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A lot of clients ask me how to figure out what market rents are in a neighborhood. This is a critical input into the calculations an investor needs to make in order to determine what their return on investment will be on a rental property. So you don't want to screw this up! Unfortunately, this is one of the many figures new investors get wrong.
One place people go to get rents is Rent-o-Meter. Rent-o-Meter is billed as an online resource to get accurate market rents. In my experience it is anything but! However, I have a fairly simple solution. Multiply what you see on Rent-o-Meter by 80% and you'll probably be close. I can't explain why but I find rents on Rent-o-Meter to be about 25% high, so multiplying their rents by 80% will get you close (do the math, it works out).
So then, how do you get market rents? Simple: start at the subject property and drive concentric circles around the neighborhood. Call every For Rent sign you see (if you don't see any this is a good sign!). Interview the landlords. A subtle but telling sign is how polite the landlords are on the phone. If they act overly solicitous and desperate it's a sign that vacancies are high and they're desperate to get tenants - not a good sign for you. If they are breezy, abrupt, and even rude, that's GREAT! It means they have too many phone calls for their vacancy and it's a strong landlord market. This is what you want to hear!
In many neighborhoods around town today this is exactly what you'll find. I know. When the vacancy rate was 13% a few years ago I was very nice over the phone. Now that it's 4%...well, a little less nice. Nothing like good -ol' market research.
Showing posts with label denver real estate investing. Show all posts
Showing posts with label denver real estate investing. Show all posts
Tuesday, October 28, 2008
Topic: Investor Series: Things to look for when you look at roofs
Have you ever driven through Aurora North looking for a rental property and taken a close look at the roofs? Here's what you'll see: a bunch of 1950's ranches in varying states of repair or disrepair, lawns that are often grassless, old handcrank windows and roofs in almost perfect condition! This surprised me at first and perplexed me for a long time. Why, in a neighborhood devastated by foreclosures with properties with massive deferred maintenance are the roofs in such condition? Really! Stand in the middle of a typical street and looking at 10 roofs simultaneously, you'll be amazed. Well, it turns out the answer is pretty simple. There was a huge hailstorm in the mid-90's and most of the roofs were replaced by insurance companies then. The result is that while you certainly need to be careful about what you buy in Aurora North, chances are your roof is going to be fine. Thank goodness for small favors.
Wednesday, October 15, 2008
Jefferson County, Colorado 3Q 2008 Home Price Performance
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By Mike Welk and Lon Welsh, Your Castle Real Estate.
The average home price in Metro Denver increased +2% in the full year 2005 to the full year 2006. Comparing 2006 to 2007, the average home price across the metro dropped 3%, to $303,000. The average price in the first three quarters of 2008 was $272,000 vs. similar period of 2007 was $308,000: an 11% decrease. These numbers will be slightly different than Metrolist, as they are just Denver Metro and don’t include outlying areas like Colorado Springs or Boulder.
Much of the decline is a mix issue. For example, sales volume of homes over 4,000 square feet has plummeted in the last twelve months. Middle-market homes have generally been steady in their sales volume. Very inexpensive homes under 1,000 square feet have greatly increased their sales volume. You can explain it to your clients like this: Imagine you own a car dealership and you sell Chevys and Cadillacs. If you sold 50 of each type of car last month, but then you sold 75 Chevys and 25 Cadillacs this month, the average price at your dealership would have dropped quite a bit. This would be true even if you didn’t change the price of the cars. This is what we mean by a mix of what is sold issue.
Our guess is that the buyers of the 4,000 square foot homes are sitting on the sidelines since very few people really need that much space - it is a decision that can be postponed. They are probably waiting for the bad news in the headlines to blow over and for the rates on jumbo loans to return to more reasonable levels. While they wait, the investors are snapping up bargain REO properties to use as rentals.
This market behavior is likely to continue for at least another nine to eighteen months. However, once the REO volume starts to decline a little, and the jumbo rates come down, we’ll see a reversal to the mix problem. Suddenly, the pent-up demand at the high end of the market will be unleashed, and we’ll finally start to run out of bargain basement REO homes. Using the car dealer analogy, we’ll be selling 25 Chevys and 75 Cadillacs each month. You can guess what will happen to the average prices – in some neighborhoods they will increase as fast as they have dropped in the last few years.
The attached chart shows different neighborhoods in our region. Each region has the neighborhood’s name and the percentage of sales in the last twelve months that were either short sales or bank-owned properties. The second line has the price change the twelve months from October 2007 to September 2008 vs. the twelve months immediately preceding. Next, you’ll see the average home price in the last twelve months and the average days on market (DOM) in the last twelve months. There had to be at least twenty sales in the last year for an area to be included. The numbers are more reliable in areas where there were more sales.
Get the insider's edge on what is happening in the Denver Real Estate market in my Real Estate Trends Blog:
http://activerain.com/blogs/lonwelsh
Source: Your Castle Real Estate analysis, MLS data
South Metro Denver, Colorado 3Q 2008 Home Price Performance
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By Lon Welsh, Your Castle Real Estate.
The average home price in Metro Denver increased +2% in the full year 2005 to the full year 2006. Comparing 2006 to 2007, the average home price across the metro dropped 3%, to $303,000. The average price in the first three quarters of 2008 was $272,000 vs. similar period of 2007 was $308,000: an 11% decrease. These numbers will be slightly different than Metrolist, as they are just Denver Metro and don’t include outlying areas like Colorado Springs or Boulder.
Much of the decline is a mix issue. For example, sales volume of homes over 4,000 square feet has plummeted in the last twelve months. Middle-market homes have generally been steady in their sales volume. Very inexpensive homes under 1,000 square feet have greatly increased their sales volume. You can explain it to your clients like this: Imagine you own a car dealership and you sell Chevys and Cadillacs. If you sold 50 of each type of car last month, but then you sold 75 Chevys and 25 Cadillacs this month, the average price at your dealership would have dropped quite a bit. This would be true even if you didn’t change the price of the cars. This is what we mean by a mix of what is sold issue.
