For all of the talk about the “sudden recovery” in the Denver housing market, the truth is that things began to improve noticeably all the way back in August of last year. On September 15, 2011, I wrote a post on this blog entitled “Where Has the Inventory Gone?” Seven months later, I long for the number of homes we had for sale back in September!
My April market report shows more of the same – falling inventory levels, increased demand and absorption rates that are dropping to unprecedented levels.
Now check out what’s happened to absorption rates at these price points over the past year:
April 2011 absorption rate for homes below $250,000: 4.43 months
April 2012 absorption rate for homes below $250,000: 1.46 months
April 2011 absorption rate for homes between $250k-$400k: 7.33 months
April 2012 absorption rate for homes between $250k-$400k: 2.09 months
April 2011 absorption rate for homes between $400k-$600k: 11.34 months
April 2012 absorption rate for homes between $400k-$600k: 3.31 months
For those who like percentages, that's a 68% drop in market time for homes below $250,000; a 71% drop in market time for homes between $250k - $400k; and a 72% drop in market time for homes between $400k - $600k.
Read any book on real estate investing, and you’ll see that one reason people like real estate is that values tend to move up or down more slowly than they do in the stock market. It's more stable, more predictable, and less stressful. But when you look at these numbers, it’s hard to imagine much downside in pricing right now when you see how flooded the market is with qualified buyers.
And who are these qualified buyers?
First and foremost, we have first-time buyers. Tons of them. For the past five years, the normal ebb and flow of new homeowners coming into the market has been disrupted by the bad economy. Kids living at home longer, young people renting instead of owning, less upward mobility in the economy, and nearly 100,000 homeowners in Colorado losing their homes to foreclosure.
Today, with prices generally 10 to 15% off the peak and the first generation of foreclosed homeowners cycling back into the market, buyers literally are everywhere.
And with short sales and foreclosures, which made up over 40% of our market 18 months ago, now accounting for just 18% of housing inventory, there is a huge shortage of homes for sale to accommodate this crushing demand.
Make no mistake, prices below $300,000 are rising in almost every area of town. Yes, I said that. Values are RISING!
And between $300,000 and $600,000, there is more stability (a precursor to appreciation) than we have seen since 2007.
Housing is a leading indicator, and the snowball of positive news in the Denver housing market bodes very well for our city, our state and our economy during the balance of 2012 and beyond.
These numbers demand your attention. The shift is so dramatic, so sudden and (still) so underreported that the real economic impact of this improving market is nowhere close to being felt.
