Monthly e-News September, 2011

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August supply sinks, while sales sizzle

Supply and demand means home prices poised to rise.

Normally, it’s rare for there to be only 18,000 and change unsold homes on the Denver-area market. But the seasonal low supply so far this year occurred last month – ironically, during the hottest August on record. There were only 18,164 unsold homes on the market in August, the lowest inventory number of 2011. That is unprecedented. For seasonal reasons, August typically has the third largest supply of homes on the market, as many buyers are eager to purchase their dream home before the start of school. You would have to go back to January 2010 – when there were only 17,783 homes on the market – to find a time when buyers had fewer homes to choose from.

Low inventory has been a trend for all of 2011. There has not been one month this year where even 20,000 homes were on the market. By contrast, every month from March through November in 2010 there were more than 20,000 homes unsold homes on the market.

This year’s low inventory reflects sellers unwillingness to compete with all of the distressed properties on the market. In short, if they don’t have to put their home on the market, they will put off listing it until the market rebounds a bit. It may be a self-fulfilling prophecy. While overall sold prices were slightly below they were a year ago – largely due to the mix of homes on the market – that could change, as demand is as strong as the inventory is low.

Under contracts jumped by 14.4% in August from August 2010 and sales were up a whopping 29% on a year-over-year basis. Depending on how you measure it, there is less than a five-month of supply of unsold homes on the market, while a year earlier there was about an eight-month supply.

The weekly sales rate in August was 5.77%, 49% higher than the 3.88% in August 2010. In normal times, this would be a seller’s market, as strong demand and low supply normally yields higher prices. When you couple a low supply and strong demand with historically low mortgage rates hovering around 4% for a 30-year-fixed rate rate, a compelling case could be made that home prices are likely to rise.

So unless you are willing to bet against the law of supply and demand, prospective buyers may only have a short window of opportunity to buy homes at these prices.

Year Weekly Sales Rate in August Unsold Home Inventory in August
2002 2.79% 22,910
2003 2.55% 26,613
2004 2.61% 27,592
2005 5.29% 26,650
2006 4.14% 31,664
2007 3.99% 30,627
2008 5.25% 24,648
2009 5.99% 20,225
2010 3.88% 23,615
2011 5.77% 18,164

The Denver-area housing market was the third best performing, on a year-over-year basis, of the 20 major cities tracked by Case-Shiller. To read more:

A developer plans an apartment community in trendy LoHi. However, some observers worry about a lack of parking could be a problem. To read more:

If you are thinking of buying a rental property as an investment, all of the stars seem to be aligned. Rents are rising in more than 500 cities across the country. To read more:

The Boys & Girls Clubs of Metro Denver is the first redevelopment partner for the Mile High Greyhound Park in Commerce City. To read more:

The number of Colorado homeowners entering the Obama Administration’s flagship program to keep people out of foreclosure has hit a new low. To read more:

Permits for single-family homes in the Denver area – a reflection of future construction – fell 22 percent in July, from a year earlier. But apartment permit activity is way up. To read more:

FasTracks has received $1 billion in federal funding for two rail lines. And one of them is to help pay for the line from Union Station to DIA. To read more:

Oakwood Homes has sold its 10,000th home in the Denver area. And the locally based company is celebrating its 20th anniversary this year. To read more:

The Denver area housing market is doing better than many other places in the country. And growth in aerospace and cleantech industries could help the Denver-area economy, boosting the housing market, noted Tom Clark, executive vice president of the Metro Denver Economic Development Corp. To read more:

Wild Horse Ranch is the name of a new housing planned for Golden. Prices of the 50 homes in the new community are expected to start in the low to mid-$200,000s. To read more:

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