Our guess is that the buyers of the 4,000 square foot homes are sitting on the sidelines since very few people really need that much space - it is a decision that can be postponed. They are probably waiting for the bad news in the headlines to blow over and for the rates on jumbo loans to return to more reasonable levels. While they wait, the investors are snapping up bargain REO properties to use as rentals.
This market behavior is likely to continue for at least another nine to eighteen months. However, once the REO volume starts to decline a little, and the jumbo rates come down, we’ll see a reversal to the mix problem. Suddenly, the pent-up demand at the high end of the market will be unleashed, and we’ll finally start to run out of bargain basement REO homes. Using the car dealer analogy, we’ll be selling 25 Chevys and 75 Cadillacs each month. You can guess what will happen to the average prices – in some neighborhoods they will increase as fast as they have dropped in the last few years.
The attached chart shows different neighborhoods in our region. Each region has the neighborhood’s name and the percentage of sales in the last twelve months that were either short sales or bank-owned properties. The second line has the price change the twelve months from October 2007 to September 2008 vs. the twelve months immediately preceding. Next, you’ll see the average home price in the last twelve months and the average days on market (DOM) in the last twelve months. There had to be at least twenty sales in the last year for an area to be included. The numbers are more reliable in areas where there were more sales.
Get the insider's edge on what is happening in the Denver Real Estate market in my Real Estate Trends Blog:
http://activerain.com/blogs/lonwelsh
The average home price in Metro Denver increased +2% in the full year 2005 to the full year 2006. Comparing 2006 to 2007, the average home price across the metro dropped 3%, to $303,000. The average price in the first three quarters of 2008 was $272,000 vs. similar period of 2007 was $308,000: an 11% decrease. These numbers will be slightly different than Metrolist, as they are just Denver Metro and don’t include outlying areas like Colorado Springs or Boulder.
Much of the decline is a mix issue. For example, sales volume of homes over 4,000 square feet has plummeted in the last twelve months. Middle-market homes have generally been steady in their sales volume. Very inexpensive homes under 1,000 square feet have greatly increased their sales volume. You can explain it to your clients like this: Imagine you own a car dealership and you sell Chevys and Cadillacs. If you sold 50 of each type of car last month, but then you sold 75 Chevys and 25 Cadillacs this month, the average price at your dealership would have dropped quite a bit. This would be true even if you didn’t change the price of the cars. This is what we mean by a mix of what is sold issue.
Our guess is that the buyers of the 4,000 square foot homes are sitting on the sidelines since very few people really need that much space - it is a decision that can be postponed. They are probably waiting for the bad news in the headlines to blow over and for the rates on jumbo loans to return to more reasonable levels. While they wait, the investors are snapping up bargain REO properties to use as rentals.
This market behavior is likely to continue for at least another nine to eighteen months. However, once the REO volume starts to decline a little, and the jumbo rates come down, we’ll see a reversal to the mix problem. Suddenly, the pent-up demand at the high end of the market will be unleashed, and we’ll finally start to run out of bargain basement REO homes. Using the car dealer analogy, we’ll be selling 25 Chevys and 75 Cadillacs each month. You can guess what will happen to the average prices – in some neighborhoods they will increase as fast as they have dropped in the last few years.
The attached chart shows different neighborhoods in our region. Each region has the neighborhood’s name and the percentage of sales in the last twelve months that were either short sales or bank-owned properties. The second line has the price change the twelve months from October 2007 to September 2008 vs. the twelve months immediately preceding. Next, you’ll see the average home price in the last twelve months and the average days on market (DOM) in the last twelve months. There had to be at least twenty sales in the last year for an area to be included. The numbers are more reliable in areas where there were more sales.
Get the insider's edge on what is happening in the Denver Real Estate market in my Real Estate Trends Blog:
http://activerain.com/blogs/lonwelsh
Source: Your Castle Real Estate analysis, MLS data
Parker, Castle Rock, Colorado 3Q 2008 Home Price Performance
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By Brian Evins and Lon Welsh, Your Castle Real Estate.
The average home price in Metro Denver increased +2% in the full year 2005 to the full year 2006. Comparing 2006 to 2007, the average home price across the metro dropped 3%, to $303,000. The average price in the first three quarters of 2008 was $272,000 vs. similar period of 2007 was $308,000: an 11% decrease. These numbers will be slightly different than Metrolist, as they are just Denver Metro and don’t include outlying areas like Colorado Springs or Boulder.
Much of the decline is a mix issue. For example, sales volume of homes over 4,000 square feet has plummeted in the last twelve months. Middle-market homes have generally been steady in their sales volume. Very inexpensive homes under 1,000 square feet have greatly increased their sales volume. You can explain it to your clients like this: Imagine you own a car dealership and you sell Chevys and Cadillacs. If you sold 50 of each type of car last month, but then you sold 75 Chevys and 25 Cadillacs this month, the average price at your dealership would have dropped quite a bit. This would be true even if you didn’t change the price of the cars. This is what we mean by a mix of what is sold issue.
Our guess is that the buyers of the 4,000 square foot homes are sitting on the sidelines since very few people really need that much space - it is a decision that can be postponed. They are probably waiting for the bad news in the headlines to blow over and for the rates on jumbo loans to return to more reasonable levels. While they wait, the investors are snapping up bargain REO properties to use as rentals.
This market behavior is likely to continue for at least another nine to eighteen months. However, once the REO volume starts to decline a little, and the jumbo rates come down, we’ll see a reversal to the mix problem. Suddenly, the pent-up demand at the high end of the market will be unleashed, and we’ll finally start to run out of bargain basement REO homes. Using the car dealer analogy, we’ll be selling 25 Chevys and 75 Cadillacs each month. You can guess what will happen to the average prices – in some neighborhoods they will increase as fast as they have dropped in the last few years.
