Spring Thaw is in the Air

Wow what a difference a few days makes. Within the last 7 days, 1,395 properties went under contract in the metro area. During the same week 939 properties sold and closed and  there were 735 new listings. In summation, it is still a seller’s market based on inventory and activity.

As I work in the deluxe and luxury market I am seeing some signals that the weakness in the upper-end may be abating OR sellers are becoming more realistic. In Cherry Creek North (I consider 1st Avenue on the south, 6th Avenue on the north, University Boulevard on the West and Colorado Boulevard on the East as boundaries) I noticed listings on the market asking under $1M seem to be generating activity and going under contract.

For fun I ran an informational statistical analysis. In the beginning of January 2016 the average listing in Cherry Creek North was asking $480 PSF above grade. This morning the average asking above grade is $414 PSF. I assume some residences have sold, other listings have been withdrawn or expired. However I believe more telling; listings coming on the market in the last two months have been priced more realistically and many under $1M thus generating additional activity and demand.

While some of my peers may begin to panic, this is the sign of a healthy marketplace or as I suggest coming back to reality. At $480+ PSF one may suggest a bubble was forming. Instead we are seeing a sense of equilibrium heading back into the marketplace. Yes, Cherry Creek North is a unique niche of the market and accounts for a minuscule part of the overall metro area HOWEVER from experience I look to the luxury market to read the tea leaves concerning the overall metro area.

Granted this is far from scientific; however the upper and luxury markets do tend to mirror the economy. I personally know a few retail analysts on Wall Street who visit luxury retailers to gauge the overall activity within the bricks and mortar stores to assess economic health and psychological predictors i.e. spending on attainable luxury suggests an overall positive view of future economic activity.

In speaking with a mortgage lender over lunch this past week; we are both market watchers and agreed at present the market seems to be moving towards equilibrium. With the number of houses on the market still oriented towards a seller’s market; prices may continue to rise yet at an abated rate closer to inflation (which continues to be minimal). Yet once we start seeing a spike in listings i.e. above 10,000 units in the metro area we may be in for a snowball effect with additional listings coming on the market and demand regressing. If this happens and we move into a buyer’s market coupled with potentially higher interest rates the end of our expansion era may happen.

Yet this is not a negative. For many years Denver Metro has been an attractive destination based on lifestyle factors i.e. employment opportunities, weather, recreation and until recently affodable housing. The recent influx of residents has truly strained some of our infrastructure which needs time to catch up coupled with houses prices exceeding average income and decreasing affordability. While positive for an existing homeowner, a challenge for the newly arrived or those who desire to relocate.

While I do not desire a hard downturn, I do wish for a more balanced market including options for first-time homebuyers not being banished to the exurbs for affordability (which only increases metro wide trafffic congestion and lessens air quality), availabile inventory for move-up and move down (empty-nester) buyers and additional options for our aging longer-term resident population.

As one client confided to me “we need to move into a more balanced market so my child can move from our basement to a home of their own”. And I say to that “Amen”.

Advertisements

Is The Country Club Neighborhood Overheated

DSC_00791I honestly don’t know. However for a client request I decided to run some statistics. I pulled resales through the end of 2015 and compared on a per square foot price to the homes on the on the market at present.

I kept the comparison sample as close a possible as follows:

  • Houses priced/sold below $1,300,000.
  • Using only above grade measurements.
  • Avoid listings on busier streets i.e. Downing St., University Blvd., 1st and 6th Aves.
  • The Results:

The Closed Sales came in at: $446 PSF

Active on the Market at present: $481 PSF

Both on a percentage basis and actual sale price, I have some concerns. For example a 2,000 SF house based on the statistics during the 6 months from summer to today would have gone from $892,000 to $962,000. The difference in a mortgage payment is approximately $345.00/month or over $4,140/yr and .and extra $124,000 over the term of a 30-yr mortgage,

Granted, this is Closed  versus Asking, however sold prices have consistently been close to asking. My concern; will appraisals support the values beings presented during this 1st Quarter of 2016 (in general appraisals look backward not forward). Also, for those buyers purchasing at present will equity appreciation continue?

