Living Littleton

   High end homes in the Denver/Littleton area are starting to rebound from their record lows.  It’s no secret that the high end home market has been close to dormant over the last couple of years, with the uncertainty in the market coupled with the difficulty in obtaining jumbo loan financing.  The good news is that we are starting to see in increase in this market for homes priced over a million dollars.  In fact, sales in this price range have risen to a level not seen in two years.  Several factors have contributed to this, the most important being the steep discounting some sellers have been forced to do, in order to get their homes sold.  Coupled with a slowly building demand, record low rates, and the beginning of some sanity in the mortgage industry,  buyers are starting to become more active in this price range.

    This increase in the high end market may pull up the average sales prices in the Denver/Littleton market.  If this happens, hopefully buyers won’t be lead to believe all home prices have increased by the announce price increase, if there is one.  As I always stress, these figures are the average prices of all the homes sold, not the percentage increase in prices.

A local real estate company recently finished an analysis of which homes are most likely to sell.  As it takes a while for a home to go through the selling process, they limited their study to homes that went on the market from January through September of 2009.  What they found out was the odds of a home selling were dependant on several factors. 
1.  Homes owned by banks (REO) had the best chances.  90% of these listings sold, with the remaining 10% being withdrawn from the market or had the listing expire.
2.  Short sales (SS) were the least likely to sell with only 32% of these listings ever selling.
3.  Regular, non-distressed home listings had only slightly better odds than short sales, with 37% of these selling.

In the various categories, they discovered that the price of a home determined it’s odds of selling.  In the Denver and Littleton market, the least expensive, 10% of all homes sell for $85,000 or less. Non-distressed sellers in this price range had a success rate of 78%.  This is compared to a success rate of just 44% for SS sellers in the same price range.  At the opposite end of the range, the most expensive 10% of  the home sales sold for over $460,000.  This market segment requires a jumbo loan, and they weren’t easy to obtain, or cheap, during this time period.  In this high end, only 16% of the regular listings sold and only 14% of the SS.

For a middle of the pack comparison, let me tell you that in the price range of $210,000 to $315,000 for regular, non-distressed home listings, only 41% of these homes sold.  Now true, this information came from 2009’s market and we’re doing much better in 2010, however, as a seller, one really needs to pay attention to the prices of previous sales.  Over reaching in this market can end up costing you lots of time plus a potential sale.

Jerry Becker
jbeckerhomes@comcast.net

   As I mentioned in an earlier post, weakness in the Euro has caused an inflow of dollars into the bond market, resulting in some of the lowest home loan rates, ever.  Currently, Littleton lenders are quoting rates in the high 4’s for 30 year fixed rate loans.  In spite of these low rates, the number of purchase loans being applied for, is at a 13 year low.  I think much of this is caused by the market taking a breather after the expiration of the Federal Tax Credit.            
    As nice as these low rates are, no one can say how long they will last.  If our economy starts to pick up, as the talking heads all predict, we could see money leaving bonds to buy stocks.  When this happens, expect to see rates rise.
Jerry Becker
jbeckerhomes@comcast.net

For the fifth month in a row Denver Metro home prices, which includes Littleton, have shown an increase in year over year pricing.  There was also a slight increase from February of this year to March of this year.  These statistics came from the latest S&P/Case-Shiller Home Price Index.

The report showed the the average price increase from a year ago was 4.1%.  Once again, I want to stress that these are the averages of all the homes sold in the respective months, and not the increase of 4.1% for each home. 

Since much of the market was driven by the push of first time buyers to take advantage of the expiring tax credit, I suspect the market was weighted to more of the entry home price range.  We may see another increase in April as that was the last month to take advantage of the tax credit.  After that, the experts predict the number of sales will slow, however, we may see more of a mix of higher priced homes because of the fall off from first time buyers.  This may give us a continued increase in year over year prices, however, the total number of home sales may decline.  These experts also expected interest rates to be higher by now, but in fact, they’ve declined.  It’ll be interesting to see how all of this shakes out.            

Another index is a comparison of a market’s present average home values when compared to the year 2000.  Based on that index, Denver and Littleton came in at 125.31.  That means prices were 25.31% higher than they were in 2000.  The average for the top 20 cities was 143.35 in March.

