July was a big step backward with closed home sales down a whopping 21.4% from a year ago and 13.3% from last month. The local real estate market is now down 14.1% from last year and the streak of monthly decreased home sales has now reached all the way back to last September. There seemed to be some light at the end of the tunnel when June sales totaled 407 homes, a drop of 7.7% from a year ago but a significant 16% increase over the previous month but we obviously did not build on that momentum.

In addition to the drop in home sales, the average selling price is also down and now shows a slight decrease of 0.2% for the year to date. The median price is down more at $210,000 for the year to date compared to $215,000 last year, a decline of 2.3%. By major categories, the average price of a resale home for the year to date is $267,707 an increase of 2.3% from 2007 and the median price of $229,900 is exactly the same as a year ago. Newly built single family home sales are down 27% but the average price is up 4.3% to $355,438 and the median price is up 2.4% to $260,368. It is the multi-family category that is pulling down the market with the average price of $160,085 down 5.2%.

The total market value of closed sales for the year to date is $503M compared to $586M at this time last year which also means real estate commissions are off 14% for the year. With seven months of the year complete – or 60% as it normally relates to home sales, the market is on a pace for about 3,300 closed sales but if the 14% decrease continues over the next five months, it is possible we could be looking at closer to 3,000 closed sales. This would take us back to the three year period of 1995 – 1997 when annual sales averaged just over 3,000. In the ten years since then, sales have averaged 3,848 per year.

The marketing time for the closed sales in July averaged 103 days compared to 90 days last year. For the year to date, we are at 112 days this year, an improvement over the 118 days last year. The decline in the supply of active listings is helping to hold prices. The current supply of 2,031 homes compares to 2,379 listings at the end of July last year and 2,793 homes on the market at the end of July 2006. This means there is about a seven month supply of homes in total but it varies greatly by price range. Under $300,000, which accounts for almost 80% of the market, there is a five or six month supply. Above $300,000 there is a one to two year supply of homes so where you are positioned as either a buyer or seller depends a lot on the price point.

All in all, July will have to be recorded as a disappointing month but our local market remains in a lot better shape than many other areas although our situation is quite different. In most other markets both the average price and the number of homes sold are both down considerably. As an example, metro Denver reports a 6.2% drop in sales for the first seven months of the year. Coupled with 9.8% drop in the average selling price this gives them a total market volume decline of 14.4%. Closer to home, Weld County has a 14.3% drop in home sales and a 7.8% decline in average selling price, a total market volume decrease of 21%. Locally we have a 14% drop in total market but it is all in the lower number of homes sold – not affected by a drop in average selling price. Clearly contrary to the trend elsewhere, but that seems to be typical of our local market!

We had an interesting week last week and thought we would share it with you. We wouldn’t call it a typical week, but there probably isn’t a typical week in the life of a professional Realtor. Most of this activity is in addition to the normal real estate life of prospecting, marketing, networking, budgeting, learning and staying on top of the business.

It started on Sunday when we dealt with an offer on a property we had listed – just four days earlier. On Monday we presented a counterproposal to the original offer which was accepted by the buyer so we now had the property under contract. A lot of stuff has to happen at the time a property goes under contract so that kept us busy on Monday. Plus we had to prepare for Tuesday when we hosted our regular office sales meeting at an on site model and made a presentation to our office agents on a $15 million project we have listed.

On Wednesday, we hosted clients from Maryland. They found us through the internet and visited the Fort Collins area six years ago. We stayed in touch and having just become empty nesters, they were back for another look. We put on our Chamber of Commerce hats and put them in the car, visiting eight or nine different neighborhoods which took us literally all around town. We looked at few homes, had the obligatory lunch in old town and pitched the Fort Collins lifestyle. We invited them to our home on Wednesday evening for a social evening and spent more time with them on Thursday before they headed to check out Genesee and Evergreen. They are also considering relocating to North Carolina but promised us a decision when they got back home.

Friday brought another out of town client, this one from Milwaukee. She works for a company that is expanding and she was taking over supervision of their western operations. The company allowed her to pick the location for her home base and she wanted to get back to the mountain region – she had attended college in Montana - and selected Fort Collins. She also had found us through our web site and visited three weeks ago to look around, went back to Milwaukee, got her home there under contract and headed back here to find a home. We looked at homes on Friday and again on Saturday, she made a decision, we prepared the purchase offer and got it signed and delivered to the listing agent on Sunday. The offer was countered and accepted on Monday.