Of course we are in a low interest environment and while this morning’s unemployment rate was positive for the economy there are questions concerning slipping back into a recession based on world-wide economies.

Anyone who knows me knows I am always bullish on central Denver neighborhoods. I believe in location, location and location. However when I see 8% gains in 6 months and some justifying the gain, I become a bit more skeptical.

 

Cherry Creek North Real Estate Recap for 2015

It was another banner year for the Cherry Creek North residential neighborhood (generally considered from 1st to 6th Avenues, University to Colorado Boulevards).

Cherry Creek North: 1st Avenue to 86h Avenue, University Blvd to CO. Blvd:

Average Home Sold: 3 Bedrooms/3 Bathrooms

Average Size: 2,009 SF Above Grade / 2,642 SF Total

Average Days on Market: 62

Average Price: $987,303

As a neighborhood resident since 1989 I am in awe at the numbers.  As a broker I and others were shocked when Paul Kobey developed a row of luxury attached homes called the Georgetown on the 400 block of Columbine Street. At the time of development the asking price of $400,000 was considered the top of the market and unattainable. In today’s market, the lowest priced listing in the neighborhood is in the $450K range, a small tudor abutting Colorado Boulevard.

Will the success last? If I were truly clairvoyant I would not be composing this blog and would be residing on

the French side of St. Martin, however I would be somewhat concerned. While the average sales price is just shy of $1M; of concern is the number of days on the market.  While conventional wisdom does advise the higher the price the longer on the market, coupled with increased inventory available and higher interest rates the pinnacle may have been reached.

Of concern from a brokers perspective is the development of the luxury rentals and condos being developed in the neighborhood. I am just not sure where the demand for such inventory is coming from. While I have represented mountain residents and others desiring a pied-a-terre in Cherry Creek, this market is truly finite. It is not uncommon to look up at the buildings and see few if any lights on.

More positive is the lack of spec houses i.e. those built on speculation. With standard 50′ x 125′ lots pushing the $1M mark, development on those lots is now more commonly bespoke by a buyer versus speculation. While there are a few spec developments, still more common south of 1st Avenue where land is generally less costly.

If I were in the market as a potential seller at present I would place on the market yet price attractively to cut through the clutter on the market and stand out as a value proposition. As a buyer, unless planning to stay a minimum 3-5 years I would seriously consider advising to rent or hold off a few months and keep an eye on inventory and price reductions. Granted I am a conservative broker yet I have also been through three business cycles during my years as a broker and while I am not concerned about a potential crash of value; between forecast increases of mortgage interest rates, the equities market moving sideways the economic issues in China, many pundits are cautious. As one long time client who is a voracious buyer commented to me “I am now a seller”.

 

Country Club Real Estate Recap for 2015

Greetings from Cherry Creek. As you are probably aware 2015 was a banner year for real estate in Central Denver. From the depths of the Great Recession we witnessed a true market reversal. The Country Club neighborhood continued to witness strong growth concerning prices. Of note, the average sales price was just under $1M, a significant amount within Metropolitan Denver. Below is a recap of 2015 real estate activity from our Multilist Service:

Country Club: 1st Avenue to 8th Avenue, Downing Street to York/University Blvd:

Average Home Sold: 4 Bedrooms/3 Bathrooms)

Average Size: 2,373 SF Above Grade / 3,417 SF Total

Average Days on Market: 41

Average Price: $983,520

Of interest, Country Club is truly a collection of smaller unique sub-neighborhoods. In general homes south of 3rd Avenue and east of Gilpin Street commanded the highest prices due to lot and home size coupled with location.

The homes sold in the 400 and 500 blocks from Downing Street to Gilpin St enjoyed serious equity appreciation with a few sales generating 30%+ appreciation from 2-3 years prior sans renovation or updating.

North Country Club considered the neighborhood between 6th and 8th Avenues from Downing to York St. continued to prove popular providing buyers with larger homes and lots when compared to their south of 6th neighbor’s and generating increasing values. Of note from Williams St east includes the 7th Avenue Historic District. In general Historic Districts command higher prices and resale values.

