Washington Park Real Estate Trends
“Foreclosures are up, prices are down, and buyers and sellers are skittish and nervous.” This is the headline we all read or hear regularly.
As the old saying goes, “All real estate is local.” I recently read an article on the site “Seeking Alpha,” by Sol Palha in which he concludes:
“The unemployment rate has to level off and the excess inventory of both new and used homes needs to drop considerably before there is any hope of a long-term bottom taking hold.”
Another blogger on the same site says that home prices are overvalued, citing the Case-Schiller Index. He looks at the historical trends before the 1995-2007 bubble, during the bubble, and after the collapse. His conclusion is that there is a long way yet to fall.
The Zillow Home Value Index says that the lowest priced homes are the hardest hit with a decline in prices of 15% from 2010 to 2011.
These really smart guys conclude that the real estate market has not bottomed, is overvalued, and the cheapest homes are the hardest hit. Yet none mentions the old saw “all real estate is local?” Well, I ask, is it? Should we listen to them?
What constitutes the bottom for the country is meaningless for those looking to buy and sell homes in their own neighborhoods. A perfect example is the esteemed Washington Park neighborhood in Denver, Colorado.
Washington Park Real Estate Introduction
Washington Park real estate is a unique spot in a unique community that is centrally located, has a wide variety of homes in terms of price, age, size to choose from, has a beautiful amenity and it is a quiet, safe place. Washington Park, in my opinion, is emerging from the crisis; if not entirely, then at least segment-by-segment.
Hungry investors are gobbling up small houses to rent, or to build on speculation. Rents are strong, but even so the rentals do not probably have a positive cash flow. So why invest? It is about the inherent value that Washington Park real estate has and the possibility of future price appreciation.
I did an informal and unscientific survey of the Washington Park detached single-family rental market. What I found by monitoring listings on Craig’s List is that the average rental is gone within a week! What does that tell you about future rent appreciation? What does it tell you about the demand for houses in Washington Park? Even if people cannot buy, they want to live here. They are willing to pay high rents to be in this location. All real estate is local, I think.
So let’s look at this particular market in more detail. First of all, there are about 3000 homes in Washington Park. The original bungalows were primarily built between 1925 and 1940. Afterwards there was minimal construction of new homes until the turn of the century. However, many of the original homes have been renovated and expanded significantly beyond their original 1000-1200 square feet. The post-2000 homes are generally greater than 3000 square feet.
Given these facts, a casual observation reveals that comparing an original 1000 square foot 1920 bungalow to a 3600 square foot modern home does not compute. I have therefore segmented the Washington Park market into 5 segments:
- Less than 1200 square feet
- 1201-1600 square feet
- 1601-2400 square feet
- 2401-3000 square feet
- Greater than 3000 square feet
Washington Park Real Estate Market Evaluation
For 2009-2011 the unit sales have been averaging between 11 and 12 units per month. This is subject to normal seasonal variations, however. Not all segments are performing equally. So far in 2011 all segments have exceeded their 2009 sales volumes yet clearly the strongest demand rests in the two smallest segments.
There are 5 segments, but 31% of total unit sales came from the smallest house segment, <1200 square feet; this segment has only 24% of the active listings and the lowest DOM; 51% better than the next best segment.
Sales volume for all segments in 2011 YTD has exceeded 2009 volumes except for the > 3000 segment whose numbers are distorted because of al the private sales between builders and their clients that are not included in these data.
There are currently 61 homes on the market, 2% of the total number of homes. At the current rate of sale, it will take 5-months, on average, to absorb those homes. Averages, however, can be dangerous. One can drown in a lake that averages 6 inches in depth.
6-months of inventory is widely considered a balanced market, not favoring buyers or sellers. The two smallest segments are clearly sellers markets while the top 3 are barely into the buyers favor at 7 months of inventory.
An interesting part of any real estate market is the sector devoted to income; in other words, rental properties. If rental vacancy rates are low and rents are high, it usually does not bode well for the sale of homes. However, with Washington Park real estate, we have all three factors running together simultaneously: high sales rate with strong prices, low vacancy rates for rental properties and high rents $2000-$5000 per month). Clearly, given the rules of the pundits, this market is an anomaly.
Price-per-square-foot (PSF) has been declining in all segments except for the smallest. The segment with the highest year-on-year unit sales growth also had the lowest PSF. Highest PSF is in the smallest segment, as expected.
Overall sold prices are stable. >3000 showed a slight decline but these numbers do not include the private sales that would drive up the average.
If you look at average sold price month-on-month for the entire market, prices have been declining. This is because of the change in the mix of homes sold with cheaper homes gaining share, as in all of Denver metro area.
The difference between the original list price and the actual sold price tells us how well the homeowners and realtors understand the market. For the 3 segments with the smallest houses have been consistently at 5-7%. The largest two have experienced some special variation because of the discounting of pop-tops that cleared out some old inventory. However, the Washington Park market seems to be stable and realistic.
The Washington Park neighborhood spreads alongside the park of the same name from Veteran’s Park all the way to the Denver Country Club and extends east to University Boulevard. The neighborhood was developed in waves to developers from its beginning until all blocks of plots had been sold. These plots are, generally, 125 feet deep and either 37 or 50 feet wide. There is a 24 square block area where there is a higher concentration of 50’ lots. The section from University to Franklin and from Mississippi to Ohio has the highest concentration of new homes that are, on average, 11% bigger than the rest of the park, the PSF is 5% better than the rest of the neighborhood and the average sales price is $759,000.
Wash Park Real Estate Implications
All of these numbers are irrelevant unless they can be used by buyers, sellers, and residents (Keepers). The implications are as follows:
- Buyers: Prices have stabilized and the demand is increasing, houses are selling quicker. Buy now.
- Sellers: Although overall prices are 14% down from the peak in 2009, if you own a smaller home on a large plot the time to sell is now.
- Builders: Demand for infill development is resurgent. Plot costs will rise in the near future. Get in now.
- Investors: Rents are at an all-time high and vacancies are non-existent. Investors are getting 5% of the value in rent with great tenants. Although with 25% down these homes may not be cash flow positive, the price appreciation may compensate.
- Keepers: If you still want to wait for the return to pre-crisis prices (which, by the way, are prices you never had), then invest in the upgrade of your home. The activity in Washington Park is great and a home that has not been upgraded will not get top dollar when you do sell. All upgrades are not equal, however. Before you decide to upgrade, please check the remodeling already done in the neighborhood to determine what is necessary to maximize your PSF. I recently visited a beautifully remodeled home that has high-end finishes, great craftsmanship, yet the resulting product is almost impossible to sell. Why? Because the owner remodeled the home to fit her desires and not those of the market.
An Experienced Washington Park Real Estate Agent is just a phone call way…
Demand top level analysis from any Washington Park Real Estate agent you interview. If you are ready to dig deep into Washington Park Real Estate opportunities and trends, the Washington Park Real Estate agents on this blog can help you find just the home you’ve been dreaming of.
Call for a FREE Neighborhood Analysis & Report!