The attached chart shows different neighborhoods in our region. Each region has the neighborhood’s name and the percentage of sales in the last twelve months that were either short sales or bank-owned properties. The second line has the price change the twelve months from October 2007 to September 2008 vs. the twelve months immediately preceding. Next, you’ll see the average home price in the last twelve months and the average days on market (DOM) in the last twelve months. There had to be at least twenty sales in the last year for an area to be included. The numbers are more reliable in areas where there were more sales.
Get the insider's edge on what is happening in the Denver Real Estate market in my Real Estate Trends Blog:
http://activerain.com/blogs/lonwelsh
The average home price in Metro Denver increased +2% in the full year 2005 to the full year 2006. Comparing 2006 to 2007, the average home price across the metro dropped 3%, to $303,000. The average price in the first three quarters of 2008 was $272,000 vs. similar period of 2007 was $308,000: an 11% decrease. These numbers will be slightly different than Metrolist, as they are just Denver Metro and don’t include outlying areas like Colorado Springs or Boulder.
Much of the decline is a mix issue. For example, sales volume of homes over 4,000 square feet has plummeted in the last twelve months. Middle-market homes have generally been steady in their sales volume. Very inexpensive homes under 1,000 square feet have greatly increased their sales volume. You can explain it to your clients like this: Imagine you own a car dealership and you sell Chevys and Cadillacs. If you sold 50 of each type of car last month, but then you sold 75 Chevys and 25 Cadillacs this month, the average price at your dealership would have dropped quite a bit. This would be true even if you didn’t change the price of the cars. This is what we mean by a mix of what is sold issue.
Our guess is that the buyers of the 4,000 square foot homes are sitting on the sidelines since very few people really need that much space - it is a decision that can be postponed. They are probably waiting for the bad news in the headlines to blow over and for the rates on jumbo loans to return to more reasonable levels. While they wait, the investors are snapping up bargain REO properties to use as rentals.
This market behavior is likely to continue for at least another nine to eighteen months. However, once the REO volume starts to decline a little, and the jumbo rates come down, we’ll see a reversal to the mix problem. Suddenly, the pent-up demand at the high end of the market will be unleashed, and we’ll finally start to run out of bargain basement REO homes. Using the car dealer analogy, we’ll be selling 25 Chevys and 75 Cadillacs each month. You can guess what will happen to the average prices – in some neighborhoods they will increase as fast as they have dropped in the last few years.
The attached chart shows different neighborhoods in our region. Each region has the neighborhood’s name and the percentage of sales in the last twelve months that were either short sales or bank-owned properties. The second line has the price change the twelve months from October 2007 to September 2008 vs. the twelve months immediately preceding. Next, you’ll see the average home price in the last twelve months and the average days on market (DOM) in the last twelve months. There had to be at least twenty sales in the last year for an area to be included. The numbers are more reliable in areas where there were more sales.
Get the insider's edge on what is happening in the Denver Real Estate market in my Real Estate Trends Blog:
http://activerain.com/blogs/lonwelsh
Source: Your Castle Real Estate analysis, MLS data
Central Denver Colorado 3Q 2008 Condo Price Performance
By Michael Canon and Lon Welsh, Your Castle Real Estate.
The big message has not changed since last quarter – it’s still a great time to be a buyer in the condo market. Prices are at a three year low in many areas, and interest rates on mortgages are still historically low.
The average condo price in Metro Denver declined 4% between 2006 and 2007: from $187K to $180K. Homes dropped 3% in that time period. Looking just at the first nine months of 2008 vs. the same time period in 2007, the price dropped 6%: from $181K to $172K. Homes dropped 11% in that time period. From their peak prices in 2006, condos have dropped around 9.5% while homes have dropped 12%. These numbers will be slightly different than Metrolist, as they are just Denver Metro and don’t include outlying areas like Fort Collins, Colorado Springs, or Boulder.
Some areas did better than others. The attached chart shows different neighborhoods in our region. Each region has the neighborhood’s name and the percentage of sales in the last twelve months that were either short sales or bank-owned properties. The second line has the price change the twelve months from October 2007 to September 2008 vs. the twelve months immediately preceding. Next, you’ll see the average condo price in the last twelve months and the average days on market (DOM) in the last twelve months. There had to be at least twenty sales in the last year for an area to be included. The numbers are more reliable in areas where there were more sales.
Last quarter, we reported that days on market (DOM) had been declining for condos, which should be a leading indicator that we are due for price increases soon. That still seems to be the case.
Get the insider's edge on what is happening in the Denver Real Estate market in my Real Estate Trends Blog:
http://activerain.com/blogs/lonwelsh
The big message has not changed since last quarter – it’s still a great time to be a buyer in the condo market. Prices are at a three year low in many areas, and interest rates on mortgages are still historically low.
The average condo price in Metro Denver declined 4% between 2006 and 2007: from $187K to $180K. Homes dropped 3% in that time period. Looking just at the first nine months of 2008 vs. the same time period in 2007, the price dropped 6%: from $181K to $172K. Homes dropped 11% in that time period. From their peak prices in 2006, condos have dropped around 9.5% while homes have dropped 12%. These numbers will be slightly different than Metrolist, as they are just Denver Metro and don’t include outlying areas like Fort Collins, Colorado Springs, or Boulder.
Some areas did better than others. The attached chart shows different neighborhoods in our region. Each region has the neighborhood’s name and the percentage of sales in the last twelve months that were either short sales or bank-owned properties. The second line has the price change the twelve months from October 2007 to September 2008 vs. the twelve months immediately preceding. Next, you’ll see the average condo price in the last twelve months and the average days on market (DOM) in the last twelve months. There had to be at least twenty sales in the last year for an area to be included. The numbers are more reliable in areas where there were more sales.
Last quarter, we reported that days on market (DOM) had been declining for condos, which should be a leading indicator that we are due for price increases soon. That still seems to be the case.
