May Quick Stats
Denver Metro Single Family Housing Stats:
Active Listings: 8,705
- Down 38% from May. ‘11
Under Contracts: 4,818
- Up 25% from May. ‘11
- Up 24% from May. ‘11
Average Price: $307,896
- Up 10% from May. ‘11
Average Days on Market: 78
- Down 28% from May. ‘11
Denver Metro Condo Housing Stats:
Active Listings: 1,886
- Down 52% from May. ‘11
Under Contracts: 1,090
- Up 19% from May. ‘11
- Up 23% from May. ‘11
Average Price: $179,253
- Up 12% from May. ‘11
Average Days on Market: 81
- Down 28% from May. ‘11
Real Estate News
For many years it has been fashionable among the local real estate intelligentsia to assert that there’s a major “Shadow Inventory” problem lurking in our future; i.e. that there is a huge amount of inventory not yet on the market that will descend upon us at any time and drive home prices down precipitately. While this may be true for many large cities in the US, I believe it isn’t true here.
First, let’s define the term Shadow Inventory. I define it as the number of properties that are either REO (bank-owned) or 90+ days late on their mortgage in a given area that are not yet on the market.
If the inventory is REO, that property could be:
- Actively on the market, available for purchase today
- On the market, but under contract
- Not actively on the market – a part of the Shadow Inventory that has to be sold eventually
If the inventory is consumer-owned, the property could be:
- Actively on the market, available for purchase (as a short sale or regular sale)
- Under contract or pending bank approval of short sale terms
- Not on the market – but likely to get a loan modification
- Not on the market – but likely to be sold as a regular sale or short sale soon, in an orderly way
- Not on the market –the owner is in denial, and the home will eventually become a foreclosure. This is still part of the Shadow Inventory that may hit the market someday.
I believe the metro Denver area does not have a large Shadow Inventory based on three key data points:
- According to the National Association of Realtors (NAR), Denver has had the highest average home appreciation gain of any of the 30 largest cities in the U.S. in the past three years, at $29,900. The average gain (loss, actually) of the largest 30 cities is -$18,400. Just for kicks, the worst performing city is Las Vegas, at -$59,900.
- Because Denver’s home prices didn’t appreciate as much during the bubble as other cities, and began the correction before most markets, Denver has already processed the majority of its REO inventory. According to NAR, metro Denver has only 9,740 homes currently owned by banks. Only San Antonio and Kansas City have smaller REO inventories. Miami has the largest REO inventory with 159,000 properties.
- Denver has the second fewest number of 90+ days late residential mortgages of the top 30 cities in the country at 29,000, again according to NAR. Chicago has 284,000 and Miami has 124,000 90+ days late mortgages respectively.
My contention is that while there certainly is Shadow Inventory in our market, there is no Shadow Inventory PROBLEM. Why? Because we have relatively very little Shadow Inventory in our market, and even on the extremely slim chance that a large portion of that inventory suddenly and magically descended on the market in a short period of time, we currently have such a low level of inventory it would actually help our market, not hurt it! Five years ago when we had 27,000 properties on the market, a huge influx of inventory would indeed have been a problem. Today, with an inventory of only 10,000 properties, a dump of 8,000 more properties on the market would only get us back to 2010 inventory levels. In fact, we need this inventory to sell!
So when you read a national news article that describes the Shadow Inventory menace understand that in some part of the country it is indeed a potential problem, but not here. Our Shadow Inventory problem is pure fiction
What does the real estate landscape look like for seller’s these days? Well, let’s review the facts:
Metro Denver home prices are up a whopping 10% in the past year.
- The inventory of homes on the market is the lowest in 13 years.
- The number of homes under contract is up 25% over this time last year.
- The average Days on Market for a home is down 28% in the past year.
Add it all up and you get the best seller’s market in a decade. So then, how are sellers reacting to this market? Exactly the same way you would. They are hiking prices, testing the limits of the market, and pushing the envelope. Call me if you want to discuss what your home is worth in this new seller’s market!
The decisive uptick in our local real estate market has moved many investors off the fence and into the game. Both buy-and-hold and fix-and-flip investors are finding terrific opportunities to take advantage of this fast changing real estate market.
Long term, buy and hold investors are enjoying a market with very low vacancy rates, historically low interest rates and very high home affordability (home prices, taking into account interest rates). Taken all together we have a market that highly favors buy-and-hold landlords. Most of our clients who buy a single family home as a rental are on track to have the house paid off in 12-14 years. As amazing as that sounds it is very achievable in this market if you know what to buy, where to buy, and how to buy.
Fix and flippers are experiencing demand for their remodeled properties that they haven’t seen for many years. There is a major lack of fixed-up, quality homes on the market, so nice properties in nice neighborhoods are leading the surge in pricing. Because so much of their competing inventory is bank-owned or shortsale properties, their properties shine by comparison. The issue, as always, is finding the right property. I have a tool called the Your Castle Hotsheet that analyzes every new property on the market and tells me, among many other things, how much below market value the property is. Call me so I can show you how it helps me find great deals for my buyers.
YCRE in the News
Your Castle is proud to announce that according to the 2012 edition of the Denver Business Journal Book of Lists we are now the second largest independent (locally owned, non-franchise) real estate company on the Front Range, and the ninth largest real estate company overall! What started eight years ago as a few real estate investors banding together to find better deals for themselves has grown into a full-service real estate agency dedicated to using technology and our local knowledge to help you find the best deals on the market and sell your home for the highest price possible. Thank you for your support – we couldn’t have done it without you!
Mortgage rates are remaining at historic lows. We’ve seen rates below 4% for primary residences and 4.75% or less for investment properties. We’ve also seen many homeowner’s take advantage of 15 year loans which can have rates as low as 3.25% or less and allow you to pay off your loan in half the time. If you’ve been waiting for mortgage rates to decrease before you buy a new property or refinance your current home, now might be a good time to review your options.
The Whittier neighborhood was named after the poet and abolitionist Greenleaf Whittier (seriously). Sitting between 23rd Ave, Martin Luther King Blvd., York and Downing, Whittier was first populated as a Capitol Hill suburb more than a century ago. Most of the homes were built in the 20th century and lie behind wonderful old tree-lined streets making this neighborhood an inviting place to call home. Because it’s so close to downtown, Whittier has terrific access to many of Denver’s treasures like the Denver Zoo, City Park, the Denver Museum of Nature and Science, and so much more. It’s city living without the city hassles and has been a prominent Denver neighborhood for over 100 years.