Sub-$300,000 sweet spot for home sales

The “sweet spot” for Denver-area home sales continues to be for houses priced below $300,000

An analysis of home sales data by independent broker Gary Bauer found that more than 70 percent of the home sales were priced at $300,000 or below in the first nine months of the year.

Still, home sales in the price range account for a slightly smaller percentage of the total sales than they did during the first nine months of 2009, as more expensive home sales have picked up this year. Total closings, meanwhile, are down from last year.

Bauer, using Metrolist statistics, analyzed sales in the six-county area of Adams, Arapahoe, Broomfield, Denver, Douglas and Jefferson, as well as an eight-county and 11-county area, which he added Boulder and Elbert counties, and Boulder, Clear Creek, Gilpin and Park counties, respectively.

Bread-and-butter below $300K

“The sweet spot is that $300,000 and below price range,” Bauer said. “That is the bread-and-butter range. Part of that is because of the availability of homes in that price range. It also has to do with the age of the buyers and the number of foreclosure and problem-properties on the market. But the bottom line it comes down to is that homes remain very affordable in the Denver area.”

One of the troubling trends, however, is a reluctance of people who could qualify for a home are reticent to take a chance, given the turmoil the market in recent years. He said one big bank recently released a survey that found households with a combined income of $50,000 are showing little interest in buying a home in today’s market, despite record-low mortgages and affordable home prices. “We are looking at people who would rather rent than buy, which is going to cause the monthly and year-to-date sales numbers to drag for a period of time. The focus on the American Dream of homeownership is just not there anymore.”

Luxury buyers demanding

The Denver-area data also showcases a challenge to homeowners selling high-end properties and brokers selling them, Bauer said.

“Brokers must manage their expectations and far as how they to be priced and they must tell them to take credit of deferred maintenance,” as buyers at the upper-end want their homes to be in showroom condition, Bauer said. Illustrating the point, he said he recently spoke to a Realtor who had been selling lower-priced homes, and was surprised how demanding prospective buyers of a property in the $400,000 are. The home, in this case, had new carpet installed three months ago, and the buyer wanted it cleaned before he would entertain buying it. “I told that I would guarantee that if she were selling a home in the $600,000s, the buyer would demand new carpeting,” even though it was almost brand-new, Bauer said.

Tom Cryer, a broker with the Kentwood Co., uses $400,000 as his demarcation line. He finds that 82 percent to 84 percent of all of the home sales are below $400,000. “When we were going great guns and selling those millennium mansions, it was higher and then when we had the tax-credit buying at the end of last year and the beginning of this year, it drove (sale) prices down,” Cryer said. He said while there is a pick-up at the high-end as sellers aggressively slash prices, there is still this “no man’s land” above $400,000 but less than $1 million.

“Instant liquidity” key

“I’m finding to sell in that price range you have to tell a compelling story for your home,” Cryer said. “Literally, buyers have to look at your home and believe it is compelling as compared to other homes in the marketplace.” That might mean the price has to be dropped as much as 30 percent from 2007, he said, although that will vary depending on the “geography and neighborhood.”

In order to be compelling, the buyer must believe that the price tag is a good deal – not down the road, but the during the moment of signing on the dotted line, he said

“I’m finding that buyers are making decisions based on the perception of instant liquidity,” Cryer said. ”If a buyer feels he can buy it today and sell it tomorrow for the same price, and hopefully than move forward with some upward mobility – that is what it takes to get them off the couch to look at the home, and then feel comfortable enough to buy it.”

For the six-county area, home sales at $300,0000 or below accounted for 73.9 percent of the total sales, compared with 76 percent of the sales in that price range in the same period last year. Overall, there were 26,000 home sales in the first three quarters of 2010, down 7.9 percent 28,241 during the same period in 2009.

Home sales by the numbers

For the eight-county region, there were 7,946 home sales that did not exceed $300,000, accounting for 70.4 percent of the total activity. In the first nine months of 2009, there were 8,309 homes sales in that price strata, accounting for 73.6 percent of the condos and single-family home sales. Total home closings fell by 6.9 percent in the eight-county region this year to 29,523 form 31,716.

In the 11-county area, there were 8,053 homes sold at $300,000 or below, for 70.5 percent of the 29,909 home closings in the first nine months of this year. Last year, there were 8,391 home closings from January through September, accounting for 73.7 percent of the 32,084 closings.

Meanwhile, Bauer’s analysis found that among the larger counties, Denver had the most sales, followed by Arapahoe, Jefferson, Adams and Douglas.

Also, Bauer’s analysis of the six-county area found:

• Home priced at $99,999 or below, accounted for 12 percent of closings.
• Homes priced from $100,000 to $199,999 accounted for 34 percent of closed transaction.
• Homes priced from $200,000 to $299,999 equaled 27 percent of all closings.