Economic Snapshots and Stats

South Metro Denver Economic Snapshot - June '13

“And the beat goes on!” 

The South Metro Denver real estate market continues to show improvement over 2012 as we begin our annual trek through the dog days of summer. Single family home sales are up 21.76% through May/2013 compared to through May/2012. Attached unit sales are up 24.78% and the combined market is up 22.26% for the same time periods.

Mortgage interest rates, those little devils that often play havoc with our economic lives, continue to reside near historic lows. That old bastion, the thirty-year fixed rate loan, which many home buyers have relied on through the years, is hovering around 3.75% to 4.0% for a conventional loan, and slightly less for a government insured loan (FHA/VA).  Rates have trickled up recently as the economic climate has experienced times of continued improvement.

Available inventory of single family homes in South Metro Denver showed a modest gain in May/2013 compared to April/2013 increasing by 26.15% (1722 vs. 1365). Improving home values have provided sellers, who have been sitting on the sidelines to do something these past few years, an opportunity to make the move to a larger home or downsize as their needs change. 

With lower mortgage interest rates and reduced inventory, rental properties have become less available. Scarcity creates demand and rental rates have increased over the course of the past year. Once again real estate is a wise investment, providing investors with tax benefits and appreciation.    

Real estate is characteristically a bottom-up phenomenon. Homes on the less expensive end of the scale have a tendency to start selling first in an improving real estate market. If the market sustains itself, then pricier homes begin to sell. The Front Range real estate market is following suit with more expensive homes showing marked improvement in sales activity this spring. Expect this pattern to persist through the balance of the summer.        

Late spring and early summer are the times when the South Metro Denver real estate market bell curve has a tendency to peak. Available inventory reaches its highest point and buyer activity rises. With low mortgage interest rates and a shortage of inventory (compared to previous years), expect the South Metro Denver real estate market to be quite active through late summer.

As we shift from spring into summer there doesn’t appear to be anything perched on the economic horizon waiting to create chaos with the South Metro Denver real estate market. Bank foreclosures and short sales still rear their ugly heads on occasion, but not at the levels that existed between 2007 and 2011. New home construction has become a greater part of the economic landscape with starter homes flourishing across the Front Range and even custom homes beginning to sprout in subdivisions that were stagnant for the past few years. Seller motivation has increased and buyer confidence has improved; two elements that are vital to a healthy real estate market.

Real estate markets are normally slow moving entities when they are going through a period of recovery. This current shift was accomplished quite quickly, which bodes well for both buyers (low mortgage interest rates) and sellers (appreciation and lack of competition).

 

South Metro Denver Economic Snapshot - May '13

And the Beat Goes on. That’s a 1980 song from an American group called The Whispers. The song is about moving on from a lost love. In a different sense, the Boulder Valley, Metro Denver, and Northern Colorado real estate markets have moved on from a period of time when real estate values plummeted, bank foreclosures and short sales multiplied, and banks were draping Out-of-Business signs on their front windows courtesy of the Federal Reserve.

In the span of less than two years the Front Range real estate market has shifted from a buyer’s market to a balanced market to a seller’s market. Driven by pent-up demand and affordable mortgage interest rates the Front Range real estate market regained its mojo. Sometimes the wheels of change move quickly.

The South Metro Denver real estate market peaked in 2005 and plateaued in 2009. The years 2010 and 2011 mirrored 2009. 2012 saw the market begin to shift upward as the economy improved and mortgage interest rates reached historic lows. Four months into 2013 the South Metro Denver market is up 22.92% for single family home sales (3839 vs. 3123) compared to the same time period for 2012. Attached unit sales are up 24.78% (1601 vs. 1283) for the same time periods. The overall market is up 23.46%.

The Absorption Rate for the South Metro Denver real estate market for single family homes stands at 43 days at the end of April/2013. This is the length of time it would take for the market to fully sell assuming no new listings came into the marketplace and the rate of sales activity remained the same. It’s a good gauge for determining what is happening in the market over the course of the past few months. Absorption Rates normally drift lower as sales activity in the spring and summer markets increase.

The question becomes can the South Metro Denver real estate market sustain itself? The available inventory of single family homes in South Metro Denver continues to creep-up, but at a snail’s pace. When comparing the end of April/2013 to the end of April/2012, available single family homes in South Metro Denver are down 38.74% (1365 vs. 2228). 

Across the Front Range the real estate market is beginning to experience the trickle-up effect where more expensive homes are selling. The average single family home through April/2013 in South Metro Denver has sold for $345,709. This compares to $306,543 through April/2012, an increase of 12.77%. Entry level homes continue to sell well and now the market is undergoing an upper movement in buyer confidence. That’s a positive sign for the market as a whole.