 

Is the Market Slowing or Is it the Season

Anyone who has traveled around Denver has probably noticed a few more For Sale signs and fewer Under Contract and Sold Signs. The view may be somewhat deceiving. Sales continue to be strong HOWEVER inventory of properties available has also increased, thus the perception of more homes on the market is actually the reality.

As a broker I try to look at statistics over time to assess the true activity in the market. Two statistics I like to follow are Price Decreases and Back on the Market. Price Decrease and its increase of units may indicate a market in which the original listing price is meeting resistance. I am seeing this in the upper-end of the market where it has not been uncommon to see 30% increases over sale prices from two years prior.

The Back on Market is for me more concerning. While issues do arise during inspection (and can usually be resolved with an Inspection Resolution the other reasons include financing and appraisals. Back on market can be troubling as when a unit re-enters the market the Days on Market and subsequent frustration of sellers and skeptical buyer will thus increase inventory.

In general Metro Denver does enter into seasonal slowness beginning in November and usually lasting through President’s Weekend in February. The winter is actually the perfect time to prepare a residence for sale in the Spring.

Thus am I worried? No. I believe we are in a seasonal shift and the underlying economy continues to strengthen. What will be interesting is when the Federal Reserve raises Interest Rates. Will buyers be motived to avoid an interest rate increase and/or will sellers lower prices to compensate for higher interest rates? Only time will tell.

September 2015 Statistics in the Books

As I have noted in previous blog posts I have noticed a slowdown in the marketplace. While far from empirical, from my own activity level and in discussion with peers, we came to similar conclusions. Now The Denver Metro Association of Realtors (a trade organization), one of the best resources concerning statistical information and analysis concerning the Metro Denver residential real estate market has provided empirical evidence.

Of note, while I have quoted the Case/Shiller index and other sources of information, the DMAR which compiles information concerning the 11 county metro area is consistently the most accurate source of market statistics and overall information and trends concerning Metro Denver.

Some interesting statistics for review:

  • Nationally the average home is on the market for 47 days and an additional 42 days to close. In the Denver Metropolitan Area the average home is on the market for 28 days with an additional 38 days to close. Of note with the new loan processing procedures, days until closing may have a moderate increase during the 4th quarter. Locally showing activity is beginning to slow: translation, seasonal adjustment and more opportunities for buyers.
  • The Average and Median Single-Family Sold Price for September 2015 decreased by 2.51% to $398,591 and by 1.65% to $340,000 respectively.
  • The Average and Median Condo Sold Price for September 2015 decreased by 0.78% to $253,109 and by 1.86% to $211,000 respectively.
  • Concerning the overall marketplace from the month prior:
  • Under Contract decreased by 10%
  • Sold decreased by 7.8%
  • Total Sales Volume by 9.91% to $1.76B which is still respectable volume as 12.05% higher than the same period the year prior.
  • The highest price paid for a Single Family Home in September 2015 was $5.395M for a 3-bedroom, 8 bathroom, 7,990 SF home in Cherry Hills Village.
  • The highest price paid for an Attached (Condo) Single Family in September 2015 was $1.8M for a 2-bedroom, 3 bathroom, 2,621 residence in the Cherry Creek North neighborhood of Denver (where yours truly resides).

Am I concerned? Not at all. First, a seasonal adjustment is to be expected. Second, many believe the market was a bit over-heated during the Spring and Summer of 2015 and third, we are moving into a more equitable market for sellers and buyers which is a good thing.

For sellers, a more balanced market may NOT translate into top dollar, however appraisal issues are not as prevalent and the gains over the past few years are still impressive and Denver continues to be one of the top performing markets in the nation only behind San Francisco over the past year.

For buyers an increase in inventory and moderation of pricing is welcoming.

My prediction as the market continues to move towards equilibrium including the potential for a modest fed fund increase during the 4h quarter of 2015 or the 1st quarter of 2016 we will return to a market where buyers and sellers transact based on value versus a monthly payment, overall a positive.