by Larry Hotz, Denver Real Estate
Denver home sales dropped a modest 4.3% in November from the year ago period according to Metrolist the MLS sales reporting agency. But, that figure includes condominium sales and home sales in areas with lower income and higher foreclosure rates.
Most of my clients want to know what is happening in the more desirable neighborhoods within Denver itself and in the better suburbs.
Those are somewhat different real estate markets. Absolute numbers of sales do not tell the whole story. Professional sellers such as relocation companies rely on average home sales absorption to tell the health of the real estate market. Absorption is the percentage of homes that sell every month compared to the total number of active listings. Sales in this case is measured as homes placed under-contract pending closing.
In the city, many higher home value neighborhoods are located in the southeast section. There home sale absorption increased in November to 12%. In the more affluent suburbs located southeast of the city absorption increased from 13% in October to 15% in November. 25% is considered to be a balanced market. So, even these markets are somewhat soft. But, they are better than markets like Arizona, California, Florida and Nevada where absorption in under 10%.
Why is this occurring in a slower market? The number of homes on the market have been decreasing every month since May. In fact, single family homes for sale decreased from 21,947 in October to 20,603 in November market-wide. In those more affluent south suburbs, the inventory of available resale homes dropped from 800 in October to 730 in November.
Another interesting fact is that average sales price increased in November market-wide from $290K to $298K. In those same south suburbs, the average sales price increased to $600,331 from $505,270 in January of this year. In the southeast Denver market, the average sales price increased to $537,262 in November from $409,410 in January.
My sense is that some home prices are increasing neighborhood by neighborhood. But, not all neighborhoods are appreciating and some are actually depreciating slightly. However, fewer of the lowest priced homes are selling changing the “mix” of homes that sell. In other words, more expensive homes are comprising a greater percentage of all home sales.
The bottom line is consider what is happening in each individual neighborhood whenever buying or selling. “All real estate is local”. That means even within a market there can be variations. That is certainly what is happening in the Denver real estate market at this time.