The financial markets continued to improve over the past few weeks with both the Dow Jones Industrial Average and the S&P 500 reaching and surpassing two key milestones. The Dow eclipsed the 12,000 threshold and the S&P climbed over the 1300 level for the first time in two and a half years. Both milestones are viewed by market watchers as important barometers, not only of the health of Wall Street but consumer sentiment on Main Street.Stock Photo - stock exchange  - illuminated  dow jones information  board indicating.  fotosearch - search  stock photos,  pictures, wall  murals, images,  and photo clipart

 Steady improvement in the financial markets is putting the Great Recession even farther behind us. It means that retirement accounts for millions of Americans have erased much of the losses inflicted by the sharp downturns of 2008 and early 2009. Two years ago next month the Dow stood at 6,547 and the S&P at 676. Since then, they’ve nearly doubled in value. It’s an encouraging signal that the economic recovery is gaining traction, albeit slower than most of us would like.

 So what about the real estate market? In general, the nation’s housing market remains fragile. While there has been improvements in many communities since the depths of the recession, including here in the Denver Metro area, the market overall continues to be challenged by high unemployment rates and the shadow inventory of additional homes that could fall into short sales or foreclosures.

 While acknowledging all of the economic headwinds, Rick Newman, chief business correspondent for U.S. News and World Report, wrote this week that the stage could be set for a solid recovery in the housing market this year. “A buzzer won’t go off when it happens, but 2011 could be the year that the housing bust officially ends,” he said.

 Nationwide, prices have fallen by about 30 percent since the peak in 2006, and Moody’s Analytics thinks they could fall another 5 percent or so in 2011. “But improvements in the overall economy will lift the housing market sooner or later, with many buyers who have been sitting on the sidelines finally deciding to take the plunge,” Newman writes. “In a few markets, that already appears to be happening.”

 U.S. News says home buyers are tiptoeing back into the market, amid an increasing number of signs that the fifth year of the housing bust might be the last. “Economists are watching closely for an inflection point at which the housing market turns upward for good. But for buyers planning to live in a home for years, precise timing matters less because they also need to take into account the direction of interest rates and their own personal need for housing,” Newman said.

 “With flippers and speculators largely out of business, most buyers simply want to know that the home they buy won’t plunge in value once they own it. In many U.S. cities, that now looks to be the case,” he adds.

 U.S. News points to four reasons that home buyers may be feeling more confident that it’s safe to step off the sidelines:

  • In some markets, homes are now undervalued. According to the Case-Shiller home-price index, overall prices nationwide have fallen 30.3 percent since peaking in 2006. Moody’s, for instance, says that homes are undervalued in many cities, based on the ratio of home prices to median income.
  • Affordability is excellent. Falling prices, plus falling interest rates, have made homes more affordable than they’ve been in decades. The National Association of Realtors’ affordability index, which goes back to 1970, is at the highest level it’s ever been. The typical family today needs to spend just 13 percent of its monthly income to pay the mortgage on a median-priced home, compared with nearly 25 percent at the peak of the housing bubble.
  • Economic factors that affect housing are improving. Most economists believe the recession is over for good, with the risk of a double-dip fading rapidly. Consumers are spending again, and the economy is growing. Big companies have lots of cash and are in a good position to hire once business picks up. A rally in the financial markets is helping many Americans recover some of the wealth they’ve lost through falling home values. Those trends all support increased higher demand for homes.
  • The government will continue to support housing. There will likely be continued political debate over Fannie Mae and Freddie Mac, the troubled housing agencies now operating under government control. But despite some calls for a private system to finance housing, it’s likely the government will remain a key player in the mortgage market until at least 2013, after the next presidential election. And once policymakers figure out how to replace Fannie and Freddie, it will probably happen slowly, so as not to upset the housing recovery.

While it’s still too early to tell for sure where the market is in the recovery, anecdotal reports from our field offices tell us that things are gradually moving in the right direction. Buyers are easing back into the housing market in many Colorado communities. As the spring approaches, and with it the buying season, it will be interesting to see how this translates into sales. Stay tuned!

Below is a market-by-market report from local offices:

Boulder:  Feedback from agents in the office indicates an increased pace of business.  Many agents are working with at least one active buyer and have a scheduled or upcoming listing appointment.  While showings remained flat the total number of parties looking at houses has increased over the past two weeks.  Listings are up 5% over the previous two week period and agents report information gathering by potential listing clients is increasing.

Colorado Springs:  Listings have been steady at best, with a lot of sellers waiting until Spring, showing no urgency to move at this time.  Showings have been increasing with the past week being the best showing week since last November.  Sales have slowed even with the showing activity as buyers are still hoping interest rates will go lower.