We also had clients that arrived on Friday from Massachusetts. They too are recent empty nesters and decided to check out Fort Collins because some very good friends of theirs just recently relocated here from Ohio. We had helped their friends find a new home in Fort Collins and they were nice enough to refer us. We had been in touch with them over the last couple of weeks – via email - and visited with them Friday evening for a little social talk about the area. We did the Chamber of Commerce thing on Saturday and visited a few homes that they had selected from the internet to give them an idea of the market. We hosted an open house on Sunday afternoon then met with them again late Sunday to show another home and their friends hosted a bit of a neighborhood party for them on Sunday evening to help with the pitch.

Obviously we don’t have three potential buyers in town every week so that made it a bit atypical but working with home buyers and sellers is what this business is all about. It is particularly enjoyable when you get a chance to show off this wonderful area and you might be surprised to know how impressed visitors are with our town and the region. We know there are those among us who don’t like growth and wish they could keep things status quo but we can tell it is not going to happen. There are too many good reasons for people to want to live in this area and, for the most part, we believe these new arrivals add energy and value to the community and we welcome them with open arms.

New home sales are way down, both locally and nationally, and that is not good news for the economy. On a national basis, new single family homes have normally been about 15% of the total home sales and sales of new homes peaked in 2005 with a total of 1.283 million out of 8.359 million home sales. Sales for this year are on a pace for 512,000 new home sales out of a total of 5.502 million home sales. This is the lowest total for new home sales in nearly two decades and also is a projected drop to just 9.3% of total home sales. These sales are down 40% from a year ago. The low sales and high inventory are dragging down prices which are now off 26% from a year ago to a current median price of $231,000.

Locally, new home sales to the end of June are down 28.7% from last year, on top of a 29.4% drop for the same period in 2007 compared to 2006. New home sales now account for 12% of total single family sales compared to 19% two years ago. In the region, the news is worse with the Loveland area off 33% for this year on top of a 35% decline the previous year and Weld County down 50% this year after a 7.5% drop last year.

Not all new home sales are reported through the multi-list system but building permits tell the same story. Permits for new single family construction are down 30.2% for the first six months of this year and are on a pace for 285 for the year. This compares to 345 in 2007 and 442 in 2006, a drop of 35% in two years.

Based on sales over the last year, there is a demand for 18.3 new homes per month in the Fort Collins area. Almost 60% of this demand is for homes priced under $300,000. There are currently 173 active listings for new single family homes which represents a 9.5 month supply but less than half of these homes are actually complete or under construction so we actually have just a 4 month supply of inventory. This ranges greatly by price range with less than a one month supply of standing inventory priced below $300,000 to a twenty month supply for homes priced above $1 million. If you are considering the purchase of a new home, you may have to enter into a contract to begin construction on a home priced below $400,000. Above $400,000 there is some standing inventory and you should be able to find a home that will fit your needs but for the most part these homes are not being replaced with new construction starts so when they are gone, there could be an actually shortage of new homes to choose from. You will find the builders in this price range very accommodating and you can probably make a deal that will make you happy and keep the builder in business. The relatively low inventory of new homes for sale has to be the reason that prices are holding up very well, particularly when compared to the national figures. For the year to date the Fort Collins area average price is up 6.0% to $362,323 and the median price is up 0.5% to $253,001.

The weak move up market has obviously hurt new home sales in the higher price ranges as has the jumbo mortgage market which now charges a premium of about 1.25 points over a conventional fixed thirty year mortgage compared to a premium of 0.5 points a year ago.

Home construction is a very important part of the economy. The National Association of Home Builders estimate that the local impact of building 100 single family homes in a typical U. S. metropolitan area include $16.0 million in income, $1.8 million in taxes and other revenue for local governments and 284 local jobs. The additional, recurring impact for 100 single family homes include $3.2 million in local income, $648,000 in taxes and other revenue for local governments and 63 local jobs. These are ongoing, annual local impacts that result from new homes being occupied and the occupants paying taxes and otherwise participating in the local economy year after year. With the drop in single family home building permits of over 250 homes in the last couple of years, this is $40 million of income, $4.5 million in taxes and other revenue and 710 local jobs that have gone missing plus the ongoing impact from not having the occupants of these new homes adding to the local economy. And new homes are not just about growth, a lot of new homes replace old homes and bring energy saving efficiencies and other benefits to home owners.

