It looks like Jack O'Conner, Broker/Owner of Prestige Real Estate, LLC and Lawrence Yun, Chief Economist for the National Association of Realtors were right. They both predicted the housing market in Denver would start to turn around in spring and summer of 2008.
Let's look at some statistics. Listing inventory is the best indicator of where the market is headed. There's some very good news in the inventory statistics in the Denver area. On June 9, 2008 the active number of listings in the MLS was 27,295 units for sale. In June of 2007 there were 30,145 units active. That is a 9.45% decrease. Inventory has been decreasing in Denver for nine months and will probably continue.
We have said before that once the inventory gets to a 5-7 month supply, historically prices start to increase because buyers are just not getting as many choices. Let's take at look at the price range of $0 to $250,000 in particular in the Denver market. In that range there are 7849 single family homes and 4119 condominiums on the market.
The number of homes sold year-to-date in that range is 7999 single family and 2968 condominiums which means each month an average of 1599 single family and 594 condominiums have sold this year. Divide the current inventory by the average number sold each month and you will see that we currently have less than a 5 month supply of single family homes and less than a 7 month supply of condos in this price range.
This means prices should start to turn around and head upwards. We are already beginning to see the turn-around to less of a buyer's market here in Highlands Ranch in this price range.
The number of homes under contract on June 9, 2008 was 8382, 967 more homes than 12 months ago. That is great news! The market inventory did start to dip about 14 months ago here in the Denver area and we are starting to see the rebound. The number of homes under contract for June of 2008 is the highest number of homes under contract for a June in the last 5 years!
The sold data is still lagging and this makes good headlines so that is all you hear from the media. However, the sold data should change in June and July as those homes under contract close.
What's the advice for buyers and sellers?
For sellers, if you are in the lower price range of $0 to $250,000, this is a good time to sell as there are fewer homes on the market and you can get a good price unless there are other negative factors affecting your particular neighborhood. A local realtor can best advise you if this is the case.
As sellers turn into buyers, if they are going to a higher price range, they will find a more abundance of homes to choose from and can possibly negotiate a better price. The home they buy will probably then appreciate in 2009 and 2010 as higher price ranges start to experience declining inventory and rising prices. It's an almost perfect time for homeowners to sell and move up this summer.
Buyers who need to buy in the $0 to $250,000 price range should remember that inventory is low and may get lower so negotiating a lower price may not happen. Prices have not generally increased up to this point because of the large number of foreclosures which were keeping the prices down. We are seeing foreclosure properties, particularly in the lower price ranges up to $350,000, being snapped up so quickly that the prices on even foreclosure homes seems to be improving.
Buyers should also remember that a home bought today in any price range could show some nice appreciation in the next few years. Buy quickly, though, while those prices are low. Even in the price ranges above $250,000 inventory will most likely continue to decrease and prices will start to turn around.
Financing is easing up, even for the jumbo loans (over $417,000). Rates will probably not go any lower. From all indications, now is the time to buy.