hotline 1-877-601-HOPE www.coloradoforeclosurehotline.org
• Condominium sales are lagging behind single family homes and will not see the appreciation that entry level single family homes are experiencing.
• Interest rates will rise in the summer through the fall of 2010.
• Inventory in the upper price range will grow slightly from current levels in 2010.

 What should buyers do in today’s market?

• Take advantage of the $6,500 dollar Tax Credit before April 30^th contract deadline.
• There are tremendous properties above $750,000 looking for offers. This window will close in 12-18 months from now.
• Consider terms over price in some instances to move into your dream home.

 

What should sellers do in today’s market?

• Price your home to sell within 30-60 days. Get moved now before inventories increase and interest rates increase.
• Offer terms to attract to discriminating buyers.
• Know your competition before getting ready to sell. Utilizing an Experienced Broker is not Expensive, It’s Priceless in today’s market.

Thanks for checking out March market stats.  Please feel free to forward to friends.