Recovery Road

Recovery Road

Monthly Denver real estate statistics are out and the numbers have an interesting story to tell.

The Metro Denver average price increased 3.4% from April to May ($255,944). The average Metro Denver sales price in May 2008 was 11.4% less than 2007.
Available residential resale properties in Metro Denver has declined 9.54% from last May (26,333).
The absorption rate has declined to 5.71 months (24.47 weeks). This takes the market into a “neutral” position, neutral generally considered to be an inventory supply of from 4-6 months. There is wide disparity in the various sub-markets.
The “fallout” rate, (sales that do not close) is 25.81% in May of 2008. In May of 2006 the rate was 13.81%. This partly explains the general frustration the industry has with the market.
Total May 2008 residential closings were down 9% from May 2007.
Interest rates for 30 year fixed rate mortgages were holding just over 6% at the height of the buying season.

Yes there are a few holes in the recovery process, we deal with many buyers who want to buy but can’t. Some have credit issues and cannot qualify with today’s more stringent lender guidelines. Many persons trying to relocate to Denver are waiting for real estate in other part of the country to sell. Then of course there is the “lack of consumer” confidence. The focus in the news seems to be on the negative.

There are some good factors to focus on. The resale market in Denver has less inventory, fewer days on the market, and a lower absorption rate, all favorable factors for sellers. Homes priced well, and in good condition are selling in 30 days or less.

The fallout rate increase is particularly interesting. I believe much of it is attributed to negative media, misunderstanding of the local market and a lack of consumer confidence. Buyers and sellers don’t seem to be in the same camp. Buyers coming from hard hit areas of the U.S. where there is a seemingly endless absorption rate, feel they can “make a deal” here.

Noting once again the absorption rate (for the overall market) is 5.79 months. A “neutral” market is considered by many in the real estate industry to be a 5-6 month supply, while a “sellers” market is a 4 month supply. Our market is moving in that direction.

Good news in the future for home sellers. Not so good for those buyers sitting on the fence.