Denver Central:  According to agents, activity is definitely picking up.  Numbers have also picked up but need to remember there were two holidays in there, January 3rd and January 17th.  It is anticipated that numbers should be up a little the first two weeks of the month.

Devonshire:  The end of January is here & it looks like an interesting year is shaping up.  There has been a very nice jump in showings on the office properties since mid-month & sellers are feeling much more optimistic about the activity level in the community.  Interest rates have bumped up slightly but just enough to remind both sellers & buyers that these historic rates may not be around forever.  There is a very nice increase in buyer activity at open houses & with showings.  With increasing listing inventory, buyers are having many more homes to choose from.  Looks like this Spring will be better than last year & everyone is feeling good about that.  The upper end is seeing an increase in sales yet but the activity will generate sales very soon.  2011 brings optimism.

Evergreen:  There were a total of twelve new listings go on the market in January.  Listing inventory has started to increase as both new sellers as well as past sellers are beginning to put homes on the market.  Seven listings went under contract & six buyers have been put under contract in January.  Showing activity is improving as new buyers are coming into the market following the holidays with 199 showings during the month, nearly double the number of showings in December.

Larimer County:  BRRRRRRRRRR! It may be cold outside, but the market continues to gain steam & momentum toward Spring.  Buyers seem to be emerging from hibernation & pent-up demand that we’ve been hearing about seems to be kicking in.  Combined with seasonally low sale inventory, we’ve seen some competing offers for homes in the popular price ranges (under $280,000).  Investors are also scouring the inventory for great deals as the demand for rentals increases.  Rental inventory is moving quickly which will likely push rental rates higher.  This appears to be a trend that will have some legs as financing for new purchase homes is still primarily dominated by the first time homebuyers with good credit & some down payment money saved up.  Move-up buyers with equity & good credit are also taking advantage of some tremendous deals in the $300,000 to $500,000 range.  Those without good credit or recent foreclosures on their record still need homes to live in & the rental market is where they’ll end up.  If you’re thinking about selling – now may be a good time to get your home on the market to take advantage of the low inventory & improving demand.

Longmont:  it is nice to see the showings on listings up by 16% week over week.  The price point of homes being shown is predominately in the mid-price-range for the Longmont market.  It is good to have this mid-level buyer activity.  The market is still very active with HUD homes, short sales and bank owned properties.  Investors have entered the market in a large way.  They are looking for great deals and they are coming with cash.  A bright note is that appraisals seem to be more realistic on current contracts.  The overall market is one of confidence.  Now is the time to buy.

Parker:  The trend from last week continues!  Although the number of showings has decreased slightly, there are new offers on the office listings which seems to indicate that buyers are getting more serious!  Energy priced listings are still seeing multiple offers and the sellers are taking advantage to sell for top dollar!  Now is the time to get your home on the market.

Southeast Metro:  The first month of the new year started strong in the SE Metro office.  There were an  average of 600 showings every week in January and the average number of showings before selling dropped to 17 as compared to last year’s average of 24.  Agents closed nearly 100 properties in January and put under contract 132 homes.  The luxury market is also experiencing an up tick in activity.  Open house activity is strong and the office set a record for the most open house traffic over one weekend in January with 55 potential buyers visiting one home for sale!  It is an important time for sellers to evaluate the listing price of their homes and to adjust their list price accordingly.

Southwest Metro:  There is a continued increase in showings.  Agents are very busy with buyers looking to buy.  The office mortgage rep had a great January & is continuing to stay busy.  The interesting fact is that sellers are wanting to list their properties but are looking for a full service company.  They realize that in this market they do need to have all the bells & whistles that CB provides.  The $300,000 & below market is doing very well and there has been a slight slowdown in the upper end listings.  Buyers are all over looking for starter homes as well as to move up.  There seems to be a tremendous amount of activity in the office & everyone is very happy to see it.  Open houses have been very good as well as floor calls.

Denver West:  Agents are very busy with buyers, showing property in all price ranges.  New listings at all price points have increased.  Although the market conditions indicate seller’s should be flexible when receiving an offer, not all of them are so.  Some are holding firm and the buyer is accepting their counter offer.

Conifer:  There was one new listing for the month of January.  Inventory has stabilized as fewer homes are being withdrawn and both new and past sellers are beginning to put homes back on the market.  Five buyers were put under contract in January.  Showing activity has improved almost 50% over December with 86 showings this month compared to 58 for all of December.

Loveland:  The price point on homes being shown is still predominately at the lower level.  First time buyers are seeing the benefit of owning vs renting.  With interest rates holding at a very attractive level more buyers are seeing this is the time to act.  Buyers are facing a long & sometimes not so friendly process when obtaining a loan.  Lots of documentation is needed and it may even have to be supplied more than once.  My advice, please don’t let the frustration with the process hold you from purchasing your dream home.