So help us out – go and buy a really new home!

Finally, a month of sales that we can crow about…a little! Local real estate sales in June were the best month since last July and, while still a decrease from June 2007, the drop put an end to the double digit decreases we have experienced every month since last September. The average selling price also showed a very modest increase, but an increase nevertheless and the fourth month this year on the plus side.

As the sales table shows, there were 402 homes sold in June, a 13.2% increase from the previous month but a decline of 8.8% from a year ago. This results in year to date sales of 1,649 homes, down 12.6% from this point in 2007. The average price was up 0.3% to $249,115 and the year to date average selling price is $250,910, an increase of 0.6% from last year. The median sales price in June was down 2.6% to $210,658 and the year to date figure is $210,000, down 2.3% from 2007.







June closed sales averaged 103 days on the market compared to 114 last month and 111 in June last year. For the year to date, marketing times have improved from an average of 125 days last year to 114 days this year. The inventory of homes for sale dropped at the end of June to 2,074 compared to 2,154 at the end of May and 2,462 last year. The supply of homes is equivalent to about 7.5 months compared to close to 9.0 months supply at this time last year. A balanced market between supply and demand is generally considered to be around six months so we are still in buyer friendly territory although this ranges dramatically by price point.

Sales in other areas of the region are considerably worse. The Loveland area had a decrease in sales in June of 25.2% coupled with a 14.4% decline in average selling price to $257,473. For the year to date sales are off 10.7% and the average price is down 5.6% to $260,063. In Weld County, June sales were down 26.7% and the average price was $202,187, a drop of 8.9%. This puts sales down 18% for the year and prices off 8.1% to $195,198.

A metro Denver area headline reads “Area housing may be recovering” and they report June sales increased 3.9% over May and were down 5.5% compared to June last year. The median price of a single-family home was up 1.5% from May but is still down 12.5% from 2007. Significantly, the number of homes on the market was down 13.7% from a year ago.

With half the year in the books it is difficult to predict where we will end up. The year to date 1,649 closed sales would normally equate to total sales in the range of 3,300 to 3,400 homes which would be the lowest total since 1997. But to even achieve this, sales in the next six months would have to equal the sales of the same period last year, at a time when we have been experiencing double digit decreases this year compared to last year and have a year to date drop of 12.6%. No matter where we end up, it is apparent that our market is in a lot better shape, for both buyers and sellers, than other areas of the region and a lot of other areas of the country and there is no reason to suggest it won’t stay that way.

New home sales are way down, both locally and nationally, and that is not good news for the economy. On a national basis, new single family homes have normally been about 15% of the total home sales and sales of new homes peaked in 2005 with a total of 1.283 million out of 8.359 million home sales. Sales for this year are on a pace for 512,000 new home sales out of a total of 5.502 million home sales. This is the lowest total for new home sales in nearly two decades and also is a projected drop to just 9.3% of total home sales. These sales are down 40% from a year ago. The low sales and high inventory are dragging down prices which are now off 26% from a year ago to a current median price of $231,000.

Locally, sales to the end of May are down 22.8% from last year, on top of a 29.4% drop for the same period in 2007 compared to 2006. New home sales now account for 12% of total single family sales compared to 19% two years ago. In the region, the news is worse with the Loveland area off 30% for this year on top of a 35% decline the previous year and Weld County down 52% this year after a 7.5% drop last year.

Not all new home sales are reported through the multi-list system but building permits tell the same story. Permits for new single family construction are down 23.6% for the first five months of this year and are on a pace for 295 for the year. This compares to 345 in 2007 and 442 in 2006, a drop of 33% in two years.

Based on sales over the last year, there is a demand for 18.3 new homes per month in the Fort Collins area. Almost 60% of this demand is for homes priced under $300,000. There are currently 173 active listings for new single family homes which represents a 9.5 month supply but less than half of these homes are actually complete or under construction so we actually have just a 4 month supply of inventory. This ranges greatly by price range with less than a one month supply of standing inventory priced below $300,000 to a twenty month supply for homes priced above $1 million. If you are considering the purchase of a new home, you will find a good selection priced above $400,000 but you may have to enter into a contract to begin construction on a home priced below $400,000. The low inventory has to be the reason that prices are holding up very well, particularly when compared to the national figures. For the year to date the Fort Collins area average price is up 3.2% to $363,825 and the median price is down 7.3% to $244,724.

