Denver’s housing rebound is in full swing, but sellers are acting as though they didn’t get invitations to the party.
“The question each and every day is: Where are the sellers?” said Gary Bauer, an independent real estate research analyst.
At the end of April,metro Denver had just shy of 7,000 pre-owned homes available for sale, a third fewer than a year earlier and less than half the 15,000 to 20,000 homes that Bauer said would represent a normal market.
“I can’t figure out why people aren’t listing,” said Brenda Yates, a broker associate with Keller Williams DTC.
Yates and her husband plan to put three properties on the market, after finally seeing enough appreciation to make it worthwhile, and they don’t expect it will take long for them to sell.
The median price of homes sold in metro Denver last month rose to $280,000, up from $268,200 in March. The latestStandard & Poor’s/Case-Shiller Home Price indexreports 14 straight months of price increases in Denver, with prices up nearly 10 percent year-over-year as of February.
Scarcity is triggering bidding wars and causing homes to move quickly, often on the first day, brokers report. The median time a new listing in April remained available before going under contract was four days, reports Jim Smith, owner of Golden Real Estate.
The law of supply and demand would argue that higher prices will bring out more sellers and restore balance. And while that may yet happen, several impediments are working against it.
Littleton resident Kelli Jo Paddilla chafes at reports that it is a seller’s market. She bought a condo at Shadow Canyons in 2006 for $208,000. When the developer discounted a larger
Kelli Jo Paddilla sits on an empty condo that is costing her $1,200 a month rather than walk away. “I am very uncomfortable having to make that mortgage payment one more time,” she says. (Cyrus McCrimmon, The Denver Post)
unit, she bought another one in 2009 and rented her first one to a family member.
And then prices plunged. Several units went into foreclosure and were converted into rentals. Tenants proved unreliable, and the rent she could get was $400 a month short of her costs.
“I have been stuck with that thing,” said Paddilla, who considered walking away but didn’t want to destroy her credit rating.
Paddilla estimates she would probably get only $107,000 out of the condo, in part because her development no longer qualifies for FHA financing. And while it sits empty, the condo is costing her $1,200 a month she doesn’t have.
“I am very uncomfortable having to make that mortgage payment one more time,” said Paddilla.
Despite recent price increases, many owners remain blocked out of the market. Paddilla, whose firm Key Concepts specializes in short sales, where a lender agrees to accept a sale price less than the remaining mortgage amount in a sale, said she may consider one herself if a tenant doesn’t show up at the increased rent she is asking.
Across metro Denver, 18.2 percent of homeowners carrying a mortgage owed more on their loans in the fourth quarter than what their homes were worth,according to a report from CoreLogic. Another 6.4 percent of mortgage borrowers were barely above water but couldn’t sell for enough to cover various costs, such as commissions.
Most sellers also need money to put down on the next property — 20 percent if they want to avoid tacking on private mortgage insurance or the added costs that come with an FHA loan.
And all of that is before even getting to the question of having enough equity to acquire a bigger and better property, a key motivation for many people selling in the first place.
The equity needed to fuel the “move up” market is still missing, said Michael Clarkson, a managing broker with Snow Coast Real Estate.
That mismatch between supply and demand, which Clarkson describes as “draining the tub,” could cause the market to lose momentum if not reversed, one reason he remains skeptical.
In a perverse kind of way, the tight inventory is making some sellers, especially those who don’t relish having to fight to find a new property, less likely to list, even though the market is very much in their favor.
“People are fearful (that) if they get their property sold, they can’t find a replacement,” said Van Lewis, with Re/Max Alliance 3000 in Aurora.
Scott and Mittie-Ellen Haase want to buy a larger home in Jefferson County before they list the one they own in Applewood, even though the strategy carries some risk.
“Carrying two mortgages is a scary position to be in,” Mittie-Ellen Haase said. “It is a question of finding something that we would move for.”
If the couple sold their house quickly, it could force them to make multiple moves and put them under more pressure to buy something that doesn’t fit, she said.
Haase recounts touring one new listing and realizing that severe water damage would make it a money pit, something that a more desperate buyer might have overlooked just to get a property.
If the couple doesn’t find a home they like, they plan to add on to their property rather than list it.
Because shortages create an expectation of higher prices in the future, sellers are also motivated to wait, especially if a refinanced mortgage has made their payments more comfortable.
Three-quarters of people surveyedby online real-estate firm Trulia expected that next year would be even more favorable for sellers. Only 32 percent expected next year would be more favorable for buyers.
“The very short answer is no one wants to sell near the bottom,” said Trulia chief economist Jed Kolko on why more sellers aren’t showing up.
