This past week I had a very interesting conversation with a client. He was very concerned that this might not be a good time to buy a home priced in the $600,000-$700,000 range in Durango. He'd been reading the Wall Street Journal article of November the 21st and it have him cause for concern. In that article, the author pretty much held “ last rights” for the mortgage industry and the real estate industry. It went well beyond “ the sky is falling” to more like there isn't even any sky left.
What the author of that article missed, and what I explained to my client, was that real estate markets are very local in nature. Those of you that have been reading my blog or my electronic newsletter for a while know that that is a theme that I have used in my 30 some years in the real estate business. I have actually come to understand it as one of the truisms of real estate. Further, it is my opinion, that not only are real estate markets local in nature, but you can have certain price bands or price segments that respond differently than other price bands in the same market area. My sense was that a house in the price range that this gentleman was considering was within one of our stronger price bands. In order to investigate the facts, (rather than generalize with broad-brush scare tactics like the Wall Street Journal author did) I performed the following searches through our MLS database: (1) All residential sales in La Plata County; (2) priced between $500,000 and $1 million; and (3)those sales occurred between January 1 through November 23 for the years 2005, 2006, and this year 2007. The results were quite interesting.
Before I detail the results let me share some common assumptions. Assumption number one: It's universally accepted that the year 2005 was an absolute banner year in the real estate business and very much a seller's market. That was not only true across the country but it was very much true here in Durango. Assumption number two: if a market is declining, homes stay on the market longer and thus take longer to sell. Assumption number three: if the market is declining the seller receives a lesser percentage of the asking price than he would during a stronger market. Assumption number four: if the market is declining, cash is short and fewer and fewer people are able to actually pay cash for a property and they will require financing. Assumption number five: if the market is declining, fewer homes will sell.
Here's the information that I was able to accumulate: In ‘05 there were 155 homes with the above criteria sold in La Plata County; in ‘06 that number increased to 162 homes; and in ‘07 it rose once again to 169 homes. If I look at days on the market countywide in ’05 it was 278 days; and in ‘06 it was 241 days; and in ‘07 it dropped to just 200 days on the market. We have all read stories of people who sold their homes for 75% or even 50% of their asking price. Our market is quite different. In ‘05 a seller would get 96.32% of his asking price; in ’06 he would get 97.28% and in ’07 he would get 97.09%. These stats certainly show a strong market in the price band selected. One of the more interesting statistics was the number of transactions that were straight cash, that is, there was no loan involved. In ‘05, using the above criteria, 14 properties sold for cash, and in ’06 it jumped to 26 properties sold for cash, while this year 30 properties have sold for cash, a number that is nearly double the 2005 figures. In my opinion, that stat reflects the fact that smart investors feel real estate is an even better place to invest their cash. Clearly an all cash buyer would qualify for a loan…but they still used their cash to pay acquire debt-free real estate. To get an even better handle on the local market and more specifically to this particular buyer’ type of property, I also searched for Durango in town homes. In 2005, 51 homes sold, and in 2006, 47 homes sold, and in 2007 51 homes sold. One of the more telling statistics was the number of days on the market for those in town homes. In 2005, it took 311 days on average to sell that $500,000-$1,000,000 home; 270 days in the year 2006; and only 204 days in the year 2007.
It's pretty easy to see that the $500,000 - $1,000,000 Durango home is certainly a price band that has stayed quite strong. That said, my next analysis will be in the $200-$500,000 price range home and I will post that on my blog this next week.
What the author of that article missed, and what I explained to my client, was that real estate markets are very local in nature. Those of you that have been reading my blog or my electronic newsletter for a while know that that is a theme that I have used in my 30 some years in the real estate business. I have actually come to understand it as one of the truisms of real estate. Further, it is my opinion, that not only are real estate markets local in nature, but you can have certain price bands or price segments that respond differently than other price bands in the same market area. My sense was that a house in the price range that this gentleman was considering was within one of our stronger price bands. In order to investigate the facts, (rather than generalize with broad-brush scare tactics like the Wall Street Journal author did) I performed the following searches through our MLS database: (1) All residential sales in La Plata County; (2) priced between $500,000 and $1 million; and (3)those sales occurred between January 1 through November 23 for the years 2005, 2006, and this year 2007. The results were quite interesting.
Before I detail the results let me share some common assumptions. Assumption number one: It's universally accepted that the year 2005 was an absolute banner year in the real estate business and very much a seller's market. That was not only true across the country but it was very much true here in Durango. Assumption number two: if a market is declining, homes stay on the market longer and thus take longer to sell. Assumption number three: if the market is declining the seller receives a lesser percentage of the asking price than he would during a stronger market. Assumption number four: if the market is declining, cash is short and fewer and fewer people are able to actually pay cash for a property and they will require financing. Assumption number five: if the market is declining, fewer homes will sell.
Here's the information that I was able to accumulate: In ‘05 there were 155 homes with the above criteria sold in La Plata County; in ‘06 that number increased to 162 homes; and in ‘07 it rose once again to 169 homes. If I look at days on the market countywide in ’05 it was 278 days; and in ‘06 it was 241 days; and in ‘07 it dropped to just 200 days on the market. We have all read stories of people who sold their homes for 75% or even 50% of their asking price. Our market is quite different. In ‘05 a seller would get 96.32% of his asking price; in ’06 he would get 97.28% and in ’07 he would get 97.09%. These stats certainly show a strong market in the price band selected. One of the more interesting statistics was the number of transactions that were straight cash, that is, there was no loan involved. In ‘05, using the above criteria, 14 properties sold for cash, and in ’06 it jumped to 26 properties sold for cash, while this year 30 properties have sold for cash, a number that is nearly double the 2005 figures. In my opinion, that stat reflects the fact that smart investors feel real estate is an even better place to invest their cash. Clearly an all cash buyer would qualify for a loan…but they still used their cash to pay acquire debt-free real estate. To get an even better handle on the local market and more specifically to this particular buyer’ type of property, I also searched for Durango in town homes. In 2005, 51 homes sold, and in 2006, 47 homes sold, and in 2007 51 homes sold. One of the more telling statistics was the number of days on the market for those in town homes. In 2005, it took 311 days on average to sell that $500,000-$1,000,000 home; 270 days in the year 2006; and only 204 days in the year 2007.
It's pretty easy to see that the $500,000 - $1,000,000 Durango home is certainly a price band that has stayed quite strong. That said, my next analysis will be in the $200-$500,000 price range home and I will post that on my blog this next week.
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