Wednesday, December 1, 2010

Home sale closings fall across Colorado, median home prices mixed

The number of metro Denver home sales closed fell 24.6 percent in October, making October the fifth month in row that home sales have fallen year-over-year. According to new home sales data released by the Colorado Association of REALTORS, the number of closings also fell statewide and in the Pikes Peak region with year-over-year drops of 21.8 percent and 18.4 percent, respectively.

The declines in home sales closings reflects the end of the home buyer tax credits that stimulated home buying during late 2009 and early 2010. The tax credits ended in April 2010, and initially, any home under contract by April 30 needed to close by June 30, but additional legislation extended the closing deadline so that loans closed by September 30 would still be eligible. In spite of the change in legislation, it is clear that sales activity falls off considerably following the June 30 deadline, and year-over-year declines since July has often been as much as 20 percent.

The first graph shows the year-over-year changes in the number of closings in the metro Denver area. The months of June through October have all shown negative movement in closings compared year over year. Similarly, in the second graph, which shows year-over-year changes in closings in the Pikes Peak region, July, August, September and October all show drops in closings as well.

The third graph, which shows closings statewide, shows that a similar trend applies statewide. All large metropolitan areas reported year-over-year drops in transactions, including Fort Collins, Greeley, Pueblo and Grand Junction.

Median home prices showed gains, however. The fourth graph shows that in both the Pikes Peak region and in the metro Denver area, median home prices were up in October compared to both October of 2008 and October of 2009.

In the fifth graph, we see that year-over-year changes in median home prices have been positive since July 2009 in metro Denver, and have also been positive since April 2010 in the Pikes Peak region. No downward trend has been forming in either metro Denver or in the Pikes Peak region. With fewer buyers, however, the recent declines in closings are likely to put downward pressure on prices.

In the final graph, we see that statewide, growth in median home prices has been less strong. Outside of metro Denver and the Pikes Peak region, growth has been considerably smaller, with Fort Collins, Greeley, Grand Junction and Pueblo all showing year-over-year drops in prices.