Metro Denver inflation slowed somewhat during the first half of 2007, with prices increasing 2.5 percent from the first half of 2006. A drop in the cost of natural gas helped keep overall inflation lower, though higher housing costs accounted for nearly one-third of the overall increase.
Residential real estate sales slowed in July, decreasing 2.9 percent from June. However, year to date sales are 0.6 percent ahead of this time last year. So far in 2007, homes under contract number 2.1 percent over a year ago. Unsold inventory is still over 30,000, but is actually 5.4 percent below a year ago.
Nationally, small homes are holding their value better than larger homes, but the opposite is true in the Denver metro area. Small homes (under 1,200 square feet) values have declined by 3.3 percent over the past year, while larger homes (over 1,900 square feet) have increased by 0.3 percent. Nationally, large home values are down 2.8 percent and small home values are down one percent.
Metro Denver's office market shows continued good health. Vacancy rates are down to 12.9 percent and average lease rates are up to $19.60 per square foot, the highest since the third quarter of 2002. About 2.15 million square feet of office space and 1.87 million square feet of industrial space are currently under construction.
Real Estate Bright Spots & Industry Trends
Various mortgage lenders around the country and in Colorado are trying to work out a modified repayment plan if there seems to be a realistic chance that the borrower can catch up. In the FHA's experience, about half the borrowers in the program do become current within a year. If the lenders and the regulators follow through, they can ease the problem substantially.
Foreign Investors, Immigrants Boosting the Market: More and more consumers from around the world are interested in purchasing a home in the United States for themselves, as an investment, or simply to enjoy a piece of the American dream. A recent study reveals that immigrants and foreign investors are coming to America specifically to buy homes. Amid slow demand from an aging and slow-growing native population, immigrants are fueling predictions of a rebound.
Vacation home buyers going strong: If the sun is shining on the shore, or the powder's falling on the slopes, vacation-home buyers don't mind short-term market fluctuations very much. The main thing motivating a vacation-home buyer is utility. They want to maximize their purchase around a recreational activity, according to EscapeHomes.com, a San Francisco-based second-home research site.
Neighborhoods seeing strong activity: According to housing analysts, the types of neighborhoods seeing the strongest activity include those with the following attributes.
. Real estate in most major markets whose local economies display moderate to strong fundamentals.
. Established neighborhoods convenient to the urban center's employment and cultural attractions that don’t require residents to make long commutes.
Above-median-income areas, often well above, with home prices to match.
Positive Signs in the Real Estate Market:
Economist's Advice to His Family Members about Selling Their Home Now:
"Don't say you want to sell and then set the price so high that you spend the year cleaning up every morning, having people walk through your living room and look in your medicine cabinets and reject you. That's just painful - and expensive."
Mayer's research offers a simple lesson for everyone out there waiting for a high price to push them back into the black: Get real.
--Professor Christopher Mayer, Director of the Paul Milstein Center for Real Estate, Columbia Business School, A Reality Check For Home Sellers, New York Times, Economic View, Sept. 23, 2007.
President of National Real Estate Brand on Buying Now
"Most people buy products when the prices are low." He added that consumers should not be scared off by the troubles in the subprime market.
"The reality is, if I have a job, and I have income, and I have a good credit rating, I can buy a house today."
--Tom Kunz, president and CEO, Century 21 Real Estate LLC, "Sales of Existing Homes Declined 4.3% in August," By Michael M. Grynbaum, New York Times, Sept. 26, 2007.
What To Tell Reluctant Home Buyers Based on Interest Rate Cut
The cuts reduced the target federal funding rate by a half-point, from 5.25 to 4.75 percent -- the first time in four years for a cut of that size. Tell your buyers:
1. Interest rates may not come down at the right time for you.
2. Interest rates are at near-historical lows now. The only thing that will make them go lower is a recession and nobody wants that.
3. Interest rates may not get low enough for you to buy the home you want. If you want to buy, you should buy in a range that you can get with a fixed-rate loan, unless you know you are going to sell within two to five years. If you get an adjustable rate loan, pay extra on the principal with the savings you achieve on the interest rate. That's about $25 for every 1/8 of a point between the adjustable rate and the fixed rate you could have gotten.
4. There's no guarantee that the home you want will be available at the same time as the lowest interest rate is available to you.
5. Interest rates could sink to all-time lows, making you a genius. But that doesn't mean the home you want won't cost more in the meantime. --"Something New to Tell Your Reluctant Homebuyers," Realty Times, Sept. 21
"There are more people who can afford a home than there was yesterday at this time. I think it's going to help the consumer confidence that the economy is starting to turn around." --Pat Guanciale, real estate agent for Coldwell Banker King Thompson, Newark, Ohio, "Interest-rate cut will help local borrowers," Advocate Report, Sept. 19, 2007
The "Other" Housing News
"The big real estate stories make themselves conspicuous across newspapers and TV. But sometimes we miss little nuggets that shine a bit of light on the housing market."
The highest priced international city was a shocker: Dublin, Ireland, at $2.1-million, a hair below U.S. leader Beverly Hills, "Housing News with No Mention of 'Crisis,' by James Thorner, St. Petersburg Times, Oct. 1, 2007
Regional News: A Great Time to Buy in Texas "In North Texas, we've seen a steady increase in home values during the past 30 years. Even now, while some areas of the country have suffered short-term declines from recent record appreciation, we continue to see regional appreciation of about 5 percent." "Dallas-Fort Worth enjoys one of the most favorable economic climates in the country. Even if the current market adjustment continues through the end of the year, North Texas will likely still see its second-best, if not best, real estate year in history." "It's not surprising that people who have played the real estate housing boom of recent years as if they were day-trading stock are now concerned. However- homes are not stocks, and for the majority of consumers, buying a home is not a short-term investment." "Most people buy a home to live in for about six years, not to flip it a few months later. For those consumers, now is a great time to buy." "Mortgage rates are historically low, and financing is readily available for qualified borrowers. The economy is strong, and buyers have more choices than ever." -- Sue Meyer, president and CEO, Coldwell Banker Residential Brokerage, Texas, "Focus on - Home Prices in the Metroplex," Star-Telegram, Oct. 2, 2007
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