With foreclosure sales becoming something from the distant past, I focused on the here and now in the Denver Residential Market for Mid-Year 2012. Yes, you heard me correctly; foreclosures and foreclosure sales have dropped to pre-financial meltdown numbers. No so fast, Short Sales have become the lender’s foreclosure of choice. Not nearly as “dirty” and “messy” as a foreclosure sale, short sales involve borrower participation and as an industry generally attract a 15% higher return than a vacant abandoned foreclosure transaction.
By mid-year 2012, the Denver Foreclosure Trend had returned to pre-2005 rates. On the other hand, short sales have absorbed the distressed inventory, and by my calculation. 10% of the transactions in the Metro Denver Area so far this year have been short sales. Even this stat is down from 2011.
What’s the big change? Supply! Our market has enjoyed an incredible metamorphosis in a very short period of time. Although cooling off a bit since the close of the first have, it’s been a hot summer and we are in a very contentious political season right now. But, but the numbers, here’s what has happened: We started the second half of 2010 with 24,731 total listings. We started the second half of 2011 with 14,647 active listings. That’s a huge change. A 40% decline in inventory is clearly something to talk about. As we stand today, at mid-year 2012, however, we have dropped to 9,251 active listings or another 36% decline of inventory. Whenever any market enjoys a 63% decline in inventory in just 24 months’ time things will change. And, change they have.
In just 24 months we have seen our months’ supply of inventory drop from 7.2 to 3.6 in all price ranges, but below $400K and $200K we’ve seen inventory supply drop even more precipitously. In other words, we have turned from a buyer’s market to a seller’s market below $400K. The good think about this is how this trickles up in price. If I can sell my house at $400K, I can afford to buy a house at $600K, and if I can sell my house at $600K, I can buy a house at $2M. Well that example is pretty dramatic, but it is does and has happened!
That does not mean we are out of the woods, but we can see the light. As you can see from this chart, even though under $400K we are in great shape, as we move up in price point, the market has not been quite as efficient in satisfying its supply and demand relationship. This tells us something very exciting, however, and we are beginning to clearly see a trend of well positioned move up buyers make that lifestyle move to the more expensive home.
As an example, if you bought a home in the early 2000s for $400,000, and have lived there the last 12 years, and reduced your loan amount even without appreciation, you have equity. That equity can potentially buy you a home that was $800,000 for possibly $700,000 effectively accessing a potential upside that would be unavailable in your lower price range. It’s happening all the time. The real advantage is coming to that seller who purchased for $600 or $700K in the late 1990s or early 2000s is allowing that buyer today to possibly approach a home that sold in 2006 for $1.6M for possibly $1.3M today.
So far we know two things. Patient home owners with debt reduction and purchase timing in the late 90s or early 2000s, have a fantastic opportunity to move up. It might be time to take your market profits from our run up in the stock market and diversify them in a dream home.
Now, I’m a big believer that your home is shelter first, and only after financial stability is achieved does it become a lifestyle and truly become an investment. Where ever you are in your financial cycle, take a long hard look at where you are on the wheel of home ownership. Whether you want to move out of that Townhome to a Single Family, or move out of your life’s home into your Dream Home, call a professional and see if it’s the time for you. I bet you will be surprised!
Tom Cryer, SCRP
Realtor – Broker Associate
The Kentwood Company
5690 DTC Blvd. #600W
Greenwood Village, CO 80111
303.773.3399 Ext: 2991 (Office)
888-621-7157 (Toll Free)