A couple of weeks ago, we reported on the May real estate sales for the Fort Collins area. The month showed a 1.2% decline in average selling price compared to a year earlier and a 15.6% drop in the number of homes sold. This left a very slim year to date average selling price increase of 0.8% and a 14.0% decrease in the number of homes sold. These figures are for the entire ‘Area 9’ which is Fort Collins and all of northern Larimer County and include all home sales: single family, multi-family (condos and townhomes), both new and resale. A breakdown of these figures shows the largest category, single family resale homes actually have a 4.1% increase in the average selling price for the year to date and a 1.7% increase in the median price.

Four other reports that track home selling prices are now out with their updated reports and the news is all over the map. The National Association of Realtors (NAR) says that national resale homes sales are down 14.5% on an annual basis compared to May last year and the median price of an existing single family home is down 6.8%. The Office of Federal Housing Enterprise Oversight (OFHEO) says that U. S. home prices fell 4.6% in April compared to April 2007. The S&P/Case-Shiller home price index reports that home prices dropped 15.3% in April in the 20 major metropolitan areas that they track. And finally, the U. S. Commerce Department reported that sales of newly built single-family homes were off 40% compared to the annual adjusted sales a year ago and that the median price of a new home was down 26% from a year ago.

According to the Case-Shiller report, the metro Denver area outperformed seventeen of the twenty metro areas reported, with a 4.7% drop compared to the 15.3% decline nationwide. OFHEO in their monthly report did not break out individual cities but showed the Mountain region, which includes Colorado with a 4.9% drop, very comparable to their national figure.

There continues to be a big difference in the selling price figures reported. NAR says prices are down 6.7% to the end of May. OFHEO says 4.6% (April) and Case-Shiller reports 15.3% (April). There are two major differences between OFHEO and Case-Shiller. OFHEO uses a much broader geographic area with data from 292 Metropolitan Statistical Areas while Case-Shiller follows just the twenty largest U.S. metro areas. OFHEO tracks mortgage loans – both purchase and refinance of $417,000 or less while Case-Shiller reports only purchase financings. With 1.4 million foreclosed properties for sale nationally, this means that their prices reflect a foreclosure heavy sample, with foreclosures usually representing a substantial price discount. Lawrence Yun, NAR chief economist, said “Foreclosures and short sales appear to be a larger part of the market, particularly in California, and are creating a drag on current home sales”. The NAR report covers national existing home sales with a total of 4.99 million on an adjusted annual basis. It covers cash sales as well as those financed with mortgages and includes all properties sold through a Realtor co-op multi-list system.

Whatever the number, it is obvious our local market is holding up very well compared to the national scene. This has been helped particularly by the fact that we did not have a big run up in selling prices over the last few years and also that our housing inventory is at about a seven month supply level compared to a 10.8 month supply nationally. Slow and steady we go!

“Fine Homes” are generally considered to be those homes priced in the top 5% of the market price range. Obviously this fine home definition varies greatly across the country with homes in the $200’s qualifying in some areas and homes priced above $1 million in other areas. Last year, in this area, the top 5% of the market totaled 173 homes priced above $520,000. For this year to date the top 5% are the 71 homes sold for $525,000 or more. By way of contrast, the top 5% of the market five years ago were the 186 homes sold above $410,000.

The marketing of a home in the upper price range requires a different set of skills and experience, particularly when it is noted that there are currently 331 homes listed for sale priced at $525,000 and above. This represents 15% of the current active listings even though the normal demand is just 5% of total sales. Obviously this kind of inventory / competition makes it difficult for home sellers and their agents and a boon for buyers.

Above $1,000,000 it is even more of a challenge. In 2007 there were thirteen single family home properties sold at $1,000,000 or more. There were three other sales in this price range but they were large horse properties and / or large acreages. Five of these sales were new homes in Glenn Ridge (3), Fossil Lake (1) and The Hill at Cobb Lake (1). The other sales were resale homes in Eagle Ranch (4), Woody Creek (1), Coeur D’Alene Estates (1), Terry Cove (1) and a Cortina condo.

For this year to date, sales above $1 million are on a roll, certainly going against the grain of all the bad news about the economy, financial institutions, the mortgage crisis and more. In the first five and one half months, there have been thirteen single family sales closed above $1 million. This does not include another three sales of horse / large acreage properties. Six of the sales have been newly constructed homes with four of those in the new Harmony development, one in Glenn Ridge and one in Fossil Lake Ranch. The resales have been four in Eagle Ranch and one each in Warren Shores, Breakwater Estates and Cottonwood Point.

