Getting your player ready...
The Denver-area housing market is not experiencing a terribly slumping spring season, especially considering that the federal tax credits that fueled activity a year ago are no longer in place, Jack O’Connor, an owner of Prestige Realty Services, said today.
“Both in year-over-year and month-to-month, we’re seeing much the same market that we did in 2010,” said O’Connor, who released a report that included real estate data through the end of April, as well as the first week of May. “However, we’ve witnessed a drop in inventory of around 9.6% over the year that will help sustain prices in many ranges, and the future as some expected job growth returns will almost certainly improve.” O’Connor used Metrolist data, as did an earlier report by independent broker Gary Bauer.
Healthy mix
O’Connor says that the business press has taken a glum view of the most recent numbers, but that the actual picture is considerably brighter. “The mix of inventory is very healthy right now in Denver,” he added, noting that around 77 percent of homes on the market are single family homes, favorable from a demand standpoint. Historically, about 40 percent of the inventory would be condos, he said.
“It’s really logical that the condo inventory is going down, because we really haven’t seen any condo complexes built in the past four years,” O’Connor said. There is little chance that a new wave of condo construction will sweep the market any time soon, he added.
“What we usually see is condo conversions at some point,” O’Connor said. “At some point, developers and investors will either convert existing buildings into condos, or they will buy apartment buildings and convert them into condos. If you add a 250-unit apartment building into the mix, the condo inventory will pick up pretty quickly. But we’re not seeing that yet. We’re not seeing that at all.”
Last year’s spring performance reflected an unusual number of homes under contract as the federal tax credit expired, O’Connor said. In order to receive up to an $8,000 tax credit, a buyer had to place a home under contract by the end of April 2010. That created an unrealistic picture of actual market performance in comparison to the numbers this spring.
Contracts down
His report shows that in early May, there were 6,245 single family homes and condos under contract, a 27.325 percent drop from the 8,592 a year earlier, when the tax credits were in place. That has led to headlines that paint the real estate market as a bleak one, in some cases, he said.
“I can’t say that negative press hurts the market,” O’Connor said. “I do think it misinforms the people who have a particular need. As an example, a seller who has to sell in this market, has to sell. But the buyer who has the luxury of buying in this market, may read the articles and think the market is worse than it actually is. A buyer may come in with an unrealistic view on how hard the market has been impacted, thinking he can offer 50 cents on the dollar. But I don’t think the press impacts the market positively or negatively, other than it gives people a starting point to talk about it. I’m not overly concerned about what Zillow or Case-Shiller reports, because they are just snapshots of a moment in time.”
O’Connor said the two overriding forces that impact the market are jobs and interest rates. “When the job market improves and interest rates start to rise slightly, buying propensity is going to increase,” O’Connor said. Mortgage rates, surprising most observers, have continued to hover near historic lows. However, it is more difficult to qualify for loans, making it difficult for many people to take advantage of the low rates.
People buying in this market will do well, assuming they have a longer-term perspective, he said. “Although I don’t see much appreciation for homes this year other than the lower price ranges,” he said, “I would suggest that by 2015 people who bought today will have purchased at the low end of the pricing spectrum for the next decade.”
Contact John Rebchook at JRCHOOK@gmail.com