The weak move up market has obviously hurt new home sales in the higher price ranges as has the jumbo mortgage market which now charges a premium of about 1.25 points over a conventional fixed thirty year mortgage compared to a premium of 0.5 points a year ago.

Home construction is a very important part of the economy. The National Association of Home Builders estimate that the local impact of building 100 single family homes in a typical U. S. metropolitan area include $16.0 million in income, $1.8 million in taxes and other revenue for local governments and 284 local jobs. The additional, recurring impact for 100 single family homes include $3.2 million in local income, $648,000 in taxes and other revenue for local governments and 63 local jobs. These are ongoing, annual local impacts that result from new homes being occupied and the occupants paying taxes and otherwise participating in the local economy year after year. With the drop in single family home building permits of over 250 homes in the last couple of years, this is $40 million of income, $4.5 million in taxes and other revenue and 710 local jobs that have gone missing plus the ongoing impact from not having these new homes. And new homes are not just about growth, a lot of new homes replace old homes and bring energy saving efficiencies and other benefits to home owners.

A couple of weeks ago, we reported on the May real estate sales for the Fort Collins area. The month showed a 1.2% decline in average selling price compared to a year earlier and a 15.6% drop in the number of homes sold. This left a very slim year to date average selling price increase of 0.8% and a 14.0% decrease in the number of homes sold. These figures are for the entire ‘Area 9’ which is Fort Collins and all of northern Larimer County and include all home sales: single family, multi-family (condos and townhomes), both new and resale. A breakdown of these figures shows the largest category, single family resale homes actually have a 4.1% increase in the average selling price for the year to date and a 1.7% increase in the median price.

Four other reports that track home selling prices are now out with their updated reports and the news is all over the map. The National Association of Realtors (NAR) says that national resale homes sales are down 14.5% on an annual basis compared to May last year and the median price of an existing single family home is down 6.8%. The Office of Federal Housing Enterprise Oversight (OFHEO) says that U. S. home prices fell 4.6% in April compared to April 2007. The S&P/Case-Shiller home price index reports that home prices dropped 15.3% in April in the 20 major metropolitan areas that they track. And finally, the U. S. Commerce Department reported that sales of newly built single-family homes were off 40% compared to the annual adjusted sales a year ago and that the median price of a new home was down 26% from a year ago.

According to the Case-Shiller report, the metro Denver area outperformed seventeen of the twenty metro areas reported, with a 4.7% drop compared to the 15.3% decline nationwide. OFHEO in their monthly report did not break out individual cities but showed the Mountain region, which includes Colorado with a 4.9% drop, very comparable to their national figure.

There continues to be a big difference in the selling price figures reported. NAR says prices are down 6.7% to the end of May. OFHEO says 4.6% (April) and Case-Shiller reports 15.3% (April). There are two major differences between OFHEO and Case-Shiller. OFHEO uses a much broader geographic area with data from 292 Metropolitan Statistical Areas while Case-Shiller follows just the twenty largest U.S. metro areas. OFHEO tracks mortgage loans – both purchase and refinance of $417,000 or less while Case-Shiller reports only purchase financings. With 1.4 million foreclosed properties for sale nationally, this means that their prices reflect a foreclosure heavy sample, with foreclosures usually representing a substantial price discount. Lawrence Yun, NAR chief economist, said “Foreclosures and short sales appear to be a larger part of the market, particularly in California, and are creating a drag on current home sales”. The NAR report covers national existing home sales with a total of 4.99 million on an adjusted annual basis. It covers cash sales as well as those financed with mortgages and includes all properties sold through a Realtor co-op multi-list system.

Whatever the number, it is obvious our local market is holding up very well compared to the national scene. This has been helped particularly by the fact that we did not have a big run up in selling prices over the last few years and also that our housing inventory is at about a seven month supply level compared to a 10.8 month supply nationally. Slow and steady we go!