Jerry Becker
Jerry Becker and Associates – Metro Brokers
jbeckerhomes@comcast.net

     March sales statistics have been released, comparing March 2010 to March 2009.  The numbers aren’t consistent for the two Littletons.  By two Littletons, I’m refering to the City of Littleton (SSC) and unincorporated South Jefferson County (JFS), which is also known as Littleton.  Keep in mind that Trailmark, which is in Southern Jefferson County is part of the City of Littleton.

     When comparing the average days on the market, both areas experienced a decline, which was steeper in SSC than in JFS.  SSC went from about 93 days in March 2009 to about 68 days in March of this year.  JFS dropped from about 98 to 79 days.

     When it comes to average price for homes sold, this is where the areas reversed themselves.  SSC saw the average price of homes sold go from $310K in March of 2009 to about $210K in March of this year.  JFS, on the other hand, saw an increase from $275K to $345k in year over year numbers.  The  numbers are for all types of property, both single and multiple family.  I’ll break them out further in a future post.

     I want to stress, as I have in previous posts , the numbers don’t reflect the increase or decrease in home values but the average prices of all the homes sold in a particular period.  In JFS more expensive homes were sold in March 2010 than in March 2009, while just the opposite happened in SSC. 

Jerry Becker
jbeckerhomes@comcast.net

   We’ve all read articles lately about how the government is doing everything it can to drive home loan rates down to the 4% range, to stimulate the economy.  Most of these articles originate from various departments of our federal government, and while I agree rates at 4% would be a big boost, I’m afraid we’ll never see them.  I attended a loan conference last week where they explained what was going on in the home loan business.  Their assessment was that the government had already done everything they can do to cause home loan rates to fall into that 4% range.  If that was the case then why aren’t they there, yet?  According to the speakers, it was because the banks weren’t allowing that to happen, for two main reasons. 

   First of all, the rates are already at historically low levels, and while loans may be tough to get because of all the new loan restrictions, banks are presently swamped with people trying to buy or refinance their current homes.  Because banks don’t want to hire additional personal to handle this influx, they currently have all the business they can handle.  If the banks would allow the rates to actually go to the 4% range, they wouldn’t be able to handle the increased influx. 

    The second reason banks don’t want to let the rates drift lower is the fact the banks get to keep the yield spread, from where rates currently are to where they would be if the banks let them go to 4%.  This means when the banks go to sell the loans on the secondary market, they can sell the loan to investment companies for more money because these loans are paying a higher return than what the current cost of money is currently paying.  This increase in income is being used by the banks to bolster their reserve accounts, which has taken such a beating with the loan foreclosures.  The government requires banks to set aside funds to cover these loan losses.  When there isn’t enough money to cover these loses, banks are declared insolvent.  By boosting these reserves, the lenders are making themselves healthy, again, and thus in a better position to pay back the government’s TARP funds.

   While you may not like the fact your rates may be higher than they need to be, don’t be fooled into waiting for those magical 4% rates to appear.  They’re still at historical low levels.

Beginning July 1st, 2009, all sellers of residential property that contain a fireplace, a fuel-fired heater or appliance, or an attached garage will lbe responsible for assuring that a carbon monoxide alarm is properly installed within 15 feet of the entrance to each room lawfully used for sleeping.  This new law was recently signed by our Governor.  I do support it, but I’m wondering how it will be implemented.  I haven’t read the whole law, so I still have some questions about it that I’m sure will be answered by our various Realtor trade organizations.  It sounds like detectors wouldn’t be required in non-conforming basement bedrooms because they wouldn’t fit the profile of ”lawfully used for sleeping.”  This does put some monetary obligations on the seller but I think it’s for public good. 

I think it’s a better law than some of the recent ones floated such as requiring sellers to install certain energy efficiency features, which was kicked around.  There was also a proposal to require sellers to disclose to buyers the energy usage for a home, but that was also defeated.  This information can be obtained by anyone by calling the energy provider for that particular home and asking them.  There’s also the fact that residents use energy differently.  For instance, do the current residents have several young children where the family is doing three loads of laundry each day, or do they have a portable electric hot tub?  While the usage information can give a clue about a home’s energy consumption, it’s not necessarily the ultimate answer to how much energy a new buyer will be using.