Denver Metro Single Family Housing Stats:
Active Listings: 9,087
- Down 35% from July ‘11
Under Contracts: 4,181
- Up 23% from July ‘11
- Up 20% from July ‘11
Average Price: $312,920
- Up 5% from July ‘11
Average Days on Market: 64
- Down 35% from July ‘11
Denver Metro Condo Housing Stats:
Active Listings: 1,740
- Down 51% from July ‘11
Under Contracts: 1,055
- Up 22% from July ‘11
- Up 20% from July ‘11
Average Price: $190,269
- Up 24% from July ‘11
Average Days on Market: 69
- Down 37% from July ‘11
Real Estate News
As we discussed a few months ago the Home Affordability Index (HAI) is at its highest recording ever in the metro Denver area. Just like it sounds, the HAI is a measure of how affordable homes are in a given location. It’s calculated by comparing the median price of a home in the Metro Denver market to the median worker’s income level, taking into account the current interest rate for a 30-year fixed rate loan. What this means is that the median income earner can buy more house today than ever before. Why? Because home prices, while rising quickly, are still well below their peak prices of 5-6 years ago and interest rates are at never-before-seen historic lows. It’s interest rates that continue to make homes so wonderfully affordable, so let’s dig into this a bit.
The typical rate on a 30-year fixed mortgage tumbled below 3.5% for the first time last week, the latest record low in a trend that has fired up homes sales around the country. Freddie Mac’s weekly survey of what lenders are offering to qualified borrowers showed the 30-year rate at an average of 3.49%, down from 3.53% the week before. The 15-year fixed loan fell from 2.83% to an almost unbelievable 2.8%! Let’s put this in perspective. In late July 2010 and 2011 the typical 30-year rate in the Freddie Mac survey was just over 4.5%, more than a percentage point higher than now. The 30-year rate was above 6% in 2006 and most of 2007, over 8% back in 2000, and over 10% in 1990. Back in the bad old days of inflation, the rate topped 18% in 1981. Look at how the interest payments affect your monthly Principle and Interest payments:
$200,000 property in 1981 at 18% interest: $3,014
$200,000 property in 1990 at 10% interest: $1,755
$200,000 property in 2000 at 8% interest: $1,467
$200,000 property in 2007 at 6.5% interest: $1,264
$200,000 property in 2011 at 4.5% interest: $1,013
$200,000 property in 2012 at 3.5% interest: $898
What’s more, according to a recent CNN Money article the average cost of closing on a mortgage has fallen by 7.4% over the past year. At the end of June, a homebuyer looking to close on a $200,000 mortgage with 20% down paid an average of $300 less than 12 months earlier.
No one knows how long these historically low rates can last. But in the meantime my clients are taking advantage of them to buy the homes of their dreams and lock in once-in-a-lifetime interest rates.
A few months ago the National Association of Realtors (NAR) ran a study to determine the home equity gain/loss for homes in the 30 largest U.S. cities over the past three years. They ranked the cities from largest average loss in home equity to largest average gain in equity. While there was little surprise that the usual suspects like Las Vegas and Los Angeles have been among the poorest performers, most of my clients have been shocked to see that metro Denver has had the HIGHEST APPRECIATION OF ANY OF THE TOP 30 U.S. CITIES FOR THE PAST THREE YEARS! Those of us who watch the market as closely as I do were not surprised by this, but for those who don’t, it has come as a most welcome surprise. The fact is that Denver is in the middle of a robust, even historical, real estate recovery that is leading the nation.
Of course no one knows what the future holds. Over time prices will go up and prices will go down, that much never changes. But there’s no denying there is much more confidence in the housing market than there has been for years and this confidence has my buyers excited to see what’s out there. Let me know if you’re curious and want to check out some homes, I’d be happy to show you!
Buyers can easily find the home or investment property they want with the easy to use interactive metro Denver homes for sale map search.
We have been discussing for months the incredible turnaround in our housing market. If you’re looking to sell your home this should be very welcome news! One of the key metrics of this recovery has been the high number of homes sold in the past few months. The graphic shows home sales per month for the past seven years. Note that the number of homes sold peaked in 2005 and 2006 and has fallen ever since. But recently this trend has reversed itself. Starting in March of this year the number of homes sold began jumping upwards, from April with 3,133 to May with 3,768 to June with 3,981. June’s numbers are almost equal to those of 2007 when the market was just starting to slow down.
For you as a seller what this means is that it might be a great time to sell. The inventory of homes on the market is at all-time lows, prices are up, and home sales are up as well. Call me and I’ll be happy to run a complimentary Comparative Market Analysis on your home to let you know what it might be worth. It’s great information and costs you nothing!
Learn more about how to sell a Denver home.
Over the past few months we’ve talked a lot in this Newsletter about why so many investors are buying rental properties in metro Denver. The graphic shows one of the reasons why. The vacancy rate is a big driver of how well a rental property performs for a number of reasons. First, the lower the vacancy rate the higher the demand for the property. More demand means landlords can be more choosey selecting their tenants, and also can charge higher prices. In fact, rental rates increased by 4.5% in 2011, the highest jump in 10 years.
One of the reasons vacancy rates are so low is that many people cannot qualify for a loan. I don’t expect this to change for the foreseeable future. We’ve had a huge shakeout in the lending industry, and lending guidelines are much stricter than they were a few years ago. Until lending standards ease up I expect vacancy rates to remain low and keep my investor clients happy. If you’ve ever thought of investing in a condo or house as a rental property call me and I can show you what the numbers look like and what options you have.
Learn more about metro Denver real estate investment.
The mortgage market is staying hot with interest rates at all time lows. If you haven’t reviewed your options lately it may be a great time to take a look at your options to refinance, or your options to trade-up to a bigger home with a lower payment (call me and I’ll tell you how I can help with this!).
But before applying for your new mortgage make sure that you are in good shape with the 4 items needed for a new loan:
1 – Income – Make sure your income is remaining consistent and your tax returns are reflecting your total annual income.
2 – Credit – For the very best rates you want to have a credit score of 740 or greater. There are loan options for clients all the way down to a 620 score, but as your credit score goes down your rate goes up. So it is to your benefit to have your credit cleared up and as high of a score as possible.
3 – Assets – You will need to have funds in the bank for your down payment and to show you have 2 months of savings. Make sure you are depositing all earnings and keeping good records of your bank statements.
4 – Collateral – The property you are borrowing against (your current home or your new property) needs to be in good shape and not have any “safety or soundness” issues. Make sure there are no broken windows, plumbing leaks, lead based paint, etc.
By taking care of these 4 critical areas you can be confident that you will qualify for a new loan and be able to refinance or buy a new home.
Bet you didn’t know “Auraria” is Latin for gold! Well, the Russell brothers who panned seven ounces of gold along the South Platte in 1858 did, and they were so excited they founded Auraria City. Today, Auraria is dominated by the Auraria Higher Education Center which is a campus serving three distinct collegiate institutions, and buzzes 24 hours a day. Bordered by Colfax Ave., Speer Blvd. and the Platte River, it’s centrally located just east of downtown with fast access to I-25, light rail, the Starz Film Center, Confluence Park, and the REI flagship store.
August 2012 Metro Denver Real Estate Newsletter brought to you by:
J. David Lampe, Denver REALTOR®