This is on a pace for twenty-five sales this year which would be remarkable considering that the best year ever for sales of homes priced above $1 million were the seventeen closed in 2005. This has to be good news for sixty four sellers in this price range. In analyzing the homes for sale in this market, it is interesting to note that they are literally all over the map. Twenty four of them are large acreages, mountain properties, ranches, horse operations and development properties. Of the balance, they are located in twenty two different subdivisions with the most in Harmony Club (5) and The Hill at Cobb Lake (4). There are three listings in Fossil Lake and three in Eagle Ranch and the rest are one or two listings in areas like Harmony Ridge, Glenn Ridge, Patterson Point, Hearthfire, Eagle Lake, Cottonwood Shores, Woody Creek, Center Greens, Greenstone, Parkwood, Hearthside, Loomis (‘old town’), Warren Shores, Gregory Road, Vista Largo and The Ridge.

In addition to the many varied locations, these homes offer a wide range of amenities, features, size and age. Prices range from $250 per square foot (finished living space above grade) all the way to $600 and size ranges from a 1,900 main floor to more than 5,000 sq. ft. above grade and almost 10,000 sq. ft. of total finished space. Most have at least four or five bedrooms plus office / study and four baths all the way to seven seems to be the norm. Garages range from a very normal two car attached all the way up to a massive 2,400 sq. ft. seven car – about the size of an average home. The oldest was built in 1905, a few are from the sixties and seventies but the majority is less than ten years old and several are waiting for a contract before even beginning construction.

If you are a potential buyer or are just interested in more information on any of these properties you can view them at www.ColoProperty.com. Go to the ‘Fort Collins’ area and put in a price range of $1,000,000 and up. Most have many additional photos and virtual tour links.

Before we get into all that negative stuff, let’s see what we can find to write that is positive about the current local real estate market – at least for home owners and home sellers. How about home sales in May were up 19% compared to last month. May was the biggest month of closed sales since August of last year. There were an additional twelve sales recorded for April so the decline improved from 16.8% to 12.2%. The average selling price showed a very modest drop of 1.2% compared to last year. Marketing times, at least for the homes that are sold, continue to improve. The homes that closed in May were on the market an average of 114 days and the year to date now stands at 118 days compared to 129 days at the same time last year. The inventory of homes for sale is staying low with 2,154 available at the end of May, a 19% decrease from the 2,445 on the market last year. Based on sales over the last twelve months, this is about a seven month supply of homes, very close to a balanced market and much better than the ten to twelve months of inventory reported nationally. And new home sales hit a record price with an average of $420,161 in May, an increase of 30.7% from last year. This was obviously caused by the mix of sales but the median price was also up 6.6%

On the national scene, the pending home index reported by the National Association of Realtors increased 6.2% in April compared to the previous month, contrary to the Wall Street economists who had predicted no movement.

Now for all the other stuff! The table shows home sales dropped 15.6% in May compared to the previous year, continuing an uninterrupted trend of double digit decreases that began in September last year. There has been a drop in closed sales of over 200 homes in the first five months of this year and a decrease of 15.3% representing almost 400 homes in the last nine months. The average selling price drop in May was just the second in the last seven months and now stands at a very slim 0.8% increase for the year. The median price to the end of May is actually down 1.9% for the year to $209,970.

Traditionally closed sales in the four month period from May to August are the highest of the year, averaging around 46% of the total annual activity. With the first month of this peak season in the books, it looks like sales for the four month period in 2008 could be in the range of 1,400 homes which in turn would put us on a pace for annual sales of just over 3,000 homes. With just one month behind us, this is a bit of an analytical stretch but if we continue with a 15% decline in monthly home sales that is exactly where we are headed. Thankfully, beginning in September, we are up against very low sales figures from last year and if we can at least match those figures for the last four months of the year, sales should end up in the 3,300 range. This would take us back over ten years to a level of home sales not seen since 1997.

We believe the low sales are mainly the result of fewer first time home buyers entering the market, due to tighter lending standards and a feeling of uncertainty as to where the market is headed. When there are fewer first time home buyers this limits the options of the move up buyer and this can affect all price levels. We are then left with a market dominated by new buyers moving into the area and, while Fort Collins is still an attractive destination, there are not enough jobs being created in the current economy and potential buyers from states such as California are experiencing their own problems trying to sell in order to relocate.

So we end with the familiar refrain; for sellers, if you are motivated – and we have to assume that you are if you have your home on the market at this time – be assured that there are qualified buyers – who are looking for homes that are competitively priced and in move in condition. For buyers, you have the best of all worlds. Flat selling prices that have increased just 1% to 2% per year for the last few years, a good selection of homes offered by motivated sellers and mortgage interest rates that are about as low as they have ever been. Over time, a home of your own has been one of the best investments a family can make and now is a good time to buy and start enjoying it.

