Mid-summer housing data are showing favorable swings in inventory and sales that haven’t been seen in the Denver metropolitan area in five years, and that suggest a general return to rising home prices early in 2009.

Jack O’Connor
“Typically you would see an increase in inventory and a small decrease in sold data from June through September; however, this summer is already showing the opposite trend,” said Jack O’Connor, Managing Broker of Prestige Real Estate Group and author of the Prestige Monthly Report.
“These indicators at this point in the calendar year are both unusual and indicative of an improving situation that will likely begin affecting market-wide prices in the first half of next year,” O’Connor continued.

Prestige, in a report released today based on Metrolist data at the end of July, shows market-wide inventory in the 7-county area standing at 26,864 units, down 119 units from June, the first time in five years that the mid-summer monthly total has fallen.

Meanwhile, home sales took an un-seasonal jump upward to 4,433 sold units, 146 more than were reported in June, and the first time in five years that the mid-summer figure showed an increase. At the height of the market in 2005, metro-wide sales at mid-summer stood at 5,290.

“These are the final two building blocks in a pattern that suggests a return to a healthier market,” O’Connor said. “We’ve seen similarly suggestive data through the earlier part of the year with respect to year-over-year inventory and rising numbers of contracts, now up 6.9% year-to-date over 2007.”

The rising sales figure, particularly poignant during a month when sales generally decline, is generally the last indicator to show a trend, whether headed into a rise or a decline, O’Connor noted. During early 2006, the exact opposite situation occurred when the market showed a record pace of closings, even as increased inventory and fewer contracts suggested that the market had actually slowed.

“At that point in time,” said O’Connor, “many people had a hard time seeing that we really were slowing down. We didn’t see the decline in sold data until it strongly impacted the market in August 2007.”

Now, says O’Connor, the opposite is likely occurring. Home inventory has fallen consistently, even into the summer months when sales typically slacken. The supply of homes (how fast the market absorbs inventory based on current rate of sales) has dropped…particularly in the lower price ranges that are often the first to recover from a downturn. Numbers of contracts are up from the same month’s figures during 2007.

O’Connor projects that if sales continue at present levels (on track for a projected 44,700 sold properties), inventory figures will drop toward 22,000 units in the first half of 2009. That level would mark the arrival of a seller’s market that would be accompanied by generally rising prices.

One qualifier should be added to the brightening picture, O’Connor noted. Homes priced above $750,000 are not keeping pace with the increases in sales at lower ranges. “We can attribute the slower upper-end market to difficulties obtaining financing and large levels of inventory. This price point will likely follow behind as lower price points see appreciation and as sellers use that equity for purchasing into the upper-end market.”

“Considering Denver has had between 1%-per-year and 2%-per-year appreciation for the last seven years, it’s inevitable that the higher level will take time to catch the pace that has been exhibited in the lower ranges,” O’Connor added.

Prestige’s president Leeann Iacino notes that other factors are pointing toward a favorable market ahead. Prestige agents are providing anecdotal reports of shorter turnarounds and of competitive bidding in some neighborhoods. National analysts are noting Denver’s relatively stable home values in comparison to sharply falling numbers posted by California, Florida, Nevada and other states that experienced booming growth over recent years; and are predicting Colorado could help lead a recovery.

Tags: Colorado, Denver, DNC, economy, homes, real estate market, recovery

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