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January 2012 – Real Estate Market Update


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Real Estate Market Update
2012 Market Outlook: Slow Motion Recovery Continues
A monthly market analysis capturing the observations and insights of the 8z Team
The market ended 2011 in a manner that has become typical during the slow motion housing recovery that we are now two years into. It’s not all that dramatic and does not make for great headlines, but the market continues to grind along showing modest improvement.
The total volume of real estate sold in Dec across all Front Range markets was up 1.1% over Dec 2010, ending the year with a run of six straight months posting a positive year over year gain.
2011 sales volume ended the year 0.8% higher than 2010 sales volume along the Front Range, indicating a market that stabilized and improved slightly, even without the help of the home buyer tax credit that fueled the market in 2010.

(Figures above in millions)
The supply of active listings ended 2011 at a very low 4.6 months, a signal that sellers, especially in the lower price segments, may begin to increase asking prices as buyers compete for the few listings on the market.
For the entire year, Front Range sales volume in 2011 topped 2010 sales volume by 0.8%. Not a huge, headline grabbing gain, but certainly a positive, solid sign of recovery.
The inventory of homes for sale along the Front Range dropped even further in Dec and ended the year at a shockingly low 4.6 months of supply. There simply are not enough active listings to satisfy demand at the lower price points.
In Boulder County, the volume of real estate sold in Dec was down 13.5% compared to Dec 2010, a weak end to the year. Active listings decreased faster than sales, causing a further tightening of inventory. Boulder County’s supply now stands at 6.8 months.
So that wraps up 2011. What will the Colorado housing market look like in 2012?
The short answer: “A lot like 2011.” Specifically, we are predicting the following for 2012:
#1. Sales volume up 1% to 5% in 2012
Demand will continue to grow. Colorado home buyers are gaining confidence as they realize that our housing market is much healthier than the national housing market they read about in the newspaper.
However, an acute lack of supply at the lower end of the market will mean many ready and willing home buyers will have a difficult time finding a property to purchase. This inventory shortage will actually hold the market back in 2012, resulting in modest year over year increases in volume.
Note- more inventory, including the much feared but yet to be seen flood of “shadow inventory” from bank foreclosures, might actually help the market meet demand, resulting in sales volume increases of more than 5% in 2012.
#2. Home values flat, plus or minus 3% in 2012
2012 home values and prices will look a lot like 2011, and 2010 for that matter. Overall, home values have been bouncing along the bottom within a narrow range of plus or minus 5% for more than two years now.
Of course, there are exceptions in specific markets and price points, both positive and negative, to this generalization. For instance, luxury homes in areas where developable land is plentiful have seen more than a 5% drop in value in the last two years.  On the flip side, homes in neighborhoods with low price points and few foreclosures have appreciated more than 5%.
Many of these same market segment themes will continue to play out in 2012. Overall though, prices will remain stable, if not ticking up slightly, as measured by macro pricing models such as the Case Shiller indexthat combine all market segments.
Note – 2012 may be the year in which we see appreciation of greater than 3% in the lower price ranges. A lack of inventory, coupled with high demand from investors who are attracted by soaring rental rates and first time buyers who are escaping those same rental rates, may result in significant appreciation at the low end. A 2012 appreciation surprise to the upside in the lower price market would eventually work its way to the middle market and increase home values more broadly.
#3. Colorado outperforms national market in 2012
Colorado will continue to be a market that leads the housing recovery. If the so-called national experts want to see what a recovery in the housing market looks like, they should book the next flight to DIA.
When they arrive, they may not be blown away by what they see, but this recovery is not about double digit increases and sizzling hot markets.  It’s about slow, incremental gains.
Bottom-line: 8z’s outlook is a stable market in 2012
Of course, as a real estate professional, I can only make predictions; I cannot control what the market will do. However, what is in my control is my commitment to keep you informed and to tell it like it is, both good and bad, as the market unfolds. You can count on me for that!
John Rebchook
Inside Real Estate News by John Rebchook
A monthly conversation with John Rebchook, Editor of InsideRealEstateNews.com and former Editor of the Rocky Mountain News, and Lane Hornung, President of 8z Real Estate.
It’s been almost seven years since Freakonomics: A Rogue Economist Explores the Hidden Side of Everything, became a run-away non-fiction best-seller, but Lane Hornung still periodically gets questions about the passages involving real estate agents.
To refresh your memory, the book by economist Steven Levitt and writer Stephen Dubner, said that Realtors on average sold their homes for 3 percent more than an average price for a home and kept their own homes on the market for 10 days longer.
