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Home prices take dive during June

'It takes a while to get the prices up,' broker says

By John Rebchook, Rocky Mountain News (Contact)

Published July 8, 2008 at 10:28 a.m.
Updated July 8, 2008 at 9:43 p.m.

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Home prices in the metro Denver nose-dived last month, as the large number of distressed homes on the market made it the worst June in five years.

And in the first six months of the year, Realtors sold about $6 billion in homes. That's a $1.2 billion drop from the $7.2 billion sales volume in the first half of 2007.

In June, the average price of a single-family home sold and closed was $286,887, a 14.3 percent drop from $334,833 a year earlier. That was the lowest since June 2003, when the average price stood at $277,672.

While the average price rose about $10,500, or 3.8 percent from $276,374 in May, prices typically rise for seasonal reasons from May to June. It was the lowest May to June percentage increase since 2004.

The median June price of $230,000 for a single-family home, was the lowest since 2002, when it stood at $225,000.

"From the overall standpoint, we're going through some tough times and it takes a while to get the prices up," said independent broker Gary Bauer, who prepares a report each month based on Metrolist data.

The $1.2 billion drop in home sales from the first half of 2006 also will trickle through the entire economy.

In addition to less money earned by home sellers, real estate agents and lenders, the drop will affect other businesses indirectly.

"Conservatively, I'd say it has a three or four times multiplier effect," meaning the drop in sales is at least a $3.6 billion to $4.8 billion impact on the economy, Bauer said.

The culprit is the record pace of foreclosures clogging the market, which drives down the median and average prices of homes.

The good news is that foreclosure filings dropped 7.5 percent in the second quarter from the first quarter, although they are still up in the first six months of this year compared to the first half of last year.

"We're not done with the foreclosure mess," Bauer said. "I think we have a couple of more years to deal with it. But we're starting to get a handle on it."

Adam Cox, head of Denver-based ReLogic Inc., said his company is working with a lot of first-time home buyers who are finding bargains with bank-owned and otherwise distressed properties. First-time buyers also don't have the burden of trying to sell homes in a down market.

"If you don't have to sell your home now, why would you? But there is no telling whether the market is going to be better next year," Cox said. "None of us have a crystal ball."

Tom Clark, executive vice president of the Metro Denver Economic Development Corp., said the downturn in the housing market will cause pain short-term.

"But my general take on it is that the unevenness of this real estate recovery is a sign that the housing market is on the rebound," Clark said. "I think what we're seeing is a trailing statistic as people pick up foreclosed homes at bargain prices."

Clark said the recent home selling and buying experience of one of his sons is a microcosm of the dynamics of the market.

Four years ago, Clark's son paid about $215,000 for a home in the Green Gables area on the west side, and sold it for $217,000.

Although he took a loss after the expenses of selling, he accrued the tax benefits of four years of ownership, Clark said.

He tried to buy a home in Reunion in Commerce City, but was outbid.

Instead, he paid $190,000 for a 3,000-square-foot home east of Brighton that was in foreclosure.

"The seller had bought the Richmond American house for $270,000 four years ago and tried to sell it for $300,000," but was unable to, and the house went back to the lender, Clark said.

"You can't build a 3,000-square-foot home for $190,000," Clark said. "If we see any kind of rebound or pickup in the resale market, my son could easily be looking at a $30,000 or $40,000 bump in value in two or three years."

rebchook@RockyMountainNews.com or 303-954-5207

Pending sales slide

* The National Association of Realtors' pending* home sales index for existing homes fell 4.7 percent in May to 84.7 from an upwardly revised April reading of 88.9. That is the third-lowest reading on record. The index was 14 percent below year-ago levels. Pending sales fell around the U.S., sinking the most in the South, and the least in the West.

Comments

  • July 8, 2008

    11:10 a.m.

    Suggest removal

    ISKIFREELY writes:

    Aaah aaah, the sky is falling. The sky is falling.

    Cycles. The come and go. If you have capital, buy now and buy often.