Get the insider's edge on what is happening in the Denver Real Estate market in my Real Estate Trends Blog:
http://activerain.com/blogs/lonwelsh
Source: Your Castle Real Estate analysis, MLS data
Recap of Aurora, Colorado 3Q 2008 Condo Price Performance
By Terry Wenze and Lon Welsh, Your Castle Real Estate.
The big message has not changed since last quarter – it’s still a great time to be a buyer in the condo market. Prices are at a three year low in many areas, and interest rates on mortgages are still historically low.
The average condo price in Metro Denver declined 4% between 2006 and 2007: from $187K to $180K. Homes dropped 3% in that time period. Looking just at the first nine months of 2008 vs. the same time period in 2007, the price dropped 6%: from $181K to $172K. Homes dropped 11% in that time period. From their peak prices in 2006, condos have dropped around 9.5% while homes have dropped 12%. These numbers will be slightly different than Metrolist, as they are just Denver Metro and don’t include outlying areas like Fort Collins, Colorado Springs, or Boulder.
Some areas did better than others. The attached chart shows different neighborhoods in our region. Each region has the neighborhood’s name and the percentage of sales in the last twelve months that were either short sales or bank-owned properties. The second line has the price change the twelve months from October 2007 to September 2008 vs. the twelve months immediately preceding. Next, you’ll see the average condo price in the last twelve months and the average days on market (DOM) in the last twelve months. There had to be at least twenty sales in the last year for an area to be included. The numbers are more reliable in areas where there were more sales.
Last quarter, we reported that days on market (DOM) had been declining for condos, which should be a leading indicator that we are due for price increases soon. That still seems to be the case.
Get the insider's edge on what is happening in the Denver Real Estate market in my Real Estate Trends Blog:
http://activerain.com/blogs/lonwelsh
The big message has not changed since last quarter – it’s still a great time to be a buyer in the condo market. Prices are at a three year low in many areas, and interest rates on mortgages are still historically low.
The average condo price in Metro Denver declined 4% between 2006 and 2007: from $187K to $180K. Homes dropped 3% in that time period. Looking just at the first nine months of 2008 vs. the same time period in 2007, the price dropped 6%: from $181K to $172K. Homes dropped 11% in that time period. From their peak prices in 2006, condos have dropped around 9.5% while homes have dropped 12%. These numbers will be slightly different than Metrolist, as they are just Denver Metro and don’t include outlying areas like Fort Collins, Colorado Springs, or Boulder.
Some areas did better than others. The attached chart shows different neighborhoods in our region. Each region has the neighborhood’s name and the percentage of sales in the last twelve months that were either short sales or bank-owned properties. The second line has the price change the twelve months from October 2007 to September 2008 vs. the twelve months immediately preceding. Next, you’ll see the average condo price in the last twelve months and the average days on market (DOM) in the last twelve months. There had to be at least twenty sales in the last year for an area to be included. The numbers are more reliable in areas where there were more sales.
Last quarter, we reported that days on market (DOM) had been declining for condos, which should be a leading indicator that we are due for price increases soon. That still seems to be the case.
Get the insider's edge on what is happening in the Denver Real Estate market in my Real Estate Trends Blog:
http://activerain.com/blogs/lonwelsh
Recap of 3Q 2008 Jefferson County Condo Price Performance
By Mike Welk and Lon Welsh, Your Castle Real Estate.
The big message has not changed since last quarter – it’s still a great time to be a buyer in the condo market. Prices are at a three year low in many areas, and interest rates on mortgages are still historically low.
The average condo price in Metro Denver declined 4% between 2006 and 2007: from $187K to $180K. Homes dropped 3% in that time period. Looking just at the first nine months of 2008 vs. the same time period in 2007, the price dropped 6%: from $181K to $172K. Homes dropped 11% in that time period. From their peak prices in 2006, condos have dropped around 9.5% while homes have dropped 12%. These numbers will be slightly different than Metrolist, as they are just Denver Metro and don’t include outlying areas like Fort Collins, Colorado Springs, or Boulder.
Some areas did better than others. The attached chart shows different neighborhoods in our region. Each region has the neighborhood’s name and the percentage of sales in the last twelve months that were either short sales or bank-owned properties. The second line has the price change the twelve months from October 2007 to September 2008 vs. the twelve months immediately preceding. Next, you’ll see the average condo price in the last twelve months and the average days on market (DOM) in the last twelve months. There had to be at least twenty sales in the last year for an area to be included. The numbers are more reliable in areas where there were more sales.
Last quarter, we reported that days on market (DOM) had been declining for condos, which should be a leading indicator that we are due for price increases soon. That still seems to be the case.
Get the insider's edge on what is happening in the Denver Real Estate market in my Real Estate Trends Blog:
http://activerain.com/blogs/lonwelsh
The big message has not changed since last quarter – it’s still a great time to be a buyer in the condo market. Prices are at a three year low in many areas, and interest rates on mortgages are still historically low.
The average condo price in Metro Denver declined 4% between 2006 and 2007: from $187K to $180K. Homes dropped 3% in that time period. Looking just at the first nine months of 2008 vs. the same time period in 2007, the price dropped 6%: from $181K to $172K. Homes dropped 11% in that time period. From their peak prices in 2006, condos have dropped around 9.5% while homes have dropped 12%. These numbers will be slightly different than Metrolist, as they are just Denver Metro and don’t include outlying areas like Fort Collins, Colorado Springs, or Boulder.
Some areas did better than others. The attached chart shows different neighborhoods in our region. Each region has the neighborhood’s name and the percentage of sales in the last twelve months that were either short sales or bank-owned properties. The second line has the price change the twelve months from October 2007 to September 2008 vs. the twelve months immediately preceding. Next, you’ll see the average condo price in the last twelve months and the average days on market (DOM) in the last twelve months. There had to be at least twenty sales in the last year for an area to be included. The numbers are more reliable in areas where there were more sales.
Last quarter, we reported that days on market (DOM) had been declining for condos, which should be a leading indicator that we are due for price increases soon. That still seems to be the case.
