Getting your player ready...
Denver-area buyers placed only 3,571 homes under contract in March, a 40 percent drop from a year earlier, when the federal tax credits created a home-buying frenzy, especially among first-time buyers, according to a report released today.
Realtors and others who watch the market closely were anticipating a huge drop in sales activity this spring without the tax credits that last year provided up to $8,000 for first-time buyers who placed a home under contract by April 31, 2010. Under contracts last month were down 3 percent from February. That is only the second times since 1990, that contract activity in the Denver area dropped in March from February on a month-to-month basis. The only other time in recent history that contracts dropped in March from February was in 2003.
Loss of tax credits hurts activity
“I had not expected the under contracts to be lower in March than in February,” said Scott Matthias, a broker with RE/MAX Professionals and president-elect of the Colorado Association of Realtors. “But the drop from last March was definitely because we no longer have the tax credits.”
Perhaps even more surprising than the big drop in contracts from March 2010, is that there were only 19,320 unsold homes on the market last month, a 9-year low for March inventory. It was the lowest March inventory numbers since 2002, when there were 18,322 unsold homes on the market.
Home prices, however, remained fairly stable.The median price of a single-family home sold and closed in March was $224,900, down 2 percent from $229,000 in March 2010 and up 2 percent from February, when it stood at $220,000. The average price of a single-family home was $273,877, compared with $274,950 in March 2010 and $265,277 in February.
And the number of closings were not hammered as much as the under contracts on a year-to-year basis. There were 3,209 homes sold and closed last month, only down 11 percent from a year earlier. And closings were up 44 percent from February, when 2,229 houses closed. However, big jumps in closings for seasonal reasons are typical in March from February. Closings reflect contract activity from prior months.
Denver “normalizing”
Gary Bauer, an independent broker who released the report based on Metrolist statistics, said this anonymous quote that he read on a financial website, bests sums up where the Denver-area market stands today: “Denver is normalizing. Inventory is steady, buyers are shopping, and sellers are ready.”
Chris Mygatt, president of Coldwell Banker Residential Brokerage in Colorado, said he wasn’t troubled by the huge drop in under contracts from March 2010.
“We were riding the fever of the federal tax credits a year ago, and we do not have those this year,” Mygatt said. “This time last year, it was a frenzy.”
Low inventory key stat
The most significant number in March’s data was the unsold falling below 20,000, Mygatt said.
“That is really important,” Mygatt said. “I would say if there is one driver of all the drivers of the market we are concerned about, the most important one is the inventory. This time last year, we really started to begin to increase our inventory numbers. I think every single month from about this time a year ago, we started seeing a year-over-year increase in inventory numbers. It only started to change this year. It never rose to catastrophic concerns, but we were concerned.”
The reason is Economic 101: supply and demand, Mygatt said. As the supply rose, and with demand steady or falling, it was almost inevitable that home prices would start to erode. “We all know that,” Mygatt said. “It is basic economics.”
Mygatt is pleased to see the inventory fall from a year earlier. “I hope to see another month or two of that and then we can call it a trend,” Mygatt said. And the numbers are so low that even a modest increase in unsold inventory will not bring a world of hurt to prices, he said.
Bauer, however, said he was a “little concerned that the inventory was as low as it was. I expected it to be higher.” He did agree, however, that the low supply will help to preserve the value of prices.
Fixer-uppers not selling
From talking to fellow brokers, Bauer said he thinks the reason there are so few unsold homes on the market is that sellers are taking more time than usual to make sure their homes are in showroom-condition, before putting them on the market. “Buyers are not interested in fixer-uppers or partial fixer-uppers,” Bauer said. “People are taking a little more time than usual to get their property ready to put on the market. I think we will see an increase this month and through the summer. Because demand goes up in the summer, I think we will be fine with more homes on the market.”
Matthias said that a number of people who couldn’t sell their homes – and weren’t forced to sell – simply took their homes off the market. “And showings have been down, too,” Matthias said. “We are not seeing the showing activity pick up like it normally does in April. And I’m not seeing a pick up in listings, either, which also usually happens in April.”
That said, Matthias said that he feels that the Denver-market is finally clawing its way up from the bottom.
“I feel like there is a recovery starting in Denver,” Matthias said. “I think we all have been speculating that the last six months and last year that we were at the bottom. Now, I feel we have hit bottom and we’re going to start to recover.”
