Friday, February 17, 2012

Single-family home sales activity inches up

The number of single-family home sales closings increased again in December in metro Denver, the Pikes Peak Region, and statewide. According to home sales information released by the Colorado Association of Realtors, the number of single-family closings rose 1.9 percent in metro Denver during December 2011 compared to December 2010. Over the same period, closings rose 2.3 percent statewide, and 3.5 percent in the Pikes Peak region. Statewide in December, there were 4,549 closings. 2,544 of them were in the metro Denver region and 651 occurred in the Pikes Peak region.

The number of closings in all three measures has increased, year over year, each month for the past six months.

This recent growth trend has also begun to show up in the 12-month moving averages used to track trends in home sales. The highly-cyclical nature of home sales trends makes it difficult to track multi-year trends in home sales. The addition of the homebuyer tax credits from 2008 to 2010 further complicated the picture. So, I have smoothed out the sales totals using a 12-month moving average for each month.

In the first graph, we see the moving average in home sales compared to year-over-year changes in the average for the metro Denver area. The trend in home sales closing has been downward since mid-2005 and accelerated in early 2009. From March 2008 until September 2011, every month showed a negative year-over-year change in home sales. In December, the year-over-year change was positive for the third time in 47 months, with an increase of 1.5 percent. As indicated by the moving averages themselves, overall home sales numbers have been generally flat since early 2009, although they dipped during mid-2011.

The second graph shows the same measurements for Colorado statewide. The year-over-year change in the statewide average for home sales turned positive in December for the third time in 15 months. Statewide, transactions moved into positive territory in response to the homebuyer tax credits that were were offered in 2009 and 2010, but moved into negative territory again after the expiration of the credits. The statewide moving average increased 3.4 percent in December, year over year.

The third graph shows the same measures for the Pikes Peak region. The homebuyer tax credit produced much larger changes in the regional trends in the Pikes Peak region than in metro Denver or statewide. The year over year change in December was positive, making it the second time in fourteen months that the year-over-year change in average sales has been positive. Excluding the run-up in home sales produced by the tax credit in 2009 and 2010, the average in home sales has been largely flat since mid-2009 in the Pikes Peak region, but has turned slightly upward since the fall of 2011.

The analysis of moving averages in home sales activity indicates that the markets continue to stabilize in metro Denver, the Pikes Peak region, and statewide. Recent upward trends suggest that sales activity will continue to build at least in the near term. Sales totals, however, are likely to continue to be well below peak levels for at least the next year.