Has the real estate market stabilized?
Information submitted by Doug Hutchins, Castle Pines Real Estate Specialist
Broker Associate – The Kentwood Company
The most common question being asked about the local real estate market is whether or not home prices have stabilized in the Castle Pines community. It is easy to find predictions about the real estate market, but generally these predictions are for the real estate market nationally and not locally. Even predictions about the entire metro Denver real estate market are not fully relevant to specific metro Denver neighborhoods.
Each neighborhood has unique characteristics that determine the performance of the real estate market within the neighborhood. The biggest factor currently in neighborhood performance is home prices. Because of the changes in lending standards over the past 12 months, neighborhoods with home prices above $500,000 are struggling. Buyers are having difficulty qualifying for loans above $417,000. This impacts the demand for homes priced at $500,000 and higher.
The areas around Castle Pines are a great illustration of how real estate markets are neighborhood specific and how home prices affect the market. For simplicity and accuracy, the Castle Pines area is broken into three distinct markets – Castle Pines North (CPN), Castle Pines Village, and acreage property (consisting of Surrey Ridge, Charter Oaks, Oak Hills and Happy Canyon).
Home prices and lot sizes help illustrate the differences in these neighborhoods and explain why each neighborhood is unique. In 2009, the average sales price for homes in Castle Pines Village was approximately $1,010,000 and the average lot size for these homes was 0.68 acres.
In CPN, the average sales price was approximately $460,000 and the average lot size was 0.26 acres. In the acreage properties, the average sales price was approximately $530,000 and the average lot size was 2.60 acres. All sales price and lot size information is based upon sales reported in Metrolist.
Real estate prices are generally driven by supply and demand. With high demand and low supply, prices will increase. With low demand and high supply, prices will decrease. The best gauge of housing inventory is Months in Inventory (MII). MII is the calculation of the number of months it would take to sell the existing supply of homes at the sales pace of the prior 12 months. A balanced market, where prices stay stable, has a MII of six to eight months.
As of mid-December, CPN has a MII of 10 months. This inventory level usually predicts a slight reduction in prices over the next six to eight months. Castle Pines Village had an MII of 29 months, which usually predicts significant price reductions in the next six to eight months. The acreage properties have a MII of 18 months, which would indicate moderate price reductions during the next six to eight months. If these markets are broken down further by price, MII drops in the lower price ranges and increases substantially in the higher price ranges.
Although these statistics indicate that the market has not stabilized, these numbers have improved from where they stood just three months ago. In addition, homes priced at or below $500,000 should see solid demand and pricing in each of these neighborhoods. One final positive point to understand is that these three markets are generally performing better than other similar communities in metro Denver.