Mountain Suburbs Economic Snapshot - May '12

To a great degree real estate is a numbers game. It’s about sales and appraisal values, financing rates, statistical analysis on the number of sold properties and active listings, and return on investment for commercial buyers and sellers. There is the square footage conundrum where tiny homes sell for much more than larger homes. Did I hear someone say, “Location, location, location.”? 

As the Mountain Suburbs real estate market has “heated-up” over the course of the past few months, here are some numbers to chew on. (Information is from MetroList, the Denver Metro MLS.) Through April/2012, single family home sales are UP approximately 14% when compared to through April/2011 (190 vs. 166). 

One of the impacts from an active real estate market is an obvious decline in the available inventory of properties for sale. When this takes place, there often begins a subtle shift away from what we have been experiencing across the Mountain Suburbs area for the past few years (a buyer’s market) toward a more balanced market. As more buyers actually become buyers, multiple offers and homes selling for more than the list price appear more frequently. Potentially, this buyer’s market trending to a balanced market can evolve into a seller’s market. At the end of April/2011 there were 571 active single family home listings in the Mountain Suburbs market. That number at the end of April/2012 was only 386; a 32% decrease in availability.

The Absorption Rate for Mountain Suburbs single family homes stands at 245 days through April/2012. This is the length of time it would take for the market to fully turn. Of course that’s assuming no new listings enter the market and sales remain at the same level. The Absorption Rate drifts down as the year progresses since most sales occur from May through August. The Absorption Rate at the end of April/2011 was 412 days.

Home mortgage interest rates continue to hover around 4% for the traditional thirty-year fixed rate loan. Interested in an Adjustable Rate Mortgage where the first five years are fixed? They can be had for less than 3%. If you’re considering moving in the next few years, this may be a good option to consider. There are no indications from the financial wizards in Washington that rates will shift up or down noticeably from where they currently are in the near future.

Two things have hindered the real estate market the past few years. They both deal with the financial aspects of buying or selling. The first is the proliferation of short sales and bank foreclosures that have entered the marketplace. These properties have been scattered across all price ranges and have negatively affected the market value of neighboring properties. The second area relates to the Golden Rule i.e. he/she who has the gold makes the rules. Financial institutions control the outcome when it comes to making loans. They have transformed themselves from lending to marginal borrowers to becoming reticent about loosening the purse strings.

Expect the Mountain Suburbs real estate market to continue to be vibrant through the spring and summer months. Active listings will peak by mid-summer and sales will begin to decline as fall approaches. If you take the time to look at the numbers, now IS a great time to purchase a home. Mortgage interest rates are at historic lows; home values remain at a reasonable pricing level; and sellers are still motivated to sell.