What real estate crash?
Durango experiencing sales activity not seen since boom years
The Great Recession is hardly a distant memory, but it’s safe to say that Durango’s real estate market has been seeing quite the boom lately.
Low interest rates on mortgages, growing consumer confidence and low inventory have converged in recent months to create a wave of demand that is outpacing supply at a rate that real estate agents say they haven’t seen in years.
The phenomenon is at its peak in the city.
“It’s a really busy market in town. Almost all homes that are priced accordingly are flying off the shelf,” said Tina Miely, a real estate agent with Coldwell Banker Heritage House Realtors. “Bidding wars and all kinds of things like that are happening under the $350,000 price point just in the past three weeks.”
The low inventory levels right now aren’t a surprise to Realtors – the number of properties up for sale always tends to drop in the winter as people wait until spring. The difference this year is that demand has remained high thanks to historically low mortgage interest rates and affordable home prices, real estate agents said.
“Buyers are starting to feel the pinch – interest rates aren’t going to get any lower, and prices are potentially going to rise this spring, so people are going to try to jump in the market,” said Denise Storm, president of the Durango Area Association of Realtors.
In Colorado, interest rates for 30-year fixed-rate mortgages bottomed out at 3.38 percent in December, according to HSH.com, a mortgage-rate tracking website. Average rates this week ticked up to 3.75 percent.
Inventory levels indicate the in-town Durango market could be headed toward a sellers’ market. Last week, 77 Durango homes were on the market, indicating a five-month supply based on last year’s sales. But of those 77, 29 are under contract, leaving 48 – or a 3½ month supply – that are truly on the market. A five- to seven-month supply indicates a balanced market, according to the National Association of Realtors. Any less and the market is said to favor sellers.
Data from the Colorado Real Estate Network show a 14 percent increase in the percentage of houses sold at or above their final asking price during the last three months as compared to all of 2012.
“The market is obviously heating up,” said Don Ricedorff, a real estate broker with The Wells Group who compiled the data.
Prices also have been rising as demand has increased for Durango homes. The median home price for in-town properties increased almost 10 percent from the fourth quarter of 2011 to the fourth quarter of 2012.
Meanwhile, days on the market for in-town Durango homes dropped from 181 days in 2011 to 149 days in 2012. In 2005, at the height of the market, homes were for sale an average of 124 days.
Homes that have been on the market for several months now are becoming more appealing to buyers faced with a more limited selection, said Melissa Mayer, a real estate broker with The Wells Group.
The uptick in the real estate market has spilled over into home construction, with building permits in the city of Durango increasing from 11 in 2008 to 35 in 2012.
Lenders have seen an increase in mortgage applications as people respond to the historically low interest rates, said Mark Bowman, a mortgage consultant with First National Bank of Durango.
Typically, he would take two or three applications in a week, Bowman said, but last month, that number was more like five or six. Bowman said he has seen a resurgence of first-time homebuyers and investors who are finding homes priced low enough that they can produce positive cash flow as rentals. Both are groups that agents say they are seeing in larger numbers, as well.
Increasing in-town demand is affecting the market in Bayfield and other parts of the county, Storm said. Elke Brutsaert, head women’s coach of Fort Lewis College’s cycling team, is selling her house on Florida Mesa to move into Durango. After two weeks on the market, her house already had been shown 10 times, Brutsaert said last week.
With buyer demand so high, real estate agents are sending out mailers, Facebook messages and calls to potential sellers encouraging them to sell now.
“I went through my phone list and called people who perhaps wanted to sell a year or two years ago and asked if they wanted to sell again,” Miely said. “Houses are going on the market and selling in a week or two.”
And Durango isn’t the only place feeling the inventory squeeze – the supply of Denver-area homes for sale hit a 23-year low in January, according to a report in the Denver Business Journal.
The reality of financing
While low interest rates are out there, it has become harder for people to qualify for them because new federal regulations on areas such as underwriting and mortgage buybacks are rightly causing banks to be more cautious, said Jennifer Lopez, executive director at the Regional Housing Alliance, and Pam Moore, the agency’s deputy director.
Rising home prices in an area already known for its higher costs also means people have to put down more money up front on a mortgage.
“For a family making $60,000, their dollars don’t go as far here,” Moore said.
If people can’t make a down payment of 20 percent or more, banks require they purchase mortgage insurance, creating an even bigger financial burden for homebuyers, Moore said.
In response, the Regional Housing Alliance has partnered with three local banks on a program to write a second mortgage for qualified homebuyers, allowing them to avoid insurance requirements.
With so many moving parts in the home-buying process, people seem to be seeking more education before taking the leap.
The Regional Housing Alliance’s monthly homebuyer education class had its highest attendance yet in February, Moore said.