For most of 2009, first-time buyers have been in a frantic sprint to find inventory, write offers, and cash in on the $8,000 tax credit from the federal government. From the time the stimulus bill was signed in February, the inventory of homes below $250,000 dropped down to less than 3 months (and then stayed there). That's an exceptionally tight market by anyone's standards.
This tight market created urgency, bidding wars and a lot of angst for both buyers and their agents. But now that we have hit the holiday season (and even though the tax credit has been extended), it's seems the market has hit a wall of exhaustion.
The inventory of homes priced below $250,000 has jumped from 2.89 months to 4.79 months in the past 60 days. That's a 60% increase in market time, caused not by a surge of new inventory, but by a dramatic reduction in the number of buyers looking for homes.
The market from $250,000 to $400,000 has also cooled off, with inventory rising from 6.99 months to 9.86 months over the past 60 days. Above $400,000 the demand has remained relatively unchanged, but since homes below $400,000 have accounted for over 85% of the sales in the Denver metro area this year (peaking at 88% in October), the bottom off the market is what we should be watching as we try to project where buyer confidence is headed.
Come January, I would expect to see a lot of new inventory on the market and a lot of buyers coming back in off the sidelines, but for now, there's not a lot to choose from.
Until then, the market figures to continue to move in slow motion.