Broomfield/Westminster Economic Snapshot - February '11

Real estate markets are often difficult to define. Homes may be selling well in one geographic area, but not another. Home values may be increasing in one price range, but declining in others. Inventory levels of available homes may be growing in one neighborhood, but diminishing in another. It can be tricky to get a true and accurate picture of what the overall market is doing at any one point in time.

There is an approach that does provide relevant information. It’s an “apples to apples” comparison. What took place in this specific area last month, last year or five years ago? What happened in sales activity, available listings and average prices? Of course, there are always variables to consider. What were mortgage interest rates at the time? How was the economy doing? Was the government providing a buyer assistance program? Did it snow everyday?

In January/2011, the Broomfield/Westminster real estate market was down 21% in single family home sales and down 32% for attached unit sales when compared to January/2010. The average single family home sales value was down 5%; the average attached unit sales value was up 3%. Active listings for January/2011 were up 19% for single family homes and up 30% for attached units when compared to January/2010. The Absorption Rate (the time it would take the market to sell the existing inventory, assuming a similar rate of sales activity) is currently approximately 259 days. The year 2005 is considered a benchmark year; the year sales activity peaked for most geographic areas. The Absorption Rate in January/2005 for the Broomfield/Westminster real state market was 248 days.

Here are some things to digest as we venture down this precarious real estate path the rest of 2011.

1. Mortgage Interest Rates: Back in the late 1980’s and early 1990’s, home buyers would have literally killed to get a thirty-year fixed rate loan for 4.75%. It would have felt like they were stealing money from the banks. They would have been lined-up for blocks; drooling on themselves. In today’s economic climate 4.75% doesn’t generate the same level of enthusiasm. It’s nice, but it doesn’t get home buyers salivating. Mortgage interest rates have risen slightly over the course of the past few months. If the housing market rights itself, look for interest rates to continue this pattern.

2. Available Inventory: That black cloud perched on the horizon is composed of bank foreclosures, short sales and HUD properties. It’s unclear how many of those little devils are out there. They keep popping their heads-up. In the past couple of years many of them have been purchased by savvy investors, first-time homebuyers or, on a more limited basis, buyers looking to take advantage of a price sensitive marketplace and make a move-up. Lack of inventory creates motivation in the mind of buyers. Unfortunately, high inventory levels of available properties have been the norm the past few years.

3. Balanced Real Estate Market: Before a declining real estate market can recover it must reach a plateau. It must halt its negative momentum and begin the process of turning itself around. Real estate markets move slowly. They are a perception based entity. Do buyers view the market improving or continuing to weaken? Do homeowners glimpse an opportunity to sell now or are they hoping for the market to bounce back? A healthy real estate market is always one that is balanced; a relatively equal number of motivated buyers and realistic sellers.

Market data statistics are from MetroList the Denver Metro MLS.