Get the insider's edge on what is happening in the Denver Real Estate market in my Real Estate Trends Blog:
http://activerain.com/blogs/lonwelsh
North Metro Denver, Colorado 3Q 2008 Condo Price Performance
By Jamie Abeyta and Lon Welsh, Your Castle Real Estate.
The big message has not changed since last quarter – it’s still a great time to be a buyer in the condo market. Prices are at a three year low in many areas, and interest rates on mortgages are still historically low.
The average condo price in Metro Denver declined 4% between 2006 and 2007: from $187K to $180K. Homes dropped 3% in that time period. Looking just at the first nine months of 2008 vs. the same time period in 2007, the price dropped 6%: from $181K to $172K. Homes dropped 11% in that time period. From their peak prices in 2006, condos have dropped around 9.5% while homes have dropped 12%. These numbers will be slightly different than Metrolist, as they are just Denver Metro and don’t include outlying areas like Fort Collins, Colorado Springs, or Boulder.
Some areas did better than others. The attached chart shows different neighborhoods in our region. Each region has the neighborhood’s name and the percentage of sales in the last twelve months that were either short sales or bank-owned properties. The second line has the price change the twelve months from October 2007 to September 2008 vs. the twelve months immediately preceding. Next, you’ll see the average condo price in the last twelve months and the average days on market (DOM) in the last twelve months. There had to be at least twenty sales in the last year for an area to be included. The numbers are more reliable in areas where there were more sales.
Last quarter, we reported that days on market (DOM) had been declining for condos, which should be a leading indicator that we are due for price increases soon. That still seems to be the case.
Get the insider's edge on what is happening in the Denver Real Estate market in my Real Estate Trends Blog:
http://activerain.com/blogs/lonwelsh
The big message has not changed since last quarter – it’s still a great time to be a buyer in the condo market. Prices are at a three year low in many areas, and interest rates on mortgages are still historically low.
The average condo price in Metro Denver declined 4% between 2006 and 2007: from $187K to $180K. Homes dropped 3% in that time period. Looking just at the first nine months of 2008 vs. the same time period in 2007, the price dropped 6%: from $181K to $172K. Homes dropped 11% in that time period. From their peak prices in 2006, condos have dropped around 9.5% while homes have dropped 12%. These numbers will be slightly different than Metrolist, as they are just Denver Metro and don’t include outlying areas like Fort Collins, Colorado Springs, or Boulder.
Some areas did better than others. The attached chart shows different neighborhoods in our region. Each region has the neighborhood’s name and the percentage of sales in the last twelve months that were either short sales or bank-owned properties. The second line has the price change the twelve months from October 2007 to September 2008 vs. the twelve months immediately preceding. Next, you’ll see the average condo price in the last twelve months and the average days on market (DOM) in the last twelve months. There had to be at least twenty sales in the last year for an area to be included. The numbers are more reliable in areas where there were more sales.
Last quarter, we reported that days on market (DOM) had been declining for condos, which should be a leading indicator that we are due for price increases soon. That still seems to be the case.
Get the insider's edge on what is happening in the Denver Real Estate market in my Real Estate Trends Blog:
http://activerain.com/blogs/lonwelsh
Source: Your Castle Real Estate analysis, MLS data
The Truth about Denver’s Home Inventory
By Michael Canon and Lon Welsh, Your Castle Real Estate.
If you have not heard already, the inventory of home on the market in Denver has been declining. This is not true in many regions of the county. Your clients, who often only see national headlines, might not be aware of this favorable news. Our market has some unusual factors at work. Let’s explore them, so you can better help your clients.
If you look at the first chart (MOI 1), you’ll see the MOI (months of inventory) for Denver’s suburbs on the bottom axis and the average sales price in that suburb on the axis on the left side. Denver metro currently has about six months of inventory (a balanced market, on average), but you can see there is a lot of variety from one city to the next. Lower cost areas, such as Thornton, are seeing inventory move fast. Sellers (mainly banks) don’t have to wait long for offers. Thornton’s average price in the last year was around $250,000 and the average MOI was about 3 months. Greenwood Village, on the other end of the scale, had about 13 MOI and an average price of about $1.4 million. Sellers are suffering there. The city of Denver is about in the middle.
If you look at the second chart (MOI 2), you’ll see the MOI information sorted by the price of the home. In some cases, this might be more useful when you meet with clients. The city of Denver, for example, has many neighborhoods with homes under $100,000, and they are selling fast. On the other hand, upscale neighborhoods like Cherry Creek and Hilltop have significant levels of inventory and it’s taking a long time to get homes sold, especially over the $1 million price barrier.
The left part of the chart show what percent of the active listings are REO (in red) and which are regular sellers (in green). For homes priced between $0 and $100K, regular (e.g.,, non-bank) sellers are 17% of the active inventory, but only 12% of the sales in the last twelve months. You can see on the left that since they are not getting their “fair share” of the sales, the MOI for the regular sellers under $100K is 2.7 months. For REO under $100K, it’s a blazing 1.9 months. This probably isn’t a surprise to any Realtor that has written an offer for a low priced REO and the listing agent has told them their buyer is competing with ten other offers. It’s a strong seller’s market at this price point!
Compare the homes from $480K to $1MM. Here, MOI is around 14 months - a very slow market. Your seller’s experience with marketing time depends greatly on their price. I hope this information will help you demystify our market for your clients.
Get the insider's edge on what is happening in the Denver Real Estate market in my Real Estate Trends Blog:
http://activerain.com/blogs/lonwelsh
If you have not heard already, the inventory of home on the market in Denver has been declining. This is not true in many regions of the county. Your clients, who often only see national headlines, might not be aware of this favorable news. Our market has some unusual factors at work. Let’s explore them, so you can better help your clients.
