by Larry Hotz, Lead Editor
Denver homes sales soared 15% in September compared to the year ago period. And, homes placed under sales contract went up 20% over that same period. There were dramatically fewer homes on the market too. So, why then did the average price of a home drop by 15%?
I don’t think it really did. You see, it depends on what you mean by the average price. Certainly, the statistics from MetroList, Denver’s MLS organization, accurately reported the prices of the average of the homes actually sold. However, the most recent Case-Shiller reports said that the average price of a home and only dropped 5%. In other words, a greater percentage of low priced homes are selling than they did last year. The mix of sales is different.
This is an enigma. But the answer lies in what price homes are actually selling. Home sales of over $1 million are much lower than they were a year ago. And, sales of lower-priced homes have increased dramatically. First-time homebuyers are gobbling up affordable homes. Investors are fiercely competing over foreclosures and short sales. These are the lower-priced homes. So the composition I’ll home price sold this September is skewed dramatically toward the lower end of the home price spectrum. Therefore, the average sold price is down even though the price of the average home has not depreciated nearly as much.
Those market statistics for the entire Denver metro area were great! But they’re even better in some of Denver is better neighborhoods and suburbs. For example, the table below shows the sales results for the southeast suburbs including Cherry Hills, Greenwood Village and other areas with access to the popular Cherry Creek school system.
In the southeast suburbs, September home sales were up almost 24% over the same period last year. And, the time it takes to sell the average home on the market (Absorption rate) dropped from 9.3 months to 7.8 months. Individual neighborhoods within Denver at equally impressive sales statistics in September. That indicates that the better neighborhoods are improving even more than the overall market. Other markets such as those in Naples, Florida have absorption rates as high as 25 months.
Inventories of existing homes have also been moving down. As I’ve reported before, inventories are usually a leading indicator of an improving market. Because the fewer homes are competing for available buyers, that is generally the better for sellers, prices and time on the market. It’s been very encouraging to see those inventories moving down consistently over the last year.
So, the Denver real estate market is certainly no longer booming. But it’s not suffering in the doldrums that was a year ago. At least, that was true through the month of September. We should be prepared to expect a drop in sales during October just because of the shocking economic news. Showings and sales in our office are dramatically down in October.
Denver home sales came to an almost standstill following 9/11 and it stayed that way for a couple months. But, that stagnant. was followed by December home sales which were the highest on record for any December.
So even if the statistics stumble in October, as I suspect they will, Denver home sales will likely regain the trend sometime shortly thereafter. There’s always demand for homes. Even though demand occasionally becomes pent-up, eventually it flows again stronger.