Can't say this is a surprise, but the real estate market in Denver hit a wall in the 30 days immedately after the tax credits expired. The absorption rate for homes priced below $250,000 rose by over two full months, from 3.36 months to 5.42 months, while the inventory of homes priced between $250,000 and $400,000 rose from 5.20 months to 7.75 months.
"Absorption rate" is a mathematical calculation that shows how many months it would take to clear out all inventory in a given price range, assuming no new inventory was to come on the market. For example, if there were 100 homes for sale in a given price range and 10 of them went under contract in the prior 30 days, you would have a 10 month supply of inventory.
Real estate economists will tell you that six months of inventory represents a stable market, favoring neither buyers nor sellers. Any number below that (like the 3.36 months supply of sub-$250k homes we saw in April) represents a seller's market, while inventory above six months is considered to be a buyer's market.
Overall, during the past month the inventory of homes in Denver has risen from 5.00 months to 7.53 months, which basically reflects a 50% increase in the absorption rate. Any way you cut it, May was not a good month to be selling your home.
We knew with the flurry of activity at the tax credit deadline, things were bound to cool off in May. And they did. In my opinion, it's going to be a good 60 to 90 days before the market stabilizes and we figure out what "normal" looks like going forward.
Rates are still low, but with tax credits now out of the picture, the focus goes 100% back toward the overall economy. No jobs, no recovery. No jobs, no buyers. No jobs, more foreclosures.
I would gladly take a 1% increase in interest rates for two points off the unemployment rate. When jobs return, there will be pent up demand for housing. But until then, we're just in a holding pattern.
The next move forward in the housing market is spelled J-O-B-S.
