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Quick Stats
Denver Metro Single Family Housing Stats:
Active Listings: 14,014
· Down 22% from July ’10
Under Contracts: 3,386
· Up 11% from July ’10
Solds: 3,082
· Up 17% from July ’10
Average Days on Market: 99
· Up 18% from July ’10
Average Price: $298,654
· Up 1% from July ’10
July Denver Metro Condo Housing Stats:
Active Listings: 3,569
· Down 35% from July ’10
Under Contracts: 864
· Up 14% from July ’10
Solds: 753
· Up 20% from July ’10
Average Days on Market: 109
· Up 17% from July ’10
Average Price: $153,058
· Down 1% from July ’10
Metro Denver Real Estate News
Home Ownership Hits Lowest Level Since 1965
This was the banner headline recently of a study describing how the downturn has affected home ownership in America. While the 45 year low figure factored in delinquent mortgage borrowers (the ones who are likely to lose their homes at some point) it is an undeniable fact that home ownership has dropped precipitously in the past five years and will continue to decline in the foreseeable future.
The question you should be asking yourself is “what does this mean to me?” because it means very different things depending on what stage you are in life. Are you a buyer, a renter, a seller, an investor? So let’s break it down. Let’s say you want to buy a home; what does the huge drop in homeownership mean for you? Quite simply it means prices for homes have fallen – 32% nationally (about 10% locally from the highs in 2006) – making it cheaper to buy a home. But it gets better. Interest rates are literally at all time lows, so the affordability of a home, i.e. the total cost to own a home in the Denver Metro region taking into consideration average income levels HAS NEVER BEEN BETTER. That’s right, homes are now more affordable for the average home buyer than they have ever been, and likely ever will be.
If you’re a seller you know you have competition from distressed shortsale and bank-owned properties. But as I discuss in the Sellers section of this newsletter, the time it takes to sell a home in our market is surprisingly low. One of the reasons this is so is that if you have a well-priced home that shows well, most shortsales and bank-owned properties can’t compete with your product! Most people looking for a home want something they can move into right away, and ironically there is a dearth of these properties on the market right now. Well priced, well maintained homes are selling quickly!
Lastly, if you are an investor now is your time to buy and hold properties for the longterm. Prices for distressed homes are low, interest rates are at record lows, vacancy rates are at record lows, and rents are going up. Feel free to call me and I’d be happy to share with you all the data underlying these findings.
Metro Denver Real Estate Buyers
We’re going to look back at this period in history and say this was the best time in decades to buy a home. According to the National Association of Realtors, our Home Affordability Index (HAI) is at the highest level on record. That means it is more affordable to own a home than it ever has been. Think about that. Buying a home has never been more affordable. Home Affordability is calculated by measuring the total cost to purchase a home (including the purchase price, interest rate, property taxes, and insurance) and comparing it to the average income levels in the measured area. Taken all together, our HAI is at a record high! Distressed homes (shortsales and bank-owned properties) are particularly attractive because the bulk of the price reductions are found among distressed homes.
Metro Denver Real Estate Buyer Success Story
This spring we worked with a married couple who had been renting an apartment for the last couple years for their family that included three children. In investigating the option to purchase a home, they were very concerned that their price point of $200k was not going to be able to get them a home that they would be able to fit in comfortably in the NE Denver area and close to downtown.
We never thought we would find their perfect fit on our first trip viewing properties, but we did!!! We found a lovely brick tudor style home that not only gave them the 3 bedrooms and 2 baths that they had hoped for, but also had a bonus room downstairs that offers space for an office or 4th bedroom.
Since we had thought this process would take a couple weeks to find a home, we were even able to negotiate with the sellers to get a later closing that would fit with the end of their lease date. At the end of the day (and now summer), my clients are thrilled to be in their home and found that the process was very much a learning experience in buying their first home!
Metro Denver Real Estate Sellers
Quick, is this a buyer’s market or a seller’s market? If you’re like most people you think it’s a buyer’s market, maybe even a really strong buyer’s market. But you’d be wrong! The fact is that it’s a very balanced market, leaning towards a seller’s market in the under $300k price range. So why does everyone think the opposite? So much of it comes from both the local and national media which tend to focus on the negative and gloss over the positive. Let’s look at the facts. According to the National Association of Realtors, six Months of Inventory (MOI) is a balanced market. So if a neighborhood has six properties on the market and traditionally about one sells per month it would take six months to clear that inventory.