Ouch!
Hornung, President, CEO and co-founder of 8z Real Estate and COhomefinder.com, found the first book to be a good and entertaining read, but he thinks they missed the mark when it came to their analysis of real estate agents.
“Great book by the way,” Hornung said, in a recent monthly conversation with John Rebchook, of InsideRealEstateNews.com. “I really enjoyed it. People often ask me about my thoughts on the part of the book about Realtors. As a person, I like to base my arguments and conclusions on data, just as the authors of Freakonomics do. But I thought their section on Realtors was fairly amateurish.”
John: In Freakonomics, the authors contend that Realtors have an incentive to low-ball listing prices to sell them quickly. While a $10,000 increase is a big deal for most sellers, for a Realtor, it might only mean another $500 or so in their pocket, so they would rather sell it quickly at a lower price – something they don’t do when selling their own homes. What do you think, Lane?
Lane: I’ll start by saying, “Have their ever been cases where that has happened? Yes. I’m not going to say, Gee, a Realtor has never done that. Is it as pervasive in our industry as the authors contend? I don’t think so.”
John: Why not? It seems to make sense on a purely economic level?
Lane: I think their logic and analysis is pretty laughable. It ignores variables and dynamics of this business.
John: Can you elaborate?
Lane: No. 1, time and price are extremely correlated in real estate. Sellers have to make tradeoffs between time and price. The dynamics are very different for someone who has to sell a home in a month compared with one who can sell it any time in the next six months or longer. If you’re not in a hurry to sell your home, you can probably price it a little higher.
John: What about the danger of over-pricing?
Lane: There is a huge risk in over-pricing a house. Most Realtors will tell you that in this age of the Internet, people will look at two things – price and photos. If both of those aren’t attractive, they seldom return to it, even with successive price reductions. It has already has passed over their transom and has become a stale listing. So you take a huge risk in over-pricing a home.
John: Getting back to Realtors selling their own homes, if they are correct that they command premiums, why do you think that is the case?
Lane: First, as I recall it was a very limited data set. But for the sake of argument, let’s say they are correct. There are actually very good reasons they sell them for more, and they have nothing to do with the notion that they are somehow ripping off consumers and clients.
The first is the question of time that I mentioned before. Realtors often put their homes on the market not because they have to sell. It is usually a move of convenience, so they have plenty of time to wait it out for a higher price.
John: Other reasons?
Lane: The authors completely overlook the presentation or staging of a home. Realtors are in the business. They know what needs to done to receive the maximum price. They know that merchandising a property correctly can mean a plus or minus 5 percent swing in the final selling price. You can’t really do a proper analysis without accounting for that.
John: Even though it’s been a number of years since Freakonomics was first published, do you think its impact still lingers?
Lane: It just adds to the perception that you can’t trust Realtors. It’s part of the long history of trashing Realtors. But a good Realtor who sells 20 or more homes each year – not someone who sells one or two homes a year to friends and family – is a true professional. They take classes, they truly study the neighborhood they work in and they get to know their clients. They want repeat business. They want their buyers and sellers to be happy.
And like I said, I really enjoyed Freakonomics. They just should have dug a little deeper into their analysis of Realtors selling their own homes.
John: Thanks, Lane.
Marsha Badger
Mobile: (303) 818-1390
MarshaBadger@8z.com

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We wanted to take the opportunity to give you a little home tip this month. Most home owners deal with condensation in the winter months and if not delt with it can become a very serious issue. Please check out this article to see our tips on how to deal with this real home issue.
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Noel Bennett
8z Mortgage
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nbennett@8zmortgage.com
Data Log
– Total existing homes sales,which are completed transactions that include single-family, townhomes, condominiums and co-ops, increased 4.0 percent to a seasonally adjusted annual rate of 4.42 million in November from 4.25 million in October, and are 12.2 percent above the 3.94 million-unit pace in November 2010.
– Lawrence Yun, NAR chief economist, said more people are taking advantage of the buyer’s market. “Sales reached the highest mark in 10 months and are 34 percent above the cyclical low point in mid-2010 – a genuine sustained sales recovery appears to be developing,”
-The national median existing-home price for all housing types was $164,200 in November, down 3.5 percent from a year ago. Distressed homes – foreclosures and short sales typically sold at deep discounts – accounted for 29 percent of sales in November (19 percent were foreclosures and 10 percent were short sales), compared with 28 percent in October and 33 percent in November 2010.

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