Foreclosure and Non-distress Property Sales Volume Trends in Denver
This chart separates non-distress and distress unit sales volume over time.
Note how until recently the two graphs have had distinct characteristics, or patterns.
Non-distress sales have followed the same seasonality pattern over the years but at different levels. The different levels are a result of the average number of units falling, year-on-year.
The distress volume trends have been steadily increasing without seasonaity.
In September non-distress sales volume demonstrated a break in the pattern with an uptick, followed by the same thing in October. In November the sales volume of non-distress properties tanked. Beginning in September we had:
- Lehman Brothers Failure
- Drop in stock prices that has continued on and off ever since.
Distress properties sales volume growth, which had been steady for years, stopped in April and has remained flat, although with considerable variation. Â In July the volumes began to look like the non-distress property cycle.
Conclusions:
Normal, stable processes have been changed by special causes that came from outside the processes. We have a pretty good idea of what happened. What we don’t know is if the volume of bank listings on MLS has dropped. We also do not know what is causing the distress properties graph to look like the non-distress properties graph. Understanding what is going on here may help investors make the right decisions.
Are banks holding inventory while they wait to see what will happen with the TARP funds? Perhaps the Fed and the FDIC will force the issue on inventory since they do not like for banks to hold houses as inventory on their balance sheets. Their assets need to be loans and their liabilities deposits. I doubt that these regulators will allow the banks to accumulate house inventory for long.
Stay tuned. I believe this is a volatile situation and that rapid dramatic changes will soon be upon us.
My prediction? There will be a huge influx of new inventory for investors to buy in the Denver metropolitan market by March 1st.Â