The market is awash this week with news of housing's demise. Sales fell nationally by over 27% in July (post tax-credit), with just 320,000 homes changing hands. That represented the worst one-month performance since May 1995.
Inventory has also spiked, something that we are seeing in Denver right along with the national trend. After 36 consecutive months of declining inventory on a year-over-year basis (truly a sign of a strengthening market), unsold inventory has now rised by 12% from its April lowpoint. There are also 12.2% more unsold homes today than one year ago in the seven-county Denver metro area.
The absorption rate, which is a hypothetical calculation that shows how long it would take to extinguish all unsold inventory based on the current pace of sales, has jumped from 5.00 months at the end of April to 9.08 months today. That's an 81% increase in the length of time it will take to sell an average home in today's market.For 18 months, demand was shifted forward by offering two highly attractive tax credits to first-time buyers and repeat buyers. The bill has now arrived for that extended giveaway.
The market is not broken... but it most definitely is recalibrating. Of course the post-tax credit world looks different. But over the next few days, we'll break some of the data down to show which part of the markets are faring better, and which sectors are most vulnerable.
