Colorado Real Estate

By John Rebchook
insiderealestatenews.com

April housing market sets records

An unprecedented nine-month streak of the inventory of unsold homes falling in the Denver area from the previous month came to an end in April, according to a report released today by independent broker Gary Bauer.

Last month, there were 6,945 unsold homes on the market, a 3.9 percent increase from the 6,682 homes in March.

The month-to-month gain is exactly in line with the average percentage increase from March to April during the past 10 years, according to an analysis by InsideRealEstateNews.com.

Bauer bases his report on Metrolist data. There were 32.3 percent fewer homes on the market last month than the 10,254 in April 2012. On a month-to-month basis, the inventory level had dropped each month since July 2012, when there were 10,827 unsold homes on the market.

Inventory levels hit an all-time low of 6,682 last March. The inventory level is still the lowest on record for an April, since Metrolist began releasing real estate information in 1985. In April 1985, there were 19,268 unsold homes on the market, at a time when about a million fewer people lived in the metro area.

“In other words, instead of just having an extremely constrained market, we just have a constrained market,” said economist Patty Silverstein, when told of Bauer’s report. “Without a doubt, for a market of our size, there are not enough homes on the market,” said Silverstein, the chief economist for the Metro Denver Economic Development Corp. and principal of Littleton-based Development Research Partners.

“I think more homes will come on the market, now that we are entering the prime selling season,” she said. “But let’s face it. Another 10,000 homes aren’t going to hit the market overnight.” Without question, it is a good time to sell, she said. “Basically, home prices are back to pre-recession levels,” Silverstein said.

“There’s no question the Denver market remains hot,” said Metrolist CEO and president Kirby Slunaker. “The numbers we’re seeing are aligning with the stories we are hearing from Realtors who are on the front lines,” Slunaker continued. “Homes are flying off the market, and in many circumstances buyers are prepared to go above and beyond asking prices in order to secure a home. “There is far more demand than there is supply, so homebuyers need to move quickly or they’ll risk losing out. Sellers need to keep focused, be prepared for multiple offers and, in some cases, personal appeals from prospective buyers.”

Indeed, unless you are a buyer, scrambling to find a home in a market of rising prices and fierce bidding, it is hard to find any weak link in the data.

“It was just a great April,” Bauer said. In the first four months of the year, Denver-area Realtors sold $4.4 billion in homes, he said. “That is a record for that time period,” he said.

Other records: The year-to-date average of a closed single-family home of $317,919 and the year-to-date closed condominium at $186,740.

Bauer’s report, by the numbers, also shows:

• In April, there were 6,855 homes placed under contract, a 20.7 percent jump from the 5,681 in April 2012 and a 14.7 increased from 5,976 in March.
• There were 4,714 closings in April, a 21.2 percent increase from the 3,891 in April 2012 and a 8.8 percent increase from the 4,333 in March.
• The average price of a closed home in April was $336,123, a 12.5 percent increase from $298,712 a year earlier and up 5.2 percent from $319,366 in March.
• The median price of a closed home last month was $280,000, 12 percent higher than the $249,900 in April 2012 and up 4.4 percent from $268,200 in March.

The number of homes placed under contract last month was almost equal to the number of unsold homes on the market.

There is a caveat to that almost one-to-one ratio, Bauer and others said. “In excess of 50 percent of the homes under contract were placed under contract within seven days or less after being listed,” Bauer said.

Bauer and others said an increasingly large number of people are putting homes under so as not to be outbid. Then, the sale collapses either because of a low appraisal, an inspection dispute or the buyer gets cold fee. A back-up buyer then snaps up the house, in some cases for a higher price. “So a home might go under contract and two weeks later, it goes under contract again,” Bauer explained.

“The same house is counted twice that month as an under contract.” Still, April is one for the record books, according to Peter Niederman, CEO of Kentwood Real Estate.

“It is nothing short of being spectacular,” said Niederman, when reached at the annual RealTrends’s sponsored “Gathering of Eagles,” which brought almost 300 residential real estate leaders from across the nation to Denver. Real Trends, based in Castle Rock, is headed by Steve Murray.

