Denver Real Estate Blog

Denver Real Estate Economic Monitor

Existing Homes Sales

Existing Homes Sales fell 0.3% in May to a seasonally adjusted annual rate of 5.99 million units – lowest level of resales since June 2003. Home prices declined for a 10th straight month. Housing inventory was at an all time high – an 8.9 months supply at the current sales pace. While economic conditions favor strong demand for homes, the high inventory needs to diminish before buyer confidence is restored. The likely direction over the next six months is expected to remain the same. Soft sale trend to continue through the third quarter.

New Home Sales

Following a double-digit increase in April, sales of newly constructed homes declined 1.6% in May. New Home inventory is stabilizing while the number of new homes available for sale fell modestly to a 7-month supply. This is higher than new home inventory in May 2006, but well below the 8.3-month supply posted three months ago. Given tighter credit standards, particularly related to sub-prime loans, the demand for new homes will continue to trend on the low side for the next three months. The likely direction over the next six months is expected to travel downward. New Home Sales will weaken further and remain soft until spring of next year.

Housing Starts

Housing Starts declined in May to 1.47 million seasonally adjusted annualized units, off 2.1% from April, but down 24% from the level in May of 2006. Housing permits generally a reliable indicator of future starts rose 3.0%, but the increase was due primarily to permits issued for multi-family starts. The likely direction over the next six months is expected to continue downward. Builders profit margin is getting squeezed and they will be forced to hold back on construction.

Housing Affordability

National Association of Realtors housing affordability index dipped in May to 109.9 it’s lowest point of the year, but well above the 101.8 levels recorded in May of 2006. Increases in the major components of the index. Interest rates, qualifying income and the median price of homes all contributed to driving affordability downward. The likely direction over the next six months is expected to increase. Wage growth rising at a 4% clip, while prices have been falling about 2%

Mortgage Rates

The 30 year fixed mortgage rates rose in June to an average 6.61%, the highest level since summer of 2006, but lower then in June of 2006. Similarly, the one year ARM rate also jumped 15 bases points and its highest point so far this year, High mortgage rates, along with stricter qualifying criteria are cutting into housing affordability for many households. The likely direction over the next six months is expected to remain the same. No major changes in rates from current levels.

Employment

The economy created 132,000 new jobs in June, higher then most analyst expected. In addition, April and May job creation figures were revised upward. In the past twelve months. 2.0 million jobs have been added to the economy. The commercial real estate sector contributed more than 10,000 jobs to the month’s employment figures. The unemployment rate was unchanged at 4.5% the likely direction over the next six months is expected to drop. Job creation continuing but at about the same pace, which is neither outstanding nor disappointing.

Economic Growth

The economy expanded at a slow 0.7% growth rate in the first quarter of 2007. This is the third and final reading based on complete data. The sluggishness was due primarily to the housing market slump. Residential investment fell 16% during the quarter. Any growth rate below 3% would be considered as sub par. In spite of that, consumer spending continued to show strength by expanding at 4.2%. Job gains and wage growth and the record stock market wealth are supporting spending. The likely direction over the next six months is expected to increase. Exports should be rising from the weak dollar.

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Jeffery McClintock, is a real estate broker in Denver and prides himself on providing clients with professional guidance in all phases of residential new construction, including market research, product development, consulting, marketing and advertising. His personal mission is to bring to you a level of knowledge, experience, commitment, high standards and results to answer your real estate needs. He believes, the most effective way to provide superior service is to build a strong working relationship with you. His system includes regular consultations and feedback, which is the best tool for identifying and clarifying your real estate objectives and help define strategic solutions.