From data supplied by Metrolist

As you can see from the chart below growth this spring in Denver area home listings is slower than in past springs.

Active Listing Inventoryat the Beginning ofMay of Each Year:
2004 -- 23,879
2005 -- 24,991
2006 -- 30,946
2007 -- 28,885
2008 -- 27,249

However, this small increase in inventory will be good news for all homeowners as the year goes on, since there is a buyer pool that is entering the marketplace today that will continue to absorb the inventory. This will become more evident later in this article as we look at contract numbers. But, as we look at the total number of sales in 2007 for a pace of home sales, we see 45,616 homes sold. If we divide that into the current inventory of 27,249 we get .59 or 59% and then multiply that times 12 months, we learn that we have a 7.16 month supply of homes for sale. Historically, 6-8 months is a normal market. And history has shown us that the market tends to be a buyers market when the supply exceeds 8 months and to be a sellers market when the supply goes under 6 months.

Sold Data

The Denver market is still experiencing a slower sold market versus previous years in April. Why is that?

Sold Properties in April of Each Year:

2004 -- 4609
2005 -- 4362
2006 -- 4354
2007 -- 4363
2008 -- 3763

We are seeing many properties take longer to close for a number of reasons.

First, the mortgage crisis has put a whole new slant on how a buyer obtains a loan. In the past, buyers who could rightfully afford a home could be approved in less than 14 days, because many of the banks has plenty of staff and lending guidelines were not as tight. Today, most lenders have reduced staff and guidelines are very tight and require more documentation and research and, thus, time. It is easily taking 4 and sometimes 8 weeks to get approved and funded.

Second, there might be a third party involved to approve the sale as in short sales or bank owned properties. Everything takes longer in these types of sales which are plentiful today.

Third, there are fewer vendors such as inspectors and appraisers servicing the real estate industry to call upon for service. The ones who are still with us are being required to be more prudent in their research, documentation and calculations which lengthens the process.

Homes That Are Under Contract As of May of Each Year

You can clearly see from the under contract properties, there is a backlog of properties that will be closing in the future and will change the "sold" trend. The leading indicator that the market has turned in a positive direction is the number of homes that are placed under contract and are set to close sometime in the future. Historically these properties take 30-60 days to close, but, due to the real estate circumstances listed above, we are seeing quite a back log of properties ready to close. When the market has had 50% more properties under contract than have closed in the previous month this has indicated in the past a stronger housing pattern. Currently with 7926 homes under contract and 3763 closed in April that represents a 52% ratio between the two numbers. A good sign the closings will start to follow.

Homes Under Contract in the Beginning of May of Each Year:

2004 -- 6820
2005 -- 7902
2006 -- 8335
2007 -- 7415
2008 -- 7926

The Denver housing market has 6.89% more homes under contract today than in May of 2007. When you consider what conditions the market has experienced with the challenges in financing and buyers having to deal with elongated contract periods, this is a very good sign for months to come.

Properties Under Contract from april to May of Each Year:

2004 -- April, 6501, May 6820
2005 -- April 7270, May 7902
2006 -- April 7778, May 8335
2007 -- April 7211, May 7415
2008 -- April 7409, May 7926

Looking from April to May of each year will show that 2008 is starting to resemble 2005, in growth. If that trend were to continue, the Denver marketplace will be experiencing appreciation later this year and definitely into 2009, as 2005 was the single highest real estate market in volume and number of closings ever in Denver.

The positive growth in the number of homes under contract follows some of the better growth years from April to May. These numbers set the Denver marketplace back on track to outperform national markets, so don't believe all you read about the negative versions of the future of real estate. It is my belief that real estate in Denver is about to make a statement in the upcoming months that will be the envy of many national markets!

In an article of 4/07/08, Matt Woolsey of Forbes magazine points out four factors that are widely seen as affecting the housing market for sellers: job growth, amount of new construction, vacancy rates and credit availability. Considering these factors, Mr Woolsey goes on the list the top ten cities for sellers of the country's forty largest metro areas. He lists Denver as number seven because of a 49% drop in construction starts and a 2% rise in new jobs. Check out the article at www.forbes.com/realestate/2008/04/07/homes-sellers-cities-forbeslife-cx_mw_0407realestate.html

Lets talk about prices. Fannie Mae and Freddie Mac have not in the past participated in the jumbo market. They are preparing to do that now, since it is legally permissible to do so. As they start to offer jumbo loans it is expected that interest rates will be more favorable in that market. The housing market above $1 million has the highest backlog of inventory for sale, in some areas of Denver representing 12 + months to 24 + months. Once more jumbos are being offered and at better rates, we can expect to see a lift in median home prices which were artificially depressed due to very few jumbo loans and very few expensive home sales. This is the opinion of Lawrence Yun, NAR Chief Economist, in article at www.realtor.org/research/reinsights/forecast.

Mr. Yun also points out in an another article at www.realtor.org/RMODaily.nsf/pages/News2008040801?Open that the 30 year fixed-rate mortgage rate should average 5.8% in the second and third quarters of 2008 and then rise to an average of 6.3% in 2009. So all of that pent up demand for a new home that many buyers are squelching while they wait for cheaper prices may not be wise to continue squelching because of a predicted upturn in prices, plus, they will probably pay even higher interest rates if they wait to buy later.

As far as sellers, what are they to do? If they wait to get a better price when prices go up, they will also pay a higher price for their new home. And they will probably not get as low an interest rate as they could get today. And consider this, if prices go up, say 1% in the next six months, wouldn't it be better to be holding a higher priced home during that rise?