South Metro Denver Economic Snapshot - November '11

As home mortgage interest rates continue to hold at historic lows, the real estate market across the Front Range has begun to stabilize. New home construction has reenergized over the course of the past two years with production builders like Meritage Homes, Toll Brothers, Ryland Homes, Richmond Homes, etc. developing new parcels of land and/or purchasing in-fill lots from other builders, banks, etc.

According to a recent report, foreclosure filings were down 25% statewide for the third quarter of 2011 when compared to the third quarter of 2010. Foreclosure sales were down 30% when comparing the two timeframes. Based on those numbers, one would surmise things are improving on the foreclosure front. They may be, but there could be a couple of reasons why those numbers are suspect. First, banks and mortgage companies may be holding off pursuing foreclosures due to the “robo-signing” controversy that has enveloped the mortgage loan industry. A second thought is lenders are suggesting/recommending/advising borrowers to consider a short-sale solution rather than going through the foreclosure process, which can potentially be more costly to the lender.

Short sales are simply defined as a lender is willing to accept less than they are owed on a property in lieu of ending-up with the property through the foreclosure process. It’s a cut your losses and move-on with your life approach that benefits the lender and provides the borrower with a way out that may not have as great a negative impact on their future credit worthiness.

The South Metro Denver real estate market has remained relatively stable for the past two years. Through October/2011, single family home sales were 8,499; through October/2010 there were 8,457 single family home sales. For attached unit sales, the numbers were 3,528 (2011) and 3,568 (2010). These sales numbers are still far below the peak years of 2004 and 2005, but it’s encouraging to see a balancing effect in the market.

As we drift from fall into winter, expect mortgage interest rates to continue to remain around the 4% level for the traditional thirty-year fixed rate mortgage. Adjustable rate mortgages with fixed three, five and seven year terms, and fifteen-year mortgages can be had for a lower rate. Obtaining financing can still feel like having your teeth pulled, but lenders do have funds available and are willing to work with qualified buyers; the key word being “qualified”.

Look for the South Metro Denver real estate market to experience its normal quiet period as the holidays, time of year and the weather take precedence over finding the perfect house. But, there will still be buyers out looking and, hopefully, buying this time of year. There will just be fewer of them. Inventory levels of available homes also decline during this time of year as sellers decide to wait for spring to start the process. If you are seller, it is still an opportune time to sell, because there is less competition.

Finally, we aren’t out of the woods yet as it relates to the state of the local real estate market. The “ancient” adages of price, location and condition will continue to apply as 2012 makes its presence known. Buyers will continue to be selective and aggressive in looking to buy.