If you look at the first chart (MOI 1), you’ll see the MOI (months of inventory) for Denver’s suburbs on the bottom axis and the average sales price in that suburb on the axis on the left side. Denver metro currently has about six months of inventory (a balanced market, on average), but you can see there is a lot of variety from one city to the next. Lower cost areas, such as Thornton, are seeing inventory move fast. Sellers (mainly banks) don’t have to wait long for offers. Thornton’s average price in the last year was around $250,000 and the average MOI was about 3 months. Greenwood Village, on the other end of the scale, had about 13 MOI and an average price of about $1.4 million. Sellers are suffering there. The city of Denver is about in the middle.
If you look at the second chart (MOI 2), you’ll see the MOI information sorted by the price of the home. In some cases, this might be more useful when you meet with clients. The city of Denver, for example, has many neighborhoods with homes under $100,000, and they are selling fast. On the other hand, upscale neighborhoods like Cherry Creek and Hilltop have significant levels of inventory and it’s taking a long time to get homes sold, especially over the $1 million price barrier.
The left part of the chart show what percent of the active listings are REO (in red) and which are regular sellers (in green). For homes priced between $0 and $100K, regular (e.g.,, non-bank) sellers are 17% of the active inventory, but only 12% of the sales in the last twelve months. You can see on the left that since they are not getting their “fair share” of the sales, the MOI for the regular sellers under $100K is 2.7 months. For REO under $100K, it’s a blazing 1.9 months. This probably isn’t a surprise to any Realtor that has written an offer for a low priced REO and the listing agent has told them their buyer is competing with ten other offers. It’s a strong seller’s market at this price point!
Compare the homes from $480K to $1MM. Here, MOI is around 14 months - a very slow market. Your seller’s experience with marketing time depends greatly on their price. I hope this information will help you demystify our market for your clients.
Get the insider's edge on what is happening in the Denver Real Estate market in my Real Estate Trends Blog:
http://activerain.com/blogs/lonwelsh
Central Denver, Colorado 3Q 2008 Home Price Performance
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By Michael Canon and Lon Welsh, Your Castle Real Estate.
The average home price in Metro Denver increased +2% in the full year 2005 to the full year 2006. Comparing 2006 to 2007, the average home price across the metro dropped 3%, to $303,000. The average price in the first three quarters of 2008 was $272,000 vs. similar period of 2007 was $308,000: an 11% decrease. These numbers will be slightly different than Metrolist, as they are just Denver Metro and don’t include outlying areas like Colorado Springs or Boulder.
Much of the decline is a mix issue. For example, sales volume of homes over 4,000 square feet has plummeted in the last twelve months. Middle-market homes have generally been steady in their sales volume. Very inexpensive homes under 1,000 square feet have greatly increased their sales volume. You can explain it to your clients like this: Imagine you own a car dealership and you sell Chevys and Cadillacs. If you sold 50 of each type of car last month, but then you sold 75 Chevys and 25 Cadillacs this month, the average price at your dealership would have dropped quite a bit. This would be true even if you didn’t change the price of the cars. This is what we mean by a mix of what is sold issue.
Our guess is that the buyers of the 4,000 square foot homes are sitting on the sidelines since very few people really need that much space - it is a decision that can be postponed. They are probably waiting for the bad news in the headlines to blow over and for the rates on jumbo loans to return to more reasonable levels. While they wait, the investors are snapping up bargain REO properties to use as rentals.
This market behavior is likely to continue for at least another nine to eighteen months. However, once the REO volume starts to decline a little, and the jumbo rates come down, we’ll see a reversal to the mix problem. Suddenly, the pent-up demand at the high end of the market will be unleashed, and we’ll finally start to run out of bargain basement REO homes. Using the car dealer analogy, we’ll be selling 25 Chevys and 75 Cadillacs each month. You can guess what will happen to the average prices – in some neighborhoods they will increase as fast as they have dropped in the last few years.
The attached chart shows different neighborhoods in our region. Each region has the neighborhood’s name and the percentage of sales in the last twelve months that were either short sales or bank-owned properties. The second line has the price change the twelve months from October 2007 to September 2008 vs. the twelve months immediately preceding. Next, you’ll see the average home price in the last twelve months and the average days on market (DOM) in the last twelve months. There had to be at least twenty sales in the last year for an area to be included. The numbers are more reliable in areas where there were more sales.
Get the insider's edge on what is happening in the Denver Real Estate market in my Real Estate Trends Blog:
http://activerain.com/blogs/lonwelsh
Source: Your Castle Real Estate analysis, MLS data
The average home price in Metro Denver increased +2% in the full year 2005 to the full year 2006. Comparing 2006 to 2007, the average home price across the metro dropped 3%, to $303,000. The average price in the first three quarters of 2008 was $272,000 vs. similar period of 2007 was $308,000: an 11% decrease. These numbers will be slightly different than Metrolist, as they are just Denver Metro and don’t include outlying areas like Colorado Springs or Boulder.
Much of the decline is a mix issue. For example, sales volume of homes over 4,000 square feet has plummeted in the last twelve months. Middle-market homes have generally been steady in their sales volume. Very inexpensive homes under 1,000 square feet have greatly increased their sales volume. You can explain it to your clients like this: Imagine you own a car dealership and you sell Chevys and Cadillacs. If you sold 50 of each type of car last month, but then you sold 75 Chevys and 25 Cadillacs this month, the average price at your dealership would have dropped quite a bit. This would be true even if you didn’t change the price of the cars. This is what we mean by a mix of what is sold issue.
Our guess is that the buyers of the 4,000 square foot homes are sitting on the sidelines since very few people really need that much space - it is a decision that can be postponed. They are probably waiting for the bad news in the headlines to blow over and for the rates on jumbo loans to return to more reasonable levels. While they wait, the investors are snapping up bargain REO properties to use as rentals.
This market behavior is likely to continue for at least another nine to eighteen months. However, once the REO volume starts to decline a little, and the jumbo rates come down, we’ll see a reversal to the mix problem. Suddenly, the pent-up demand at the high end of the market will be unleashed, and we’ll finally start to run out of bargain basement REO homes. Using the car dealer analogy, we’ll be selling 25 Chevys and 75 Cadillacs each month. You can guess what will happen to the average prices – in some neighborhoods they will increase as fast as they have dropped in the last few years.
