Real Estate News - The Lack of

Inventory is the Whole Story (p. 1 - p.2)

Investors - Big Updates in the Lending
World! (p. 3)

Volume 7
Issue 2

Real Estate Newsletter

1777 S. Harrison St #1100
Denver, CO 80210

Hows the real estate market? Because of what I do for a

living Im asked this at least once a day. I love the question
because it lets me talk about my favorite subject: our alwayschanging, ever-fascinating real estate market! There are lots of
different factors and metrics I can discuss when assessing our
market, such as:

But the thing I like to do most when explaining our real

estate market is to show folks the chart on the next page.
Truly, a picture is worth a thousand words. Please take a
look at it and begin to absorb what its telling us. Everything
you need to know about our current real estate market is
contained in this chart.

1. Rising home prices

What you see are two lines, a blue one and a red one. The
blue line shows the inventory (i.e., the number) of homes
for sale in metro Denver every month from January 2007 to
November 2014. The red line shows the number of homes
sold every month. You can see that the inventory peaked in
July 2007 at 30,827 homes for sale. That was at the depth of
our economic and housing downturn, when fear ruled our
market, banks were being shut down, our local and national
economies were in shambles, unemployment was rising,
and consumer confidence plummeted. The result of course
was that people didnt want to buy homes; they were afraid
of the future and didnt want to take on any risk. On the
seller side of the equation, many home owners were getting
caught with rising monthly mortgage payments as their
Option ARM mortgages adjusted upward, so suddenly they
wanted to sell, at the very worst time possible. The perfect
storm.
>>> Real Estate News Cont. on Page 2.

2. Overwhelming consumer demand for homes

3. A lack of inventory for sale
4. New construction not keeping up with demand for housing
5. Rental prices skyrocketing
6. The effect gas and oil prices have on housing

Sales vs. Inventory 2007 - 2014

7. How low interest rates are continuing to make housing

relatively affordable
8. What parts of town have appreciated more than others over
time
9. And on and on...

Market Snapshot
Jan 14

Prior Month

%change

Year Ago

% Change

Single Family (Detached)

Active

4,201

4,392

-4%

5,597

-25%

Under Contract

3,293

2,564

28%

3,381

-3%

Sold

1,793

2,878

-38%

2,161

-17%

42

41

2%

58

-28%

$366,173

$378,776

-3%

$329,311

11%

Avg DOM
Avg Sold Price
4
2

Real Estate news continued...

Its simple economics: if you have more supply
than demand prices start to fall and that is exactly
what they did from 2007 to 2009. Around 2010
and 2011 the market became roughly balanced,
with 18,000 to 20,000 homes on the market. But
as you can see the market did not remain balanced
for long because the supply continued to fall.
Which brings us to todays market. In January
2015, there were 5,152 homes on the market, 26
percent less than January 2014 and an all-time
low for a January since records have been kept!
This lack of inventory defines our current housing
market.
The past several years have seen an incredibly strong real estate market in metro Denver and this chart explains
exactly why. The supply of homes has vanished placing an imbalance in our market. No three dimensional, super
fancy, econometrics model can do a better job of explaining the imbalance in our market than this simple chart.
Its interesting to see that while the blue inventory line has dropped dramatically the past seven years, the red number
of sold properties has barely inched upward, even though our population continues to rise about 1.5 percent per year.
This tells me that our demand for housing is going to stay very strong for the foreseeable future.
So, how do you use this information? It depends, of course, on who you are and what youd like to do. Heres a brief
sample.
If you own a home and are thinking of moving: Its an incredible sellers market and you can expect to get top value
for your home. Youll need to consider the purchase of your next home though, and make sure you have planned the
process correctly so you find the home of your dreams and make the transition from your current to future home
seamless.

Mortgage
Big Updates in the Lending World!
Ever since the mortgage meltdown of 2008, it seems like it has been impossible for buyers to qualify for new
loans. Following the 2008 crisis and well into 2011 it looked like every lender required 20 percent down, excellent
credit, and outstanding income in order to qualify for a new loan. Most buyers felt they would never be able to
meet these requirements. However, the most recent three years have started to bring some flexibility back to the
mortgage market. More specifically, weve seen some outstanding developments over the last six months that are
really exciting for buyers:
- FHA reduced their annual mortgage insurance fee by 0.5 percent. This equates to a savings of $80 per month on
a $200,000 home.
- The minimum down payment for conventional loans has been reduced to only 3 percent. This means you can
purchase a $200,000 home with as little as a $6,000 investment.
- New down payment assistance programs provide either a grant or a repayable second lien for the majority of the
down payment, requiring the borrower to contribute as little as $1,000.
- Investment property loans are available with as little as 15 percent down, allowing many smaller property
investors to get back into the market.
If youre considering buying a property and havent been prequalified yet its worth your time to speak with a loan
professional and see what they can do for you.
Joe Massey, Castle & Cooke Mortgage, jmassey@castlecookemortgage.com

If you are renting: Rents continue to zoom upward to all-time highs so you might want to get out of the rental rat race
and buy a home. Inventory is low so youll need to make sure youre prequalified to buy a home and come across as a
serious buyer, otherwise sellers wont even consider your offer. But because inventory is still so low we expect prices
to continue to move up for several years, at least until the inventory balances with the demand. So you can expect
appreciation in your home purchase for the next several years.
If youre considering buying rental property: Theres no better way to build wealth than owning rental properties for
the long term. Home prices have risen, but so have rents, and interest rates remain at record lows. Smart investors
dont try to time the real estate market; its as difficult to do as timing the stock or bond market. The vast majority of
Americans who have built wealth as real estate investors have done it buying rental property and having their tenants
pay it off for them over time. Its not complicated and it works.
Of course, everyones situation is unique. If you want to talk about how best to take advantage of our real estate market
and see what it can do for you please give me a call. I love talking about the real estate market!

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