As we enter the peak real estate selling season here are some things buyers and sellers will need to focus on. For buyers, available inventory will continue to remain at a low level with well-priced homes selling quickly. Get your financing in place before you make an offer. This bodes well in the mind of sellers to know they have a qualified buyer. It also makes sense in terms of timing. The early bird catches the worm or in this case makes the home purchase.

For sellers, be aware of changing market conditions. Home values are trending up in most areas and price segments. Take advantage of that shift by pricing your home competitively, but also knowing this is not a discount housing market. There will still be “bottom-feeders” out there looking for “deals”. Don’t feel like you need to buy into that scenario.

South Metro Denver Economic Snapshot - April '13

As the Colorado real estate market ramped-up in 2012, one of the issues facing the South Metro Denver real estate market as 2013 began was available inventory of homes for sale when compared to previous years. In March/2012 there were 2266 active single family listings in South Metro Denver. In March/2013 that number was 1333 representing a 41.18% reduction, which was driven by increased buyer activity.

When comparing March/2013 to March/2012, single family home sales are up 24.36% for South Metro Denver. Attached unit sales are up 29.62% for the same time periods. Collectively, those two market segments are up 25.89%.

Below are some sold numbers for single-family homes for various areas throughout South Metro Denver. Information is courtesy of MetroList (Denver Metro MLS).

As spring deals with winter’s last feeble efforts to hang on, this is the scenario that exists across South Metro Denver, the Boulder Valley, Metro Denver, and Northern Colorado – fewer listings and more sales. Combined with low mortgage interest rates the result is a perfect storm, if you’re a seller.

Normally, scarcity creates demand, which in turn adds value to whatever is in short supply. Looking at the South Metro Denver real estate market and average sales value, the average sales value for single family homes year-to-date in March/2012 was $298,463. That number in March/2013 was $331,539, a 11.08% increase year-over-year. 

Look for the South Metro Denver spring real estate market to continue to flourish. Available inventory will creep-up, but will continue to be swept-up by prospective buyers waiting in the wings. Mortgage interest rates have trickled-up over the past few weeks, but there are no signs on the horizon they will shift noticeably either up or down for the balance of 2013.

South Metro Denver Economic Snapshot - March '13

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Two months plus into this New Year and the South Metro Denver real estate market continues to show strong activity. Through February single family home sales are up 29.60% for South Metro Denver over last year for the same time period; attached unit sales are up 36.90%. The inventory level of single family homes declined 4.94% in February/2013 from January/2013 (1310 vs. 1378), and were down 39.47% when compared to February/2012 (1310 vs. 2164).

The US Department of Labor (Bureau of Labor Statistics) recently released their unemployment rates for the country and by state. Nationally, the unemployment rate stands at 7.7% at the end of February. Last year at this time the rate was 8.3%. Colorado is currently at 7.5%. The state with the highest unemployment rate is Rhode Island at 9.9%. Not far behind are Nevada and California at 9.8%. The state with the lowest unemployment rate is North Dakota at 3.2%. For a point of reference, the unemployment rate for the Great Depression peaked at around 25% in 1933. In 1929 the unemployment rate was 3.2%.

On the home mortgage scene, interest rates have trended up slightly since the first of the year. The traditional thirty-year fixed-rate loan has moved from 3.35% to around 3.75% depending on the lender and closing/loan costs. Sometimes an advertised lower interest rate can mean higher closing/loan costs. Buyers need to make sure when they are looking at getting a loan they are comparing apples to apples.

From a financial perspective, there are still those ankle biters out there in the real estate market, bank foreclosures and short sales. There aren’t as many as there were a year or two ago, but like weeds, they keep popping-up.  

Spring is that eternal time of year when everything looks brighter. Days are getting longer; nights are getting shorter. Flowers and trees are beginning to bloom and bud. The gray days of winter are fast becoming a distant memory. It’s also the time of year when a plethora (large number) of home sellers and buyers begin the process of becoming actively involved in the real estate market. 

The next few months are the time when the South Metro Denver real estate market begins to accelerate. Active listings will increase, but so will sales activity. Home values, especially in the lower price ranges, have been improving. Appraisers are aware of this and are making pricing adjustments accordingly. There has been a slight up-tick in sales activity in the higher end homes across most market areas. That’s a good sign for the overall market, since real estate markets strengthen from the bottom up.

New construction continues to play an important part of this renewed housing market. It started with production builders building starter homes, mid-range homes, and attached units. The market has slowly evolved to where custom builders are dusting off the cobwebs and seeing some activity. Spec inventory on expensive homes? Don’t see that coming anytime soon. Banks and builders are too wary.

As late winter and spring days vacillate between snowstorms and record highs, look for the South Metro Denver, Denver Metro, and Northern Colorado real estate markets to remain on the current pace. Available inventory will be the key to sustaining the rate of growth across all market areas.