“Fine Homes” are generally considered to be those homes priced in the top 5% of the market price range. Obviously this fine home definition varies greatly across the country with homes in the $200’s qualifying in some areas and homes priced above $1 million in other areas. Last year, in this area, the top 5% of the market totaled 173 homes priced above $520,000. For this year to date the top 5% are the 71 homes sold for $525,000 or more. By way of contrast, the top 5% of the market five years ago were the 186 homes sold above $410,000.

The marketing of a home in the upper price range requires a different set of skills and experience, particularly when it is noted that there are currently 331 homes listed for sale priced at $525,000 and above. This represents 15% of the current active listings even though the normal demand is just 5% of total sales. Obviously this kind of inventory / competition makes it difficult for home sellers and their agents and a boon for buyers.

Above $1,000,000 it is even more of a challenge. In 2007 there were thirteen single family home properties sold at $1,000,000 or more. There were three other sales in this price range but they were large horse properties and / or large acreages. Five of these sales were new homes in Glenn Ridge (3), Fossil Lake (1) and The Hill at Cobb Lake (1). The other sales were resale homes in Eagle Ranch (4), Woody Creek (1), Coeur D’Alene Estates (1), Terry Cove (1) and a Cortina condo.

For this year to date, sales above $1 million are on a roll, certainly going against the grain of all the bad news about the economy, financial institutions, the mortgage crisis and more. In the first five and one half months, there have been thirteen single family sales closed above $1 million. This does not include another three sales of horse / large acreage properties. Six of the sales have been newly constructed homes with four of those in the new Harmony development, one in Glenn Ridge and one in Fossil Lake Ranch. The resales have been four in Eagle Ranch and one each in Warren Shores, Breakwater Estates and Cottonwood Point.

This is on a pace for twenty-five sales this year which would be remarkable considering that the best year ever for sales of homes priced above $1 million were the seventeen closed in 2005. This has to be good news for sixty four sellers in this price range. In analyzing the homes for sale in this market, it is interesting to note that they are literally all over the map. Twenty four of them are large acreages, mountain properties, ranches, horse operations and development properties. Of the balance, they are located in twenty two different subdivisions with the most in Harmony Club (5) and The Hill at Cobb Lake (4). There are three listings in Fossil Lake and three in Eagle Ranch and the rest are one or two listings in areas like Harmony Ridge, Glenn Ridge, Patterson Point, Hearthfire, Eagle Lake, Cottonwood Shores, Woody Creek, Center Greens, Greenstone, Parkwood, Hearthside, Loomis (‘old town’), Warren Shores, Gregory Road, Vista Largo and The Ridge.

In addition to the many varied locations, these homes offer a wide range of amenities, features, size and age. Prices range from $250 per square foot (finished living space above grade) all the way to $600 and size ranges from a 1,900 main floor to more than 5,000 sq. ft. above grade and almost 10,000 sq. ft. of total finished space. Most have at least four or five bedrooms plus office / study and four baths all the way to seven seems to be the norm. Garages range from a very normal two car attached all the way up to a massive 2,400 sq. ft. seven car – about the size of an average home. The oldest was built in 1905, a few are from the sixties and seventies but the majority is less than ten years old and several are waiting for a contract before even beginning construction.

If you are a potential buyer or are just interested in more information on any of these properties you can view them at www.ColoProperty.com. Go to the ‘Fort Collins’ area and put in a price range of $1,000,000 and up. Most have many additional photos and virtual tour links.

Before we get into all that negative stuff, let’s see what we can find to write that is positive about the current local real estate market – at least for home owners and home sellers. How about home sales in May were up 19% compared to last month. May was the biggest month of closed sales since August of last year. There were an additional twelve sales recorded for April so the decline improved from 16.8% to 12.2%. The average selling price showed a very modest drop of 1.2% compared to last year. Marketing times, at least for the homes that are sold, continue to improve. The homes that closed in May were on the market an average of 114 days and the year to date now stands at 118 days compared to 129 days at the same time last year. The inventory of homes for sale is staying low with 2,154 available at the end of May, a 19% decrease from the 2,445 on the market last year. Based on sales over the last twelve months, this is about a seven month supply of homes, very close to a balanced market and much better than the ten to twelve months of inventory reported nationally. And new home sales hit a record price with an average of $420,161 in May, an increase of 30.7% from last year. This was obviously caused by the mix of sales but the median price was also up 6.6%

On the national scene, the pending home index reported by the National Association of Realtors increased 6.2% in April compared to the previous month, contrary to the Wall Street economists who had predicted no movement.

