This 1,946-square-foot home at 1640 Garfield St. is priced at $274,900, close to the average sales price of $270,821 in February.
If you were house hunting in the Denver area last month, numbers released today will confirm what you have been seeing – or not seeing – as it were: the number of unsold resale homes plunged 42 percent in February from February 2011.
There were only 10,086 unsold single-family homes and townhomes/condominiums on the market last month, compared with 17,358 in February 2011. The inventory was down 3.4 percent from January, when buyers had 10,443 homes to choose from, according to the report released by independent broker Gary Bauer.
The last February when there were fewer homes for sales was in 2000, when there were 8,357 homes on the market.
“The inventory is still a somewhat challenging situation,” Bauer said. “It’s a good-bad situation, depending on whether you are a buyer or a seller. Quite frankly, I think as the word gets out more and more about how low our inventory levels are, more people will start to put their homes on the market.”
Other than the inventory, February was an extremely strong month that bodes well for the spring and summer prime selling seasons, Bauer said.
“We started on Jan. 1 with some momentum, and it continued through the end of February,” said Bauer, who bases his report on Metrolist data. Because this is a Leap Year, he adjusted the 29 days this February for the 28 days in February 2011.
“We are seeing a lot of pent-up demand,” Bauer said. “We are seeing multiple offers for homes. We are also seeing very well-educated buyers and very well-educated sellers.”
That is absolutely correct, according to Eaun Graham, a broker with 8z Real Estate.
Snooze and you lose
Graham had an experience with the lack of dearth of houses on the market this morning, in fact. He and a client who is interested in buying a home in the Broomfield-Westminster area looked at six homes on Saturday. He offered full-price for one priced at the full-asking price of $250,000, but was out-bid. He was prepared to make an offer on his second choice, looking at it Saturday and 5 p.m. on Sunday.
“First thing this morning I called the listing broker and the home was gone,” Graham said. “In this market, the good inventory is gone right away. You can’t go home and think about buying a well0-priced home – you have to write an offer that days. It wasn’t this way a year ago.”
Graham thinks the lack of inventory is only going to get worse, as the market heads into the prime selling season. Multiple offers are driving up prices at the low-end, and he predicts that is a trend that will later increase the prices of more expensive homes, too.
Demand is improving, even as the supply dwindles.
The report shows that 4,150 homes were placed under contract in February, a 19 percent increase from the 3,486 homes in January and 12.4 percent more for the 3,693 in February 2011.
The number of closings rose 11.9 percent to 2,495 in February from 2,229 in February 2011 and were up 1 percent from 2,470 in January. Year-to-date, contracts are up 11.6 percent and closings are up 13.2 percent from the same period in 2011.
The report showed that the average price of a single-family home that sold last month was $270,821, compared with $265,277 in February 2011 and $272,328 in January. The median price was $220,00, unchanged from a year earlier and up slightly from $218,855 in January.
For single-family homes, 43 percent of the homes that closed last month were below $200,000 and 62 percent of the condos that sold in February were below $150,000.
Peter Niederman, CEO of Kentwood Real Estate, using both January and February closings, calculated there currently is only a four-month supply of unsold single-family homes homes on the market, compared with a 7.7 month at the end of February 2011. Niederman uses two months worth of data “to take some of the noise” out of only looking at one-month’s data. Using the same methodology, there is about a four-month supply of condos on the market, compared to almost a nine-month supply in February 2011.
‘When you get below a five-month supply that is a pretty good market,” Niederman said. “If this trend continues, with strong under contract activity, but little added supply, we could get down to a two- or three-month supply.”
Niederman was especially pleased by the jump in under contract activity in February, as it indicates activity in a given month and is a leading indicator of future closings.
An even more basis indicator is the number of showings and those numbers have been off the charts.
“Last Friday, we had the highest number of showings we have experienced in many, many years,” Niederman said. “Fridays kick off the showing activity for the weekend. You can’t sell a home unless you show it, so that is a very important leading indicator.”
Chris Mygatt, president of Coldwell Banker Residential, said buyers at the high-end still have quite a bit of inventory to choose from.
Still, given the historic low mortgage rates, he is encouraging anyone who is thinking of selling their home to list it now.
“What the whole Denver real estate world is talking about is our low inventory,” Mygatt said. “If you are a homeowner and in any way you are just waiting in the wings looking to sell at some point, the message these numbers tell me that if you are dreaming of moving up in Colorado, this is a great opportunity to sell.”
It wasn’t that long ago that the market was fearing quite the opposite – a flood of “shadow-market” inventory as banks unloaded properties that they had repossessed.
Legal issues involving the settlement such things as “robo-signing” of foreclosure documents likely delayed banks processing all of the pending foreclosures.
“Now that the banks have some kind of agreement with the government, we might see some more of these foreclosures being processed,” Mygatt said. “I think the banks are smart enough not to dump everything they have on the the market at the same tie. But the truth is, here in Denver, we could absorb a significant amount of additional inventory at this time.”
However, it is not just the inventory, but the condition of the homes on the market.
One buyer, named Chris, last week made a full-price, $300,000 offer for a 2,100-square-foot in Mayfair, but the deal fell apart over $5,000. Following the inspection, Chris and his wife wanted $10,000 in concessions, but the seller only offered half that amount.
“I was surprised they pushed back that hard,” said Chris, who didn’t want his last name used. “But the place would need a new roof, water heater, electrical upgrades, etc., in the next two to three years, as well as a lot of upgrades inside, so it was too much for us.”
203(k) to the rescue
That is one reason that Jocelyn Predovich, president and CEO of the Limetree Lending Group, is pushing what is called 203(k) mortgages, HUD’s primary program for the rehabilitation of properties.
“No home is ever perfect, but what is so hard in this market, when there is almost nothing to choose from, a lot of the homes out there are kind of tired and worn out,” Predovich said. “That is why we are pushing the 203(k) loans so hard.”
Borrowers typically pay an extra $49 to $52 each month for every $10,00 in 203(k) financing rolled into the mortgage, she said.
She said a lot of Realtors are surprised that more people aren’t buying homes, given how unbelievable low rates are today.
Lender Jocelyn Predovich offers a free "webinar" class to Realtors for continuing real estate education at 10 a.m. every Wednesday.
Predovich compared it to someone shopping for a new wardrobe expecting to get the perfect outfit at a basement-bargain price. Instead, she walks into store after store and everything she sees is “old, worn, torn and full of holes. No matter how much the clothing is discounted, or how inexpensively you could finance your purchases, it does not matter. You are not buying this ugly clothing. You are better off to keep the clothing you have. Agents are pushing worn-out, broken-down, outdated properties to an impatient generation seeking immediate gratification in a ‘buyer’s market.’”
That’s where the 203(k) comes in.
She said the beauty is you can hire professionals come in and do the work on just about any improvement, a move that more times than not will increase the value of your purchase from Day One.
“While I can’t guarantee that it is going to result in instant, organic equity, that has been the case of everyone in our files,” Predovich said. ‘It really lowers the risk of buying a home. You’re not going to be sucked into a home that needs to be fixed up and you can’t sell. It’s a huge benefit to anyone who needs to sell their home in a year or two. The improvements offers you a hedge against having to sell your home in a year, because the improvements usually provide you with instant equity.”
It seems to be catching on.
“Last Thursday, nine contracts came in (to our office) and they all had 203(k) loans.”