In last week's report on the metro Denver area real estate revealed that housing inventory dropped to 4.7 months in July, its lowest reading in several years. For homes priced under $200,000, inventory is now under 3 months.
For decades a housing market in which inventory is under 6 months has been identified as a Seller's Market. So, is the Denver market now a Seller's Market? On some homes it definitely is as a majority of bank owned properties now sell for above listing price and as much 20% higher!
Why is this happening? Buyers are getting into bidding wars on these homes as the banks "artificially" price these homes too low on purpose. Also, inventory levels are really low. If you are trying to buy a home under $100,000 inventory levels are at about 2 weeks I hear!
So, what does a Seller's Market mean for home buyers and especially first time home buyers?
First, is more and more bidding wars on homes. In 2000 my wife and I were involved in two of these before being able to buy the 3rd home we wrote a contract on.
Second, home prices will rise as NAR's 2nd quarter report revealed on Wednesday. I remember in the late 90's when prices were rising 10% to 15% a year consistently that 99% of first time home buyers could not save money fast enough to keep up with the rising prices. For example, a couple might be able to save $500 a month or $6,000 a year; but home prices rose $20,000! They would go backwards by trying to save additional money.
Third and this is key for many first time home buyers, is fewer seller concessions to help with your closing costs. Two weeks ago I asked my most trusted appraiser whom I have worked with for 8 years about seller concessions. He told me he expects that seller concessions will diminish greatly in 2010 as sellers begin to realize that the market is NOW in their favor. This could mean that you need an extra $3,000-$5,000 to buy a home in 2010.
On Monday, I will cover 2 more reasons why 2009 may be the BEST YEAR EVER to buy a home in Denver.
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