Much of the increase in inventory is due to foreclosures and short sales, in which banks are willing to take less than the mortgage amount when the house trades hands.
But he said banks aren’t willing to take huge haircuts on distressed homes in their portfolios. If they did, that would drive down the overall housing market.
“I don’t think the banks are willing anymore to take the 40 percent or 50 percent price adjustments,” O’Connor said. One reason “if they are fearful of an audit, they don’t want to take a big hit on the value of their REO (real-estate owned, or foreclosure) properties. They would rather wait and see if they can sell them at a higher price, and not be forced to take an immediate, huge write-down.”
Also, strong demand from investors may mean they do not have to dump properties at bargain-basement prices, he noted.
“There does not appear to be the potential of a double dip in Denver,” O’Connor said. “I just don’t see a double dip in Denver’s future.”
Gretchen Faber, the broker manager at Kentwood Co. in Cherry Creek, notes that if you look at Case-Shiller’s historical data, it shows a “very lengthy period of flat growth from 1991 through 1997. Rather than a double dip, I think we’re most likely going to look back and see a flat period like that one. Sellers should be very careful about taking the new consumer confidence and translating that into a sense that their home is appreciating.”
Ryan Carter, a broker with 8z Real Estate, agrees with other agents that Denver is not heading for a double dip.
“I think Denver is going to dodge that,” Carter said. “We are positioned well enough, and our initial bubble was not so large, that there is no need for a double correction. I think we will probably see a flat market, with flat to a small amount of appreciation. Some pockets may see small declines, but I think most consumers will realize they will be short-lived and we will continue to bounce along the bottom.”