Douglas County Economic Snapshot - February '12

The detail that most often spurs a real estate market isn’t mortgage interest rates, home values or market inventory, its motivation. It’s home buyers and sellers seeing opportunity in the marketplace and being motivated to take action. For the past few years, motivation has been missing in the local and national real estate markets, but the elements that spur buyer and seller activity currently exist.

• Mortgage interest rates continue to hold at historic lows with the traditional thirty-year fixed rate mortgage hovering around 4% and adjustable rate mortgages available for under 3%, with the first five years fixed. The Federal Reserve has indicated they are going to maintain interest rates at or around their current levels into 2014. That’s good news for the real estate market as it provides buyers and sellers with a sense of stability in making personal financial decisions.
• Home values have adjusted downward the past few years across the Denver Metro, Boulder Valley and Northern Colorado market areas. Much of this was the result of bank foreclosures and short sales. The market appears to have righted itself with home values increasing in certain geographic areas.
• The available inventory of resale homes in the Douglas County real estate market declined 32% at the end of 2011 versus the end of 2010. The overall Denver Metro available inventory of resale homes declined 36% when comparing these two year ends. For sellers looking to sell this is an opportune time to become active in the market.
• After years of limited new construction, new home builders have experienced a renewed motivation by purchasing subdivision in-fill lots along the Front Range. Buyers can once again purchase a moderately priced new home, with builder incentives and attractive financing packages.

With the decrease in the amount of available inventory, the Douglas County real estate market may potentially experience an economic scenario where scarcity creates demand. If this occurs, some of the resulting effects are an increase in home values, multiple purchase offers on individual properties, and a reduction in the length of time properties are available on the market.

Real estate markets gain momentum from a bottom-up perspective. Less expensive homes begin to sell, which in turn provides owners of those properties an opportunity to move-up and purchase more expensive homes. This is called the domino effect; a chain reaction occurs in the marketplace. This aspect of the market has been missing the past few years, which has resulted in more expensive homes staying on the market for longer periods of time and experiencing a sharper decrease in value. Look for this to change in a positive way as the real estate market continues to exhibit renewed energy.

Winter is on the wane and spring sits patiently on the horizon. It is the time of year when buyer and seller motivation turns to buying and selling. Inventory levels of available properties creep-up and buyers take advantage of appealing mortgage interest rates and reasonable home values.