Nationally, there is a whopping 9.5 MOI – clearly a buyer’s market. But in the Denver Metro region the MOI is only 4.8 months, strongly leaning towards a sellers market! Homes under $85k = 4.2 MOI; homes $85k – $135k = 4.1 MOI; homes $135k – $210k = 4.5 MOI; homes $210k – $315k = 5 MOI; homes $315k – $460k = 6.6 MOI; and homes $460+ = 10.3 MOI.
So if you’re thinking of selling your home call me to get the facts on your neighborhood so we can discuss whether it might be a good time to sell.
Metro Denver Real Estate Seller Success Story
A client of ours owned a home in Park Hill that she needed to sell. She was worried that the market was soft but we looked at the data and decided we could hold pretty firm on her price. The property sold in three months and she was able to avoid the shortsale she had been worrying about by getting the price she needed. She was thrilled to see the market in her neighborhood was stronger than she thought and was able to sell her home with minimal fuss.
Metro Denver Real Estate Investors
A great strategy in this market is to purchase a property with hard money, fix up the property, rent it out and refinance the loan into a 30 year fixed mortgage. Done correctly, investors can bring no money to the table and own a longterm cash flowing property.
One of our clients recently bought and refinanced a property in Jefferson Park (Denver) to keep as a rental. Their goal was to minimize their out of pocket money, as opposed to putting down 20%. They accomplished this by buying the home with hard money (using Pine Financial), which included their fix up costs, then refinanced it with Denver Mortgage Company. They used $8k out of pocket and have a 30 year loan at 5% interest. Here’s the deal:
Purchase Price: $133k
Fix up: $22k
Cost of Money: $10k
Total Money Financed with Hard Money: $165k (aka; amount to be refinanced)
So, in order to be out of pocket $0, they needed the home to appraise for $220k (25% equity). The home appraised for $300k on the first appraisal and $245k on the second which easily allowed for $0 out of pocket. But, since this buyer decided to do a few things that weren’t in the original budget, they used $8k out of their own pocket for some fix up items beyond the original scope of work. Once the home was completed, they quickly rented it for $1650/month. The mortgage is $1175/month so they have $475/month of cashflow. Their cash on cash return is 70%. Not bad for a “bad” market. Call me if this is something you’d like to do!
YCRE In the News
The Denver Business Journal recently released their list of the largest real estate brokerages in metro Denver and we’re happy to report that this year we moved up from #13 to #10! We are now the 2nd largest non-franchise brokerage in town, and the 10th largest overall. In addition, the DBJ released their list of Fastest-Growing Denver Area Private Companies and we debuted at #6, doubling our revenue from two years ago. Thanks for all your help and support, we couldn’t have done it without you!
Also, Your Castle was featured on a Colorado Public Radio segment covering the Denver real estate investment market. Ben Markus, the reporter from CPR, joined us on one of our YCRE property tours and discussed why it’s such a great time to buy rental property. You can hear it at http://www.cpr.org/#load_article|Investors_Picking_Up_Properties_Around_Denver.
Come join us on our next tour (always free of charge) or go to yourcastle.org and click on Training/Seminars for our full calendar of training.
Metro Denver Real Estate Mortgage News
Mortgage rates hit an all-time low in August; literally an all-time low. My lender quoted a 30-year fixed rate mortgage of 3.875% to one of my clients that we locked immediately. A few months ago we were talking about 30-year lows. Then came the 40-year lows. Now we are at all-time lows. One result of the continued turmoil in the stock market combined with the world-wide fear of a second recession is that bond prices have been bid higher resulting in plummeting interest rates. Now’s the time to lock them in!
Neighborhood Spotlight
Frisco Highlights!
Frisco Colorado is located approximately 70 miles west of Denver on I-70 and sits at 9,100 feet elevation. It is a historic mining town with a quaint and charming Main Street lined with shops and restaurants. From Frisco Main Street the Summit Stage, a free bus service, takes passengers to Copper Mountain Ski Resort and to Breckenridge Ski Resort. Frisco is a popular location for second home owners because of its central location in Summit County and easy access to I-70. Frisco is surrounded by bike paths, hiking trails, and boasts a marina on Lake Dillon where sailboats, pontoon boats, and speed boats are available for rental.
The Frisco real estate market peaked in 2007 when the average sold price of all residential real estate was $550k. Since 2007, average prices have declined by 18%. More telling is that sales volume has declined by over 60% from 2007, making Frisco a clear buyer’s market. Well priced properties that show well continue to move in Frisco with properties under the $400k mark facing the most competition.