Now for all the other stuff! The table shows home sales dropped 15.6% in May compared to the previous year, continuing an uninterrupted trend of double digit decreases that began in September last year. There has been a drop in closed sales of over 200 homes in the first five months of this year and a decrease of 15.3% representing almost 400 homes in the last nine months. The average selling price drop in May was just the second in the last seven months and now stands at a very slim 0.8% increase for the year. The median price to the end of May is actually down 1.9% for the year to $209,970.

Traditionally closed sales in the four month period from May to August are the highest of the year, averaging around 46% of the total annual activity. With the first month of this peak season in the books, it looks like sales for the four month period in 2008 could be in the range of 1,400 homes which in turn would put us on a pace for annual sales of just over 3,000 homes. With just one month behind us, this is a bit of an analytical stretch but if we continue with a 15% decline in monthly home sales that is exactly where we are headed. Thankfully, beginning in September, we are up against very low sales figures from last year and if we can at least match those figures for the last four months of the year, sales should end up in the 3,300 range. This would take us back over ten years to a level of home sales not seen since 1997.

We believe the low sales are mainly the result of fewer first time home buyers entering the market, due to tighter lending standards and a feeling of uncertainty as to where the market is headed. When there are fewer first time home buyers this limits the options of the move up buyer and this can affect all price levels. We are then left with a market dominated by new buyers moving into the area and, while Fort Collins is still an attractive destination, there are not enough jobs being created in the current economy and potential buyers from states such as California are experiencing their own problems trying to sell in order to relocate.

So we end with the familiar refrain; for sellers, if you are motivated – and we have to assume that you are if you have your home on the market at this time – be assured that there are qualified buyers – who are looking for homes that are competitively priced and in move in condition. For buyers, you have the best of all worlds. Flat selling prices that have increased just 1% to 2% per year for the last few years, a good selection of homes offered by motivated sellers and mortgage interest rates that are about as low as they have ever been. Over time, a home of your own has been one of the best investments a family can make and now is a good time to buy and start enjoying it.

A review of the headlines over the couple of weeks would leave anyone confused as to the actual current state of the real estate business.

It started with the National Association of Realtors May 23, 2008 report on existing home sales for April. Their headline was “Existing Home Sales Ease Due to Mortgage Restrictions; Some Markets Rising”. The explanation was that existing home sales slowed in April partly because restrictive lending practices hampered home buyers. Sales declined, on a seasonally adjusted annual rate, by 1% compared to the end of March but were 17.5% below the level reported at the end of April 2007. The national median existing home sales price was $202,300, 8.0% below a year ago. The good news, according to NAR President Richard Gaylord, is that mortgage restrictions have been eased. “In the past week, Freddie Mac and Fannie Mae have announced that they were eliminating their ‘declining market’ policies effective June 1,” he said. “This means consumers will have access to safe, affordable financing with downpayments of only 5% on most mortgages, with 100% financing available on some loan products.” Also there has been a recent noticeable drop in interest rates on conforming jumbo loans which will help home buyers of higher priced homes.

One of the biggest factors keeping pressure on home prices is the national inventory of homes for sale, which increased 10.5% at the end of April, representing an 11.2 month supply at the current sales pace.

At the same time the Office of Federal Housing Enterprise Oversight (OFHEO) released their first quarter home price index and the headlines read “Federal home-price index records its biggest decline”. The report showed that home prices nationally fell 3.1% in the first quarter compared with last year. It was only the second quarter of price declines since the index started in 1991. Importantly, there was a sub headline in one of the papers stating that “Most areas of Colorado report gains amid the 3.1% U. S. drop.

On May 25 there was a report headlined “Denver’s housing market sees shift” with the comment that the real estate market is showing signs of a precipitous shift from a buyers market to a “normal” market due to a drop in inventory which now stands at a seven month supply.

Then on May 26, the first quarter S&P/Case-Shiller report on the National Home Price Index was released and the headlines screamed “Home Values Tumble 14.1 Percent. The double digit drop qualified as the worst decline in the index’s two decades. David Blitzer, chairman on S&P’s index committee, said “There are very few silver linings that one can see in the data. Most of the nation appears to remain on a downward path.”