The attached chart shows different neighborhoods in our region. Each region has the neighborhood’s name and the percentage of sales in the last twelve months that were either short sales or bank-owned properties. The second line has the price change the twelve months from October 2007 to September 2008 vs. the twelve months immediately preceding. Next, you’ll see the average home price in the last twelve months and the average days on market (DOM) in the last twelve months. There had to be at least twenty sales in the last year for an area to be included. The numbers are more reliable in areas where there were more sales.
Get the insider's edge on what is happening in the Denver Real Estate market in my Real Estate Trends Blog:
http://activerain.com/blogs/lonwelsh
Source: Your Castle Real Estate analysis, MLS data
Sunday, September 7, 2008
Denver 1Q 2008 condo real estate trends
Denver Board of Realtors – Trends Article – May 2008
Recap of First Quarter 2008 Condo Price Performance
By Lon Welsh and Michael Canon, Your Castle Real Estate.
The average condo price in Metro Denver decreased -2% in the full year 2005 to the full year 2006, from $190,000 to $187,000. Comparing 2006 to 2007, the average condo price across the metro dropped -3%, to $180K. Looking at the first quarter 2008 vs. the first quarter of 2007, prices dropped 4%, from $175K to $169K.
The average price of a foreclosure or short sale condo dropped from 2006 from 2007 by -6% to $108,000. The average price of a non-distress sale increased +2% to $211,000. Sales volume in January and February of 2007 was 1,316. In the same period in 2008, it was 1,223, or -7%.
Some areas did better than others. The attached chart shows different neighborhoods in our area. Each region has the neighborhood’s name and the percentage of sales in the last twelve months that were either short sales or bank-owned properties. The second line has the price change the twelve months from 4/1/2007 to 3/31/2008 vs. the twelve months prior. Next, you’ll see the average condo price in the last twelve months and the number of homes that were sold.
The good news: The average days on market for condos, in January to March 2008, was 108 days. This was a 6 day drop from the first quarter of 2007.
There had to be at least twenty sales in the last year for an area to be included. The numbers are more reliable in areas where there were more sales. Less expensive areas generally didn’t do as well. There’s a pretty strong relationship; where home prices are less expensive, there is more of a foreclosure problem, and that tends to drag down the prices.
Source: Your Castle Real Estate analysis, MLS data
Question or need more detail? Call Lon Welsh at 303 619 0633 or LonWelsh@YourCastle.org
Recap of First Quarter 2008 Condo Price Performance
By Lon Welsh and Michael Canon, Your Castle Real Estate.
The average condo price in Metro Denver decreased -2% in the full year 2005 to the full year 2006, from $190,000 to $187,000. Comparing 2006 to 2007, the average condo price across the metro dropped -3%, to $180K. Looking at the first quarter 2008 vs. the first quarter of 2007, prices dropped 4%, from $175K to $169K.
The average price of a foreclosure or short sale condo dropped from 2006 from 2007 by -6% to $108,000. The average price of a non-distress sale increased +2% to $211,000. Sales volume in January and February of 2007 was 1,316. In the same period in 2008, it was 1,223, or -7%.
Some areas did better than others. The attached chart shows different neighborhoods in our area. Each region has the neighborhood’s name and the percentage of sales in the last twelve months that were either short sales or bank-owned properties. The second line has the price change the twelve months from 4/1/2007 to 3/31/2008 vs. the twelve months prior. Next, you’ll see the average condo price in the last twelve months and the number of homes that were sold.
The good news: The average days on market for condos, in January to March 2008, was 108 days. This was a 6 day drop from the first quarter of 2007.
There had to be at least twenty sales in the last year for an area to be included. The numbers are more reliable in areas where there were more sales. Less expensive areas generally didn’t do as well. There’s a pretty strong relationship; where home prices are less expensive, there is more of a foreclosure problem, and that tends to drag down the prices.
Source: Your Castle Real Estate analysis, MLS data
Question or need more detail? Call Lon Welsh at 303 619 0633 or LonWelsh@YourCastle.org
(c) Copyright 2008, Your Castle Real Estate
Denver 1Q 2008 real estate trends
Recap of First Quarter 2008 Home Price Performance
By Lon Welsh and Michael Canon, Your Castle Real Estate.
The average home price in Metro Denver increased +2% in the full year 2005 to the full year 2006, from $309,000 to $317,000. Comparing 2006 to 2007, the average home price across the metro dropped 2%, to $311,000. The first quarter of 2008 was $278,000 vs. the first quarter of 2007 was $296,000: a 6% decrease. Note that prices in the first quarter are usually a bit less than the rest of the year. This is because families that tend to purchase larger, more expensive homes tend to move in the summer months when their kids are out of school.
The average price of a foreclosure or short sale dropped -3% to $188,000 from 2006 to 2007. The average price of a non-distress sale increased 5% to $370,000. Sales volume over the last twelve months is off -4% for DSF/ASF. Foreclosure and short sale volume is up +31%; non-distress seller volume is off 20%. This trend continued in the 1Q 2008; foreclosure volume was up another 15% at the expense of the non-distress sellers.
Some areas did better than others. The attached chart shows different neighborhoods in Denver. Each region has the neighborhood’s name and the percentage of sales in the last twelve months that were either short sales or bank-owned properties. The second line has the price change the twelve months from April 2007 to March 2008 vs. the twelve months immediately preceding. Next, you’ll see the average home price in the last twelve months and the number of homes that were sold.
The good news is that the foreclosures are likely to peak in the next six to nine months. Many of the foreclosures were due to resetting rates on ARMs (adjustable rate mortgages). There are two reasons. First, according to Bank of America data, the volume of ARM resets is set to peak in March 2008. It often takes six months or a bit longer for an ARM reset to conclude in the sale of a foreclosed home. Second, the index rates that many ARMs use have declined lately. As a result, some borrowers that might have had a huge shock if their rate reset a year ago might get less of an increase today. For these reasons, we’re likely to hit the bottom of this cycle this year.
