South Metro Denver Economic Snapshot - August '12

As late summer melds into early fall the South Metro Denver real estate market continues to remain positive both in the resale sector and new home construction. For the first time in several years we’re seeing a few new homes being built across the Front Range in the higher price ranges. These are mainly presales as lenders and builders are still wary of building spec inventory in a price range approaching and exceeding seven digits.

Through July/2012 South Metro Denver single family home sales are UP 19.04% when compared to through July/2011 (6,956 homes vs. 5,843 homes). Attached unit sales are UP 14.50%  for the same time periods (2,723 properties vs. 2,378 properties). The overall market is UP 17.73%.  When compared to 2005, when the metro Denver market peaked, single family home sales for the South Metro Denver market are down 18.08% through July of each year (6,956 homes vs. 8,491 homes).

Since 2005, the South Metro Denver real estate market has experienced a decline and then a period of stability. This is historically characteristic of real estate markets. They seem to drop off the edge of a cliff, regain their balance, and then claw their way back to the top. It’s a slow process, fraught with many sleepless nights on the part of buyers and sellers, not to mention Realtors, title people, inspectors, appraisers, builders, etc.

The Absorption Rate (the time it takes for the market to fully turn assuming the same rate of sales activity and no new inventory) for South Metro Denver continues to drop as available inventory remains at a low level and sales expand. The Absorption Rate for South Metro Denver at the end of July/2012 stood at 72 days. Compare this to the end of July/2011 (145 days) and July/2005 (140 days).  Active single family home listings in South Metro Denver at the end of July/2012 were down 41.15% compared to the end of July/2011 (2,366 homes vs. 4,020 homes) and down 58.05% when compared to the end of July/2005 (2,366 homes vs. 5,639 homes).  

With this uptick in the South Metro Denver real estate market, where do we go from here?

Unless something dramatic happens in world affairs and the economy takes another shift south, look for the balance of 2012 and into 2013 to remain much the same as they are now. Available properties for sale will continue at historic lows as sales activity swallows-up the inventory at a pace at least equal to new inventory coming into the market. Look for home mortgage rates to continue to vacillate up and down slightly, but stay at a reasonable level. New home production builders see opportunity in the marketplace. As the inventory of platted lots dwindle, dirt work on new home subdivisions will once again be part of the landscape.

The South Metro Denver real estate market has not reached the point of a scarcity mentality where either there is (a) a plethora of listings and few buyers (a buyer’s market) or (b) a limited number of listings and an abundance of buyers (a seller’s market). For the next year, South Metro Denver should experience a balanced real estate market, where well-priced properties in good condition will sell in a reasonable amount of time.

There’s an old saying in real estate: “Price overcomes all objections.” Pricing continues to be one of the dominant elements in the real estate market as resale properties must now compete more with new construction.