Following on the heels of the OFHEO report a week ago which showed lower values during the first quarter of 2007, average prices for single family residential homes decreased in May slightly (1.12%) from April, but increased slightly over May 2006 by 1.16%. Median prices for single family residential homes (a better indicator of real prices) increased in May by 1.27% over April.

 

Homes sold for an average of 97% of list price, but 87% of original list price, showing that sellers are having to lower prices to get their houses sold. For too long sellers were setting unrealistic prices, having been used to price rises a decade ago when prices were rising by double digits every month.

 

For condo/townhomes the increase in median prices was greater, 4.73% from $148,000 in April to $155,000 in May.

 

Overall the Denver real estate market is stable, showing little growth, but little decline. Numbers of homes for sale has increased from April, but decreased from May last year, showing a lessening of the housing glut.

 

More houses sold in May than in April by 13.82%, and were up slightly (1.52%) over May a year ago. 

Days on market decreased to 98 from 108 in April, but were still higher than in 2006. Values for single family residential homes declined slightly by 1.12% from April, but rose 1.16% from May 2006.

 

Condominium/townhouse sales were up by 21.79%, a significant jump over April, but just a slight increase over May 2006. Days on market for May were unchanged from April, but down from May of last year. Average price was up just slightly over April, but down 3.21% from last year this time.

 

What may have an impact on the Denver real estate market is the threat of higher interest rates. Rates increased during May from 6.125% for an “A” borrower to 6.375% at the end of May, limiting buyer affordability. If interest rates rise significantly, as they did in the 1980s, then the pool of buyers will shrink and sellers will experience a longer time on market and a decrease in value. Peter G. Miller, in an article in Realty Times, worries that the increase in foreign ownership of American debt may one day reach a point where foreign investors will be much more cautious, lending at higher rates of return, meaning higher interest rates in the U. S. If that occurs (and it’s more or less likely depending on which economist you read!), then mortgage interest rates like the ones we had in the 1980s could shoot up.