Broomfield/Westminster Economic Snapshot - March '11

Real estate markets are creatures of habit. They have a tendency to hibernate during the winter months and then slowly awaken when the first signs of spring appear. Hopefully, they are well-rested and in a positive frame of mind. For the past few years they have emerged grumpy and indifferent to the plight of home sellers.

The Federal government attempted to ease their pain by offering the buyer tax credit incentive program early last year. That resulted in area sales activity increasing noticeably during the first six months of the year, but then retreating for the balance of the year after the program expired in late June. The end result was that overall sales activity for 2010 for the Denver Metro area was down about 10% for attached units and down around 7% for single family homes when compared to 2009. As we enter the spring of 2011, no government incentive program exists. The real estate market must sustain itself.

In viewing the Broomfield/Westminster real estate market, sales through February/2011 are lower compared to the first two months of last year, with attached unit sales down about 38% and single family sales down around 22%. Based on sales activity thus far this year for the Broomfield/Westminster market, the Absorption Rate is currently 286 days for attached units and 201 days for single family homes. The Absorption Rate normally declines as sales activity in the spring and summer increases and the listing inventory doesn’t grow as quickly. A balanced real estate market, where buyers and sellers are somewhat comparable, is characteristically around ninety days. That equates out to homes selling in a reasonable amount of time and inventory levels of available properties still offering buyers a good selection to choose from. For the Denver Metro real estate market in 2010, the Absorption Rate for attached units was 122 days and130 days for single family homes.

Home mortgage interest rates have trickled-up slightly over the course of the past few months, but unlike the rampant increases we’ve experienced recently in a gallon of gasoline; mortgage rates have adjusted incrementally and remain close to historic lows. The traditional thirty-year fixed rate mortgage can be had for around five percent with no discount points or origination fee. Dr. Sohn, a noted national economist, forecasts mortgage interest rates to remain approximately where they are for the remainder of 2011. Mortgage companies are more willing to lend these days than they were a year or two ago, but their borrowing guidelines are much more stringent. Appraisers are more conservative in their appraisals as home values have shifted lower over the past few years.

The March through June/2011 Broomfield/Westminster real estate market will possibly lag behind the same timeframe in 2010 in terms of the number of sales. That is due to the sales increase generated last year by the buyer tax credit program. Despite a slowly improving economic landscape, the real estate market continues to be a buyer’s market. Home sellers will need to stay attuned to pricing fluctuations in the market as more recent sales dictate what buyers are willing to pay for homes.

Entry level homes, those priced below $400,000, will continue to dominate the overall market in sales activity. Depending on the geographic location, they make-up over 50% of the total number of homes sold. Homes priced over a $1,000,000 are less than 10% of total buyer activity.