The Census Bureau then jumped in with a May 27th report headline “New-Home Sales Rise Slightly in April”. The report showed a 3.3% increase compared to March, but also showed that April’s pace was 42% lower than April 2007, that new home inventories decreased slightly to a 10.6 month supply and the median sales price increased 9.1%.

While these reports seem to be all over the board, the biggest difference is certainly in how the change in selling price is calculated and reported. And the two federal home price index’s are very far apart with OFHEO reporting a 3.1% drop in the first quarter and Case-Shiller showing a 14.1% decline. No wonder we get confused. A closer look indicates that the OFHEO index is much broader geographically than Case-Schiller. OFHEO uses data from 292 Metropolitan Statistical Areas while Case-Schiller follows just the twenty largest U.S metro areas. The other main difference is that OFHEO tracks mortgage loans of $417,000 or less that are bought or backed by the government-sponsored mortgage finance companies Fannie Mae and Freddie Mac. They exclude subprime and other exotic mortgages which are behind the current housing woes in states such as California, Florida and Nevada, where rapidly falling home prices are skewing the national results.

Obviously the national market conditions have an influence on our local market but it is important to take these headlines with a grain of salt. A few years ago when the headlines were trumpeting “Home Price Appreciation Continues at Robust Pace” (OFHEO March 2006) or “House Price Increase Shows Dramatic Increase” (OFHEO March 2004), we were muddling along with 2% and 3% annual price increases. The same holds true today, just in the reverse. While many areas are reporting double digit home price decreases, we continue our straight, flat line.

Look for our column in tomorrows Sunday Real Estate section for a review of the last five years of our local market compared to the OFHEO numbers for other selected markets.

We don’t want to pick on anyplace, particularly when they are down, but we noticed that Merced, California is right at the bottom of the national ranking of 292 Metropolitan Statistical Areas (MSA) tracked by OFHEO for the lowest rate of house price appreciation in the first quarter of 2008 compared to the first quarter of 2007. The quarterly report by the Office of Federal Housing Enterprise Oversight was released May 22, 2008 and shows a national decline in home prices of 1.7% but Merced was #292 on the list with a decrease of 24.7%. And we don’t even feel sorry for them.

Merced is a nice town of about 80,000 people right on Highway 99 in the Central Valley of California, a hundred miles southeast of the Bay Area. It has an annualized growth rate of 3.4% over the last nine years and is now home to the tenth campus of the University of California, which will eventually accommodate 25,000 students. In 2000 the median home price was $106,400 but this increased to $293,700 by 2005. According to OFHEO the five year HPI rate to 2005 was 141% and even after a slow 2006 the five year rate stood at 115% and now after a really slow 2007 the five year rate is down to 35.8%.

The situation is much the same in the four states – Nevada, California, Florida and Arizona - that showed the largest growth rate over the last five years as shown on the table and it seems to demonstrate that double digit increases in home values are simply not sustainable. In all cases the price appreciation has given way to a serious ‘price correction’ but even then they are still way above the national average and five times what we have seen locally in the last five years.

You have heard the expression “slow and steady wins the race” and we certainly aren’t winning any races but we think the numbers tell the story. It has been a long time since our local market experienced any double digit home price increases – 2000 to be exact – but this has certainly added some stability to our market and we have been able to show modest price increases even through the most recent double digit decline home sales.

Another item we would like to point out is that the OFHEO Home Price Index includes the Fort Collins and Loveland areas. Our multi list service breaks down the area to Fort Collins and northern Larimer County and Loveland and southern Larimer County. For the first quarter, the median price for the combined area was down 2.3% but it differed considerably from north to south with Fort Collins down 1.2% but Loveland down 6.7%. For the same five year period, the median price in Fort Collins is up 15.0% to $215,700 and in Loveland it is up 12.5% to $218,900. The reason Loveland shows a higher median price is simply the mix of residential housing. In the Fort Collins area about 20% of the homes are ‘multi family’ townhomes and condos and this figure is less than 10% in Loveland.

The local sales figures for May will be available for our June 15, 2008 column. A preliminary look shows more of the same – a double digit decrease in home sales and a flat price point.