August 5, 2008 2:20 PM

Jack O'Connor likes trend in market

Mid-summer housing data are showing favorable swings in inventory and sales that haven't been seen in the Denver metropolitan area in five years, according to Jack O'Connor, managing director of Prestige Real Estate Group
The data indicates a return to rising home prices early in 2009, according to O'Connor, who publishes the Prestige Monthly Report. On Thursday, Metrolist will release data on home sales in July.
"Typically you would see an increase in inventory and a small decrease in sold data from June through September," O'Connor said in a statement. "However, this summer is showing the opposite results."
"These indicators at this point in the calendar year are both unusual and indicative of an improving situation that will likely begin affecting market-wide prices in the first half of next year," O'Connor added.
Prestige, in a report released today based on new Metrolist data, shows market-wide inventory in the seven-county area standing at 26,864 units, down 119 units from June, the first time in five years that the mid-summer monthly total has fallen.
Meanwhile, home sales took an un-seasonal jump upward to 4,433 sold units, 146 more than were reported in June, and the first time in five years that the mid-summer figure showed an increase. At the height of the market in 2005, metro-wide sales stood at 5,290 in mid-summer.
"These are the final two building blocks in a pattern that suggests a return to a healthier market," O'Connor said. "We've seen similarly suggestive data through the earlier part of the year with respect to year-over-year inventory and rising numbers of contracts, now up 6.9% year-to-date over 2007."
The rising sales figure, particularly poignant during a month when sales generally decline, is generally the last indicator to show a trend, whether headed into a rise or a decline, O'Connor said.
During early 2006, the opposite situation occurred when the market showed a record pace of closings, even as increased inventory and fewer contracts suggested that the market had actually slowed.
"At that point in time," said O'Connor, "many people had a hard time seeing that we really were slowing down. We didn't see the decline in sold data until it strongly impacted the market in August 2007."
Now, says O'Connor, the opposite is likely occurring.
Home inventory has fallen consistently, even into the summer months when sales typically slacken.
The supply of homes (how fast the market absorbs inventory based on current rate of sales) has dropped, particularly in the lower price ranges that are often the first to recover from a downturn. Numbers of contracts are up from the same month's figures during 2007.
O'Connor projects that if sales continue at present levels (on track for a projected 44,700 sold properties), inventory figures will drop toward 22,000 units in the first half of 2009. That level would mark the arrival of a seller's market that would be accompanied by generally rising prices.
One caveat, however, should be added to the brightening picture, O'Connor said.
Homes priced above $750,000 are not keeping pace with the increases in sales at lower ranges.
"We can attribute the slower upper-end market to difficulties obtaining financing and large levels of inventory. This price point will likely follow behind as lower price points see appreciation and as sellers use that equity for purchasing into the upper-end market."
"Considering Denver has had between 1%-per-year and 2%-per-year appreciation for the last seven years, it's inevitable that the higher level will take time to catch the pace that has been exhibited in the lower ranges," O'Connor said.
Prestige's President Leeann Iacino notes that other factors are pointing toward a favorable market ahead.
Prestige agents are providing anecdotal reports of shorter turnarounds and of competitive bidding in some neighborhoods.
National analysts are noting Denver's relatively stable home values in comparison to sharply falling numbers posted by California, Florida, Nevada and other states that experienced booming growth over recent years; and are predicting Colorado could help lead a recovery.
About 300 Prestige Real Estate Group agents serve the Denver area from offices in the I-25/Tech Center corridor, Highlands Ranch, Cherry Creek, Castle Pines North, and Conifer/Evergreen.
For a copy of the latest Prestige Monthly Report, contact Jack O'Connor at 303-268-0597.

Posted by John Rebchook at 2:20 PM | Comments (3)