by Larry Hotz, All Denver Real Estate
Denver home sales increased by 4% over the previous February period according to statistics released by Metrolist, Denver’s Multi-list reporting organization. Significantly, inventory of homes for sale remained essentially constant during the year over year period rising only .8% to 25,037 homes.
Why is this important? First, home sales are lower in many neighborhoods impacted by foreclosures. Secondly, home sales usually don’t begin to pick up until March when we begin our Spring selling season.
So, what does my 30 years of experience in this real estate market tell me about the condition of the Denver real estate market?
We are on the cusp on a market movement. Which way will it move? I don’t know. But, I know that we need follow through to good February sales numbers in order for the market to improve. Simply put, if it doesn’t follow though with an increase in March sales, our usual Spring selling season could be in jeopardy.
So, how are we doing so far? In my Kentwood Company office our showings for the first week of March increased from 296 the previous week to 421. That is a huge increase in people viewing our listings. Showing activity usually the precursor to sales contracts.
Now, this is the microcasm. But, our office at least is a good barometer of showing activity of luxury home sales between $400,000 to $6 million. Granted, our office may be the most productive office in sales per agent but that is generally only at the upper end of the market and only in Denver and the south suburbs. We are not dominant in the north an eastern sections which have been heavily hit with foreclosures and declining home values.
Inventory of existing homes on the market have held remarkably consistent over the last 6 months. That is a good sign because usually inventories increase by this Spring-time in the market cycle. If inventories remain relatively consistent and sales increase as they usually do (and did last year) that could bode well for our market.
Headwinds do persist. Lenders are getting more conservative in their underwriting standards, loan-to-value ratios and appraisals. This is causing somewhat fewer people to qualify to loans. That does somewhat reduce demand. Also, foreclosure are plentiful in lower-end neighborhoods on Denver’s north side and in the eastern and northern suburbs.
Still, there are hopeful signs. Interest rates are still extremely low by historical standards. This week’s action by the Federal Reserve Board to increase liquidity in the debt market may well actually lower mortgage interest rates even lower over the next few months. Local home builders have cut back dramatically on building homes before they are sold in advance. This is reducing supply significantly. Finally, we have seen more relocation buyers enter the marketplace in the last few weeks. These tranferees tend to be the “must-buy” buyers.
Denver remains one of the market which have held-up better than others. March should tell us if this trend will continue into our Spring and even Summer selling seasons.