Market Conditions in 81301>Question Details

Pam Dobson, Home Buyer in Durango, CO

why are prices increasing in a declining market?

Asked by Pam Dobson, Durango, CO Wed Feb 9, 2011

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8
Hi Pam

I understand your frustration. However, I don't agree that prices are increasing. For the first time in 20 years we have declining prices, mostly flat over the past 2-3 year but last year decline. It is true that our statistics are often scewed because of the small volume of sales. One or two high sales will make it look like a increasing prices. There are a handful of bankowned homes for sale. If you shop around you can find a deal, I'd be happy to chat with you about that.

Frankly, I don't think the deals will get any better if you wait out the market. This is a popular lifestyle choice place and there's a finite amount of home and land inventory which keeps the prices artificially higher. Just be happy you're not in Telluride or Aspen where there's nothing under $5 Million.

That all being said, renting can be a good idea too. Typically rents in Durango are less than you would pay for a mortgage. But then you are renting and can't make the place your own. And you're not participating in any market appreciation (assuming that will happen again in the future).

Good luck with your home search. Let me know if I can help. Claudia
2 votes Thank Flag Link Thu Feb 10, 2011
Colorado real estate is thriving-contrary to all the fear you read in the newspapers-and this has pushed the inventory in most markets to a very low threshold-which drives price up. There are many smart buyers who are taking advantage of the amazing interest rates and purchasing homes so it is very common for bidding wars to erupt on aggressively priced homes and the selling price to be well over the list price. This is a GREAT time to buy a home-before interest rates increase and it is harder to buy! If you would like to view all of the great homes that are currently available on the market, with ZERO hassle, please visit http://www.HomeZero.com! All the best to you and your new home in 2011!
1 vote Thank Flag Link Wed Feb 9, 2011
Hi Pam,

This is a hard question to answer. The first reason is because I don't know where you got your info or notion that prices are in fact increasing.

I will try and answer what I think is happening. I'm going to assume that you saw a story somewhere that said prices in your area had risen recently. When numbers are released, such as the median home price, those numbers are not in consideration of a specific price range, but rather ALL homes that have sold. Example:

homes sold
$150K
$225K
$350K
$1.2m
$2.4m

and so on...

These higher home prices tend to "skew" the numbers a bit. Keep in mind when we say "market" that has different levels. There is a "market" for lower priced homes. Mid-range, and higher priced homes. From what I have seen, the "market" for higher priced homes doesn't seem to fluctuate as much. Individuals who purchase the 1m + inventory don't care as much about ups and downs. They are typically not affected by job loss and tight credit. A great majority of those deals are cash. In other words on the mid pricing $275K category, If a home were to drop by $20K that would be a huge discount. On a 1m home the same $20K would not matter much. Even a $100K drop might not matter. So even though they tend to have their own playing field their numbers are still lumped in with the rest of the sold properties.

The last thing to consider is this. Home prices are set by comps. When a Realtor lists a property for sale they will look in the MLS system and pull all the homes just like the one being listed and see what they SOLD for over the last 3 to 6 month. This is going to have the greatest impact on what the home will be listed for. So, lets say you are listing your home. the comps show the last home sold for $285K. In a "buyers" market you might want to be aggressive and list it at $280K. In a "sellers" market you might want to list it at $295K. Now is where the market - your market - comes into play. If someone has the idea that we are in a "declining" market, it is not likely that they are going to offer you your $280K. Now take into consideration how much you need to sell your home. If you are more committed to moving than your price, you are more likely to accept that $255K offer. When the home sells for that it will create a new comp for the neighborhood. And so it goes around...

Look at the same scenario in the $1m plus range. Since most homes that are over $1m are so unique, getting a real comp is difficult. Therefore having a standard to go by is not available.

I sure hope this helps you understand it better.


Jonas Mancuso
Remax Int'l
http://www.talktohouston.com
Houston family forum
1 vote Thank Flag Link Wed Feb 9, 2011
Great question. I've noticed that too in many places. There seem to be 2 markets out there: 1) distressed and short sales where I have not seen an increase and 2) turn key regular sales where there seems to be a premium for not being a short sale. What are you seeing out there?
1 vote Thank Flag Link Wed Feb 9, 2011
Firstly - the 'median' property price has shown national declines. Keep in mind the power of presentation for statistics. To me this only means that the buying demographic has moved to lesser priced homes. Median is just a mathematical calculation. Many infer that means the market is in decline, perhaps just buyers looking for the inexpensive side of the range. I see this in my area, the middle range has less inventory and subsequent less sales. Staging, quality curb and interior appeal and of course location will make it appear that the house may be priced to high. There are properties that I have prepared opinions of value for over a year ago, and the owners finally ask to list the house...... I complete another opinion and in most cases, the properly staged, properly priced properties carry the same value 12+ months later.... look at the quality of the structure and the location. In some markets with lower inventory - those 'nice' properties may actually increase.
0 votes Thank Flag Link Fri Jan 27, 2012
Make sure you are comparing apples to apples. Our average prices were skewed by a higher number of high priced home sales later in the year after a high volume of low priced home sales during the tax credit offering period. The actual number of sales and prices for specific homes acutally dropped.
0 votes Thank Flag Link Thu Feb 10, 2011
Durango is an ironic place. No jobs and they want over $200 sq ft for their inventory right now. I am a Realtor in Texas and am in Durango now (non-licensed) and I think I will wait out the market and save my cash.
Its a ski town but at some point the market is what it is. I will probably just rent. Rising interest rate and over $200 sq ft just doesnt add up for me.
0 votes Thank Flag Link Wed Feb 9, 2011
In our area we are seeing the monthly supply of inventory decrease to it's lowest point in 3 years. It's still not low enough to make the Builders go out and start speculating homes, but it does relate to an increase in demand. Add to that the fact that interest rates are rising, so now may be the most affordable time to purchase a home for many years to come.
0 votes Thank Flag Link Wed Feb 9, 2011
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