Has the abnormally low inventory of unsold homes created a seller's market in the Denver area?

An analysis released today by veteran broker Jack O'Connor indicates that is the case  - with a few caveats.

A seller's market is one in which the person listing the home has the upper-hand, in stark contrast to the buyer's market that has swept across Denver and the nation in recent years, as the country has suffered the worst housing crisis since the Great Depression.

O'Connor analyzed Metrolist data and found that as of Jan 1, there were only 8,854 single-family homes listed in the Denver area - a whopping 36.5 decline in inventory from a year earlier. O'Connor, principal of The Denver 100 brokerage firm, uses a date early in the month, as opposed to the last day of the month to analyze housing data, because most brokers end their listings on the last day of the month, which means that the end of the month inventory numbers tend to be at their lowest, not necessarily providing an accurate portrayal of inventory levels, in his opinion.

O'Connor found that the low number of listings equated to a 4.4-month supply on homes. And when he looked at homes priced below $250,000, there was only a 2.4 month supply of unsold homes. There is more than an 18-month supply of homes priced at $1 million or above, though.

A rule of thumb is that when a market has less than six months of inventory, it favors the seller, and more than six months it is the buyer that is in the catbird seat.

"I have to caution that this is a snapshot of that moment in time," O'Connor said. "I'm looking at the lowest inventory for the year, spread over a full-year's worth of sales. The number will definitely grow between now and April as the inventory rises."

O'Connor said that the reason there are so few homes on the market - inventory levels are at an 11-year low - is because so many homeowners have no equity in their houses.

"Because there has been no appreciation for so long, the average homeowner has no equity," O'Connor said. "If someone bought a typical home for $275,000 five, six or seven years ago, it's probably worth what they paid for it."

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