Amid the seemingly endless national headlines about the disastrous state of the real estate market there is more good news about our local real estate market.

It has now been a full year since the news first broke about the problems with sub prime mortgage lending and the real estate news on the national scene just seems to be getting worse with the latest headline screaming “Collapsing Housing Market” – an overly dramatic headline but just one of the many discouraging reports about the current state of the housing industry. The full year of negative publicity is almost self fulfilling and there are a lot of potential buyers who are on the fence, concerned about paying too much or wondering about their ability to qualify for a mortgage. On the other side of the fence, there are many motivated home sellers, or would be home sellers, who are concerned about going through the hassle of putting their home on the market at a fair price and waiting months for an acceptable offer.

We have to continue to emphasize that real estate is local and while we are not insulated from the national news, a lot of areas, including our local area, are in much better shape. We ended 2007 with a small 2.6% decrease in housing sales and a respectable 1.8% increase in the average price. We have experienced double digit sales decreases for the last few months but prices have held up very well.

And the 2007 fourth quarter report just released by the Office of Federal Housing Enterprise Oversight (OFHEO) certainly points to the stability of our local market. For the fourth quarter, U. S. home prices were up 0.1% compared to the third quarter and ended the year with a 0.8% price increase. Colorado was above the national average for the second quarter in a row, after years of being on the other side of the line. The state showed a 1.4% price increase but is still way behind the activity in the rest of the Mountain Region. Utah remained at #1 in the country with a one year increase of 9.3% followed by Wyoming #2 at 8.3%, Montana #4 at 6.9%, New Mexico #7 at 5.4% and Idaho #12 at 4.6%. The other Mountain Region states were Arizona #46 at -2.4% and Nevada #50 at -5.9%, obviously going through a bit of a price correction from their lofty increases of the last couple of years.

The Fort Collins – Loveland area continues to move up the charts, from a ranking of 226 out of 291 areas in the first quarter to 206 in the second quarter to 197 in the third quarter and to a 145 ranking in the fourth quarter with an increase of 1.8%. Interestingly, this 1.8% calculated by OFHEO is the same 1.8% that we show using the change in average selling price. The seven Colorado MSA?s one year increase and national ranking are as follows:

#3 Grand Junction 12.3%

#100 Boulder 2.9%

#145 Fort Collins ? Loveland 1.8%

#192 Colorado Springs -0.1%

#198 Denver ? Aurora -0.5%

#203 Pueblo -0.7%

#254 Greeley -4.8%

It is evident that our modest price increases have provided a very stable market and our one year increase of 1.8% has moved our home price increase in one year from the bottom 25% in the nation to the current ranking in the top 50% of the 291 MSA districts. Still, when compared to what is happening in most of the rest of the Mountain Region, where the five year price increase stands at 53.9%, our 12.3% increase as calculated by OFHEO has to make our current housing prices very attractive. With a good selection of homes and mortgage interest rates below 6%, this has to be the right time to be a home buyer.

A review of the headlines over the couple of weeks would leave anyone confused as to the actual current state of the real estate business.

It started with the National Association of Realtors May 23, 2008 report on existing home sales for April. Their headline was “Existing Home Sales Ease Due to Mortgage Restrictions; Some Markets Rising”. The explanation was that existing home sales slowed in April partly because restrictive lending practices hampered home buyers. Sales declined, on a seasonally adjusted annual rate, by 1% compared to the end of March but were 17.5% below the level reported at the end of April 2007. The national median existing home sales price was $202,300, 8.0% below a year ago. The good news, according to NAR President Richard Gaylord, is that mortgage restrictions have been eased. “In the past week, Freddie Mac and Fannie Mae have announced that they were eliminating their ‘declining market’ policies effective June 1,” he said. “This means consumers will have access to safe, affordable financing with downpayments of only 5% on most mortgages, with 100% financing available on some loan products.” Also there has been a recent noticeable drop in interest rates on conforming jumbo loans which will help home buyers of higher priced homes.

One of the biggest factors keeping pressure on home prices is the national inventory of homes for sale, which increased 10.5% at the end of April, representing an 11.2 month supply at the current sales pace.

At the same time the Office of Federal Housing Enterprise Oversight (OFHEO) released their first quarter home price index and the headlines read “Federal home-price index records its biggest decline”. The report showed that home prices nationally fell 3.1% in the first quarter compared with last year. It was only the second quarter of price declines since the index started in 1991. Importantly, there was a sub headline in one of the papers stating that “Most areas of Colorado report gains amid the 3.1% U. S. drop.

