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‘Brighter’ days ahead for real estate?

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Mountain Realtors believe the market has moved past the low point

By Vicky Gits

 Real estate is still a buyer's market these days, but the picture is beginning to look a bit brighter for sellers than it did in 2008 and 2009, when the average price of a house in Evergreen/Conifer dropped 3 percent and 14 percent, respectively.

In this case the term "brighter" refers to the perception that the worst of the housing downturn is probably over, and that prices have hit bottom and are slowly starting to come back after the bursting of the nation's real-estate bubble. But many factors still are holding back the housing market.

Nationally, real estate continues to be depressed. Housing prices slid in January for the sixth consecutive month, basically reaching the lows at the bottom of the recession two years ago, according to the Case-Shiller Home Price Index for the 20 large cities, where home prices are down an average of 32 percent since 2006 at the peak. The Denver area suffered less, with only a 13 percent decline.

"My prediction is this year is going to be more of a repeat of last year," said K.C. Butler, with ReMax 100 of Genesee. Butler has been selling real estate in the mountains since 1983.

"I don't anticipate the market sinking dramatically. We are somewhere near the bottom — maybe just past it," Butler said. "That's why investors are becoming so active in the marketplace.”

"Investors" are people who are buying homes as rentals and as fix-and-flips, and their presence helps lend stability to the market. "The investors are holding up the foundations and buying up the bargains," Butler said.

He expects to see price appreciation in 2012 and the market to turn around in 2013.

Butler said he started to feel the downturn in real estate by 2007.

"It was really about jobs. When the jobs fell off, the foreclosures started piling up. In 2010, 10 percent of all Evergreen sales were bank-owned, and 7 percent were all distress sales. It is very comparable to the market I experienced in the '80s. It was a brutal market clear up until the '90s.”

 

Absorbing thoughts

One of Butler's favorite statistics is the absorption rate, which he defines as the percent of homes that are under contract compared to the number of homes on the market.

As of March 16, the absorption rate for Evergreen (North and South Evergreen combined) was 10.3 percent, slightly better than a year ago but nowhere near the 19.5 percent absorption at the same time in 2007. "The other positive is, the inventory is 13 percent lower than a year ago," Butler said.

"It just tells me that sellers in Evergreen are less likely to put their homes on the market given the current market conditions unless they absolutely have to."

Some analysts say the 2011 market is being depressed by the expiration of the federal homebuyer tax credits in April 2010. A part of the American Recovery and Reinvestment Act of 2009, the program made first-time homebuyers eligible for an $8,000 credit. The existing homebuyer credit was $6,500. Both gave homebuying a big boost last year.

 

What the numbers say

The good news is the average price of a single-family home (in Evergreen/Conifer combined) increased, if only slightly, by 2.2 percent to $366,000 in 2010 from $358,000 at the bottom in 2009, based on data supplied by Tupper Briggs of ReMax Alliance of Evergreen.

The down side is the market dropped 14 percent in 2009 and 3 percent in 2008 and hasn't yet recovered to the 2007 peak of $426,000 for the average house, Briggs' data show.

Not only did prices decline, but the number of homes sold in a year across Evergreen and Conifer declined drastically in a couple of years from 1,324 in 2006 to a low of 849 in 2009, a 36 percent drop. However, the number increased slightly in 2010 to 862, an increase of 1.5 percent.

The median price of a home hit a low of $299,000 in 2009, based on 849 homes sold, compared to $340,000 in 2006, with 1,324 houses sold.

In2010, the number of homes sold increased slightly to 862 (up from 849), and the median price was up by 5 percent. (The median price is the point at which half the selling prices are higher and half lower.)

Evergreen price behavior is consistent with prices in the six-county metro area, where the median price was up 5 percent in 2010 compared to 2009, according to the Colorado Association of Realtors.

The fact remains that prices in 2010 across the metro area were at about the same level they were in 2003.

"In many cases, I've seen homes selling for the same price in 2010 that they were in 2000. Anywhere between six and 12 years of price appreciated was evaporated," Butler said. Homes above $1 million tended to have a larger decline than homes in the $250,000 range, which were more in demand, he said.

"The thing is, when the market turns around, it bounces back pretty fast. You are going to see the unemployment rate improve. Investors are holding up the foundation by buying up the bargains," Butler said.

He expects to see the bounce-back in 2013, after a year of price appreciation in 2012. A certified distressed property expert, Butler encourages anybody that can stay put not to walk away from a house if they owe more than the mortgage.

 

Return of the old days

"As 2011 begins to unfold, we are kind of back to the old days," said longtime Evergreen Realtor Briggs. "The sellers aren't selling for profit. They are selling for other reasons. But at least buyers are out looking who seem to be pretty serious, and the average selling price is starting to increase 1 to 2 percent. It's not much, but it's a whole lot better. Now we can show buyers the bottom of the market is behind us."

"It feels like the market is turning around . … After two years the sellers have clearly gotten the message that they need to be flexible if they want to sell," Briggs said.

Briggs said he has survived the downturn by switching from being a listing broker to working more with buyers.

Like Briggs and Butler, Mark Footer of Intero Real Estate Services describes the housing market as in recovery mode.

"We are past the economic abyss that held consumer spending at bay in 2009, and lenders are finding secondary markets to sell their mortgage products, opening up more capital to lend in the form of new mortgages," Footer said.

The dramatic price drops were most severe between August 2008 and February 2009, when prices began to slowly increase again. "I see prices slowly recovering over the next two years with some peaks and valleys, with the valleys growing smaller over time," Footer said.

Conventional wisdom says a low point represents a buying opportunity.

"From an investment point, there may not be a better point in my lifetime, and I'm over 50," Butler said. "First of all, historically the last two surges of personal wealth occurred after the Great Depression and the savings and loan debacle. In both cases the people who bought real estate ended up owning a great deal of equity. The third time is upon us right now."

 

Contact Vicky Gits at vicky@evergreenco.com or 303-350-1042.

 

Summary real estate data

Evergreen/Conifer houses sold

(Source: Tupper Briggs ReMax Alliance of Evergreen)

 

• Number of houses sold: 862 in 2010; 849 in 2009; 897 in 2008; 1,179 in 2007; 1,324 in 2006.

• Median prices of houses sold: $315,000 in 2010; $299,000 in 2009; $335,000 in 2008; $365,000 in 2007; $340,000 in 2006;

• Average prices of houses sold and percent increase over previous year: $366,000 in 2010, up 2.2 percent; $358,000 in 2009, minus 14 percent; $415,000 in 2008, minus 3 percent; $426,000 in 2007, up 3 percent; $415,000 in 2006, minus 1 percent; $418,000 in 2005, up 8 percent; $389,000 in 2004, up 5 percent.