  • July 8, 2008

    11:30 a.m.

    Suggest removal

    underthebusinvestments writes:

    Isn't this suppose to be real estate's peak/prime season???

    Remember, you can't attach addendums to the laws of supply and demand!

    http://www.newyorkfed.org/mortgagemaps/

    http://ml-implode.com/

    Don't get thrown under the bus!

    -Bus Driver

  • July 8, 2008

    11:45 a.m.

    Suggest removal

    bjones73 writes:

    If the greedy homebuilders would STOP building cookie cutter homes on every piece of land and open space up north and out east, we wouldn't have this problem!

    Supply and demand is too blame.

    TOO MANY HOMES BEING BUILT FOR NOT ENOUGH PEOPLE!!!!!

    Lennar, Centex and all you other greedy home builders - stop building here on what land is left here in Colorado and take your excess somewhere else!

  • July 9, 2008

    2:15 a.m.

    Suggest removal

    hockenator writes:

    I hate to see open space gobbled up by development, but remember those greedy homebuilders employ a lot of working class people, as well as professional people on the design side. Those people are hurting right now. Sure, they were still building when the market wasn't there, but in two years time all that will change.

  • July 9, 2008

    9:26 a.m.

    Suggest removal

    robbyr2 writes:

    Once again, does this mean that people are paying that much less for the same median priced home, or that people are buying less expensive homes (that they now qualify for)? Probably both. The sky is falling but perhaps not as hard as the stats might seem to show.

  • July 9, 2008

    3:01 p.m.

    Suggest removal

    duncandog writes:

    I will tell you the one percentage that hasn't fallen...Realtors are still making 6% commission!!!!!! That is the one stat that hasn't changed.

    I am glad that they quoted ReLogic in this article as I used their service to buy my home. They are one of the few companies in the country that seems to get it. We don't need realtors like we used to but we keep paying them the same percentage. I did the searching online, I pulled the most recent sales and had a pretty good idea of what I wanted to pay. I called ReLogic and when I bought my house they gave me back about 2/3 of the Realtor commission. That is the way it should be. I did most of the work, and I got most of the money

    So good luck to everyone else that overpays for homes that are already overpriced

  • July 9, 2008

    5:38 p.m.

    Suggest removal

    BikerChick writes:

    ..
    Realtors are an anachronism.

    90% of those in that field will have other jobs in ten years.

    Like Travel Agents of old, most buyers don't need the 'help.' Smart buyers will pay one thousand dollars to a savvy Real Estate Attorney to draw a decent contract, and pay nothing to any Realtor.

    Do you know anyone that was warned about a fraudulent mortgage by a Realtor - most knew the truth, and kept their mouth shut. Bad form. More than a few are collusive criminals.

    The residential home market will bottom-out in the year 2011.

    The average home will lose 40% of paper value over the four-year period.

    The market was grossly over-priced, and over-built. This 'correction' is long overdue.

    Any Realtor who tells you otherwise is a liar, albeit a nice, ignorant liar who smiles often.

    Please read the previous note carefully - written by a smart home buyer.
    ..

  • July 9, 2008

    8 p.m.

    Suggest removal

    bocacassidy writes:

    Biker chick is generally on the right track..Most of the people are blithely unaware of how bad the US economy really is....Added to the nominal decline in real estate prices , the collapse of the exchange value of the dollar in real , hard currency terms paints an even worse picture . The confiscatory level of real estate taxes in most parts of the USA will discourage much assistance from foreign investors.
    The 7 trillion dollar debt owed by the USA to the global central banks continues to mushroom out of control.The average American( if employed ! ) survives from payday to payday ...The US government and the media are of course in denial , but the looming reality is that America is a dead man walking...how I wish that I were wrong ! - bocacassidy @yahoo.com

  • July 10, 2008

    6:11 p.m.

    Suggest removal

    diamondstay writes:

    Hey there Bikerchick, Bocacassidy, and Duncandog,
    Great comments about real estate agents. About in the same category as your names. Very impressive!