This year’s Gathering of Eagles conference at the Westin Denver Downtown, is tilted “A New Era.” It certainly is a new era, in Denver and across most of the country, Niederman said.

“I am feeling exuberant not only about the Denver market, but sitting around the Real Trends conference and talking to top owners of realty companies on the East Coast and the West Coast and everywhere in between,” Niederman said.

A housing recovery is critical for the nation’s economy, he said. We certainly have a lot of tailwind here in Denver,” Niederman said.

“With interest rates basically at or close to all-time low and a slowly improving employment picture, the real estate market is looking pretty good. Like I said before, I think we are in the second year of a seven-year to 10-year upbeat market.” “

However, Niederman said just about every market in the country is suffering from a lack of inventory. But perhaps none more than Denver.

The Wall Street Journal this week analyzed the 20 metropolitan statistical areas tracked by Case-Shiller, and found that Denver’s inventory at the end of March had fallen 44.3 percent from a year earlier, the largest percentage drop of those 20 MSAs.

“I’m not surprised,” Niederman said. “I think Denver was a year ahead of the nation as far as the lack of inventory. Denver still is a little counter-cyclical to the nation.”

David Easton, of the Alliance Group at Keller Williams Realty, DTC, said a number of his clients are worried about a bubble forming again. Many of the offers for home don’t appear to be supported by comps, which can cause problems with appraisals he said.

Homes are going fast, even in formerly beat-up markets, like Sedalia, he said. Last week, he listed a horse property in Sedalia for $495,000 “and we had two contract offers and the threat of two other offers, almost immediately,”

He said the buyer decided to sell it to the first buyer for the asking price, even though the other buyer was offering more. “The seller felt he had made a moral commitment to sell it to the first people,” Easton said.

Steve Blank, a broker with Fuller Sotheby’s International Realty, said with the under contracts and inventory levels almost equal, by one line of reasoning could mean that Denver only has about a month’s worth of inventory.

“Wow. I’ve been doing this for a long time, but I have never seen a market like this,” he said. He said that if a home is priced below $350,000, and that is a reasonable ballpark figure, that list price is the starting bid for an auction-like fervor.

“If you are between $250,0000 and $350,000, even if it is on the high side, you will get multiple offers,” he said. “I would say, probably about half the time, though, people will jump into too fast to lock it up, so there is a high-risk of buyer’s remorse and the deal won’t close,” Blank said.

That is not as much of the case when moving up the housing food chain, he said. “Last week, we were looking for homes in the Hilltop, Belcaro and Washington Park area for homes priced from $1 million to $1.5 million,” Blank said.

“I was surprised. We were able to show him about 20 homes. There was a little bit of negotiations, but we were able to put a home under contract in Hilltop.”

While it was not unusual for homes priced at $1 million or more to languish on the market for a year or more during the Great Recession. That is not the case today. “This home had been on the market for all of two weeks,” Blank said.

Not only are high-end homes selling faster, but distressed homes are making up an increasingly smaller percentage of the total sales, he said. “In 2011, about 35 percent of the homes sold in the Denver area were distressed and last year it was 22 percent,” Blank said.

“This year, I do not think it will even hit 15 percent,” he said. Brett Sawyer, the managing broker at Perry & Co., was thrilled to learn that the supply of homes on the market is finally growing.

“I was wondering when the ice flow was going to break,” he said. Rising prices are a direct result of the low inventory, coupled with growing demand, he said. “To me, it is basic supply and demand,” Sawyer said. “It is simple as that.”

He said many people who previously were under water may not realize how much their homes have risen in value. The problem, of course, is buyers are selling their homes so quickly, they may not have a place to move into, unless they area.

“I’m suggesting to my brokers on the sell side to get their seller’s pre-qualified to buy a home,” Sawyer said. “As brokers, we are always getting our buyers pre-qualified. Now, we have to get creative.”