On May 25 there was a report headlined “Denver’s housing market sees shift” with the comment that the real estate market is showing signs of a precipitous shift from a buyers market to a “normal” market due to a drop in inventory which now stands at a seven month supply.

Then on May 26, the first quarter S&P/Case-Shiller report on the National Home Price Index was released and the headlines screamed “Home Values Tumble 14.1 Percent. The double digit drop qualified as the worst decline in the index’s two decades. David Blitzer, chairman on S&P’s index committee, said “There are very few silver linings that one can see in the data. Most of the nation appears to remain on a downward path.”

The Census Bureau then jumped in with a May 27th report headline “New-Home Sales Rise Slightly in April”. The report showed a 3.3% increase compared to March, but also showed that April’s pace was 42% lower than April 2007, that new home inventories decreased slightly to a 10.6 month supply and the median sales price increased 9.1%.

While these reports seem to be all over the board, the biggest difference is certainly in how the change in selling price is calculated and reported. And the two federal home price index’s are very far apart with OFHEO reporting a 3.1% drop in the first quarter and Case-Shiller showing a 14.1% decline. No wonder we get confused. A closer look indicates that the OFHEO index is much broader geographically than Case-Schiller. OFHEO uses data from 292 Metropolitan Statistical Areas while Case-Schiller follows just the twenty largest U.S metro areas. The other main difference is that OFHEO tracks mortgage loans of $417,000 or less that are bought or backed by the government-sponsored mortgage finance companies Fannie Mae and Freddie Mac. They exclude subprime and other exotic mortgages which are behind the current housing woes in states such as California, Florida and Nevada, where rapidly falling home prices are skewing the national results.

Obviously the national market conditions have an influence on our local market but it is important to take these headlines with a grain of salt. A few years ago when the headlines were trumpeting “Home Price Appreciation Continues at Robust Pace” (OFHEO March 2006) or “House Price Increase Shows Dramatic Increase” (OFHEO March 2004), we were muddling along with 2% and 3% annual price increases. The same holds true today, just in the reverse. While many areas are reporting double digit home price decreases, we continue our straight, flat line.

Look for our column in tomorrows Sunday Real Estate section for a review of the last five years of our local market compared to the OFHEO numbers for other selected markets.

We don’t want to pick on anyplace, particularly when they are down, but we noticed that Merced, California is right at the bottom of the national ranking of 292 Metropolitan Statistical Areas (MSA) tracked by OFHEO for the lowest rate of house price appreciation in the first quarter of 2008 compared to the first quarter of 2007. The quarterly report by the Office of Federal Housing Enterprise Oversight was released May 22, 2008 and shows a national decline in home prices of 1.7% but Merced was #292 on the list with a decrease of 24.7%. And we don’t even feel sorry for them.

Merced is a nice town of about 80,000 people right on Highway 99 in the Central Valley of California, a hundred miles southeast of the Bay Area. It has an annualized growth rate of 3.4% over the last nine years and is now home to the tenth campus of the University of California, which will eventually accommodate 25,000 students. In 2000 the median home price was $106,400 but this increased to $293,700 by 2005. According to OFHEO the five year HPI rate to 2005 was 141% and even after a slow 2006 the five year rate stood at 115% and now after a really slow 2007 the five year rate is down to 35.8%.

The situation is much the same in the four states – Nevada, California, Florida and Arizona – that showed the largest growth rate over the last five years as shown on the table and it seems to demonstrate that double digit increases in home values are simply not sustainable. In all cases the price appreciation has given way to a serious ‘price correction’ but even then they are still way above the national average and five times what we have seen locally in the last five years.

You have heard the expression “slow and steady wins the race” and we certainly aren’t winning any races but we think the numbers tell the story. It has been a long time since our local market experienced any double digit home price increases – 2000 to be exact – but this has certainly added some stability to our market and we have been able to show modest price increases even through the most recent double digit decline home sales.

Another item we would like to point out is that the OFHEO Home Price Index includes the Fort Collins and Loveland areas. Our multi list service breaks down the area to Fort Collins and northern Larimer County and Loveland and southern Larimer County. For the first quarter, the median price for the combined area was down 2.3% but it differed considerably from north to south with Fort Collins down 1.2% but Loveland down 6.7%. For the same five year period, the median price in Fort Collins is up 15.0% to $215,700 and in Loveland it is up 12.5% to $218,900. The reason Loveland shows a higher median price is simply the mix of residential housing. In the Fort Collins area about 20% of the homes are ‘multi family’ townhomes and condos and this figure is less than 10% in Loveland.

The local sales figures for May will be available for our June 15, 2008 column. A preliminary look shows more of the same – a double digit decrease in home sales and a flat price point.