A look at the August market statistics from Metrolist shows that demand at the bottom of our market continues to grow.Homes priced under $250,000 currently account for 1/3 of all homes on the market, but nearly 2/3 of all sales.
The absorption rate, or the number of months it would take to sell all homes under $250,000 at the current pace of sales, is just 3.85 months. Real estate economists will tell you that a 6 to 8 month supply of homes is a balanced market. Foreclosure inventory continues to fly off the shelves.
The number of homes on the market at the end of August - 24,648 - is a 20% decrease from the number of homes on the market one year ago. And all of this change has taken place over the past six months.
Wells Fargo announced last week that it was lifting its loan-to-value limits on the Denver market by 5%. In other words, for Wells Fargo programs previously capped at 80%, the new limit allows Wells Fargo to lend up to 85%, and so on.
It's all about the bottom of the market right now, and that's where the healing has to begin.
As banks continue to raise prices on less foreclosure inventory, more buyers will begin to look at traditional resales. As values rise, there is more opportunity for sellers to compete with banks, which creates more move-up buyers. It's a good cycle, and basically the opposite of what we have experienced for the past five years.
At higher price points, it's still a slog. The inventory of homes between $400 - $600k is 15.81 months. From $600k - $1 million, it's 26.07 months. And above $1 million, there is a mind-blowing 59 month supply of homes.
The economic problems plauging Wall Street and our country in general are definitely impacting the mid to high end of our market. But down low, where first-time buyers and investors live, it's a dramatically different story.
I would think the government's effective "nationalizaiton" of the housing market last week will lead to more "work-outs" with delinquent borrowers, fewer foreclosures and less inventory on the market. That means your best opportunity at a good selection of homes is right now, and that's why I think you're going to continue to see significant improvement in the bottom of our market.
