All Real Estate is Local

And some localities are ready for buyers.

The local and national media have taken averages of home sales numbers, the volume of foreclosures, net price appreciation or depreciation and pronounced we are in a real estate crisis.

Admittedly, this headline-grabbing emotional outcry has had a chilling effect on real estate sales. The market is stumbling downward, in some areas, in a self-perpetuating cycle.

"The market is falling. Now is not a good time to buy."

"Since people stopped buying, price appreciation has stopped."

"Since price appreciation has stopped, I have some time to buy."

"I am going to wait until it hits bottom."

But the consumer and the investor are smarter than the media. And the consumer is telling us a different story. His story goes like this:

"Some people have more mortgage than they can handle and they will have to sell at a discount. I have cash and a good credit history. For me cheap financing is still available. I am going to buy deals."

"Many neighborhoods are undergoing transitions. In these neighborhoods prices are being pulled up by the infill development. Average price appreciation in many neighborhoods has exceeded 10%. Before all the opportunity is gone, I am going to buy."

"I know of a neighborhood that has suffered with the foreclosure crisis. Over 70% of all sales have been bank foreclosure sales. However, nearby a recent significant investment has brought in investors. The price decline has stopped, inventory levels are down, and the days-on-market for homes is at an all-time low. I am buying now."

Contrary to the hype, real estate sales have not stopped. Great deals are being closed every day. But how does one find them? What analytical tools does one use? How can you be certain?

Let's look at a couple of examples.

First, let's examine Washington Park. Washington Park is certainly one of the most desirable places to live in Denver. It is centrally located, has its own park, has a unique character of its own, and has very few foreclosures (4% rate). The 2nd quarter 2007 data show that the average price of a home sold in Washington Park rose 14% to $641,000 with 184 sales. Within these numbers were 17 sales (9.2% of all sales) to infill developers (price range of $450,000 to $500,000) and 18 sales (9.8% of all sales) of homes that sold for more than $1 million (from $1 million to $2.280 million).

Roughly 22% of all lots in Washington Park already have infill homes.

The data show that 10% of all immediate future home sales will be over $1 million. So price appreciation will continue. If you want to live in Washington Park, buy now.

In North Aurora there is a subdivision of 1950's ranches called Hoffman Heights. All homes are similar: 1500-1600 square foot ranches, 3 bedrooms, 2 baths. Since January 2006 71% of the 194 sales (source: MLS data, Canon Colorado team analyses) have either been foreclosures or short sales. This is the type of neighborhood that has been the focus of the media attention.

If we look at the sales data by semesters the average sales price dropped from $146,000 (47 sales), to $130,000 (66 sales) to $120,000 (74 sales). There are two obvious trends: sales are increasing and prices are dropping.

However, over the last month the average sales price has increased to $143,000, a 19% price increase over the last 6 months! Further, over the last 3 months prices have stabilized.

It used to take 120 days to sell a home in Hoffman Heights and the inventory levels of unsold homes was at over 9 months. Now there is 4.5 months of inventory and days-on-market is at 72, a 40% decrease.

Conclusion? Something is happening to change the market dynamics of this one neighborhood. Why is demand increasing? Why are people buying now at a faster rate? Why are prices ticking upward?

The Fitzsimons project may have something to do with it. I don't have the answer, but lots of investors think they do.

So, is the market bad? Well, the answer is, it depends. It is bad for some and good for others. It is bad in some areas, hot in others and moving from bad to good in still others.

Don't be a lemming. The cliff is just over the horizon. Make an informed decision based upon data analysis. We are here to help you.