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Gloomy report for Sept. home prices

But some brokers feared worse with subprime collapse

John Rebchook, Rocky Mountain News

Published October 5, 2007 at midnight

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The recent collapse of the subprime mortgage market and still-climbing foreclosures drove down sales and home prices in Denver last month.

The question facing the market is whether September's poor housing performance is the harbinger of a long-term downward spiral or a needed cleansing from irresponsible lending and borrowing, setting the stage for an orderly recovery.

"I think it's just a blip," said veteran broker Larry McGee, managing broker of the Berkshire Group.

In September, the median and average prices of homes fell, as well as the number of houses placed under contract.

"I expected worse," given the turmoil caused by the abrupt loss of "easy money" in August from the loose underwriting associated with subprime lending, McGee said.

Adjustable-rate mortgages that will rise next year will add to the record 19,000-plus foreclosures filed through September, he said. "But we're not dying here. We hit a wall and now we're going around it."

While much of the news was gloomy in September, there was a bright spot. For the ninth consecutive month, the number of unsold homes on the market fell, compared with the same month in 2006, said independent broker Gary Bauer. Bauer released a report Thursday based on Metrolist data, which tracks sales by Realtors in the Denver area.

There were 30,335 unsold homes on the market in September - still high by historical standards - but 3.5 percent fewer than the 31,450 homes clogging the market a year ago.

The resale market, however, is still being hammered by competition from builders offering huge incentives, ranging from free hardwood floors to finished basements, Bauer said.

His report showed that there were 4,329 homes placed under contract in September, an 18.7 percent drop from August and 8.7 percent fewer sales than in September 2006. In September 2005, there were 6,158 homes under contract, 42 percent more than last month's tally.

The average price of a single-family home closed in September dropped almost 8 percent from August to $305,459, from $329,783. And the average price was down about 1.1 percent from September 2006, at $308,903.

The median price of a home fell 4.6 percent in September from August, to $245,000 from $258,000, but was up slightly from $243,500 in September 2006.

The Denver area probably won't be a seller's market until the spring of 2009, said Chris Djorup, owner of of Djorup & Associates, Metro Brokers.

It's a great time to buy a house that you plan to live in for several years, Djorup added, but "if you're doing fix and flips, you have to be very sensitive to what the market is likely going to do in May 2008."

The recent shakeout in the subprime market is a "blessing," said Deviree Vallejo of Kentwood City Properties. She specializes in selling homes in Riverfront, Highland, Bonnie Brae and Washington Park.

"No. 1, the unsavory lenders are getting out of the business," said Vallejo, who has seen bidding wars on some homes.

"And No. 2, everyone was getting their real estate license, but now those people are getting weeded out," Vallejo added. "The fittest will survive, so only the best professionals will make it."

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