Mid Year 2010 Residential Market Watch to Denver, Colorado and Surrounding Metropolitan Areas

2. There is no question we peaked in foreclosure filings in 2008 and we now have had almost three years of decline.

3. It should be noted right here; Short Sales are have become the new method by which lenders have been reconciling unpaid debt with borrowers in large numbers for more than 12 to 18 months.

4. Therefore, we may be past the foreclosure cycle, but the short sale cycle pedals on hard and fast.

5. We will have 2-5 more years in this cycle before a more normal trend is reached not unlike the cycle in the 1980s.

6. It takes as long to recover as it does to get sick!

7. SALES TO LISTING RATIOS

8. The ratio of sales to listings has been of paramount importance to predicting the health of a market for many years.

9. What we are seeing right now is an estimated trend of rapidly increasing supply and the absorption from sales activity remaining constant.

10. This is creating a trend or movement toward over supply.

11. If the second half of 2010 were to continue on this same trend line as the first six months, we will drift into an oversupply market creating more foreclosure and short sale potential.

12. AVERAGE PRICE TRENDS

13. Average price trends should only be considered as a guide to market conditions and not an absolute for all properties in a given market place.

14. In the first half of 2010, we have seen average prices inch up.

15. They have increased significantly in areas that have higher end inventory, because we have seen increased activity there due to the new price paradigm which is often 20, 30, 40 and even 50% of 2007 values.

16. This elevates the average price particularly if there is less activity at the lower end of the market as we have seen since the Tax Credits were eliminated from this equation.

17. Overall, average prices are up, but in many individual MLS areas, prices have actually declined.

18. Remember, each and every enclave, community or neighborhood needs to be addressed for their own individual price trend. Average prices can only be used as a guide, and then and only then can they assist with computing the health of a residential market area.

19. MARKET SHARE BY PRICE RANGE & SUPPLY OF INVENTORY

20. There is much to learn from this next chart. It can tell us the story about the health of the market.

21. Is the market growing in the higher priced market segment or is it growing at the bottom of the price ladder?

22. Here’s what we know. In the last 6 months, there has been considerable growth in the middle of the market from $200K to $750K.

23. This makes sense since we literally ran out of inventory under $200K due to the tax credits, the $200-400K price segment grew by almost 2% in just 6 months.

24. We know from NAR data that each entry level transaction creates an upward movement of parties to the market place hopefully displacing residents along the way until there have been 6 more transactions. (Keep in mind, many of the bank owned properties were vacant at the time of sale a less “friction” in the market place resulted.)

25. We know the higher the price the greater the months’ supply of inventory. This has historically been a result of greater builder margins therefore more supply was created at this end of the market, but with virtually no new construction in the market at this time, this suggests significant weakness for price improvement in this segment moving forward.

26. Additionally, we know, the higher the price the smaller the market share in terms of the number of transactions. This trend has never changed as long as this chart has been compiled.

27. IN CLOSING

28. There are always competing ways to read the data and present the data in any report.

29. The data in this analysis has been presented in this fashion since 1975.

30. The result has been a relatively accurate method of predicting future trends in this market place.

31. Everything points toward more of the same.

32. Uncertainty

33. Price sensitivity

34. Inventory teetering on the tipping point of dangerous oversupply

35. External factors affecting consumer sentiment which affects home buying confidence

36. The cost of borrowing

37. The cost of energy

38. Residential taxes

39. As a result, we can’t bet on price appreciation to “bail out” the price depressed residential market any time soon.

40. It’s going to take some time to heal all these wounds.All data obtained, compiled and edited from Metrolist, Inc. which compiles their data from individual Realtor sources. This report was completed by Tom Cryer, SCRP Broker Associate with The Kentwood Company. Information obtained from sources believed to be reliable but not guaranteed.<br />