There had to be at least twenty sales in the last year for an area to be included. The numbers are more reliable in areas where there were more sales.
Source: Your Castle Real Estate analysis, MLS data
Question or need more detail? Call Lon Welsh at 303 619 0633 or LonWelsh@YourCastle.org
(C) Copyright 2008 Your Castle Real Estate
A little more evidence we're past bottom of market cycle
Take a look at the first page, for AUN (Aurora North). Note these positive market trends this year:
- number of active listings steadily declining
- average list price pretty stable (finally!)
- U/C up dramatically
- Number of sales / month up (partially seasonality)
- DOM dropping
- Stability in average sold prices and sold price as % of list
- Sold price as % original price UP a lot – banks are getting better at pricing
- Number of expired listings down
Every indicator is improving this year in AUN. You will see the same trends in DSW (southwest Denver County), but not as marked an improvement as AUN.
By contrast look at DSE (southeast Denver County).
- listings are up (they should be – seasonality)
- Note the average list price ($758,000) is a lot higher than the average sold price ($418,000). Lots of expensive listings brining up the average ask price, but apparently they are not selling
- DOM (Days on Market) declining as it normally would due to seasonality
- Average price declining rather rapidly. Probably a mix issue – smaller, cheaper homes are probably selling better.
Since these homes in DSE are pricier, it has more of an effect on the “average” sales price on metro Denver. Oddly, we could see improvement led by the cheapo neighborhoods, with the lux neighborhoods falling behind for a while. It will be interesting to watch.
- number of active listings steadily declining
- average list price pretty stable (finally!)
- U/C up dramatically
- Number of sales / month up (partially seasonality)
- DOM dropping
- Stability in average sold prices and sold price as % of list
- Sold price as % original price UP a lot – banks are getting better at pricing
- Number of expired listings down
Every indicator is improving this year in AUN. You will see the same trends in DSW (southwest Denver County), but not as marked an improvement as AUN.
By contrast look at DSE (southeast Denver County).
- listings are up (they should be – seasonality)
- Note the average list price ($758,000) is a lot higher than the average sold price ($418,000). Lots of expensive listings brining up the average ask price, but apparently they are not selling
- DOM (Days on Market) declining as it normally would due to seasonality
- Average price declining rather rapidly. Probably a mix issue – smaller, cheaper homes are probably selling better.
Since these homes in DSE are pricier, it has more of an effect on the “average” sales price on metro Denver. Oddly, we could see improvement led by the cheapo neighborhoods, with the lux neighborhoods falling behind for a while. It will be interesting to watch.
Tuesday, January 1, 2008
Denver, CO Fourth Quarter 2007 Home Price Performance
Recap of Denver Fourth Quarter 2007 Home Price Performance
The average home price in Metro Denver increased +2% in the full year 2005 to the full year 2006, from $309,000 to $317,000.
The average home price in Metro Denver increased +2% in the full year 2005 to the full year 2006, from $309,000 to $317,000.
Comparing 2006 to 2007, the average home price across the metro dropped 2%, from $311,000. The average price of a foreclosure or short sale dropped in that time period -3% to $188,000. The average price of a non-distress sale increased 5% to $370,000. Sales volume over the last twelve months is off -4% for DSF/ASF. Foreclosure and short sale volume is up +31%; non-distress seller volume is off 20%. If you handle a lot of listing and the market seems slow, this is likely the reason why.
Some areas did better than others. The attached chart shows different neighborhoods in Denver County (email me for a larger version). Each region has the neighborhood’s name and the percentage of sales in the last twelve months that were either short sales or bank-owned properties. The second line has the price change the twelve months from 2006 vs. 2007. Next, you’ll see the average home price in the last twelve months and the number of homes that were sold.
There had to be at least fifteen sales in the last year for an area to be included. The numbers are more reliable in areas where there were more sales. For example, Wash Park West had 196 sales –the numbers are likely to be very reliable. In Lincoln Park, with only 41 sales, the numbers are more likely directional.
Less expensive areas generally didn’t do as well. For example, Westwood (average home price $100K) saw a 20% drop in prices. More expensive areas generally did better. For example, Hilltop (average home price $961,000) was up 15%. 81% of the sales in the Westwood area were related to foreclosures, where in Hilltop, only 11% were foreclosures (up from 9% last quarter). There’s a pretty strong relationship; where home prices are less expensive, there is more of a foreclosure problem, and that tends to drag down the prices. Another factor driving home price appreciation in some upscale neighborhoods are re-sales of recently scraped properties, where a small, run down $300,000 home is replaced with a new home at $1,000,000.
There had to be at least fifteen sales in the last year for an area to be included. The numbers are more reliable in areas where there were more sales. For example, Wash Park West had 196 sales –the numbers are likely to be very reliable. In Lincoln Park, with only 41 sales, the numbers are more likely directional.
Less expensive areas generally didn’t do as well. For example, Westwood (average home price $100K) saw a 20% drop in prices. More expensive areas generally did better. For example, Hilltop (average home price $961,000) was up 15%. 81% of the sales in the Westwood area were related to foreclosures, where in Hilltop, only 11% were foreclosures (up from 9% last quarter). There’s a pretty strong relationship; where home prices are less expensive, there is more of a foreclosure problem, and that tends to drag down the prices. Another factor driving home price appreciation in some upscale neighborhoods are re-sales of recently scraped properties, where a small, run down $300,000 home is replaced with a new home at $1,000,000.
Source: Your Castle Real Estate analysis, MLS data
Saturday, December 1, 2007
Welcome to the Denver Real Estate Blog
I'm the managing broker of a 105 Realtor firm in the Denver Metro area. We do a lot of research on the trends that drive our market. Stay tuned for posts about what has happened to property prices and what will happen next. I hope that you'll find find it interesting - and if you are considering a move, you'll be able to use the insights to guide your transaction.
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